1933 Act File No. 333-16157
1940 Act File No. 811-7925
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933..... X
Pre-Effective Amendment No. ...........................
Post-Effective Amendment No.__3___ __X__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 ......................................... X
----- ---
WESMARK FUNDS
(Exact name of Registrant as Specified in Charter)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) _X_ on MARCH 31, 1998
pursuant to paragraph (b) ___ 60 days after filing pursuant to paragraph (a) (i)
___ on ________________ pursuant to paragraph (a) (i) ___ 75 days after filing
pursuant to paragraph (a) (ii) ___ on ________________ pursuant to paragraph (a)
(ii) of Rule 485.
If appropriate, check the folling box:
___ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of WesMark Funds, which
consists of four portfolios, (1) WesMark West Virginia Municipal Bond Fund, (2)
WesMark Growth Fund, (3) WesMark Balanced Fund, and (4) WesMark Bond Fund. This
Registration Statement pertains to the WesMark West Virginia Municipal Bond Fund
and WesMark Growth Fund only and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(RULE 404(C) CROSS REFERENCE)
Item 1. Cover Page....................(1-4)Cover Page.
Item 2. Synopsis (1-4)Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-4)Performance Information.
Item 4. General Description of
Registrant....................(1-4)General Information;
(1-4)Investment Information;
(1-4)Investment Objective;
(1-4)Investment Policies; (1)West
Virginia Municipal Securities;
(1,2)Investment Risks;
(1)Non-Diversification;
(3,4)Additional Investment
Risks;(1-4)Investment Limitations;
(3,4)Appendix.
Item 5. Management of the Fund........(1-4)WesMark Funds Information;
(1-4)Management of the Trust; (1-4)
Distribution of Fund Shares;
(1-4)Administration of the Fund;
(1-4)Expenses of the Fund.
Item 6. Capital Stock and Other
Securities....................(1-4)Dividends and Capital Gains;
(1-4)Shareholder Information; (1-4)
Voting Rights; (1-4)Effect of
Banking Laws; (1-4)Tax Information;
(1-4)Federal Income Tax; (1)West
Virginia Taxes; (1,2)Other State
and Local Taxes; (3,4) State and
Local Taxes.
Item 7. Purchase of Securities Being
Offered.......................(1-4)Net Asset Value; (1-4)Investing
in the Fund; (1-4)Minimum Investment
Required; (1-4)What Shares Cost;
(1-4)Share Purchases; (1-4)Systematic
Investment Program; (3,4)Exchanging
Securities for Fund Shares;
(1-4)Exchange Privilege; (1-4)
Confirmations and Account Statements.
Item 8. Redemption or Repurchase......(1-4)Redeeming Shares;
(1-4)Systematic Withdrawal Program;
(1-4)Accounts with Low Balances.
Item 9. Pending Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page....................(1-4)Cover Page.
Item 11. Table of Contents (1-4)Table of Contents.
Item 12. General Information and
History.......................(1-4)General Information About the
Fund; (1-4)Massachusetts
Partnership Law.
Item 13. Investment Objectives and
Policies......................(1-4)Investment Objective and
Policies; (1)West Virginia Investment
Risks; (1-4)Investment Limitations.
Item 14. Management of the Fund........(1-4)WesMark Funds Management;
(1-4)Trustees Compensation.
Item 15. Control Persons and Principal
Holders of Securities (1-4)Fund Ownership.
Item 16. Investment Advisory and Other
Services......................(1-4)Investment Advisory Services;
(1-4)Other Services.
Item 17. Brokerage Allocation (1-4)Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.................(1-4)Purchasing Shares;
(1-4)Determining Net Asset Value;
(1-4)Redeeming Shares;
(1,2) Exchanging
Securities for Fund Shares.
Item 20. Tax Status (1-4)Tax Status.
Item 21. Underwriters..................(1-4)Distribution and Shareholder
Services Plans.
Item 22. Calculation of Performance
Data..........................(1-4)Total Return; (1-4)Yield;
(1)Tax-Equivalent Yield;
(1-4)Performance Comparisons;
(1-2)Appendix.
Item 23. Financial Statements..........(1,2) The Financial Statements for
the fiscal year ended January 31,
1998 are hereby incorporated by
reference from the Funds' Annual
Reports dated January 31, 1998 (File
Nos. 333-16157 and 811-7925);
(3,4) To be filed by Amendment.
[Graphic]
West Virginia
Municipal Bond
Fund
PROSPECTUS
MARCH 31, 1998
[Graphic]
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 the 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 31,
1998 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 31, 1998 TABLE OF
CONTENTS
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
West Virginia Municipal Securities 8
Investment Risks 8
Non-Diversification 9
Investment Limitations 9
WESMARK FUNDS INFORMATION 9
Management of the Trust 9
Distribution of Fund Shares 11
Administration of the Fund 12
Expenses of the Fund 12
NET ASSET VALUE 12
INVESTING IN THE FUND 13
Minimum Investment Required 13
What Shares Cost 13
Share Purchases 13
Systematic Investment Program 14
Confirmations and Account Statements 14
Dividends and Capital Gains 14
EXCHANGE PRIVILEGE 14
REDEEMING SHARES 15
Systematic Withdrawal Program 16
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
Maximum Sales Charge Imposed on Purchases (as a percentage of None
offering price)
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent 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 None
applicable)
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net assets)
Management Fee (after waiver)(1) 0.30%
12b-1 Fee(2) 0.00%
Other Expenses 0.44%
Shareholder Services Fee(2) 0.00%
Total Fund Operating Expenses (after waiver)(3) 0.74%
(1) The management fee has been reduced to reflect the 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 service fees. If the Fund was paying or accruing 12b-1 fees or
shareholder service 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 service fees.
