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WEST VIRGINIA
MUNICIPAL BOND FUND
PROSPECTUS
March 12, 1997
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WESMARK WEST VIRGINIA MUNICIPAL BOND FUND
(A PORTFOLIO OF WESMARK FUNDS)
PROSPECTUS
The shares of WesMark West Virginia Municipal Bond Fund (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
securities. The Fund is an investment portfolio of WesMark Funds (the
"Trust"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide current income which is
exempt from federal income tax and the income taxes imposed by the State of
West Virginia. The Fund invests primarily in securities issued by or on
behalf of the State of West Virginia and its political subdivisions,
authorities and agencies, and securities issued by other states,
territories, and possessions of the United States which are exempt from
federal income tax and the income taxes imposed by the State of West
Virginia ("West Virginia Municipal Securities").
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
WESBANCO BANK WHEELING OR ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED BY
WESBANCO BANK WHEELING OR ITS AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
12, 1997 with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge, obtain
other information, or make inquiries about the Fund by writing or calling
the Fund at 1-800-368-3369. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Fund is maintained electronically with the SEC at Internet Web
site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 12, 1997
TABLE OF CONTENTS
SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
West Virginia Municipal Securities 7
Investment Risks 7
Non-Diversification 8
Investment Limitations 8
WESMARK FUNDS INFORMATION 9
Management of the Trust 9
Distribution of Fund Shares 10
Administration of the Fund 11
Expenses of the Fund 11
NET ASSET VALUE 12
INVESTING IN THE FUND 12
Minimum Investment Required 12
What Shares Cost 12
Share Purchases 12
Systematic Investment Program 13
Exchanging Securities for Fund Shares 13
Certificates and Confirmations 13
Dividends and Capital Gains 13
EXCHANGE PRIVILEGE 14
REDEEMING SHARES 14
Systematic Withdrawal Program 15
Redemption Before Purchase
Instruments Clear 16
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
Voting Rights 16
EFFECT OF BANKING LAWS 17
TAX INFORMATION 17
Federal Income Tax 17
West Virginia Taxes 18
Other State and Local Taxes 18
PERFORMANCE INFORMATION 19
ADDRESSES Inside Back Cover
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds,
as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(1) 0.30%
12b-1 Fee(2). 0.00%
Total Other Expenses 0.44%
Shareholder Services Fee(2) 0.00%
Total Annual Fund Operating Expenses (after waiver)(3) 0.74%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser may terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.60%.
(2) The Fund has no present intention of paying or accruing 12b-1 fees or
shareholder services fees during the fiscal year ending January 31, 1998.
If the Fund was paying or accruing 12b-1 fees or shareholder services fees,
the Fund would be able to pay up to 0.25% of its average daily net assets
for 12b-1 fees and up to 0.25% of its average daily net assets for
shareholder services fees.
(3) Total Fund Operating Expenses are estimated to be 1.04% absent the
anticipated voluntary waiver described above in note 1.
* Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending January 31, 1998.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in the Fund" and "WesMark Funds Information."
Wire-transferred redemptions may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period. The Fund
charges no redemption fees $8 $24
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING
JANUARY 31, 1998.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated March 1, 1996. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The Trust
currently consists of WesMark West Virginia Municipal Bond Fund and WesMark
Growth Fund. This prospectus relates only to the WesMark Funds' West
Virginia municipal securities portfolio, known as WesMark West Virginia
Municipal Bond Fund. The shares in any one portfolio may be offered in
separate classes. As of the date of this prospectus, the Board of Trustees
(the "Trustees") has not established classes of shares of the Fund. The Fund
is designed primarily for customers of WesBanco Bank Wheeling and its
affiliates and individual investors who desire a convenient means of
accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in West Virginia Municipal Securities.
WesBanco Bank Wheeling is the investment adviser to the Fund ("Adviser"). A
minimum initial investment of $1,000 is required. Subsequent investments
must be in amounts of at least $100. The Fund is not likely to be a suitable
investment for non-West Virginia taxpayers or retirement plans since it
intends to invest primarily in West Virginia Municipal Securities.
Fund shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal income tax and the income taxes imposed by the State of
West Virginia. Interest income of the Fund that is exempt from the income
taxes described above retains its tax-exempt status when distributed to the
Fund's shareholders. However, income distributed by the Fund may not
necessarily be exempt from state or municipal taxes in states other than
West Virginia.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies
described in this prospectus. The investment objective cannot be changed
without approval of shareholders. Unless indicated otherwise, the investment
policies may be changed by the Trustees without the approval of
shareholders. Shareholders will be notified before any material changes in
these policies become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of West Virginia
Municipal Securities. As a matter of fundamental investment policy which may
not be changed without shareholder approval, the Fund will invest its assets
so that, under normal circumstances, at least 80% of its net assets are
invested in obligations, the interest income from which is exempt from
federal income tax and the income taxes imposed by the State of West
Virginia. For purposes of this policy, the tax-free interest must not be a
preference item for purposes of computing the federal alternative minimum
tax.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in West Virginia
Municipal Securities, which are:
* obligations, including industrial development bonds, issued on behalf of
the State of West Virginia, its political subdivisions, agencies, or
instrumentalities (i.e., authorities);
* obligations issued by or on behalf of any state, territory or possession
of the United States, including the District of Columbia, or any political
subdivision or agency of any of these; and
* participation, trust and partnership interests, as described below, in any
of the above obligations; the interest from which is, in the opinion of bond
counsel for the issuers or in the opinion of officers of the Fund and/or the
Adviser, exempt from federal income tax, including the alternative minimum
tax, and the income taxes imposed by the State of West Virginia. It is
possible that shareholders who are subject to alternative minimum tax will
be required to include interest from a portion of the municipal securities
owned by the Fund in calculating the federal individual alternative minimum
tax or the federal alternative minimum tax for corporations.
While the Fund intends to invest primarily in securities issued by or on
behalf of the State of West Virginia and its political subdivisions, it will
invest in other securities issued by states, territories, and possessions of
the United States which are exempt from federal income tax, including
alternative minimum tax, and the income taxes imposed by the State of West
Virginia. The Fund will invest in such securities in instances where, in the
judgment of the Adviser, the supply and yield of such securities would be
beneficial to the Fund's performance.
CHARACTERISTICS. The West Virginia Municipal Securities in which the Fund
invests are:
* rated, at the time of purchase, investment grade (within the four highest
ratings categories for municipal securities) by a nationally recognized
statistical rating organization ("NRSRO"), such as Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa), Standard & Poor's Ratings
Group ("S&P") (AAA, AA, A, or BBB), or Fitch Investors Service, Inc.
("Fitch") (AAA, AA, A, or BBB);
* guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
* fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Adviser;
* rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial paper
rating (PRIME-1) or S&P's highest municipal commercial paper rating (SP-1);
* unrated if, at the time of purchase, other municipal securities of that
issuer are rated investment grade by an NRSRO (i.e., Baa or BBB or better by
Moody's, S&P, or Fitch); or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Adviser.
If a security is subsequently downgraded below the permissible investment
category for the Fund, the Adviser will determine whether it continues to be
an acceptable investment; if not, the security will be sold. Bonds rated BBB
by S&P or Fitch or Baa by Moody's are investment grade, but have more
speculative characteristics than A-rated bonds. Changes in economic
conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated bonds. A
description of the rating categories is contained in the Appendix to the
Statement of Additional Information.
The prices of fixed income securities fluctuate inversely to the direction
of interest rates.
PARTICIPATION INTERESTS. The Fund may purchase interests in municipal
securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Fund to treat the income from the investment as exempt from federal and
state tax. These participation interests would give the Fund undivided
interests in West Virginia Municipal Securities. The financial institutions
from which the Fund purchases participation interests frequently provide or
secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Adviser will ensure that
participation interests meet the prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the West Virginia Municipal
Securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily based on a published interest rate,
interest rate index, or a similar standard, such as the 91-day U.S. Treasury
bill rate. Many variable rate municipal securities are subject to payment of
principal on demand by the Fund, usually in not more than seven days. All
variable rate municipal securities will meet the quality standards for the
Fund. The Adviser monitors the pricing, quality, and liquidity of the
variable rate municipal securities, including participation interests held
by the Fund, on the basis of published financial information and reports of
the NRSROs and other analytical services pursuant to guidelines established
by the Trustees.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, or a conditional sales contract.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any
bankruptcy, receivership, default or change in the credit quality of the
party providing the credit enhancement will adversely affect the quality and
marketability of the underlying security and could cause losses to the Fund
and affect its share price. The Fund may have more than 25% of its total
assets invested in securities credit-enhanced by banks or insurance.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest
in the securities of other investment companies (including closed-end
investment companies) but it will not own more than 3% of the total
outstanding voting stock of any investment company, invest more than 5% of
its total assets in any one investment company, or invest more than 10% of
its total assets in investment companies in general, unless permitted to
exceed these limitations by an exemptive order of the SEC. The Fund will
invest in other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incur certain
expenses such as management fees and, therefore, any investment by the Fund
in shares of another investment company would be subject to such duplicate
expenses.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted and
illiquid securities. Restricted securities are any securities in which the
Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restrictions on resale under federal securities
laws. Certain restricted securities which the Trustees deem to be liquid
will be excluded from this limitation. However, the Fund will limit
investments in illiquid securities, including certain restricted securities
not determined by the Trustees to be liquid, non-negotiable time deposits,
repurchase agreements providing for settlement in more than seven days after
notice, and over-the-counter options to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the Adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities (up to one-third of the value of its
total assets) on a short-term or long-term basis, to broker/
dealers, banks, or other institutional borrowers of securities. The Fund
will only enter into loan arrangements with broker/dealers, banks, or other
institutions which the Adviser has determined are creditworthy and will
receive collateral in the form of cash or U.S. government securities equal
to at least 100% of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the
Fund. The Fund will write call options on securities either held in its
portfolio or for which it has the right to obtain without payment of further
consideration or for which it has segregated cash in the amount of any
additional consideration. In the case of put options, the Fund will
segregate cash or other securities with a value equal to or greater than the
exercise price of the underlying securities.
The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers
of the options since options on the portfolio securities held by the Fund
are not traded on an exchange. The Fund purchases and writes options only
with investment dealers and other financial institutions (such as commercial
banks or savings associations) deemed creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options
are third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded options
have a continuous liquid market while over-the-counter options may not.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial
futures contracts call for the delivery of particular debt instruments
issued (including those issued or guaranteed by the U.S. Treasury or by
specified agencies or instrumentalities of the U.S. government) at a certain
time in the future. The seller of the contract agrees to make delivery of
the type of instrument called for in the contract and the buyer agrees to
take delivery of the instrument at the specified future time.
The Fund may write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value resulting from anticipated increases in
market interest rates. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling the futures contract
at a fixed price at any time during a specified period if the option is
exercised. Conversely, as purchaser of a put option on a futures contract,
the Fund is entitled (but not obligated) to sell a futures contract at the
fixed price during the life of the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates.
The Fund will use these transactions to attempt to protect its ability to
purchase portfolio securities in the future at price levels existing at the
time it enters into the transactions. When the Fund writes a put option on a
futures contract, it is undertaking to buy a particular futures contract at
a fixed price at any time during a specified period if the option is
exercised. As a purchaser of a call option on a futures contract, the Fund
is entitled (but not obligated) to purchase a futures contract at a fixed
price at any time during the life of the option.
The Fund may not purchase or sell futures contracts or related options, for
other than bona fide hedging purposes, if immediately thereafter the sum of
the amount of margin deposits on the Fund's existing futures positions and
premiums paid for related options would exceed 5% of the market value of the
Fund's total assets. When the Fund purchases futures contracts, an amount of
cash and cash equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of
such futures contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial futures
as hedging devices, there is a risk that the prices of the securities
subject to the futures contracts may not correlate perfectly with the prices
of the securities in the Fund's portfolio. This may cause the futures
contract and any related options to react differently than the portfolio
securities to market changes. In addition, the Adviser could be incorrect in
its expectations about the direction or extent of market factors such as
interest rate movements. In these events, the Fund may lose money on the
futures contract or option. It is not certain that a secondary market for
positions in futures contracts or for options will exist at all times.
Although the Adviser will consider liquidity before entering into options
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
TEMPORARY INVESTMENTS. The Fund normally invests at least 80% of its net
assets in West Virginia Municipal Securities, as described above. Although
the Fund is permitted to invest up to 20% of its net assets in taxable
investments under normal market conditions, there is no current intention of
generating income subject to federal income tax or the income taxes imposed
by the State of West Virginia. However, from time to time, when the Adviser
determines that market conditions call for a temporary defensive posture,
the Fund may invest up to 100% of its total assets in short-term tax-exempt
or taxable temporary investments. These temporary investments include: notes
issued by or on behalf of municipal or corporate issuers; obligations issued
or guaranteed by the U.S. government, its agencies, or instrumentalities;
other debt securities; commercial paper; certificates of deposit of banks;
shares of other investment companies; and repurchase agreements
(arrangements in which the organization selling the Fund a bond or temporary
investment agrees at the time of sale to repurchase it at a mutually agreed
upon time and price).
The Adviser will purchase temporary investments it considers to be at least
of comparable quality to the Fund's other investments.
PORTFOLIO TURNOVER. The Fund may trade or dispose of portfolio securities as
considered necessary to meet its investment objective. It is not anticipated
that the portfolio trading engaged in by the Fund will result in its annual
rate of portfolio turnover exceeding 50%.
