<PAGE> 1
As filed with the Securities and Exchange Commission on February 28, 1997
Registration No. 2-53808
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 44
on
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
------------------
TRUST FOR FEDERAL SECURITIES
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(302) 792-2555
EDWARD J. ROACH
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Name and Address of
Agent for Service)
Copy to:
W. BRUCE McCONNEL, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on February 28, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
==========================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 19331
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registra-
Registered Registered(2) Unit Price(2) tion Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of
Beneficial Interest
in
Trust for Federal
Securities 3,183,844,639 $1.00 $3,183,844,639 $0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Registrant has registered an indefinite number of shares of beneficial
interest in FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund
Portfolios under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for its
fiscal year ending October 31, 1996 for Registration No. 2-53808 was filed
on December 23, 1996.
2. The maximum aggregate offering price for Registrant's Portfolio shares with
respect to its FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund
portfolios is calculated pursuant to Rule 24e-2 under the 1940 Act. During
the year ended October 31, 1996, Registrant redeemed a total of
13,179,759,396 FedFund Portfolio shares, 2,524,303,692 FedCash Portfolio
shares, 2,231,178,626 T-Cash Portfolio shares, 1,728,498,456 Federal Trust
Fund Portfolio shares, 7,529,986,362 Treasury Trust Fund Portfolio shares
and 224,951 Short Government Fund Portfolio shares, respectively. Of these
redeemed shares, 11,620,864,697 FedFund Portfolio shares plus 202,009,298
shares allocated from T-Fund Portfolio, 1,750,440,400 FedCash Portfolio
shares plus 76,700,410 shares allocated from T-Fund Portfolio,
1,639,923,245 T-Cash Portfolio shares plus 76,617,801 shares allocated
from T-Fund Portfolio, 1,601,128,884 Federal Trust Fund Portfolio shares
plus 16,505,180 shares allocated from T-Fund Portfolio, 6,938,093,491
Treasury Trust Fund Portfolio shares plus 76,700,410 shares allocated
from T-Fund Portfolio were used for reductions pursuant to paragraph (c)
of Rule 24f-2 in Registrants Rule 24f-2 Notice dated December 23, 1996
for the year ended October 31, 1996, and none of the redeemed shares were
used for reductions pursuant to Rule 24e-2 in previous post-effective
amendments filed during the current fiscal year. In addition, 673,582,253
FedCash Portfolio shares, 514,637,580 T-Cash Portfolio shares and
1,373,370 Short Government Fund Portfolio shares valued at $12,682,552
were allocated 821,777,502 to FedFund Portfolio shares, 67,130,444 to
Federal Trust Fund Portfolio shares and 311,994,439 to Treasury Trust Fund
Portfolio shares. As a result, 2,178,662,903 redeemed FedFund Portfolio
shares, 177,994,836 Federal Trust Fund Portfolio shares and 827,186,900
Treasury Trust Fund Portfolio shares are being used to reduce, pursuant
to paragraph (a) of Rule 24e-2, the number of shares for which the
registration fee is payable with respect to this Post-Effective Amendment.