(3) Total Fund Operating Expenses were 1.04% absent the voluntary waiver
described above in note 1.
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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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. $ 8 $24 $41 $92
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
WESMARK WEST VIRGINIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated March 18, 1998, on the Fund's
financial statements for the period ended January 31, 1998, and on the following
table for the period presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
PERIOD
ENDED
JANUARY 31,
1998(A)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.35
Net realized and unrealized gain (loss) on investments 0.31
Total from investment operations 0.66
LESS DISTRIBUTIONS
Distributions from net investment income (0.35)
Distributions from net realized gain on investments (0.01)
Total distributions (0.36)
NET ASSET VALUE, END OF PERIOD $10.30
TOTAL RETURN(B) 6.64%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.74%*
Net investment income 4.26%*
Expense waiver/reimbursement(c) 0.30%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $66,381
Portfolio turnover 6%
* Computed on an annualized basis.
(a) Reflects operations for the period from April 14, 1997 (date of initial
public investment) to January 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED JANUARY 31, 1998, WHICH CAN BE OBTAINED FREE OF CHARGE.
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 four
portfolios: WesMark West Virginia Municipal Bond Fund, WesMark Growth Fund,
WesMark Bond Fund and WesMark Balanced Fund. This prospectus relates only to
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 ("S&P")
(AAA, AA, A, or BBB), or Fitch IBCA, 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 its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may 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.
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%. For the period from April 14, 1997
(date of initial public investment) to January 31, 1998, the Fund's
portfolio turnover rate was 6%.
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 46 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 $563 million on December 31, 1997. 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 $1.9 billion. Prior to
the inception date of the Fund, the Adviser had 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 of
Trusts and Investments since June 1996. Mr. Schmitt is a Chartered Financial
Analyst and received an M.A. in Economics from Ohio University. 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 of Investments 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:
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS
ADMINISTRATIVE FEE OF THE TRUST
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 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.
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. The Fund
may waive the initial minimum investment from time to time. 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, Jr. 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. CONFIRMATIONS AND ACCOUNT
STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends
paid. The Fund will not issue share certificates.
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 any of the other WesMark Funds
at net asset value without a sales charge, provided you have received a copy of
the current prospectus of the WesMark Fund you wish to purchase, and you meet
the applicable investment minimum. 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 the extent
to which Fund distributions are exempt.
The Secretary of the Department of Tax and Revenue has indicated on an informed
basis that Fund shares should be exempt from personal property taxes to the
extent that the Fund's portfolio securities are exempt from personal property
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. 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. At the Fund's
commencement of operations, the assets from the common trust fund were
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, 1997, was
5.53%. The Fund's average annual total returns for the five-year period ended
December 31, 1997, and for the period from December 31, 1990 (date of
commencement of operations of the common trust fund) to December 31, 1997 were
5.18% and 5.55%, respectively. The quoted performance data includes 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
5800 Corporate Drive
Pittsburgh, Pennsylvania
15237-7010
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 1001 Liberty Avenue
Pittsburgh, Pennsylvania
15222-3779
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania
15222-3779
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
[Graphic]
PROSPECTUS DATED
MARCH 31, 1998
[Graphic]
Edgewood Services, Inc., Distributor
Cusip 951025105
G01913-01 (3/98)
[Graphic]
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 31, 1998.
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.
WESMARK WEST VIRGINIA MUNICIPAL BOND FUND
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated March 31, 1998
[Graphic]
Cusip 951025105
G01913-02 (3/98)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Acceptable Investments 1
Investing in Securities of Other Investment Companies 3
When-Issued and Delayed Delivery Transactions 3
Repurchase Agreements 3
Reverse Repurchase Agreements 3
Futures and Options Transactions 4
Lending of Portfolio Securities 6
Restricted and Illiquid Securities 6
WEST VIRGINIA INVESTMENT RISKS 7
INVESTMENT LIMITATIONS 7
WESMARK FUNDS MANAGEMENT 9
Fund Ownership 12
Trustee Compensation 13
Trustee Liability 13
INVESTMENT ADVISORY SERVICES 13
Adviser to the Fund 13
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 15
Valuing Municipal Bonds 15
Valuing Futures and Options 16
REDEEMING SHARES 16
Redemption in Kind 16
Exchanging Securities for Fund Shares 16
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 17
The Fund's Tax Status 17
Shareholders' Tax Status 17
TOTAL RETURN 17
YIELD 18
TAX-EQUIVALENT YIELD 18
Tax-Equivalency Table 18
PERFORMANCE COMPARISONS 19
Economic and Market Information 20
FINANCIAL STATEMENTS 20
APPENDIX 21
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:
* general obligation bonds secured by a municipality's pledge of
taxation;
* tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later date;
* serial bonds sold with differing maturity dates; * bond anticipation
notes sold in anticipation of the issuance of
longer-term bonds; and
* pre-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 inves.tment 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.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.