WEST VIRGINIA MUNICIPAL SECURITIES
West Virginia Municipal Securities are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, schools,
streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and
to make loans to other public institutions and facilities. West Virginia
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct or equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Revenue bonds do not represent a pledge
of credit or create any debt of or charge against the general revenues of a
municipality or public authority. Interest on and principal of revenue bonds
are payable only from the revenue generated by the facility financed by the
bond or other specified sources of revenue. Industrial development bonds are
typically classified as revenue bonds; the industry which is the beneficiary
of such bonds is generally the only source of payment for the bonds.
INVESTMENT RISKS
Yields on West Virginia Municipal Securities depend on a variety of factors,
including, but not limited to: the general conditions of the municipal bond
market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. Further, any adverse economic
conditions or developments affecting the State of West Virginia or its
agencies or political subdivisions could impact the Fund's portfolio. The
Fund's concentration in securities issued by the State of West Virginia and
its agencies or political subdivisions provides a greater level of risk than
a fund which is diversified across numerous states and municipal entities.
The ability of the Fund to achieve its investment objective also depends on
the continuing ability of the issuers of West Virginia Municipal Securities
and participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due. Investing in
West Virginia Municipal Securities which meet the Fund's quality standards
may not be possible if the State of West Virginia or its agencies or
political subdivisions do not maintain their current credit ratings. In
addition, certain West Virginia constitutional amendments, legislative
measures, executive orders, or administrative regulations could result in
adverse consequences affecting various West Virginia Municipal Securities. A
discussion of the current economic risks associated with the purchase of
West Virginia Municipal Securities is contained in the Statement of
Additional Information.
In the debt market, prices move inversely to interest rates. A decline in
market interest rates results in a rise in the market prices of outstanding
debt obligations. Conversely, an increase in market interest rates results
in a decline in market prices of outstanding debt obligations. In either
case, the amount of change in market prices of debt obligations in response
to changes in market interest rates generally depends on the maturity of the
debt obligations: the debt obligations with the longest maturities will
experience the greatest market price changes.
The market value of debt obligations, and therefore the Fund's net asset
value, will fluctuate due to changes in economic conditions and other market
factors such as interest rates which are beyond the control of the Fund's
adviser. The Fund's adviser could be incorrect in its expectations about the
direction or extent of these market factors. Although debt obligations with
longer maturities offer potentially greater returns, they have greater
exposure to market price fluctuation. Consequently, to the extent the Fund
is significantly invested in debt obligations with longer maturities, there
is a greater possibility of fluctuation in the Fund's net asset value.
NON-DIVERSIFICATION
The Fund is a non-diversified investment portfolio. As such, there is no
limit on the percentage of assets which can be invested in any single
issuer, except as noted below. An investment in the Fund, therefore, will
entail greater risk than would exist in a diversified portfolio of
securities because the higher percentage of investments among fewer issuers
may result in greater fluctuation in the total market value of the Fund's
portfolio. Any economic, political, or regulatory developments affecting the
value of the securities in the Fund's portfolio will have a greater impact
on the total value of the portfolio than would be the case if the portfolio
were diversified among more issuers. The Fund may purchase an issue of
municipal securities in its entirety.
The Fund intends to comply with Subchapter M of the Internal Revenue Code.
This undertaking requires that at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than
5% of its total assets are invested in the securities of a single issuer;
and beyond that, no more than 25% of its total assets are invested in the
securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and pledge
assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
WESMARK FUNDS INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of the Trust and
for exercising all of the powers of the Trust except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
WesMark Funds, investment decisions for the Fund are made by WesBanco Bank
Wheeling (the "Adviser" or "WesBanco"), the Fund's investment adviser,
subject to direction by the Trustees. The Adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual
fee from the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to 0.60% of the Fund's average daily net assets. The
investment advisory contract allows the voluntary waiver, in whole or in
part, of the investment advisory fee or the reimbursement of expenses by the
Adviser from time to time. The Adviser can terminate any voluntary waiver of
its fee or reimbursement of expenses at any time at its sole discretion.
ADVISER'S BACKGROUND. WesBanco Bank Wheeling is a wholly-owned subsidiary of
WesBanco, Inc. (the "Corporation"), a registered bank holding company
headquartered in Wheeling, West Virginia. The Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses in West Virginia and Ohio with 42 banking locations. The Adviser
is a state chartered bank which offers financial services that include, but
are not limited to, commercial and consumer loans, corporate, institutional
and personal trust services, and demand and time deposit accounts. The
Adviser employs an experienced staff of professional investment analysts,
portfolio managers and traders. The staff manages the bond portfolios of the
Corporation and its subsidiaries which includes government, corporate,
mortgage and municipal securities with a total value of
$525 million on December 31, 1996. In addition, the Adviser provides
investment management services to the Trust Department of WesBanco and three
other affiliate banks with trust powers. The total assets of the trust
departments of the Corporation are valued at $1.6 billion. The Adviser has
not previously served as an investment adviser to a mutual fund.
As part of its regular banking operations, the Adviser may make loans to
public companies and municipalities. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which are
also lending clients of the Adviser. The lending relationship will not be a
factor in the selection of securities.
Jerome B. Schmitt has been a co-portfolio manager for the Fund since its
inception. He has been employed by the Adviser since 1972 and served as
Senior Vice President of Trusts and Investments since 1991, and has been
Executive Vice President since June 1996. Mr. Schmitt is a Chartered
Financial Analyst and received an M.A. in Economics from Ohio University and
is a member of the Institute of Chartered Financial Analysts. Mr. Schmitt is
responsible for supervising the activities of the Trust and Investment
Departments of the Adviser.
David B. Ellwood has been a co-portfolio manager for the Fund since its
inception. He has been employed by the Adviser since 1982 and has been
Assistant Vice President and Senior Investment Officer since May 1996. Mr.
Ellwood is a Chartered Financial Analyst and received a B.S. degree in
Business Administration from Wheeling Jesuit College. Mr. Ellwood is
responsible for portfolio management, investment research and assisting in
the supervision of the investment activities of the Investment Department.
Both the Trust and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Board of Trustees, and could result in severe
penalties.
DISTRIBUTION OF FUND SHARES
Edgewood Services, Inc. is the principal distributor (the "Distributor") for
shares of the Fund. Edgewood Services, Inc. is a New York corporation and a
wholly-owned subsidiary of Federated Investors. The Distributor is a
registered broker/dealer.
DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with the
Investment Company Act of 1940's Rule 12b-1 (the "Plan"), the Fund may pay
to the Distributor an amount computed at an annual rate of 0.25% of the
average daily net asset value of the Fund's shares to finance any activity
which is principally intended to result in the sale of shares subject to the
Plan. However, the Plan will not be activated, and the Distributor has no
present intention to collect any fees pursuant to the Plan, unless and until
a separate class of "trust" shares of the Fund (which would not have a Rule
12b-1 Plan) is created and trust clients' investments in the Fund are
converted to such class.
The Distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the
extent the expenses attributable to the shares exceed such lower expense
limitation as the Distributor may, by notice to the Trust, voluntarily
declare to be effective.
The Distributor may select financial institutions, such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers ("brokers") to provide sales and support services as agents
for their clients or customers who beneficially own shares. Financial
institutions will receive fees from the Distributor based upon shares
subject to the Plan and owned by their clients or customers. The schedules
of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the Distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the Distributor, including amounts
expended by the Distributor in excess of amounts received by it from the
Fund, interest, carrying or other financing charges in connection with
excess amounts expended, or the Distributor's overhead expenses. However,
the Distributor may be able to recover such amounts or may earn a profit
from future payments made by the Fund under the Plan.
SHAREHOLDER SERVICES ARRANGEMENTS. The Fund and WesBanco have entered into a
Shareholder Services Agreement (the "Services Agreement") with respect to
the shares of the Fund to provide administrative support services to
customers who from time to time may be owners of record or beneficial owners
of the Fund's shares. In return for providing these support services,
WesBanco (or a financial institution which has an agreement with WesBanco)
may receive payments from the Fund at a rate not exceeding 0.25% of the
average daily net assets of the shares beneficially owned by the financial
institution's customers for whom it is holder of record or with whom it has
a servicing relationship. These administrative services may include, but are
not limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel, including clerical,
supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Fund reasonably requests. Certain
trust clients, including ERISA plans, will not be effected by the Services
Agreement because the Services Agreement will not be activated unless and
until a separate "trust" class of shares of the Fund (which would not have a
Services Agreement) is created and such trust clients' investments in the
Fund are converted to such class.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may also pay financial
institutions as directed by the Adviser a fee based upon the average daily
net asset value of shares of their customers invested in the Fund for
providing administrative services. This fee is in addition to the amounts
paid under the Distribution Plan for administrative services, and, if paid,
will be reimbursed by the Adviser and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
the administrative personnel and services necessary to operate the Fund.
Such services include certain legal and accounting services. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS
ADMINISTRATIVE FEE OF THE TRUST
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$75,000 per Fund. Federated Services Company may choose voluntarily to waive
a portion of its fee.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. These expenses include, but are not limited to, the cost of:
organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund; taxes and commissions; issuing, purchasing,
repurchasing, and redeeming shares; fees for custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents, and registrars;
printing, mailing, auditing, accounting, and legal expenses; reports to
shareholders and government agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; distribution fees; insurance premiums;
association membership dues; and such nonrecurring and extraordinary items
as may arise. However, the Adviser may voluntarily waive and/or reimburse
some expenses.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets,
less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000.
Subsequent investments must be in amounts of at least $100. These minimums
may be waived for purchases by the Trust Division of WesBanco for its
fiduciary or custodial accounts and WesBanco employees and members of their
immediate family. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received. There is no sales charge imposed by the Fund.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of a Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day.
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve wire system are open for business. Shares of the Fund may be
purchased through WesBanco. In connection with the sale of Fund shares, the
Distributor may, from time to time, offer certain items of nominal value to
any shareholder or investor. The Fund reserves the right to reject any
purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call WesMark Funds
Shareholder Services at 1-800-368-3369. Texas residents must purchase shares
of the Fund through the Distributor at 1-888-898-0600. The order must be
placed by 4:00 p.m. (Eastern time) for shares to be purchased at that day's
price, and payment is normally expected the next business day.
PAYMENT BY WIRE. To purchase shares by Federal Reserve Wire, contact your
account officer for wiring instructions. Wire orders will only be accepted
on days on which the Fund, WesBanco and the Federal Reserve Banks are open
for business.
BY MAIL. To purchase shares of the Fund by mail, investors may send an
application (for a new account) and a check made payable to the Fund at:
WesMark Funds Shareholder Services, WesBanco Bank Wheeling, One Bank Plaza,
Wheeling, West Virginia 26003.
Orders by mail are considered received after payment by check is converted
by WesBanco into federal funds. This is normally the next business day after
WesBanco receives the check.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account and invested in Fund shares at the net asset
value next determined after an order is received by the Fund. A shareholder
may apply for participation in this program through WesBanco or by writing
to the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund shares. The Fund will
allow such exchanges only upon prior approval of the Fund and a
determination by the Fund and the Adviser that the securities to be
exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, and must be
liquid. The market value of any securities exchanged in an initial
investment, plus any cash, must be at least equal to the minimum investment
in the Fund.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription
or other rights attached to the securities become the property of the Fund,
along with the securities.
If an exchange is permitted, it will be treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
Fund shares, a gain or loss may be realized by the investor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared daily and paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on
the preceding business day, shares purchased by wire begin earning dividends
on the business day wire payment is received by the custodian. If the order
for shares and payment by wire are received on the same day, shares begin
earning dividends on the next business day. Shares purchased by check begin
earning dividends on the business day after the check is converted into
federal funds. Unless cash payments are requested by contacting the Fund,
dividends and capital gains are automatically reinvested in additional
shares of the Fund on payment dates at net asset value. Distributions of net
long-term capital gains realized by the Fund will be made at least annually.
EXCHANGE PRIVILEGE
You may exchange shares of the Fund for shares of the WesMark Growth Fund at
net asset value without a sales charge, provided you have received a copy of
the current prospectus of the WesMark Growth Fund, and you meet the
investment minimum of the WesMark Growth Fund.
Upon receipt of proper instructions and all necessary supporting documents,
the Fund's shares you submit for exchange will be redeemed at the
next-determined net asset value. Written exchange instructions may require a
signature guarantee. An exchange is treated as a sale for federal income tax
purposes and, depending on the circumstances, you may realize a short or
long-term capital gain or loss. The exchange privilege may be terminated at
any time, and you will be notified of such termination. You may obtain
further information on the exchange privilege by calling WesMark Funds
Shareholder Services.
The WesMark Funds currently offer only one class of shares. If each of the
Funds should add a second class of shares, exchanges may be limited to
shares of the same class of each of the WesMark Funds.
An authorization form permitting the Fund to accept telephone exchange
requests must first be completed. It is recommended that investors request
this exchange privilege on the account application at the time of their
initial application. If not completed at the time of initial application,
authorization forms and information on this service can be obtained through
WesMark Funds Shareholder Services. Telephone exchange instructions may be
recorded.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange
request, reserves the right to modify or terminate the exchange privilege at
any time. Shareholders would be notified prior to any modification or
termination.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Requests for redemptions must
be received in proper form and can be made by calling WesBanco or writing
directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling his
account officer or by calling WesMark Funds Shareholder Services at
1-800-368-3369 to request the redemption. Shares will be redeemed at the net
asset value next determined after the Fund receives the redemption request
from WesBanco. Redemption requests must be received by WesBanco before 4:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. Proceeds will normally be wired the next business day or a
check will be sent to the address of record. WesBanco is responsible for
promptly submitting redemption requests and providing proper redemption
instructions to the Fund. If, at any time, the Fund should determine it
necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service are available by calling WesMark Funds Shareholder Services.