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:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
* dealer undertakings to make a market in the security; and * 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. Total payroll
employment in West Virginia has consistently lagged the nationwide rate of
growth. During 1997, the state's payroll employment grew by only 1.4%, compared
to the 2.3% growth nationwide. Much of what growth there has been in payroll
employment has been driven by employment in the service sector, which accounted
for over 70 percent of 1997's employment growth. Service employment accounts for
28.1 percent of total employment, compared to 23.0 percent in 1990. Conversely,
manufacturing employment's share of total employment has fallen from 13.9
percent in 1990 to 11.5 percent in 1997. Though declining in recent years, West
Virginia's unemployment rate has remained well above the national rate and is
likely to do so in the future. The state is suffering from a slow-growing labor
force, driven by population patterns, and with low rates of job creation the
unemployment rate is not likely to decline significantly from current levels.
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 agreement. 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.
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 Company.
Thomas G. Bigley
15 Old Timber Trail
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.; Director, Member
of Executive Committee, 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; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Formerly, Partner, Anderson Worldwide SC; 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.
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; 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, and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board and Czech Management Center, Prague; Director or
Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; 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 Company.
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; Treasurer of some 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; 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 Core
Trust; 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 Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
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; Wesmark Funds; WCT Funds; and World Investment Series,
Inc. FUND OWNERSHIP As of February 27, 1998, Officers and Trustees as a
group own less than 1% of the Fund's outstanding shares.
As of February 27, 1998, there were no shareholders of record who owned 5% or
more of the outstanding shares of the Fund.
TRUSTEE 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
Nicholas P. Constantakis+ $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
John E. Murray, Jr. $0
Trustee
Wesley W. Posvar $0
Trustee
Marjorie P. Smuts $0
Trustee
* Information is furnished for the fiscal year ended January 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of
two portfolios.
+ Mr. Constantakis became a member of the Board of Trustees on February 23,
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.
For the period from April 14, 1997 (date of initial public investment) to
January 31, 1998, the Adviser earned $305,555, of which $152,777 was
voluntarily waived.
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. For the period from April 14, 1997 (date of initial public
investment) to January 31, 1998, the Administrator earned $76,435.
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. For the period from
April 14, 1997 (date of initial public investment) to January 31, 1998, the Fund
paid no brokerage commissions. 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.
For the period from April 14, 1997 (date of initial public investment) to
January 31, 1998, no payments were made pursuant to the Distribution Plan. In
addition, for the period from April 14, 1997 (date of initial public investment)
to January 31, 1998, no payments were made pursuant to the Shareholder Services
Agreement. 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.
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.
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:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and * 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:
* the availability of higher relative yields; * differentials in market
values; * new investment opportunities; * changes in creditworthiness
of an issuer; or * an 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 Fund's cumulative total return for the period from April 14, 1997 (date of
initial public investment) to January 31, 1998 was 6.64%.
Cumulative total return reflects the Fund's total performance over a specified
period of time. This total return assumes and is reduced by the payment of the
maximum sales charge. The Fund's total return is reflective of only 9 1/2 months
of Fund activity since the Fund's date of initial public investment. 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 Fund's yield for the thirty-day period ended January 31, 1998 was 3.87%.
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 Fund's tax-equivalent yield for the thirty-day period ended January 31, 1998
was 7.18%.
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 1998
STATE OF WEST VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.00% 34.00% 37.50% 42.50% 46.10%
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN: 25,350 61,400 128,100 278,450 $278,450
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 1998
STATE OF WEST VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
21.00% 34.50% 37.50% 42.50% 46.10%
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN: 42,350 102,300 155,950 278,450 $278,450
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:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in the
Fund's expenses; and * 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:
* 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 asset 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.
* 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.
* 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,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended January 31, 1998, are
incorporated herein by reference from the Fund's Annual Report dated January 31,
1998 (File Nos. 333-16157 and 811-7925). A copy of the Annual Report for the
Fund may be obtained without charge by contacting the Fund at the address
located on the back cover of the prospectus or by calling the Fund at
1-800-368-3369.
APPENDIX
STANDARD AND POOR'S 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 IBCA, 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 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 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:
* Leading market positions in well established industries.
* High rates of return on funds employed.
* Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
* Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
* 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 IBCA, 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.
[Graphic]
Growth Fund
PROSPECTUS
MARCH 31, 1998
[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 the 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 31,
1998 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 31, 1998 TABLE OF
CONTENTS
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Portfolio Investments 4
Investment Risks 9
Investment Limitations 9
WESMARK FUNDS INFORMATION 10
Management of the Trust 10
Distribution of Fund Shares 11
Administration of the Fund 12
Brokerage Transactions 12
Expenses of the Fund 13
NET ASSET VALUE 13
INVESTING IN THE FUND 13
Minimum Investment Required 13
What Shares Cost 13
Share Purchases 14
Systematic Investment Program 14
Confirmations and Account Statements 14
Dividends and Capital Gains 14
EXCHANGE PRIVILEGE 14
REDEEMING SHARES 15
Systematic Withdrawal Program 16
Redemption Before Purchase
Instruments Clear 16
Accounts with Low Balances 17
SHAREHOLDER INFORMATION 17
Voting Rights 17
EFFECT OF BANKING LAWS 17
TAX INFORMATION 18
Federal Income Tax 18
State and Local Taxes 18
PERFORMANCE INFORMATION 18
Performance Information for
Common Trust Funds 18
ADDRESSES Inside Back Cover
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of None
offering price)
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent 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 None
applicable)
Exchange Fee None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee 0.75%
12b-1 Fee(1) 0.00%
Other Expenses 0.39%
Shareholder Servicing Fee(1) 0.00%
Total Fund Operating Expenses 1.14%
</TABLE>
(1) The Fund has no present intention of paying or accruing 12b-1 fees or
shareholder service fees. If the Fund was paying or accruing 12b-1 fees or
shareholder service fees, the Fund would be able to pay up to 0.25% of its
average daily net assets for 12b-1fees and up to 0.25% of its average daily
net assets for shareholder service fees.
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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <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. $12 $36 $63 $139
</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.
WESMARK GROWTH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated March 18, 1998, on the Fund's
financial statements for the period ended January 31, 1998, and on the following
table for the period presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09
Net realized and unrealized gain on investments 1.71
Total from investment operations 1.80
LESS DISTRIBUTIONS
Distributions from net investment income (0.08)
Distributions from net realized gain on investment (0.57)
transactions
Total distributions (0.65)
NET ASSET VALUE, END OF PERIOD $11.15
TOTAL RETURN(B) 18.24%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.14%*
Net investment income 0.99%*
Expense waiver/reimbursement(c) 0.00%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $114,142
Average commission rate paid(d) $0.0148
Portfolio turnover 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 14, 1997 (date of initial
public investment) to January 31, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED JANUARY 31, 1998, WHICH CAN BE OBTAINED FREE OF CHARGE.
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 four
portfolios: WesMark West Virginia Municipal Bond Fund, WesMark Growth Fund,
WesMark Bond Fund and WesMark Balanced 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 unless the investment is in an Individual Retirement Account ("IRA"),
in which case the minimum initial investment is $500. 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 ("S&P") (AAA, AA, A, or BBB), or Fitch IBCA, 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 its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may 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. Stocks
in the medium capitalization sector of the United States equity market tend to
be slightly more volatile in price than larger capitalization stocks, such as
those indicated in the Standard & Poor's Stock Price Index of 500 Common Stocks
("S&P 500"). This is because, among other things, medium-sized companies have
less certain growth prospects than larger companies, have a lower degree of
liquidity in the equity market, and tend to have a greater sensitivity to
changing economic conditions. Further, in addition to exhibiting slightly higher
volatility, the stocks of medium-sized companies, may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of
medium-sized companies may decline in price as the price of large company stocks
rises or vice versa. Therefore, investors should expect that the Fund, which may
invest in medium capitalization stocks, will be more volatile than, and may
fluctuate independently of, broad stock market indices such as the S&P 500.
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 46 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 $563 million on December 31, 1997.
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 $1.9
billion. Prior to the inception date of the Fund, the Adviser had 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 of Trusts and Investments since June 1996. Mr.
Schmitt is a Chartered Financial Analyst and received an M.A. in Economics
from Ohio University. 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 of Investments 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
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 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 selects 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 unless the
investment is in an Individual Retirement Account ("IRA"), in which case the
minimum initial investment is $500. 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. The Fund may waive the initial minimum
investment from time to time. 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, Jr. 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. CONFIRMATIONS AND ACCOUNT
STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends
paid. The Fund will not issue share certificates.
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 any of the other WesMark Funds
at net asset value without a sales charge, provided you have received a copy of
the current prospectus of the WesMark Fund you wish to purchase, and you meet
the applicable investment minimum. 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
of the Trust, 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
Shareholders are urged to consult with 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.
PERFORMANCE INFORMATION FOR COMMON TRUST FUNDS
The Fund is the successor to common trust funds ("CTFs") that were managed by
the Adviser. At the Fund's commencement of operations, the assets from the CTFs
were 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 were 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.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1996*
CTFS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
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%
* The Average Annual Total Return for each CTF has been adjusted to reflect the
Fund's anticipated expenses, net of voluntary waivers.
ADDRESSES
WesMark Growth Fund
5800 Corporate Drive
Pittsburgh, PA 15237-7010
Distributor
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
Investment Adviser
WesBanco Bank Wheeling One Bank Plaza
Wheeling, WV 26003
Custodian
WesBanco Bank Wheeling One Bank Plaza
Wheeling, WV 26003
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder
Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
[Graphic]
PROSPECTUS DATED
MARCH 31, 1998
[Graphic]
[Graphic]Federated Investors
Edgewood Services, Inc., Distributor
Cusip 951025204
G01912-01 (3/98)
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 31, 1998. 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.
WESMARK GROWTH FUND
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated March 31, 1998
[Graphic]
Federated Investors
Edgewood Services, Inc., Distributor
Cusip 951025204
G01912-02 (3/98)
[Graphic]
TABLE OF CONTENTS
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
Investing in Securities of Other Investment Companies 2
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
Selling Short and Buying on Margin 6
Issuing Senior Securities and Borrowing Money 6
Underwriting 6
Investing in Real Estate 6
Investing in Commodities 6
Lending Cash or Securities 6
Concentration of Investments 7
Pleding Assets 7
Investing in Illiquid Securities 7
WESMARK FUNDS MANAGEMENT 7
Fund Ownership 11
Trustees Compensation 12
Trustee Liability 12
INVESTMENT ADVISORY SERVICES 12
Adviser to the Fund 12
Advisory Fees 13
OTHER SERVICES 13
Fund Administration 13
Custodian 13
Transfer Agent, Dividend Disbursing Agent, and Portfolio Accounting
Services 13
Independent Auditors 13
BROKERAGE TRANSACTIONS 13
PURCHASING SHARES 14
Distribution and Shareholder Services Plans 14
Administrative Arrangements 14
Conversion to Federal Funds 14
DETERMINING NET ASSET VALUE 14
Determining Market Value of Securities 14
Valuing Futures and Options 15
REDEEMING SHARES 15
Redemption in Kind 15
Exchanging Securities for Fund Shares 15
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 16
The Fund's Tax Status 16
Shareholders' Tax Status 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
Economic and Market Information 18
FINANCIAL STATEMENTS 18
APPENDIX 19
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 NationalMortgage 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 investments 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. INVESTING IN
SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.