Telephone redemption instructions may be recorded. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
In the event of extraordinary economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, it is recommended that a redemption request be made in writing and be
sent by overnight mail to your account officer at WesBanco.
BY MAIL. Shareholders may redeem Fund shares by sending a written request to
WesMark Funds Shareholder Services at: WesBanco Bank Wheeling, One Bank
Plaza, Wheeling, West Virginia 26003. The written request should include the
shareholder's name, the Fund name, the account number, and the share or
dollar amount requested. Shareholders should call the WesMark Funds
Shareholder Services at 1-800-368-3369 for assistance in redeeming by mail.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than
to the shareholder of record must have signatures on written redemption
requests guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund and its transfer agent
reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven
calendar days, after receipt of a proper written redemption request,
provided that the transfer agent has received payment for shares from the
shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may
take advantage of the Systematic Withdrawal Program. Under this program,
Fund shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Fund shares, and the fluctuation of the net
asset value of Fund shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund.
For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in the Fund. To be eligible
to participate in this program, a shareholder must have an account value of
at least $10,000. A shareholder may apply for participation in this program
through his financial institution or WesMark Funds Shareholder Services.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When you purchase Fund shares by check or through the Automated Clearing
House System, the proceeds from the redemption of those shares are not
available, and the shares may not be exchanged, until WesMark Funds
Shareholder Services and/or the transfer agent is reasonably certain that
the purchase check has cleared, which could take up to seven calendar days.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Trust have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company
Act of 1956 or any affiliate thereof from sponsoring, organizing or
controlling a registered, open-end investment company continuously engaged
in the issuance of its shares, and from issuing, underwriting, selling or
distributing securities in general. Such laws and regulations do not
prohibit such a holding company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customers.
Some entities providing services to the Fund, such as WesBanco Bank
Wheeling, are subject to such banking laws and regulations. They believe
that they may perform those services for the Fund contemplated by any
agreement entered into with the Fund without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above
services. If this happens, the Trustees would consider alternative means of
continuing available services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund expects to pay no federal regular income tax because it intends to
meet requirements of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest income earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income
for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
"tax preference" items not included in regular taxable income and reduced by
only a portion of the deductions allowed in the calculation of the regular
tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons, and other
public facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion
of the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds will become subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternative minimum
tax treats 75% of the excess of the taxpayer's "adjusted current earnings"
over the taxpayer's alternative minimum taxable income as a tax preference
item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum
taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Shareholders should consult with their tax advisers to determine whether
they are subject to the alternative minimum tax or the corporate alternative
minimum tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income. Distributions representing net long-term capital gains
realized by the Fund, if any, will be taxable as long-term capital gains
regardless of the length of time shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
WEST VIRGINIA TAXES
Under existing West Virginia laws, distributions made by the Fund will not
be subject to the West Virginia personal income tax to the extent that such
distributions qualify as exempt-interest dividends under the Internal
Revenue Code of 1986, as amended, and represent (i) interest income from
obligations of the United States and its possessions; or (ii) interest or
dividend income from obligations of any authority, commission or
instrumentality of the United States or the State of West Virginia exempt
from state income taxes under the laws of the United States or of the State
of West Virginia. For purposes of the West Virginia corporate income tax, a
special formula is used to compute such exemption.
Counsel to the Fund's distributor has been advised that (although they had
not been asked to rule on the matter since no controversy concerning the
application of the personal property tax had been presented), the Secretary
of the Department of Tax and Revenue has indicated that its likely position
would be that the exemption from the imposition of personal property taxes
on the Fund's portfolio securities would pass-through to the Fund's
shareholders, such that the Fund's shares would also be exempt from such
taxes. Shareholders should consult their own tax adviser for more
information on the application of personal property taxes on Fund shares.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
West Virginia. State laws differ on this issue, and shareholders are urged
to consult their own tax advisers regarding the status of their accounts
under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that
the Fund would have had to earn to equal its actual yield, assuming a
specific tax rate. The yield and the tax-equivalent yield do not necessarily
reflect income actually earned by the Fund and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Fund's performance to certain indices.
The Fund is the successor to the portfolio of a common trust fund managed by
the Adviser. It is anticipated that, at the Fund's commencement of
operations, the assets from the common trust fund will have been transferred
to the Fund in exchange for Fund shares. The Adviser has represented that
the Fund's investment objective, policies and limitations are in all
material respects identical to those of the common trust fund.
The Fund's total return for the one-year period ended December 31, 1996, was
3.75%. The Fund's average annual total return for the five-year period ended
December 31, 1996, and for the period from December 31, 1990 (date of
commencement of operations of the common trust fund) to December 31, 1996
was 5.21% and 5.55%, respectively. The quoted performance data is the
performance of the common trust fund for periods before the Fund's
registration statement became effective, as adjusted to reflect the Fund's
anticipated expenses as set forth in the "Expenses of the Fund" section of
this prospectus. The common trust fund was not registered under the
Investment Company Act of 1940 ("1940 Act") and therefore was not subject to
certain investment restrictions that are imposed by the 1940 Act. If the
common trust fund had been registered under the 1940 Act, the performance
may have been adversely affected.
ADDRESSES
WesMark West Virginia Municipal Bond Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897
Investment Adviser
WesBanco Bank Wheeling One Bank Plaza
Wheeling, West Virginia 26003
Custodian
WesBanco Bank Wheeling One Bank Plaza
Wheeling, West Virginia 26003
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Federated Investors Tower
Services Company Pittsburgh, Pennsylvania 15222-3779
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
[Graphic]
WEST VIRGINIA MUNICIPAL BOND FUND
PROSPECTUS DATED
March 12, 1997
[Graphic]
[Graphic]
Cusip 951025105
G01913-01 (3/97)
WESMARK WEST VIRGINIA MUNICIPAL BOND FUND
(A PORTFOLIO OF WESMARK FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of WesMark West Virginia Municipal Bond Fund (the ``Fund')
dated March 12, 1997. This Statement is not a prospectus itself. You
may request a copy of the prospectus or a paper copy of this Statement
of Additional Information, if you have received it electronically, free
of charge by calling the WesMark Funds Shareholder Services at 1-800-
368-3369. Terms used but not defined herein, which are defined in the
prospectus, are used herein as defined in the prospectus.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated Mach 12, 1997
Edgewood Services, Inc.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE FUND 3
INVESTMENT OBJECTIVE AND POLICIES 3
Acceptable Investments 3
When-Issued and Delayed Delivery Transactions 8
Repurchase Agreements 9
Reverse Repurchase Agreements 9
Futures and Options Transactions 10
Lending of Portfolio Securities 16
Restricted and Illiquid Securities 17
Portfolio Turnover 6
WEST VIRGINIA INVESTMENT RISKS 18
INVESTMENT LIMITATIONS 7
WESMARK FUNDS MANAGEMENT 23
Fund Ownership 31
Trustees Compensation 32
Trustee Liability 34
INVESTMENT ADVISORY SERVICES 34
Adviser to the Fund 34
OTHER SERVICES 34
Fund Administration 34
Custodian 35
Transfer Agent,Dividend Disbursing Agent, and
Portfolio Accounting Services 14
Independent Auditors 35
BROKERAGE TRANSACTIONS 14
PURCHASING SHARES 36
Distribution and Shareholder Services Plans 37
Administrative Arrangements 38
Conversion to Federal Funds 15
DETERMINING NET ASSET VALUE 15
Valuing Municipal Bonds 15
Valuing Futures and Options 39
REDEEMING SHARES 39
Redemption in Kind 39
MASSACHUSETTS PARTNERSHIP LAW 40
TAX STATUS 16
The Fund's Tax Status 16
Shareholders' Tax Status 41
TOTAL RETURN 42
YIELD 42
TAX-EQUIVALENT YIELD 17
Tax-Equivalency Table 17
PERFORMANCE COMPARISONS 45
Economic and Market Information 19
APPENDIX 20
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in WesMark Funds (the `Trust'') which was
established as a Massachusetts business trust under a Declaration of Trust
dated March 1, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income which is
exempt from federal income tax and the income taxes imposed by the State of
West Virginia. The objective cannot be changed without approval of
shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a non-diversified portfolio of West Virginia
Municipal Securities.
CHARACTERISTICS
A West Virginia Municipal Security will be determined by the Adviser
to meet the quality standards established by the Trustees if it is of
comparable quality to municipal securities within the Fund's rating
requirements. The Trustees consider the creditworthiness of the
issuer of a municipal security, the issuer of a participation interest
if the Fund has the right to demand payment from the issuer of the
interest, or the guarantor of payment by either of those issuers.
If Moody's, S&P's, or Fitch's ratings change because of changes in
those organizations or in their rating systems, the Fund will try to
use comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of West Virginia Municipal Securities include, but are not
limited to:
ogeneral obligation bonds secured by a municipality's pledge of
taxation;
otax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later date;
oserial bonds sold with differing maturity dates;
obond anticipation notes sold in anticipation of the issuance of
longer-term bonds; and
opre-refunded municipal bonds whose timely payment of interest and
principal is ensured by an escrow of U.S. government obligations.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from other financial
institutions irrevocable letters of credit or guarantees and give the
Fund the right to demand payment of the principal amounts of the
participation interests plus accrued interest on short notice (usually
within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value
of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by
the Fund are subject to repayment of principal (usually within seven
days) on the Fund's demand. The terms of these variable rate demand
instruments require payment of principal and accrued interest from the
issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may invest up to 5% of its net assets in municipal leases.
The Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional
interests in lease payments by a governmental or non-profit entity.
The lease payments and other rights under the lease provide for and
secure the payments on the certificates. Lease obligations may be
limited by municipal charter or the nature of the appropriation for
the lease. In particular, lease obligations may be subject to periodic
appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot
accelerate lease obligations upon default. The trustee would only be
able to enforce lease payments as they become due. In the event of a
default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment or
that the substitute source of payment will generate tax-exempt income.
In determining the liquidity of municipal lease securities, the
Adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee: (b) the potential recovery, if any, from a
sale of the leased property upon termination of the lease; (c) the
lessee's general credit strength (e.g., its debt, administrative,
economic, and financial characteristics and prospects); (d) the
likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential
to its operations (e.g., the potential for an `event of non-
appropriation'); and (e) any credit enhancement or legal recourse
provided upon an event of non-appropriation or other termination of
the lease.
If the Fund purchases unrated municipal leases, the Trustees will be
responsible for determining, on an ongoing basis, the credit quality
of such leases and the likelihood that such leases will not be
canceled.
MUNICIPAL BOND INSURANCE
The Fund may purchase municipal securities covered by insurance which
guarantees the timely payment of principal at maturity and interest on
such securities (`Policy'' or ``Policies''). These insured municipal
securities are either (1) covered by an insurance policy applicable to
a particular security, whether obtained by the issuer of the security
or by a third party (`Issuer-Obtained Insurance'') or (2) insured
under master insurance policies issued by municipal bond insurers,
which may be purchased by the Fund. The premiums for the Policies may
be paid by the Fund and the yield on the Fund's portfolio may be
reduced thereby.
The Fund may require or obtain municipal bond insurance when
purchasing municipal securities which would not otherwise meet the
Fund's quality standards. The Fund may also require or obtain
municipal bond insurance when purchasing or holding specific municipal
securities, when, in the opinion of the Fund's investment adviser,
such insurance would benefit the Fund (for example, through
improvement of portfolio quality or increased liquidity of certain
securities). The Fund's investment adviser anticipates that between
30% and 70% of the Fund's net assets will be invested in municipal
securities which are insured.
Issuer-Obtained Insurance policies are noncancellable and continue in
force as long as the municipal securities are outstanding and their
respective insurers remain in business. If a municipal security is
covered by Issuer-Obtained Insurance, then such security need not be
insured by the Policies purchased by a Fund.
The Fund may purchase two types of Policies issued by municipal bond
insurers. One type of Policy covers certain municipal securities only
during the period in which they are in the Fund's portfolio. In the
event that a municipal security covered by such a Policy is sold from
a Fund, the insurer of the relevant Policy will be liable for those
payments of interest and principal which are due and owing at the time
of the sale.
The other type of Policy covers municipal securities not only while
they remain in the Fund's portfolio but also until their final
maturity if they are sold out of the Fund's portfolio, so that the
coverage may benefit all subsequent holders of those municipal
securities. The Fund will obtain insurance which covers municipal
securities until final maturity even after they are sold out of the
Fund's portfolio only if, in the judgment of the investment adviser,
the Fund would receive net proceeds from the sale of those securities,
after deducting the cost of such permanent insurance and related fees,
significantly in excess of the proceeds it would receive if such
municipal securities were sold without insurance. Payments received
from municipal bond issuers may not be tax-exempt income to
shareholders of the Fund.
The Fund may purchase municipal securities insured by Policies from
MBIA Corp. (`MBIA''), AMBAC Indemnity Corporation (``AMBAC''),
Financial Guaranty Insurance Company (`FGIC''), or any other
municipal bond insurer which is rated AAA by S&P or Aaa by Moody's.
Each Policy guarantees the payment of principal and interest on those
municipal securities it insures. The Policies will have the same
general characteristics and features. A municipal security will be
eligible for coverage if it meets certain requirements set forth in
the Policy. In the event interest or principal on an insured municipal
security is not paid when due, the insurer covering the security will
be obligated under its Policy to make such payment not later than 30
days after it has been notified by the Fund that such non-payment has
occurred. MBIA, AMBAC, and FGIC will not have the right to withdraw
coverage on securities insured by their Policies so long as such
securities remain in the Fund's portfolio, nor may MBIA, AMBAC, or
FGIC cancel their Policies for any reason except failure to pay
premiums when due.