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:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
* dealer undertakings to make a market in the security; and * 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. For the period from April 14, 1997 (date of initial public
investment) to January 31, 1998, the Fund's portfolio turnover rate was 58%.
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 agreement.
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 debt securities 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.
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 Company.
Thomas G. Bigley
15 Old Timber Trail
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.; Director, Member
of Executive Committee, 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; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Formerly, Partner, Anderson Worldwide SC; 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.
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; 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 and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts 4905 Bayard Street Pittsburgh, PA Birthdate: June 21,
1935
Trustee
Public Relations/Marketing/Conference Planning; 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 Company.
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; Treasurer of some 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; 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 Core
Trust; 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 Obligations Trust II; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.
FUND OWNERSHIP
As of February 27, 1998, Officers and Trustees as a group own less than 1% of
the Fund's outstanding shares.
As of February 27, 1998, the following shareholder of record owned 5% or
more of the outstanding shares of the Fund: Dolling & Co., Wheeling, West
Virginia, owned 636,900 shares (6.22%).
TRUSTEE 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
Nicholas P. Constantakis+ $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
John E. Murray, Jr. $0
Trustee
Wesley W. Posvar $0
Trustee
Thomas G. Bigley $0
Trustee
* Information is furnished for the fiscal year ended January 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of
two portfolios.
+ Mr. Constantakis became a member of the Board of Trustees on February 23,
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. For the period from April 14, 1997 (date of
initial public investment) to January 31, 1998, the Adviser earned $629,221, of
which $2,725 was voluntarily waived.
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. For the period from April 14, 1997 (date of initial public
investment) to January 31, 1998, the Administrator earned $125,848.
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. For the period from
April 14, 1997 (date of initial public investment) to January 31, 1998, the Fund
paid $117,867 in brokerage commissions. 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.
For the period from April 14, 1997 (date of initial public investment) to
January 31, 1998, the Fund made no payments pursuant to the Distribution Plan.
In addition, for the period from April 14, 1997 (date of initial public
investment) to January 31, 1998, no payments were made pursuant to the
Shareholder Services Agreement. 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:
* for equity securities, according to the last sale price on a national
securities exchange, if applicable;
* in the absence of recorded sales for listed equity securities, according to
the mean between the last closing bid and asked prices;
* for unlisted equity securities, latest bid prices;
* for bonds and other fixed income securities, as determined by an
independent pricing service;
* 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
* 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.
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.
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:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and
* 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:
* the availability of higher relative yields; * differentials in market
values; * new investment opportunities; * changes in creditworthiness of
an issuer; or * an 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 Fund's cumulative total return for the period from April 14, 1997 (date of
initial public investment) to January 31, 1998 was 18.24%.
Cumulative total return reflects the Fund's total performance over a specified
period of time. This total return assumes and is reduced by the payment of the
maximum sales charge. The Fund's total return is reflective of only 9 1/2 months
of Fund activity since the Fund's date of initial public investment. 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 Fund's yield for the thirty-day period ended January 31, 1998 was 0.60%.
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:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in the
Fund's expenses; and * 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:
* 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.
* 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.
* 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.
* Consumer Price Index is generally considered to be a measure of
inflation.
* 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.
* 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.
* 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.
* 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.
* 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.
* 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,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended January 31, 1998, are
incorporated herein by reference from the Fund's Annual Report dated January 31,
1998 (File Nos. 333-16157 and 811-7925). A copy of the Annual Report for the
Fund may be obtained without charge by contacting the Fund at the address
located on the back cover of the prospectus or by calling the Fund at
1-800-368-3369. APPENDIX STANDARD AND POOR'S 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 IBCA, 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 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 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:
* Leading market positions in well established industries.
* High rates of return on funds employed.
* Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
* Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
* 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 IBCA, 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.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (1,2) The Financial Statements for the
fiscal year ended January 31, 1998 are hereby incorporated by
reference from the Funds' Annual Reports dated January 31,
1998 (File Nos. 333-16157 and 811-7925); (3,4) To be filed by
Amendment.
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the
Registrant (1.);
(i) Form of Amendment No. 1 to the Declaration of
Trust (2.);
(2) Copy of By-Laws of the Registrant (1.); (3) Not
applicable; (4) Not applicable; (5) Conformed Copy of
Investment Advisory Contract of the Registrant (1.);
(i) Conformed Copy of Exhibit B to the Investment
Advisory Contract (2.); (ii) Conformed Copy of Exhibits
C & D to the Investment Advisory Contract; +
(6) Conformed Copy of Distributor's Contract of the
Registrant (1.); (i) Conformed Copy of Exhibit B to
the Distributor's Contract (2.);
(ii) Conformed Copy of Exhibits C & D to the
Distributor's Contract (4.); (7) Not applicable; (8)
Conformed Copy of Custodian Contract of the Registrant (1.);
(i) Conformed Copy of Exhibit 1 to the Custody
Contract (Schedule of Fees) (4.);
(9) (i) Conformed Copy of Agreement for Fund Accounting,
Administrative Services, and Transfer Agency
Services of the Registrant (1.);
(ii) Conformed Copy of Schedule A (Fund Accounting
Fees) of the Registrant (4.); (iii) Conformed Copy of
Schedule B (Fees and Expenses of Transfer Agency) of the
Registrant (4.);
(iv) Conformed Copy of Shareholder Services Agreement
of the Registrant (1.);
(v) Copy of Amendment No. 1 to Schedule A of the
Shareholder Services Agreement (1.);
(vi) Copy of Amendment No. 2 to Schedule A of the
Shareholder Services Agreement (4.);
(vii) Conformed Copy of Electronic Communications and
Recordkeeping Agreement (2.);
- -------------------------------------
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed November 14, 1996 (File Nos. 333-16157 and
811-7925).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 4, 1997 (File Nos. 333-16157
and 811-7925).
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed January 8, 1998 (File Nos. 333-16157 and
811-7925).
<PAGE>
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered (2.);
(11) Conformed Copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (2.);
(14) Not applicable;
(15) (i) Conformed Copy of Distribution Plan (1.);
(ii) Conformed Copy of Exhibit B to the Distribution
Plan (2.); (iii) Conformed Copy of Exhibits C & D to
the Distribution Plan (4.);
(iv) Copy of Dealer Agreement (to be filed by
amendment);
(16) (i) Copy of Schedule for Computation of
Fund Performance Data for WesMark West Virginia
Municipal Bond Fund (3.);
(ii) Copy of Schedule for Computation of Fund
Performance Data for WesMark Growth Fund (3.);
(17) Copy of Financial Data Schedules; +
(18) Not applicable;
(19) Conformed copy of Power of Attorney. +
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
TITLE OF CLASS AS OF FEBRUARY 27, 1998
-------------- -----------------------
Shares of beneficial interest
(no par value)
WesMark West Virginia
Municipal Bond Fund 478
WesMark Growth Fund 1,412
WesMark Balanced Fund --
WesMark Bond Fund --
Item 27. Indemnification: (1.)
- ------------------------------------
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed November 14, 1996 (File Nos. 333-16157 and
811-7925).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 4, 1997 (File Nos. 333-16157
and 811-7925).
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed September 25, 1997 (File Nos. 333-16157
and 811-7925).
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed January 8, 1998 (File Nos. 333-16157 and
811-7925).
<PAGE>
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser,
see the section entitled "WesMark Funds Information - Management of
the Trust" in Part A.
The principal executive officers and directors of the Trust's
Investment Adviser are set forth in the following tables. Unless
otherwise noted, the position listed under other Substantial
Business, Profession, Vocation, or Employment is with WesBanco Bank
Wheeling.
(1) (2) (3)
Other Substantial
Position with Business, Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
Edward M. George Chairman of the President and CEO,
Board/Director WesBanco, Inc.
Paul M. Limbert Vice Chairman of the Board/Director
Dennis P. Yaeger Vice Chairman of the Board
Kristine N. Molnar President, CEO, and Director
Shirley A. Bucan Secretary
Donald K. Jebbia President, Elm Former President and
Grove Branch CEO, WesBanco Bank Elm
Grove
Jon M. Rogers Executive Vice President,
New Martinsville Office
Jerome B. Schmitt Executive Vice President,
Trusts and Investment
Stephen E. Hannig Senior Vice President,
Retail Banking
Thomas B. McGaughy Senior Vice President,
Assistant Secretary, Trusts
John W. Moore, Jr. Senior Vice President,
Human Resources
David L. Pell Senior Vice President/
Senior Loan Officer
Edward G. Sloane, Sr. Senior Vice President/MIS
Francine Swiger Senior Vice President
Lloyd E. Walker, Jr. Senior Vice President-
Loans & Assistant Compliance
Officer, Elm Grove Branch
Gregory W. Adkins Vice President
Paul J. Becka Vice President,
Information Technology
(1) (2) (3)
Other Substantial
Position with Business, Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
J. Kevin Diserio Vice President
John D. Faulkner Vice President
Lawrence P. Finneran Vice President/Manager,
Hancock County
Wyatt K. Hoffman Vice President - Credit
Peter W. Jaworski Senior Vice President - Credit
Administration
W. Taylor McCluskey Vice President & Senior
Trust Officer
Kevin D. McFarland Vice President
Andrew M. Mihalyo Vice President - Consumer
Credit
Douglas A. Molnar Vice President,
Marketing
Edward G. Sloane, Jr. Vice President and
Controller
James G. Thompson Vice President -
Weirton Office
R. Bruce Bandi Assistant Vice President &
Senior Trust Officer
Roanne M. Burech Assistant Vice President -
Financial Services
Janet D. Campeti Assistant Vice President -
Operations
Mary Ruth Cilles Assistant Vice President -
Operations
David B. Dalzell, Jr. Assistant Vice President &
Senior Trust Officer
David B. Ellwood Assistant Vice President
Patricia A. Lowe Assistant Vice President
John M. McGee Assistant Vice President
Cynthia M. Perring Assistant Vice President &
Senior Trust Officer
Robert F. Pretulovich Assistant Vice President/
Branch Manager, Weirton Main
Street Office
Matthew W. Pribus Assistant Vice President -
Operations
(1) (2) (3)
Other Substantial
Position with Business, Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
Frederick J. Quinn Assistant Vice President/
Loans, Weirton Main
Street Office
Roger E. Winters Assistant Vice President &
Senior Trust Officer
James E. Altmeyer Director President, Altmeyer
Funeral Homes, Inc.