MBIA, AMBAC, and FGIC will reserve the right at any time upon 90 days'
written notice to the Fund to refuse to insure any additional
municipal securities purchased by the Fund after the effective date of
such notice. The Fund reserves the right to terminate any of the
Policies if they determine that the benefits to a Fund of having its
portfolio insured under such Policy are not justified by the expense
involved.
Additionally, the Fund reserves the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC if such carriers
are rated AAA by S&P or Aaa by Moody's.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or expenses, other than
normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year
from the date of acquisition. The Fund requires its custodian to take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund may only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are found by
the Adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling
portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund in
a dollar amount sufficient to make payment for the obligations to be
purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying
and selling financial futures contracts and options on financial futures
contracts. Additionally, the Fund may buy and sell call and put options on
portfolio securities.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties, the seller who
agrees to make delivery of the specific type of security called for in
the contract (`going short'') and the buyer who agrees to take
delivery of the security (`going long'') at a certain time in the
future. Financial futures contracts call for the delivery of
particular debt securities issued or guaranteed by the U.S. Treasury
or by specified agencies or instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to
interest rates. A rise in rates means a drop in price. Conversely, a
drop in rates means a rise in price. In order to hedge its holdings of
fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a
predetermined price (i.e., `go short'') to protect itself against the
possibility that the prices of its fixed income securities may decline
during the Fund's anticipated holding period. The Fund would `go
long''(agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures
contracts for U.S. government securities. Unlike entering directly
into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the purchase
of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a
short position at the specified price.
The Fund may purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio
securities decrease in value during the term of an option, the related
futures contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally close out
its option by selling an identical option. If the hedge is successful,
the proceeds received by the Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund for
the original option plus the realized decrease in value of the hedged
securities.
Alternatively, the Fund may exercise its put option. To do so, it
would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the
option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the
Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and the premium
paid for the contract will be lost.
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts for U.S. government
securities to hedge its portfolio against an increase in market
interest rates. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of assuming a short futures
position (selling a futures contract) at the fixed strike price at any
time during the life of the option if the option is exercised. As
market interest rates rise, causing the prices of futures to go down,
the Fund's obligation under a call option on a future (to sell a
futures contract) costs less to fulfill, causing the value of the
Fund's call option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can offset the drop in value of the Fund's fixed income
portfolio which is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund will then offset
the decrease in value of the hedged securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts
for U.S. government securities to hedge its portfolio against a
decrease in market interest rates. When the Fund writes a put option
on a futures contract, it receives a premium for undertaking the
obligation to assume a long futures position (buying a futures
contract) at a fixed price at any time during the life of the option.
As market interest rates decrease, the market price of the underlying
futures contract normally increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because
the buyer can sell the same futures contract at a higher price in the
market. The premium received by the Fund can then be used to offset
the higher prices of portfolio securities to be purchased in the
future due to the decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the
buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of buying the second
option will be less than the premium received by the Fund for the
initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in
market interest rates is to buy a listed call option on a financial
futures contract for U.S. government securities. When the Fund
purchases a call option on a futures contract, it is purchasing the
right (not the obligation) to assume a long futures position (buy a
futures contract) at a fixed price at any time during the life of the
option. As market interest rates fall, the value of the underlying
futures contract will normally increase, resulting in an increase in
value of the Fund's option position. When the market price of the
underlying futures contract increases above the strike price plus
premium paid, the Fund could exercise its option and buy the futures
contract below market price.
Prior to the exercise or expiration of the call option the Fund could
sell an identical call option and close out its position. If the
premium received upon selling the offsetting call is greater than the
premium originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the
futures contracts. If this limitation is exceeded at any time, the
Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
``MARGIN'' IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in
cash or U.S. Treasury bills with its custodian (or the broker, if
legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve
the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination
of the futures contract, assuming all contractual obligations have
been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities. A put option
gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during
the term of the option. A call option gives the Fund, in return for a
premium, the right to buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of
the option during the option period to deliver the underlying security
upon payment of the exercise price. As a writer of a put option, the
Fund has the obligation to purchase a security from the purchaser of
the option upon the exercise of the option.
The Fund may write covered call options either on securities held in
its portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash in
the amount of any additional consideration). In the case of put
options, the Fund will segregate cash or U.S. Treasury obligations
with a value equal to or greater than the exercise price of the
underlying securities.
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of
the options for those options on portfolio securities held by the Fund
and not traded on an exchange.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan, but would terminate the loan and
regain the right to vote if that were considered important with respect to
the investment.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities laws. The Fund will not invest more than
15% of the value of its total assets in restricted securities; however,
certain restricted securities which the Trustees deem to be liquid will be
excluded from this 15% limitation.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (`SEC'') Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the `Rule''). The Rule is a
non-exclusive, safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under Rule 144A. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) for determination by the Trustees. The Trustees consider
the following criteria in determining the liquidity of certain restricted
securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
WEST VIRGINIA INVESTMENT RISKS
The economy of West Virginia has large dependence on the coal mining,
chemical, and steel industries. Per capita personal income is among the
lowest in the nation. The birth rate is also among the lowest while the
death rate is among the highest resulting in a low rate of population
growth.
The recent performance of the West Virginia economy has improved. Personal
income growth has been above 4% for the past nine consecutive quarters.
Total employment in West Virginia rose 3.4% in 1994, 1.9% in 1995, and an
estimated 1.7% in 1996. The unemployment rate was 7.9% in 1995 and is
expected to decline to 7.4% for 1996. The national unemployment rate for
1996 is expected to be 5.4%. Recent job growth is occurring in the service,
trade, and manufacturing industries.
The State posted a surplus for the fiscal year ended June 30, 1995. On
January 23, 1996, the State Legislature passed legislation which reduced
the personal income tax for certain taxpayers having federal adjusted gross
income of ten thousand dollars or less and reduced the business franchise
tax rate from seventy-five one hundredths of one percent to seventy one
hundredths of one percent of the value of the tax base. The Governor
signed the bill on January 26, 1996.
West Virginia's economy should be enhanced by the West Virginia Highway
System Improvements Initiative which is anticipated to involve the
expenditure of approximately $4.62 billion of federal and State funds over
the next several years to construct new roadways in the State. However,
one highway project, known as `Corridor H,'' has received considerable
opposition in its final approval process. Federally funded construction of
several federal administrative facilities in the State is also expected to
enhance the State's economy.
In March of 1994, the West Virginia Supreme Court of Appeals issued its
opinion in Booth v. Sims, 193 W.Va. 323, 456 S.E. 2d 167 (1994), which will
likely affect various State pension plans. In this case, the Court ruled
that the State Legislature could not reduce the state troopers' retirement
annual cost of living adjustment. The Legislature had approved such
reductions in 1994 due to concerns regarding the actuarial soundness of the
troopers' pension plan. The Court found the Legislature's reduction of
benefits unconstitutional as applied to troopers which have participated in
the plan long enough to have detrimentally relied on expected pension
profits. State lawmakers speculate that the Court's ruling may affect the
State's budget by restricting the Legislature's ability to amend State
pension plans which are inadequately funded.
In 1995, the State Legislature substantially reformed the State's workers'
compensation program. The reform, aimed primarily at enforcing employers'
premium obligations and strengthening requirements for permanent total
disability awards, is intended to decrease the program's unfunded liability
and make the State's business climate more attractive.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered
the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. During
the period any reverse repurchase agreements are outstanding, but only
to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio
instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
municipal bonds secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may
purchase put and call options on portfolio securities and on financial
futures contracts. In addition, the Fund reserves the right to hedge
the portfolio by entering into financial futures contracts and to sell
puts and calls on financial futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities
up to one-third of the value of its total assets. The Fund may,
however, acquire publicly or non-publicly issued municipal bonds or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, and limitations or
the Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as temporary
investments more than 25% of the value of its assets in cash or cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except
to secure permitted borrowings. For purposes of this limitation, the
following are not deemed to be pledges: margin deposits for the
purchase and sale of financial futures contracts and related options
and segregation or collateral arrangements made in connection with
options activities or the purchase of securities on a when-issued
basis.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement
in more than seven days after notice, over-the-counter options and
certain restricted securities and municipal leases not determined by
the Trustees to be liquid.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to
no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of its total assets in any
one investment company, and invest no more than 10% of its total
assets in investment companies in general, unless permitted to exceed
these limitations by an exemptive order of the Securities and Exchange
Commission. The Fund will purchase securities of investment companies
only in open-market transactions involving only customary broker's
commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, or acquisition of
assets.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund does not expect to borrow money or pledge securities in excess of
5% of the value of its total assets in the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''
WESMARK FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with WesMark Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing consultant; Conference Planning, Manchester
Craftsmen's Guild; Restaurant Consultant, Frick Art & History Center;
Conference Coordinator, University of Pittsburgh Art History Department;
Director or Trustee of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
C. Christine Thomson
Federated Investors Tower
Pittsburgh, PA
Birthdate: September 1, 1957
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*
John F. Donahue $ 0
Chairman and Trustee
Thomas G. Bigley $ 0
Trustee
John T. Conroy, Jr. $ 0
Trustee
William J. Copeland $ 0
Trustee
James E. Dowd $ 0
Trustee
Lawrence D. Ellis, M.D. $ 0
Trustee
Edward L. Flaherty, Jr. $ 0
Trustee
Edward C. Gonzales $ 0
President, Treasurer, and
Trustee
Peter E. Madden $ 0
Trustee
Gregor F. Meyer $ 0
Trustee
John E. Murray, Jr. $ 0
Trustee
Wesley W. Posvar $ 0
Trustee
Marjorie P. Smuts$ 0
Trustee
*The aggregate compensation is provided for the Trust which is comprised
of two portfolios. Information is furnished for the fiscal year ending
January 31, 1998.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is WesBanco Bank Wheeling. It is a wholly-
owned subsidiary of WesBanco, Inc. The Adviser shall not be liable to the
Fund or any shareholder for any losses that may be sustained in the
purchase, holding, lending, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed upon
it by its contract with the Fund.
Because of internal controls maintained by the Adviser to restrict the flow
of non-public information, Fund investments are typically made without any
knowledge of the Adviser's or its affiliates' relationships with an issuer.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus.
CUSTODIAN
WesBanco Bank Wheeling is custodian for the securities and cash of the
Fund. Under the custodian agreement, WesBanco holds the Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. WesBanco's fees for custody services are based upon the market
value of Fund securities held in custody plus certain securities
transaction charges.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING
SERVICES
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, is transfer agent for shares of the
Fund and dividend disbursing agent for the Fund. Federated Services Company
also provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The Adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund
or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the Adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The Adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares of the Fund is explained
in the prospectus under `Investing in the Fund.''
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule
12b-1 of the Investment Company Act of 1940 and a Shareholder Services
Plan. These arrangements permit the payment of fees to the Distributor, and
to stimulate distribution activities and to cause services to be provided
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Fund will
be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objective. By
identifying potential investors whose needs are served by the Fund's
objective, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; and
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing
office space, equipment, telephone facilities, and various personnel,
including clerical, supervisory, and computer, as is necessary or
beneficial to establish and maintain shareholders' accounts and records,
process purchase and redemption transactions, process automatic investments
of client account cash balances, answer routine client inquiries regarding
the Fund, assist clients in changing dividend options, account
designations, and addresses, and providing such other services as the Fund
may reasonably request.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds
and other portfolio securities. The independent pricing service takes into
consideration yield, stability, risk, quality, coupon rate, maturity, type
of issue, trading characteristics, special circumstances of a security or
trading market, and any other factors or market data it considers relevant
in determining valuations for normal institutional size trading units of
debt securities, and does not rely exclusively on quoted prices. In
addition, the Fund values short-term obligations according to the mean
between the bid and asked prices as furnished by an independent pricing
service, or for short-term obligations with remaining maturities of 60 days
or less at the time of purchase, at amortized cost.
VALUING FUTURES AND OPTIONS
The Fund will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
options trading on such exchanges, unless the Trustees determine in good
faith that another method of valuing option positions is necessary.
Over-the-counter put options will be valued at the mean between the bid and
the asked prices. Covered call options will be valued at the last sale
price on the national exchange on which such option is traded. Unlisted
call options will be valued at the latest bid price as provided by brokers.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under `Redeeming Shares.'' Redemption requests cannot be
executed on days on which the New York Stock Exchange is closed or on
federal holidays when wire transfers are restricted.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio. To the extent
available, such securities will be readily marketable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, under which the Fund is obligated to redeem shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Fund determines net asset value.
The portfolio instruments will be selected in a manner that the Trustees
deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders of the Trust may be held
personally liable as partners under Massachusetts law for acts or
obligations of the Trust on behalf of the Fund. To protect shareholders of
the Fund, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations on behalf of the Fund, the Trust is required to use its
property to protect or compensate the shareholder. On request, the Trust
will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust on behalf of the Fund. Therefore,
financial loss resulting from liability as a shareholder of the Fund will
occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the
dividends received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length of
time the shareholder has owned the shares.