Ray A. Byrd Director Partner, Schrader,
Byrd, Companion &
Gurley
Fred T. Chambers Director Funeral Director,
Chambers and James
Funeral Homes
D. Duane Cummins, Ph.D. Director President, Bethany
College
Donald R. Donell Director President, Starvaggi
Industries, Inc.
James C. Gardill Director Chairman of the Board,
WesBanco, Inc.;
Partner, Phillips,
Gardill, Kaiser &
Altmeyer
Thomas M. Hazlett Director Partner, Kinder,
Harper, Hazlett & Hinzey
James D. Hesse Director President and CEO,
Wheeling-Nisshin, Inc.
Roland L. Hobbs Director Chairman, Wheeling Park
Commission; Former
Chairman,
President and CEO, WesBanco, Inc.
John M. Karras Director President, Karras
Painting Company, Inc.
James B. Kepner Director Vice President, Kepner
Funeral Homes, Inc.
George M. Molnar Director Retired; Formerly,
President, Weirton Office, WesBanco
Bank Wheeling
Rizal V. Pangilinan Director Ophthalmologist
C. Jack Savage Director President, Savage
Construction Company
James G. Squibb, Jr. Director President and General
Manager, WTRF-TV
(1) (2) (3)
Other Substantial
Position with Business, Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
Joan C. Stamp Director
Carter W. Strauss Director President, Strauss
Industries, Inc.
Robert D. Wable Director President, Wable Ford -
Mercury, Inc.
John A. Welty Director Secretary/Treasurer,
Welty Buick, Pontiac,
GMC Trucks
Gary E. West Director Chairman, Valley
National Gases, Inc.
William E. Witschey Director President, Witschey's
Market, Inc.
John E. Wright, III Director Retired President and
COO, Wheeling-Nisshin,
Inc.
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Edgewood Services, Inc. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant: BT
Advisor Funds, BT Institutional Funds, BT Investment Funds, BT
Pyramid Mutual Funds, Deutsche Portfolios, Deutsche Funds,
Inc., Excelsior Funds, Excelsior Funds, Inc., (formerly, UST
Master Funds, Inc.), Excelsior Institutional Trust, Excelsior
Tax-Exempt Funds, Inc. (formerly, UST Master Tax-Exempt Funds,
Inc.), FTI Funds, FundManager Portfolios, Great Plains Funds,
Marketvest Funds, Marketvest Funds, Inc., Old Westbury Funds,
Inc., Robertsons Stephens Investment Trust, WesMark Funds and
WCT Funds.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Lawrence Caracciolo Director, President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Accounting Services")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
WesBanco Bank Wheeling One Bank Plaza
("Adviser" and "Custodian") Wheeling, WV 26003
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
Registrant hereby undertakes to file a post-effective amendment on
behalf of the WesMark Balanced Fund and WesMark Bond Fund, using
financial statements for the WesMark Balanced Fund and WesMark Bond
Fund which need not be certified, within four to six months from the
effective date of this Post-Effective Amendment No. 2.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, WESMARK FUNDS, certifies that it
meets all of the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 30th day of March, 1998.
WESMARK FUNDS
BY: /s/ C. Todd Gibson
C. Todd Gibson, Assistant Secretary
Attorney in Fact for John F. Donahue
March 30, 1998
Pursuant to the requirements of the Securities Act of 1933, Registration
Statement has been signed below by the following person in the capacity and on
the date indicated:
NAME TITLE DATE
By: /s/ C. Todd Gibson
C. Todd Gibson Attorney In Fact March 30, 1998
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President and Treasurer
and Trustee
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
Nicholas P. Constantakis* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 5(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
EXHIBIT C
to the
Investment Advisory Contract
WESMARK BALANCED FUND
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee equal to
.75 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued daily at the rate of 1/365th of .75 of 1% applied to the daily
net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of March, 1998.
WESBANCO BANK WHEELING
By: /S/ JEROME B. SCHMITT
Name: Jerome B. Schmitt
Title: Executive Vice President
WESMARK FUNDS
By: /S/ BETH S. BRODERICK
Name: Bether S. Broderick
Title: Vice President
<PAGE>
EXHIBIT D
to the
Investment Advisory Contract
WESMARK BOND FUND
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full compensation
for all services rendered hereunder, an annual investment advisory fee equal to
.60 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued daily at the rate of 1/365th of .60 of 1% applied to the daily
net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of March, 1998.
WESBANCO BANK WHEELING
By: /S/ JEROME B. SCHMITT
Name: Jerome B. Schmitt
Title: Executive Vice President
WESMARK FUNDS
By: /S/ BETH S. BRODERICK
Name: Bether S. Broderick
Title: Vice President
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders of WESMARK FUNDS:
We consent to the use in Post-Effective Amendment No. 3 to Registration
Statement 333-16157 of WesMark Funds (comprising the following portfolios:
WesMark Growth Fund, WesMark West Virginia Municipal Bond Fund) of our reports
dated March 18, 1998 incorporated by reference in the Prospectuses, which are a
part of such Registration Statement, and to the reference to us under the
heading "Financial Highlights" in such Prospectuses.