TOTAL RETURN
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000 adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
The yield for the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the maximum offering price per share
on the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated during
the thirty-day period is assumed to be generated each month over a twelve-
month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of certain
adjustments required by the Securities and Exchange Commission and,
therefore, may not correlate to the dividends or other distributions paid
to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield,
but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax,* and is
often free from state and local taxes as well. As the tables on the next
page indicate, a `tax-free'' investment is an attractive choice for
investors, particularly in times of narrow spreads between tax-free and
taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF WEST VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.00% 34.00% 37.50% 42.50% 46.10%
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN: 24,650 59,750 124,650 271,050 $271,050
Tax-Exempt
Yield Taxable Yield Equivalent
2.50% 3.09% 3.79% 4.00% 4.35% 4.64%
3.00% 3.70% 4.55% 4.80% 5.22% 5.57%
3.50% 4.32% 5.30% 5.60% 6.09% 6.49%
4.00% 4.94% 6.06% 6.40% 6.96% 7.42%
4.50% 5.56% 6.82% 7.20% 7.83% 8.35%
5.00% 6.17% 7.58% 8.00% 8.70% 9.28%
5.50% 6.79% 8.33% 8.80% 9.57% 10.20%
6.00% 7.41% 9.09% 9.60% 10.43% 11.13%
6.50% 8.02% 9.85% 10.40% 11.30% 12.06%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF WEST VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
21.00% 34.50% 37.50% 42.50% 46.10%
JOINT $1- $40,201- $99,601- $151,751- OVER
RETURN: 40,200 99,600 151,750 271,050 $271,050
Tax-Exempt
Yield Taxable Yield Equivalent
2.50% 3.16% 3.82% 4.00% 4.35% 4.64%
3.00% 3.80% 4.58% 4.80% 5.22% 5.57%
3.50% 4.43% 5.34% 5.60% 6.09% 6.49%
4.00% 5.06% 6.11% 6.40% 6.96% 7.42%
4.50% 5.70% 6.87% 7.20% 7.83% 8.35%
5.00% 6.33% 7.63% 8.00% 8.70% 9.28%
5.50% 6.96% 8.40% 8.80% 9.57% 10.20%
6.00% 7.59% 9.16% 9.60% 10.43% 11.13%
6.50% 8.23% 9.92% 10.40% 11.30% 12.06%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The charts on the previous page are for illustrative purposes only. They
are not indicators of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return as described below.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors, such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net as set value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the `intermediate municipal
bond funds''category in advertising and sales literature.
O MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
o LEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an index
comprised of all state general obligation debt issues with maturities
between four and six years. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total returns
calculated for one, three, and twelve month periods as well as year-
to-date. Total returns are also calculated as of the index inception,
December 31, 1979.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by the Fund portfolio managers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute (`ICI'').
For example, according to the ICI, twenty-seven percent of American
households are pursuing their financial goals through mutual funds. These
investors, as well as businesses and institutions, have entrusted over $3
trillion to the more than 5,500 funds available.
APPENDIX
STANDARD AND POOR'S RATINGS GROUP BOND RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's Ratings Group does not rate a particular type of obligation as a
matter of policy.
PLUS (+) OR MINUS (-):--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., BOND RATING DEFINITIONS
AAA--Bonds which 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 which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
NR--Not rated by Moody's Investors Service, Inc.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
NR--NR indicates that Fitch Investors Service, Inc. does not rate the
specific issue.
STANDARD AND POOR'S RATINGS GROUP NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1--(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2--(Good Credit Quality). Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1 ratings.
Cusip 951025105
G01913-02 (3/97)
[Graphic]
GROWTH FUND
PROSPECTUS
March 12, 1997
[Graphic]
WESMARK GROWTH FUND
(A PORTFOLIO OF WESMARK FUNDS)
PROSPECTUS
The shares of WesMark Growth Fund (the "Fund") offered by this prospectus
represent interests in a diversified portfolio of WesMark Funds (the
"Trust"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is appreciation of capital. The Fund
invests primarily in equity securities of companies with prospects for
above-average growth in earnings and dividends.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
WESBANCO BANK WHEELING OR ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED BY
WESBANCO BANK WHEELING OR ITS AFFILIATES, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
12, 1997 with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge, obtain
other information, or make inquiries about the Fund by writing or calling
the Fund at 1-800-368-3369. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Fund is maintained electronically with the SEC at Internet Web
site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 12, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Portfolio Investments 3
Investment Risks 8
Investment Limitations 8
WESMARK FUNDS INFORMATION 9
Management of the Trust 9
Distribution of Fund Shares 10
Administration of the Fund 11
Brokerage Transactions 11
Expenses of the Fund 12
NET ASSET VALUE 12
INVESTING IN THE FUND 12
Minimum Investment Required 12
What Shares Cost 12
Share Purchases 13
Systematic Investment Program 13
Exchanging Securities for Fund Shares 13
Certificates and Confirmations 13
Dividends and Capital Gains 14
EXCHANGE PRIVILEGE 14
REDEEMING SHARES 14
Systematic Withdrawal Program 15
Redemption Before Purchase
Instruments Clear 16
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
Voting Rights 16
EFFECT OF BANKING LAWS 16
TAX INFORMATION 17
Federal Income Tax 17
State and Local Taxes 17
PERFORMANCE INFORMATION 17
Performance Information for
Common Trust Funds 18
STATEMENT OF ASSETS AND LIABILITIES 19
INDEPENDENT AUDITORS' REPORT 20
ADDRESSES 21
</TABLE>
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee 0.75%
12b-1 Fee(1) 0.00%
Total Other Expenses 0.40%
Shareholder Services Fee(1) 0.00%
Total Annual Fund Operating Expenses 1.15%
</TABLE>
(1) The Fund has no present intention of paying or accruing 12b-1 fees or
shareholder services fees during the fiscal year ending January 31, 1998.
If the Fund was paying or accruing 12b-1 fees or shareholder services fees,
the Fund would be able to pay up to 0.25% of its average daily net assets
for 12b-1 fees and up to 0.25% of its average daily net assets for
shareholder services fees.
* Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending January 31, 1998.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in the Fund" and "WesMark Funds Information."
Wire-transferred redemptions may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
The Fund charges no redemption fees. $12 $37
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING
JANUARY 31, 1998.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated March 1, 1996. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The Trust
currently consists of WesMark West Virginia Municipal Bond Fund and WesMark
Growth Fund. This prospectus relates only to the WesMark Growth Fund. The
shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Board of Trustees (the "Trustees") has not
established classes of shares of the Fund. The Fund is designed primarily
for customers of WesBanco Bank Wheeling and its affiliates and individual
investors who desire a convenient means of accumulating an interest in a
professionally managed, diversified portfolio investing primarily in
growth-oriented equity securities. WesBanco Bank Wheeling is the investment
adviser to the Fund ("Adviser"). A minimum initial investment of $1,000 is
required. Subsequent investments must be in amounts of at least $100.
Fund shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is appreciation of capital. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus. The investment objective cannot be changed without approval of
shareholders.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a professionally
managed portfolio consisting primarily of equity securities of companies
with prospects for above-average growth in earnings and dividends. The
Fund's investment adviser selects equity securities on the basis of
traditional research techniques, including assessment of earnings and
dividend growth prospects and of the risk and volatility of each company's
business. Most often, these companies will be classified as "large-" or
"mid-"capitalization companies. The Adviser generally considers companies
with market capitalizations over $1 billion to fall within these
classifications. The Fund's investment approach is based on the conviction
that, over the long term, the economy will continue to expand and develop
and that this economic growth will be reflected in the growth of the
revenues and earnings of publicly held corporations. Under normal market
conditions, the Fund will invest at least 65% of its assets in equity
securities of U.S. companies. Equity securities include common stocks,
preferred stocks, and securities (including debt securities) that are
convertible into common stocks. Unless indicated otherwise, the investment
policies may be changed by the Trustees without the approval of
shareholders. Shareholders will be notified before any material changes in
these policies become effective.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include,
but are not limited to:
* common stocks of U.S. or foreign companies which are listed on the New
York Stock Exchange, American Stock Exchange, or other domestic stock
exchange or traded in over-the-counter markets, and preferred stock which is
convertible into common stock of such companies;
* American Depositary Receipts ("ADRs") of foreign companies traded on the
New York Stock Exchange or over-the-counter market. The Fund may not invest
more than 25% of its assets in ADRs (see "Foreign Investments"). The Fund
may also purchase non-ADR foreign securities;
* convertible bonds or other corporate debt obligations rated, at the time
of purchase, investment grade (within the four highest ratings categories
for corporate debt) by a nationally recognized statistical rating
organization ("NRSRO"), such as Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A, or Baa), Standard & Poor's Ratings Group ("S&P") (AAA, AA, A,
or BBB), or Fitch Investors Service, Inc. ("Fitch") (AAA, AA, A, or BBB);
and
* put and call options on securities and indices and futures contracts.
In addition, the Fund may invest in warrants, U.S government securities,
illiquid securities, restricted securities, securities of other investment
companies, short-term money market instruments, when-issued or delayed
delivery transactions, enter into repurchase agreements, borrow money, and
lend portfolio securities.
Bonds rated BBB by S&P or Fitch or Baa by Moody's are investment grade, but
have more speculative characteristics than A-rated bonds. Changes in
economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. A description of the rating categories is contained in the Appendix
to the Statement of Additional Information. The prices of fixed income
securities fluctuate inversely to the direction of interest rates.
PORTFOLIO INVESTMENTS
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities which
are rated, at the time of purchase, investment grade by an NRSRO (such as
BBB or better by S&P or Fitch, or Baa or better by Moody's), or, if unrated,
are of comparable quality as determined by the Adviser. Convertible
securities are fixed income securities which may be exchanged or converted
into a predetermined number of the issuer's underlying common stock at the
option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination
of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives.
In selecting a convertible security, the Adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument,
and the investment potential of the underlying security for capital
appreciation.
Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities.
The holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in
whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. Convertible securities are senior to
equity securities, and therefore have a claim to assets of the corporation
prior to the holders of common stock in the case of liquidation. However,
convertible securities are generally subordinated to similar nonconvertible
securities of the same company. The interest income and dividends from
convertible bonds and preferred stocks provide a stable stream of income
with generally higher yields than common stocks, but lower than
nonconvertible securities of similar quality. The Fund will exchange or
convert the convertible securities held in its portfolio into shares of the
underlying common stocks when, in the opinion of the Adviser, the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objective. Otherwise, the Fund will hold or trade
the convertible securities.
AMERICAN DEPOSITARY RECEIPTS. The Fund may invest in ADRs. ADRs are
depositary receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
Generally, depositary receipts in registered form are designed for use in
the U.S. securities market and depositary receipts in bearer form are
designed for use in securities markets outside the United States. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Ownership of
unsponsored depositary receipts may not entitle the Fund to financial or
other reports from the issuer of the underlying security, to which it would
be entitled as the owner of sponsored depositary receipts. Depositary
receipts also involve the risks of other investments in foreign securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest
in the securities of other investment companies (including closed-end
investment companies) but it will not own more than 3% of the total
outstanding voting stock of any investment company, invest more than 5% of
its total assets in any one investment company, or invest more than 10% of
its total assets in investment companies in general, unless permitted to
exceed these limitations by an exemptive order of the SEC. The Fund will
invest in other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incur certain
expenses such as management fees and, therefore, any investment by the Fund
in shares of another investment company would be subject to such duplicate
expenses.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted and
illiquid securities. Restricted securities are any securities in which the
Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restrictions on resale under federal securities
laws. Certain restricted securities which the Trustees deem to be liquid
will be excluded from this limitation. However, the Fund will limit
investments in illiquid securities, including certain restricted securities
not determined by the Trustees to be liquid, non-negotiable time deposits,
repurchase agreements providing for settlement in more than seven days after
notice, and over-the-counter options to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the Adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities (up to one-third of the value of its
total assets) on a short-term or long-term basis, to broker/dealers, banks,
or other institutional borrowers of securities. The Fund will only enter
into loan arrangements with broker/dealers, banks, or other institutions
which the Adviser has determined are creditworthy and will receive
collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the
Fund. The Fund will write call options on securities either held in its
portfolio or for which it has the right to obtain without payment of further
consideration or for which it has segregated cash in the amount of any
additional consideration. In the case of put options, the Fund will
segregate cash or other securities with a value equal to or greater than the
exercise price of the underlying securities.
The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers
of the options since options on the portfolio securities held by the Fund
are not traded on an exchange. The Fund purchases and writes options only
with investment dealers and other financial institutions (such as commercial
banks or savings associations) deemed creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options
are third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded options
have a continuous liquid market while over-the-counter options may not.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial
futures contracts call for the delivery of particular debt instruments
(including those issued or guaranteed by the U.S. Treasury or by specified
agencies or instrumentalities of the U.S. government) at a certain time in
the future. The seller of the contract agrees to make delivery of the type
of instrument called for in the contract and the buyer agrees to take
delivery of the instrument at the specified future time.
The Fund may write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value resulting from anticipated increases in
market interest rates. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling the futures contract
at a fixed price at any time during a specified period if the option is
exercised. Conversely, as purchaser of a put option on a futures contract,
the Fund is entitled (but not obligated) to sell a futures contract at the
fixed price during the life of the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates.
The Fund will use these transactions to attempt to protect its ability to
purchase portfolio securities in the future at price levels existing at the
time it enters into the transactions. When the Fund writes a put option on a
futures contract, it is undertaking to buy a particular futures contract at
a fixed price at any time during a specified period if the option is
exercised. As a purchaser of a call option on a futures contract, the Fund
is entitled (but not obligated) to purchase a futures contract at a fixed
price at any time during the life of the option.
The Fund may not purchase or sell futures contracts or related options, for
other than bona fide hedging purposes, if immediately thereafter the sum of
the amount of margin deposits on the Fund's existing futures positions and
premiums paid for related options would exceed 5% of the market value of the
Fund's total assets. When the Fund purchases futures contracts, an amount of
cash and cash equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of
such futures contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial futures
as hedging devices, there is a risk that the prices of the securities
subject to the futures contracts may not correlate perfectly with the prices
of the securities in the Fund's portfolio. This may cause the futures
contract and any related options to react differently than the portfolio
securities to market changes. In addition, the Adviser could be incorrect in
its expectations about the direction or extent of market factors such as
interest rate movements. In these events, the Fund may lose money on the
futures contract or option. It is not certain that a secondary market for
positions in futures contracts or for options will exist at all times.