By: DELOITTE & TOUCHE
Deloitte & Touche
Pittsburgh, Pennsylvania
March 25, 1998
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of WESMARK FUNDS ...... and the Deputy
General Counsel of Federated Services Company, and each of them, their true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/S/JOHN F. DONAHUE Chairman and Trustee March 19, 1998
- ---------------------------------
John F. Donahue (Chief Executive Officer)
/S/EDWARD C. GONZALES President and Treasurer March 19, 1998
- ---------------------------------
Edward C. Gonzales and Trustee
(Principal Financial and
Accounting Officer)
/S/THOMAS G. BIGLEY Trustee March 19, 1998
Thomas G. Bigley
/S/NICHOLAS P. CONSTANTAKIS Trustee March 19, 1998
Nicholas P. Constantakis
/S/JOHN T. CONROY, JR. Trustee March 19, 1998
- ---------------------------------
John T. Conroy, Jr.
/S/WILLIAM J. COPELAND Trustee March 19, 1998
William J. Copeland
<PAGE>
SIGNATURES TITLE DATE
/S/JAMES E. DOWD Trustee March 19, 1998
James E. Dowd
/S/LAWRENCE D. ELLIS, M.D. Trustee March 19, 1998
- ---------------------------------
Lawrence D. Ellis, M.D.
/S/EDWARD L. FLAHERTY, JR. Trustee March 19, 1998
- ---------------------------------
Edward L. Flaherty, Jr.
/S/PETER E. MADDEN Trustee March 19, 1998
Peter E. Madden
/S/JOHN E. MURRAY, JR. Trustee March 19, 1998
- ---------------------------------
John E. Murray, Jr.
/S/WESLEY W. POSVAR Trustee March 19, 1998
Wesley W. Posvar
/S/MARJORIE P. SMUTS Trustee March 19, 1998
Marjorie P. Smuts
Sworn to and subscribed before me this 19TH day of MARCH , 1998
/S/CHERI S. GOOD
Cheri S. Good
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> WestMark Funds
WestMark West Virginia Municipal
Bond Fund
<PERIOD-TYPE> 10-mos
<FISCAL-YEAR-END> Jan-31-1998
<PERIOD-END> Jan-31-1998
<INVESTMENTS-AT-COST> 64,360,138
<INVESTMENTS-AT-VALUE> 66,251,220
<RECEIVABLES> 989,708
<ASSETS-OTHER> 5,243
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,246,171
<PAYABLE-FOR-SECURITIES> 623,866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 241,549
<TOTAL-LIABILITIES> 865,415
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,485,053
<SHARES-COMMON-STOCK> 6,443,993
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,621
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,891,082
<NET-ASSETS> 66,380,756
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,549,039
<OTHER-INCOME> 0
<EXPENSES-NET> 377,257
<NET-INVESTMENT-INCOME> 2,171,782
<REALIZED-GAINS-CURRENT> 48,886
<APPREC-INCREASE-CURRENT> 1,891,082
<NET-CHANGE-FROM-OPS> 4,111,750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,171,782
<DISTRIBUTIONS-OF-GAINS> 44,265
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,013,427
<NUMBER-OF-SHARES-REDEEMED> 587,622
<SHARES-REINVESTED> 18,188
<NET-CHANGE-IN-ASSETS> 66,380,756
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 305,555
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 530,034
<AVERAGE-NET-ASSETS> 53,183,646
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.350
<PER-SHARE-GAIN-APPREC> 0.310
<PER-SHARE-DIVIDEND> 0.350
<PER-SHARE-DISTRIBUTIONS> 0.010
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.300
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> WesMark Funds
WesMark Growth Fund
<PERIOD-TYPE> 10-mos
<FISCAL-YEAR-END> Jan-31-1998
<PERIOD-END> Jan-31-1998
<INVESTMENTS-AT-COST> 101,122,159
<INVESTMENTS-AT-VALUE> 115,874,663
<RECEIVABLES> 174,706
<ASSETS-OTHER> 4,766
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 116,054,135
<PAYABLE-FOR-SECURITIES> 1,273,263
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 638,738
<TOTAL-LIABILITIES> 1,912,001
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,066,651
<SHARES-COMMON-STOCK> 10,235,557
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 66,991
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,255,988
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,752,504
<NET-ASSETS> 114,142,134
<DIVIDEND-INCOME> 615,604
<INTEREST-INCOME> 1,163,998
<OTHER-INCOME> 0
<EXPENSES-NET> 952,937
<NET-INVESTMENT-INCOME> 826,665
<REALIZED-GAINS-CURRENT> 7,637,919
<APPREC-INCREASE-CURRENT> 14,752,504
<NET-CHANGE-FROM-OPS> 23,217,088
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 759,674
<DISTRIBUTIONS-OF-GAINS> 5,381,931
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,251,699
<NUMBER-OF-SHARES-REDEEMED> 521,455
<SHARES-REINVESTED> 495,313
<NET-CHANGE-IN-ASSETS> 114,042,134
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 629,221
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 955,662
<AVERAGE-NET-ASSETS> 103,701,490
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.090
<PER-SHARE-GAIN-APPREC> 1.710
<PER-SHARE-DIVIDEND> 0.080
<PER-SHARE-DISTRIBUTIONS> 0.570
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.150
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