Although the Adviser will consider liquidity before entering into options
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. government
securities, which generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by the U.S. government agencies or instrumentalities. These
securities include securities that are backed by: the full faith and credit
of the U.S. Treasury; securities that are supported by the issuer's right to
borrow from the U.S. Treasury; and securities that are supported by the
credit of the agency or instrumentality issuing the obligations.
TEMPORARY INVESTMENTS/MONEY MARKET INSTRUMENTS. For temporary defensive
purposes (up to 100% of total assets) and to maintain liquidity (up to 35%
of total assets), the Fund may invest in U.S. and foreign short-term money
market instruments, including:
* commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch, and Europaper (dollar-denominated commercial paper
issued outside the United States) rated A-1, A-2, Prime-1, or Prime-2;
* instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances) if they have capital, surplus, and undivided profits
of over $100,000,000, or if the principal amount of the instrument is
insured by the Bank Insurance Fund, which is administered by the Federal
Deposit Insurance Corporation ("FDIC"), or the Savings Association Insurance
Fund, which is also administered by the FDIC. These instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Eurodollar Time Deposits ("ETDs");
* obligations of the U.S. government or its agencies or instrumentalities;
* repurchase agreements;
* securities of other investment companies; and
* other short-term instruments which are not rated but are determined by the
Adviser to be of comparable quality to the other obligations in which the
Fund may invest.
REPURCHASE AGREEMENTS. The securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that
the original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
CREDIT RATINGS. The Fund may invest in unrated securities if they are
determined to be of comparable quality to the Fund's acceptable rated
investments. If a security is subsequently downgraded below the permissible
investment category for a Fund, the Adviser will determine whether it
continues to be an acceptable investment; if not, the security will be sold.
Bonds rated BBB by S&P or Fitch or Baa by Moody's are investment grade, but
have more speculative characteristics than A-rated bonds. Changes in
economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. A description of the rating categories is contained in the Appendix
to the Statement of Additional Information.
DIVERSIFICATION. With respect to 75% of the value of total assets, the Fund
will not invest more than 5% in securities of any one issuer, other than
cash, cash items or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase agreements
collateralized by U.S. government securities or acquire more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be
changed without the approval of holders of a majority of the Fund's shares.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
been applied to certain contracts (including, futures, forward, option and
swap contracts) that "derive" their value from changes in the value of an
underlying security, currency, commodity or index. Certain types of
securities that incorporate the performance characteristics of these
contracts are also referred to as "derivatives." The term has also been
applied to securities "derived" from the cash flows from underlying
securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the
response of certain derivative contracts and securities to market changes
may differ from traditional investments, such as stock and bonds,
derivatives do not necessarily present greater market risks than traditional
investments. The Fund will only use derivative contracts for the purposes
disclosed above in this prospectus. To the extent that the Fund invests in
securities that could be characterized as derivatives (such as convertible
securities, options, and futures contracts), they will only do so in a
manner consistent with its investment objectives, policies and limitations.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the
purpose of seeking short-term profits, securities will be sold whenever the
Fund's Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. The Fund anticipates its portfolio turnover
rate will not exceed 200%. A higher rate of portfolio turnover involves
correspondingly greater transaction expenses which must be borne directly by
the Fund and, thus, indirectly by its shareholders. In addition, a high rate
of portfolio turnover may result in the realization of larger amounts of
capital gains which, when distributed to the Fund's shareholders, are
taxable to them. Nevertheless, transactions for the Fund's portfolio will be
based upon investment considerations and will not be limited by any other
considerations when the Fund's Adviser deems it appropriate to make changes
to the Fund's portfolio.
INVESTMENT RISKS
As with other mutual funds that invest primarily in equity securities, the
Fund is subject to market risks. That is, the possibility exists that common
stocks will decline over short or even extended periods of time, and that
United States equity market tends to be cyclical, experiencing both periods
when stock prices generally increase and periods when stock prices generally
decrease.
In the debt market, prices move inversely to interest rates. A decline in
market interest rates results in a rise in the market prices of outstanding
debt obligations. Conversely, an increase in market interest rates results
in a decline in market prices of outstanding debt obligations. In either
case, the amount of change in market prices of debt obligations in response
to changes in market interest rates generally depends on the maturity of the
debt obligations: the debt obligations with the longest maturities will
experience the greatest market price changes.
SECURITIES OF FOREIGN ISSUERS. There may be certain risks associated with
investing in foreign securities. These include risks of adverse political
and economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, less uniformity in accounting and reporting
requirements than applied to U.S. companies, and the possibility that there
will be less information on such securities and their issuers available to
the public. In addition, there are restrictions on foreign investments in
other jurisdictions and there tends to be difficulty in obtaining judgments
from abroad and effecting repatriation of capital invested abroad. Delays
could occur in settlement of foreign transactions, which could adversely
affect shareholder equity. Foreign securities may be subject to foreign
taxes, which reduce yield, and may be less marketable than comparable United
States securities. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any risk identified above appears to the
Adviser to be substantial.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and pledge
assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
WESMARK FUNDS INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of the Trust and
for exercising all of the powers of the Trust except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
WesMark Funds, investment decisions for the Fund are made by WesBanco Bank
Wheeling (the "Adviser" or "WesBanco"), the Fund's investment adviser,
subject to direction by the Trustees. The Adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual
fee from the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to 0.75% of the Fund's average daily net assets. The
investment advisory contract allows the voluntary waiver, in whole or in
part, of the investment advisory fee or the reimbursement of expenses by the
Adviser from time to time. The Adviser can terminate any voluntary waiver of
its fee or reimbursement of expenses at any time at its sole discretion.
ADVISER'S BACKGROUND. WesBanco Bank Wheeling is a wholly-owned subsidiary of
WesBanco, Inc. (the "Corporation"), a registered bank holding company
headquartered in Wheeling, West Virginia. The Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses in West Virginia and Ohio with 42 banking locations. The Adviser
is a state chartered bank which offers financial services that include, but
are not limited to, commercial and consumer loans, corporate, institutional
and personal trust services, and demand and time deposit accounts. The
Adviser employs an experienced staff of professional investment analysts,
portfolio managers and traders. The staff manages the bond portfolios of the
Corporation and its subsidiaries which includes government, corporate,
mortgage and municipal securities with a total value of $525 million on
December 31, 1996. In addition, the Adviser provides investment management
services to the Trust Department of WesBanco and three other affiliate banks
with trust powers. The total assets of the trust departments of the
Corporation are valued at $1.6 billion. The Adviser has not previously
served as an investment adviser to a mutual fund.
As part of its regular banking operations, the Adviser may make loans to
public companies and municipalities. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which are
also lending clients of the Adviser. The lending relationship will not be a
factor in the selection of securities.
Jerome B. Schmitt has been a co-portfolio manager for the Fund since its
inception. He has been employed by the Adviser since 1972 and served as
Senior Vice President of Trusts and Investments since 1991, and has been
Executive Vice President since June 1996. Mr. Schmitt is a Chartered
Financial Analyst and received an M.A. in Economics from Ohio University and
is a member of the Institute of Chartered Financial Analysts. Mr. Schmitt is
responsible for supervising the activities of the Trust and Investment
Departments of the Adviser.
David B. Ellwood has been a co-portfolio manager for the Fund since its
inception. He has been employed by the Adviser since 1982 and has been
Assistant Vice President and Senior Investment Officer since May 1996. Mr.
Ellwood is a Chartered Financial Analyst and received a B.S. degree in
Business Administration from Wheeling Jesuit College. Mr. Ellwood is
responsible for portfolio management, investment research and assisting in
the supervision of the investment activities of the Investment Department.
Both the Trust and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Board of Trustees, and could result in severe
penalties.
DISTRIBUTION OF FUND SHARES
Edgewood Services, Inc. is the principal distributor (the "Distributor") for
shares of the Fund. Edgewood Services, Inc. is a New York corporation and a
wholly-owned subsidiary of Federated Investors. The Distributor is a
registered broker/dealer.
DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with the
Investment Company Act of 1940's Rule 12b-1 (the "Plan"), the Fund may pay
to the Distributor an amount computed at an annual rate of 0.25% of the
average daily net asset value of the Fund's shares to finance any activity
which is principally intended to result in the sale of shares subject to the
Plan. However, the Plan will not be activated, and the Distributor has no
present intention to collect any fees pursuant to the Plan, unless and until
a separate class of "trust" shares of the Fund (which would not have a Rule
12b-1 Plan) is created and trust clients' investments in the Fund are
converted to such class.
The Distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the
extent the expenses attributable to the shares exceed such lower expense
limitation as the Distributor may, by notice to the Trust, voluntarily
declare to be effective.
The Distributor may select financial institutions, such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers ("brokers") to provide sales and support services as agents
for their clients or customers who beneficially own shares. Financial
institutions will receive fees from the Distributor based upon shares
subject to the Plan and owned by their clients or customers. The schedules
of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the Distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the Distributor, including amounts
expended by the Distributor in excess of amounts received by it from the
Fund, interest, carrying or other financing charges in connection with
excess amounts expended, or the Distributor's overhead expenses. However,
the Distributor may be able to recover such amounts or may earn a profit
from future payments made by the Fund under the Plan.
SHAREHOLDER SERVICES ARRANGEMENTS. The Fund and WesBanco have entered into a
Shareholder Services Agreement (the "Services Agreement") with respect to
the shares of the Fund to provide administrative support services to
customers who from time to time may be owners of record or beneficial owners
of the Fund's shares. In return for providing these support services,
WesBanco (or a financial institution which has an agreement with WesBanco)
may receive payments from the Fund at a rate not exceeding 0.25% of the
average daily net assets of the shares beneficially owned by the financial
institution's customers for whom it is holder of record or with whom it has
a servicing relationship. These administrative services may include, but are
not limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel, including clerical,
supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses;
and providing such other services as the Fund reasonably requests. Certain
trust clients, including ERISA plans, will not be effected by the Services
Agreement because the Services Agreement will not be activated unless and
until a separate "trust" class of shares of the Fund (which would not have a
Services Agreement) is created and such trust clients' investments in the
Fund are converted to such class.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may also pay financial
institutions as directed by the Adviser a fee based upon the average daily
net asset value of shares of their customers invested in the Fund for
providing administrative services. This fee is in addition to the amounts
paid under the Distribution Plan for administrative services, and, if paid,
will be reimbursed by the Adviser and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
the administrative personnel and services necessary to operate the Fund.
Such services include certain legal and accounting services. Federated
Services Company provides these at an annual rate as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$75,000 per Fund. Federated Services Company may choose voluntarily to waive
a portion of its fee.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
Adviser may give consideration to those firms which have sold or are selling
shares of the Fund and other mutual funds distributed by Edgewood Services,
Inc. or its affiliates. The Adviser makes decisions on portfolio
transactions and select brokers and dealers subject to review by the
Directors.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. These expenses include, but are not limited to, the cost of:
organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund; taxes and commissions; issuing, purchasing,
repurchasing, and redeeming shares; fees for custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents, and registrars;
printing, mailing, auditing, accounting, and legal expenses; reports to
shareholders and government agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; distribution fees; insurance premiums;
association membership dues; and such nonrecurring and extraordinary items
as may arise. However, the Adviser may voluntarily waive and/or reimburse
some expenses.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets,
less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000.
Subsequent investments must be in amounts of at least $100. These minimums
may be waived for purchases by the Trust Division of WesBanco for its
fiduciary or custodial accounts and WesBanco employees and members of their
immediate family. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received. There is no sales charge imposed by the Fund.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of a Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day.
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and
Federal Reserve wire system are open for business. Shares of the Fund may be
purchased through WesBanco. In connection with the sale of Fund shares, the
Distributor may, from time to time, offer certain items of nominal value to
any shareholder or investor. The Fund reserves the right to reject any
purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call WesMark Funds
Shareholder Services at 1-800-368-3369. Texas residents must purchase shares
of the Fund through the Distributor at 1-888-898-0600. The order must be
placed by 4:00 p.m. (Eastern time) for shares to be purchased at that day's
price, and payment is normally expected the next business day.
PAYMENT BY WIRE. To purchase shares by Federal Reserve Wire, contact your
account officer for wiring instructions. Wire orders will only be accepted
on days on which the Fund, WesBanco and the Federal Reserve Banks are open
for business.
BY MAIL. To purchase shares of the Fund by mail, investors may send an
application (for a new account) and a check made payable to the Fund at:
WesMark Funds Shareholder Services, WesBanco Bank Wheeling, One Bank Plaza,
Wheeling, West Virginia 26003.
Orders by mail are considered received after payment by check is converted
by WesBanco into federal funds. This is normally the next business day after
WesBanco receives the check.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account and invested in Fund shares at the net asset
value next determined after an order is received by the Fund. A shareholder
may apply for participation in this program through WesBanco or by writing
to the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund shares. The Fund will
allow such exchanges only upon prior approval of the Fund and a
determination by the Fund and the Adviser that the securities to be
exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, and must be
liquid. The market value of any securities exchanged in an initial
investment, plus any cash, must be at least equal to the minimum investment
in the Fund.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription
or other rights attached to the securities become the property of the Fund,
along with the securities.
If an exchange is permitted, it will be treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
Fund shares, a gain or loss may be realized by the investor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Unless cash payments are
requested by contacting the Fund, dividends and capital gains are
automatically reinvested in additional shares of the Fund on payment dates
at net asset value. Distributions of net long-term capital gains realized by
the Fund will be made at least annually.
EXCHANGE PRIVILEGE
You may exchange shares of the Fund for shares of the WesMark West Virginia
Municipal Bond Fund at net asset value without a sales charge, provided you
have received a copy of the current prospectus of the WesMark West Virginia
Municipal Bond Fund, and you meet the investment minimum of the WesMark West
Virginia Municipal Bond Fund.
Upon receipt of proper instructions and all necessary supporting documents,
the Fund's shares you submit for exchange will be redeemed at the
next-determined net asset value. Written exchange instructions may require a
signature guarantee. An exchange is treated as a sale for federal income tax
purposes and, depending on the circumstances, you may realize a short or
long-term capital gain or loss. The exchange privilege may be terminated at
any time, and you will be notified of such termination. You may obtain
further information on the exchange privilege by calling WesMark Funds
Shareholder Services.
The WesMark Funds currently offer only one class of shares. If each of the
Funds should add a second class of shares, exchanges may be limited to
shares of the same class of each of the WesMark Funds.
An authorization form permitting the Fund to accept telephone exchange
requests must first be completed. It is recommended that investors request
this exchange privilege on the account application at the time of their
initial application. If not completed at the time of initial application,
authorization forms and information on this service can be obtained through
WesMark Funds Shareholder Services. Telephone exchange instructions may be
recorded.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange
request, reserves the right to modify or terminate the exchange privilege at
any time. Shareholders would be notified prior to any modification or
termination.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Requests for redemptions must
be received in proper form and can be made by calling WesBanco or writing
directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling his
account officer or by calling WesMark Funds Shareholder Services at
1-800-368-3369 to request the redemption. Shares will be redeemed at the net
asset value next determined after the Fund receives the redemption request
from WesBanco. Redemption requests must be received by WesBanco before 4:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. Proceeds will normally be wired the next business day or a
check will be sent to the address of record. WesBanco is responsible for
promptly submitting redemption requests and providing proper redemption
instructions to the Fund. If, at any time, the Fund should determine it
necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service are available by calling WesMark Funds Shareholder Services.
Telephone redemption instructions may be recorded. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
In the event of extraordinary economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, it is recommended that a redemption request be made in writing and be
sent by overnight mail to your account officer at WesBanco.
BY MAIL. Shareholders may redeem Fund shares by sending a written request to
WesMark Funds Shareholder Services at: WesBanco Bank Wheeling, One Bank
Plaza, Wheeling, West Virginia 26003. The written request should include the
shareholder's name, the Fund name, the account number, and the share or
dollar amount requested. Shareholders should call the WesMark Funds
Shareholder Services at 1-800-368-3369 for assistance in redeeming by mail.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than
to the shareholder of record must have signatures on written redemption
requests guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund and its transfer agent
reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven
calendar days, after receipt of a proper written redemption request,
provided that the transfer agent has received payment for shares from the
shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may
take advantage of the Systematic Withdrawal Program. Under this program,
Fund shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to Fund shares, and the fluctuation of the net
asset value of Fund shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund.
For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in the Fund. To be eligible
to participate in this program, a shareholder must have an account value of
at least $10,000. A shareholder may apply for participation in this program
through his financial institution or WesMark Funds Shareholder Services.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When you purchase Fund shares by check or through the Automated Clearing
House System, the proceeds from the redemption of those shares are not
available, and the shares may not be exchanged, until WesMark Funds
Shareholder Services and/or the transfer agent is reasonably certain that
the purchase check has cleared, which could take up to seven calendar days.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Trust have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company
Act of 1956 or any affiliate thereof from sponsoring, organizing or
controlling a registered, open-end investment company continuously engaged
in the issuance of its shares, and from issuing, underwriting, selling or
distributing securities in general. Such laws and regulations do not
prohibit such a holding company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customers.
Some entities providing services to the Fund, such as WesBanco Bank
Wheeling, are subject to such banking laws and regulations. They believe
that they may perform those services for the Fund contemplated by any
agreement entered into with the Fund without violating those laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
these entities from continuing to perform all or a part of the above
services. If this happens, the Trustees would consider alternative means of
continuing available services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will not pay federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies. The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and losses
realized by the other WesMark Funds, if any, will not be combined for tax
purposes with those realized by any of the other WesMark Funds, including
the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received, including capital gains
distributions. These tax consequences apply whether dividends are received
in cash or as additional shares. Distributions representing long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains no matter how long shares are held. Information on the tax status of
dividends and distributions is provided annually.
STATE AND LOCAL TAXES
State laws differ on this issue, and shareholders are urged to consult with
their tax adviser regarding the status of their account under state and
local tax laws, including treatment of distributions as income or return of
capital.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that
the Fund would have had to earn to equal its actual yield, assuming a
specific tax rate. The yield and the tax-equivalent yield do not necessarily
reflect income actually earned by the Fund and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Fund's performance to certain indices.
PERFORMANCE INFORMATION FOR COMMON TRUST FUNDS
The Fund is the successor to common trust funds ("CTFs") that were managed
by the Adviser. It is anticipated that, at the Fund's commencement of
operations, the assets from the CTFs will have been transferred to the Fund
in exchange for Fund shares.
Set forth below are certain performance data for these CTFs. This
information is deemed relevant because the CTFs have been managed using
substantially the same investment objective, policies, and limitations as
those used by the Fund. The CTFs were not registered under the Investment
Company Act of 1940. For this and other reasons, the past performance data
shown below is not necessarily indicative of the Fund's future performance.
The Fund is actively managed, and its investments will vary from time to
time. The Fund's investments are not identical to the past portfolio
investments of the CTFs. Moreover, the CTFs did not incur expenses that
correspond to the advisory, administrative, and other fees to which the Fund
is subject. Accordingly, the performance information shown below has been
adjusted to reflect the anticipated total expense ratio for the Fund.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1996*
CTFS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
WesBanco Common Trust Fund B
Inception: November 1967 23.61% 12.37% 13.25% 8.32%
WesBanco Equity Fund
Inception: June 1973 22.53% 11.88% 12.79% 12.15%
</TABLE>
* The Average Annual Total Return for each CTF has been adjusted to reflect
the Fund's anticipated expenses, net of voluntary waivers.
WESMARK GROWTH FUND
(A PORTFOLIO OF WESMARK FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 15, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in U.S. Treasury Bills, 2/13/1997, at amortized cost $ 99,603
Cash 397
Total assets 100,000
LIABILITIES: --
NET ASSETS for 10,000 shares outstanding $ 100,000
NET ASSETS CONSIST OF:
Paid in capital $ 100,000
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$100,000 / 10,000 shares outstanding $ 10.00
</TABLE>
Notes:
(1) WesMark Growth Fund (the "Fund") is a diversified portfolio of WesMark
Funds (the "Trust"), an open-end management investment company (a mutual
fund). The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated March 1, 1996 and is registered under the
Investment Company Act of 1940, as amended. The Fund has had no operations
since that date other than those relating to organizational matters,
including the issuance on January 15, 1997, of 10,000 shares at $10.00 per
share to Federated Administrative Services, the administrator of the Trust
("Administrator"), the proceeds of which were used to purchase U.S. Treasury
Bills. Organizational expenses estimated at $21,000, were borne initially by
the Administrator. The Fund has agreed to reimburse the Administrator for
the organizational expenses during the five-year period following the date
the Fund's registration statement first became effective.
(2) Reference is made to the "Management of the Trust" (on page 9),
"Administration of the Fund" (on page 11), and "Tax Information" (on page
17) in the prospectus for descriptions of the investment advisory fee,
administrative and other services and federal tax aspects of the Fund.
(3) Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the Administrator.
(4) Investment Valuations - Short-term securities with remaining maturities
of sixty days or less.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of the WESMARK FUNDS
and Shareholders of WESMARK GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of
WesMark Growth Fund as of January 15, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of WesMark Growth Fund as of
January 15, 1997, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 30, 1997
ADDRESSES
WesMark Growth Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897
Investment Adviser
WesBanco Bank Wheeling One Bank Plaza
Wheeling, West Virginia 26003
Custodian
WesBanco Bank Wheeling One Bank Plaza
Wheeling, West Virginia 26003
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Federated Investors Tower
Services Company Pittsburgh, Pennsylvania 15222-3779
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
[Graphic]
GROWTH FUND
PROSPECTUS DATED
March 12, 1997
[Graphic]
Cusip 951025204
G01912-01 (3/97)
[Graphic]
WESMARK GROWTH FUND
(A PORTFOLIO OF WESMARK FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of WesMark Growth Fund (the ``Fund') dated March 12, 1997.
This Statement is not a prospectus itself. You may request a copy of
the prospectus or a paper copy of this Statement of Additional
Information, if you have received it electronically, free of charge by
calling the WesMark Funds Shareholder Services at 1-800-368-3369. Terms
used but not defined herein have the same meaning as defined in the
prospectus.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated March 12, 1997
Edgewood Services, Inc.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Acceptable Investments 1
Equity Securities 1
U.S. Government Securities 1
Convertible Securities 1
Foreign Securities 1
When-Issued and Delayed Delivery Transactions 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Futures and Options Transactions 2
Lending of Portfolio Securities 5
Restricted and Illiquid Securities 5
Warrants 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 6
WESMARK FUNDS MANAGEMENT 8
Fund Ownership 12
Trustees Compensation 13
Trustee Liability 14
INVESTMENT ADVISORY SERVICES 14
Adviser to the Fund 14
Advisory Fees 14
OTHER SERVICES 14
Fund Administration 14
Custodian 14
Transfer Agent,Dividend Disbursing Agent, and
Portfolio Accounting Services 14
Independent Auditors 14
BROKERAGE TRANSACTIONS 14
PURCHASING SHARES 15
Distribution and Shareholder Services Plans 15
Administrative Arrangements 15
Conversion to Federal Funds 15
DETERMINING NET ASSET VALUE 16
Determining Market Value of Securities 16
Valuing Futures and Options 16
REDEEMING SHARES 16
Redemption in Kind 16
MASSACHUSETTS PARTNERSHIP LAW 17
TAX STATUS 17
The Fund's Tax Status 17
Shareholders' Tax Status 17
TOTAL RETURN 17
YIELD 18
PERFORMANCE COMPARISONS 18
Economic and Market Information 19
APPENDIX 20
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in WesMark Funds (the `Trust'') which was
established as a Massachusetts business trust under a Declaration of Trust
dated March 1, 1996.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is appreciation of capital. The objective
cannot be changed without approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a diversified portfolio of equity securities
of companies with prospects for above-average growth in earnings and
dividends.
EQUITY SECURITIES
The Fund may invest in equity securities of U.S. companies, including
common stocks, preferred stocks, and securities that are convertible into
common stocks.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
the full faith and credit of the U.S. Treasury (such as Farmers Home
Administration and Government National Mortgage Association;
the issuer's right to borrow from the U.S. Treasury (such as Farmers
Home Administration);
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities (such as Federal Home
Loan Banks and Farmers Home Administration); or
the credit of the agency or instrumentality issuing the obligations
(such as Federal Home Loan Banks, Farmers Home Administration, Farm
Credit Banks, Federal National Mortgage Association, and Federal Home Loan
Mortgage Corporation).
CONVERTIBLE SECURITIES
When owned as part of a unit along with warrants, which entitle the holder
to buy the common stock, convertible securities function as convertible
bonds, except that the warrants generally will expire before the bonds'
maturity. The Fund will exchange or convert the convertible securities held
in its portfolio into shares of the underlying common stocks when, in the
Adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective.
Otherwise, the Fund will hold or trade the convertible securities. In
evaluating these matters with respect to a particular convertible security,
the Fund's Adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
FOREIGN SECURITIES
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issues. These considerations include the
possibility of expropriation, the unavailability of financial information
or the difficulty of interpreting financial information prepared under
foreign accounting standards, less liquidity and more volatility in foreign
securities markets, the impact of political, social, or diplomatic
developments, and the difficulty of assessing economic trends in foreign
countries. It may also be more difficult to enforce contractual
obligations abroad than would be the case in the United States because of
differences in the legal systems. Transaction costs in foreign securities
may be higher. the adviser will consider these and other factors before
investing in foreign securities and will not make such investments unless,
in its opinion, such investment will meet the Fund's standards and
objectives.
ECDs, ETDs, Yankee CDs, and Europaper are subject to somewhat different
risks than domestic issuers. Examples of these risks include
international, economic, and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or
interest, foreign withholding or other taxes on interest income,
difficulties in obtaining or enforcing a judgment against the issuing bank
and the possible impact of interruptions in the flow of international
currency transactions. Different risks may also exist for ECDs, ETDs, and
Yankee CDs because the banks issuing instruments, or their domestic or
foreign branches, are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements,
loan limitations, examinations, accounting, auditing, and recordkeeping,
and the public availability of information. These factors will be
carefully considered by the Fund's adviser in selecting these investments.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or expenses, other than
normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year
from the date of acquisition. The Fund requires its custodian to take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund may only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are found by
the Adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling
portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund in
a dollar amount sufficient to make payment for the obligations to be
purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may engage in futures and options transactions as described below.
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by
buying and selling financial and stock index futures contracts, buying put
and call options on portfolio securities and put options on financial
futures contracts, and writing call options on futures contracts. The Fund
may also write covered put and call options on portfolio securities to
attempt to increase its current income or to hedge a portion of its
portfolio investments. The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the
options are exercised, closed, or have expired. An option position on
futures contracts may be closed out over-the-counter or on a nationally
recognized exchange which provides a secondary market for options of the
same series. The Fund purchases and writes options only with investment
dealers and other financial institutions (such as commercial banks or
savings associations) deemed creditworthy by the Adviser.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and market conditions
without necessarily buying or selling the securities. The Fund also
may purchase and sell stock index futures to hedge against changes in
prices. The Fund will not engage in futures transactions for
speculative purposes.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract (`going short'') and the buyer who agrees to take
delivery of the security (`going long'') at a certain time in the
future. For example, in the fixed income securities market, prices
move inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to
hedge its holdings of fixed income securities against a rise in market
interest rates, the Fund could enter into contracts to deliver
securities at a predetermined price (i.e., `go short'') to protect
itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period.
The Fund would `go long'' (agree to purchase securities in the future
at a predetermined price) to hedge against a decline in market
interest rates.
Stock index futures contracts are based on indices that reflect the
market value of common stock of the firms included in the indices. An
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
differences between the value of the index at the close of the last
trading day of the contract and the price at which the index contract
was originally written.
``MARGIN'' IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in
cash or U.S. Treasury bills with its custodian (or the broker, if
legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not
involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will mark to market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options on
futures contracts.
PUT OPTIONS ON FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures
contracts to protect portfolio securities against decreases in value
resulting from market factors, such as an anticipated increase in
interest rates. Unlike entering directly into a futures contract,
which requires the purchaser to buy a financial instrument on a set
date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on
or before a future date whether to assume a short position at the
specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received by
the Fund upon the sale of the second option will be large enough to
offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike
price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
STOCK INDEX OPTIONS
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market to
protect against decreases in stock prices. A stock index fluctuates
with changes in the market values of the stocks included in the index.
The effectiveness of purchasing stock index options will depend upon
the extent to which price movements in the Fund's portfolio correlate
with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indices will be subject to the ability of the Adviser to predict
correctly movements in the directions of the stock market generally or
of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Equity Fund may
write (sell) listed and over-the-counter call options on financial and
stock index futures contracts (including cash-settled stock index
options) to hedge its portfolio against an increase in market interest
rates or a decrease in stock prices. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates
rise, causing the prices of futures to go down, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase. In other words, as the underlying futures price goes
down below the strike price, the buyer of the option has no reason to
exercise the call, so that the Fund keeps the premium received for the
option. This premium can substantially offset the drop in value of the
Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund will then
substantially offset the decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the
futures contracts. If this limitation is exceeded at any time, the
Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium, the
right (but not the obligation) to sell the underlying security to the
writer (seller) at a specified price during the term of the option. A
call option gives the Fund, in return for a premium, the right (but
not the obligation) to buy the underlying securities from the seller
at a specified price during the term of the option.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may also write covered put and call options to generate
income and thereby protect against price movements in particular
securities in the Fund's portfolio. As the writer of a call option,
the Fund has the obligation upon exercise of the option during the
option period to deliver the underlying security upon payment of the
exercise price. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a
fixed price at any time during a specified period if the option is
exercised.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of
the options when options on the portfolio securities held by the Fund
are not traded on an exchange. Over-the-counter options are two-party
contracts with price and terms negotiated between buyer and seller.
In contrast, exchange-traded options are third-party contracts with
standardized strike prices and expiration dates and are purchased from
a clearing corporation. Exchange-traded options have a continuous
liquid market while over-the-counter options may not. The Fund will
not buy call options or write put options, other than to close out
open option positions, without further notification to shareholders.
RISKS
When the Fund uses futures and options on futures as hedging devices,
there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures
contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Adviser
could be incorrect in its expectations about the direction or extent
of market factors such as stock price movements. In these events, the
Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Adviser
will consider liquidity before entering into these transactions, there is
no assurance that a liquid secondary market on an exchange or otherwise
will exist for any particular futures contract or option at any particular
time. The Fund's ability to establish and close out futures and options
positions depends on this secondary market.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the
Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets. When the
Fund purchases futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated account with
the custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contracts are
unleveraged. When the Fund sells futures contracts, it will either own or
have the right to receive the underlying future or security, or will make
deposits to collateralize the position as discussed above.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan, but would terminate the loan and
regain the right to vote if that were considered important with respect to
the investment.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities laws. The Fund will not invest more than
15% of the value of its total assets in restricted securities; however,
certain restricted securities which the Trustees deem to be liquid will be
excluded from this 15% limitation.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (`SEC'') Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the `Rule''). The Rule is a
non-exclusive, safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under Rule 144A. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) for determination by the Trustees. The Trustees consider
the following criteria in determining the liquidity of certain restricted
securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
WARRANTS
The Fund may invest in warrants. Warrants provide an option to purchase
common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period
of time. Warrants may have a life ranging from less than a year to twenty
years or may be perpetual. However, most warrants have expiration dates
after which they are worthless. In addition, if the market price of the
common stock does not exceed the warrant's exercise price during the life
of the warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to the
assets of the corporation issuing them. The percentage increase or
decrease in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the underlying
common stock.
PORTFOLIO TURNOVER
Although the Funds do not intend to invest for the purpose of seeking
short-term profits, securities in their portfolios will be sold whenever
the investment adviser believes it is appropriate to do so in light of a
Fund's investment objective, without regard to the length of time a
particular security may have been held.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered
the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. During
the period any reverse repurchase agreements are outstanding, but only
to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio
instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
municipal bonds secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may
purchase put and call options on portfolio securities and on financial
futures contracts. In addition, the Fund reserves the right to hedge
the portfolio by entering into financial futures contracts and to sell
puts and calls on financial futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities
up to one-third of the value of its total assets. The Fund may,
however, acquire publicly or non-publicly issued municipal bonds or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, and limitations or
the Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in cash
or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these
money market instruments, such as repurchase agreements.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except
to secure permitted borrowings. For purposes of this limitation, the
following are not deemed to be pledges: margin deposits for the
purchase and sale of financial futures contracts and related options
and segregation or collateral arrangements made in connection with
options activities or the purchase of securities on a when-issued
basis.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement
in more than seven days after notice, over-the-counter options and
certain restricted securities and municipal leases not determined by
the Trustees to be liquid.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to
no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of its total assets in any
one investment company, and invest no more than 10% of its total
assets in investment companies in general, unless permitted to exceed
these limitations by an exemptive order of the Securities and Exchange
Commission. The Fund will purchase securities of investment companies
only in open-market transactions involving only customary broker's
commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, or acquisition of
assets.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund does not expect to borrow money or pledge securities in excess of
5% of the value of its total assets in the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''
WESMARK FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with WesMark Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing consultant; Conference Planning, Manchester
Craftsmen's Guild; Restaurant Consultant, Frick Art & History Center;
Conference Coordinator, University of Pittsburgh Art History Department;
Director or Trustee of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
C. Christine Thomson
Federated Investors Tower
Pittsburgh, PA
Birthdate: September 1, 1957
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*
John F. Donahue $ 0
Chairman and Trustee
Thomas G. Bigley $ 0
Trustee
John T. Conroy, Jr. $ 0
Trustee
William J. Copeland $ 0
Trustee
James E. Dowd $ 0
Trustee
Lawrence D. Ellis, M.D. $ 0
Trustee
Edward L. Flaherty, Jr. $ 0
Trustee
Edward C. Gonzales $ 0
President, Treasurer, and
Trustee
Peter E. Madden $ 0
Trustee
Gregor F. Meyer $ 0
Trustee
John E. Murray, Jr. $ 0
Trustee
Wesley W. Posvar $ 0
Trustee
Marjorie P. Smuts$ 0
Trustee
*The aggregate compensation is provided for the Trust which is comprised
of two portfolios. Information is furnished for the fiscal year ending
January 31, 1998.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is WesBanco Bank Wheeling. It is a wholly-
owned subsidiary of WesBanco, Inc. The Adviser shall not be liable to the
Fund or any shareholder for any losses that may be sustained in the
purchase, holding, lending, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed upon
it by its contract with the Fund.
Because of internal controls maintained by the Adviser to restrict the flow
of non-public information, Fund investments are typically made without any
knowledge of the Adviser's or its affiliates' relationships with an issuer.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus.
CUSTODIAN
WesBanco Bank Wheeling is custodian for the securities and cash of the
Fund. Under the custodian agreement, WesBanco holds the Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. WesBanco's fees for custody services are based upon the market
value of Fund securities held in custody plus certain securities
transaction charges.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING
SERVICES
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, is transfer agent for shares of the
Fund and dividend disbursing agent for the Fund. Federated Services Company
also provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The Adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund
or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the Adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The Adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares of the Fund is explained
in the prospectus under `Investing in the Fund.''
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule
12b-1 of the Investment Company Act of 1940 and a Shareholder Services
Plan. These arrangements permit the payment of fees to the Distributor, and
to stimulate distribution activities and to cause services to be provided
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Fund will
be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objective. By
identifying potential investors whose needs are served by the Fund's
objective, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; and
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing
office space, equipment, telephone facilities, and various personnel,
including clerical, supervisory, and computer, as is necessary or
beneficial to establish and maintain shareholders' accounts and records,
process purchase and redemption transactions, process automatic investments
of client account cash balances, answer routine client inquiries regarding
the Fund, assist clients in changing dividend options, account
designations, and addresses, and providing such other services as the Fund
may reasonably request.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities, other than
options, are determined as follows:
o for equity securities, according to the last sale price on a national
securities exchange, if applicable;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
o for unlisted equity securities, latest bid prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Board Members.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
VALUING FUTURES AND OPTIONS
The Fund will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
options trading on such exchanges, unless the Trustees determine in good
faith that another method of valuing option positions is necessary.
Over-the-counter put options will be valued at the mean between the bid and
the asked prices. Covered call options will be valued at the last sale
price on the national exchange on which such option is traded. Unlisted
call options will be valued at the latest bid price as provided by brokers.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under `Redeeming Shares.'' Redemption requests cannot be
executed on days on which the New York Stock Exchange is closed or on
federal holidays when wire transfers are restricted.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio. To the extent
available, such securities will be readily marketable.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, under which the Fund is obligated to redeem shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Fund determines net asset value.
The portfolio instruments will be selected in a manner that the Trustees
deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders of the Trust may be held
personally liable as partners under Massachusetts law for acts or
obligations of the Trust on behalf of the Fund. To protect shareholders of
the Fund, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations on behalf of the Fund, the Trust is required to use its
property to protect or compensate the shareholder. On request, the Trust
will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust on behalf of the Fund. Therefore,
financial loss resulting from liability as a shareholder of the Fund will
occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the
dividends received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length of
time the shareholder has owned the shares.
TOTAL RETURN
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000 adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
The yield for the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the maximum offering price per share
on the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated during
the thirty-day period is assumed to be generated each month over a twelve-
month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of certain
adjustments required by the Securities and Exchange Commission and,
therefore, may not correlate to the dividends or other distributions paid
to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of yield and
total return as described below.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors, such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net as set value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the `growth funds''
category in advertising and sales literature.
o RUSSELL 1000 GROWTH INDEX consists of those Russell 2000 securities
with a greater-than-average growth orientation. Securities in this
index tend to exhibit higher price-to-book and price-earnings ratios,
lower dividend yields and higher forecasted growth rates.
o RUSSELL 2000 INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be
used to compare to the total returns of funds whose portfolios are
invested primarily in small capitalization common stocks.
o CONSUMER PRICE INDEX is generally considered to be a measure of
inflation.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones &
Company, it is cited as a principal indicator of market conditions.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation,
financial, and public utility companies. The Standard & Poor's index
assumes reinvestment of all dividends paid by stocks listed on the
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the Standard & Poor's
figures.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of
the largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o THE S&P/BARRA VALUE INDEX AND THE S&P/BARRA GROWTH INDEX are
constructed by Standard & Poor's and BARRA, Inc., an investment
technology and consulting company, by separating the S&P 500 Index
into value stocks and growth stocks. The S&P/BARRA Growth and
S&P/BARRA Value Indices are constructed by dividing the stocks in the
S&P 500 Index according to their price-to-book ratios. The S&P/BARRA
Growth Index, contains companies with higher price-to-earnings ratios,
low dividends yields, and high earnings growth (concentrated in
electronics, computers, health care, and drugs). The Value Index
contains companies with lower price-to-book ratios and has 50% of the
capitalization of the S&P 500 Index. These stocks tend to have lower
price-to-earnings ratios, high dividend yields, and low historical and
predicted earnings growth (concentrated in energy, utility and
financial sectors). The S&P/BARRA Value and S&P/BARRA Growth Indices
are capitalization-weighted and rebalanced semi-annually. Standard &
Poor's/BARRA calculates these total return indices with dividends
reinvested.
o STANDARD & POOR'S MIDCAP 400 STOCK PRICE INDEX, a composite index of
400 common stocks with market capitalizations between $200 million and
$7.5 billion in industry, transportation, financial, and public
utility companies. The Standard & Poor's index assumes reinvestment
of all dividends paid by stocks listed on the index. Taxes due on any
of these distributions are not included, nor are brokerage or other
fees calculated in the Standard & Poor's figures.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by the Fund portfolio managers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute (`ICI'').
For example, according to the ICI, twenty-seven percent of American
households are pursuing their financial goals through mutual funds. These
investors, as well as businesses and institutions, have entrusted over $3
trillion to the more than 5,500 funds available.
APPENDIX
STANDARD AND POOR'S RATINGS GROUP BOND RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard &
Poor's Ratings Group does not rate a particular type of obligation as a
matter of policy.
PLUS (+) OR MINUS (-):--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., BOND RATING DEFINITIONS
AAA--Bonds which 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 which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
NR--Not rated by Moody's Investors Service, Inc.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
NR--NR indicates that Fitch Investors Service, Inc. does not rate the
specific issue.
STANDARD AND POOR'S RATINGS GROUP NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1--(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2--(Good Credit Quality). Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1 ratings.
Cusip 951025204
G01912-02 (3/97)