<PAGE> 3
TRUST FOR FEDERAL SECURITIES
(FedFund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 4
FedFund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (FedFund shares code: 30; FedFund Dollar
shares code: 31).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. The shares described in this Prospectus represent
interests in the FedFund portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and repurchase agreements relating
to such obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to FedFund Shares, investors may purchase FedFund "Dollar Shares" which
accrue daily dividends in the same manner as FedFund Shares but bear all fees
payable by the Fund to institutional investors for certain services they provide
to the beneficial owners of such Shares. (See "Management of the
Fund--Organizations Servicing the Dollar Shares.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1997, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 5
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: FedFund Shares and
FedFund Dollar Shares. Shares of each class represent equal, pro rata interests
in the Fund and accrue daily dividends in the same manner except that the Dollar
Shares bear fees payable by the Fund (at the rate of .25% per annum) to
institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Organizations Servicing the Dollar
Shares.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
FEDFUND
FEDFUND DOLLAR
SHARES SHARES
---------- ----------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)................................. .08% .08%
Other Expenses................................................... .12% .37%
Administration Fees (net of waivers)........................ .08% .08%
Shareholder Servicing Fees.................................. 0% .25%
Miscellaneous............................................... .04% .04%
--- ---
Total Fund Operating Expenses (net of waivers)................... .20% .45%
=== ===
</TABLE>
- ------------
<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) a 5% annual return and (2) redemption at the
end of each time period with respect to the following
shares:
FedFund Shares: $2 $ 6 $11 $26
FedFund Dollar Shares: $5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
FedFund Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Total Fund Operating Expenses for FedFund
Shares and Dollar Shares would have been .30% and .55%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information.) The
investment adviser and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
2
<PAGE> 6
FINANCIAL HIGHLIGHTS
The following financial highlights are for FedFund Shares and for FedFund
Dollar Shares for the fiscal year ended October 31, 1996 and for each of the
nine preceding fiscal years. The financial highlights for the fiscal years set
forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is incorporated by reference into
the Statement of Additional Information. The tables should be read in
conjunction with the financial statements and related notes incorporated by
reference into the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
FEDFUND SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................. .0529 .0571 .0377 .0308 .0397 .0637 .0800
Net Capital Gains..................... -- -- -- .0001 .0010 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total From Investment Operations...... .0529 .0571 .0377 .0309 .0407 .0637 .0800
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................. (.0529) (.0571) (.0377) (.0308) (.0397) (.0637) (.0800)
Net Capital Gains..................... -- -- -- (.0001) (.0010) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions................... (.0529) (.0571) (.0377) (.0309) (.0407) (.0637) (.0800)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total Return.......................... 5.41% 5.86% 3.84% 3.12% 4.15% 6.56% 8.29%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)... $1,407,529 $1,377,175 $1,557,562 $1,290,971 $2,976,954 $1,918,966 $1,488,141
Ratio of Expenses to Average Net
Assets.............................. .19%(1) .18%(1) .18%(1) .20%(1) .27% .30% .30%(1)
Ratio of Net Investment Income to
Average Net Assets.................. 5.29% 5.71% 3.76% 3.08% 3.91% 6.36% 8.00%
<CAPTION>
1989 1988 1987
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................. .0891 .0703 .0614
Net Capital Gains..................... -- -- --
---------- ---------- ----------
Total From Investment Operations...... .0891 .0703 .0614
---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................. (.0891) (.0703) (.0614)
Net Capital Gains..................... -- -- --
---------- ---------- ----------
Total Distributions................... (.0891) (.0703) (.0614)
---------- ---------- ----------
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total Return.......................... 9.29% 7.28% 6.32%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)... $1,786,196 $1,772,390 $2,108,838
Ratio of Expenses to Average Net
Assets.............................. .30%(1) .30%(1) .30%(1)
Ratio of Net Investment Income to
Average Net Assets.................. 8.91% 7.02% 6.12%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .30%, .29%, .30%, .27%,
.34%, .35%, .32%, and .32%, respectively, for each of the years ended
October 31, 1996, 1995, 1994, 1993, 1990, 1989, 1988 and 1987, respectively,
for FedFund Shares.
3
<PAGE> 7
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
FEDFUND DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------- -------
Income From Investment Operations:
Net Investment Income..................... $ .0504 .0546 .0352 .0283 .0372 .0612 .0775
Net Capital Gains......................... -- -- -- .0001 .0010 -- --
-------- -------- -------- -------- -------- ------- -------
Total From Investment Operations.......... .0504 .0546 .0352 .0284 .0382 .0612 .0775
-------- -------- -------- -------- -------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income..................... (.0504) (.0546) (.0352) (.0283) (.0372) (.0612) (.0775)
Net Capital Gains......................... -- -- (.0001) (.0010) -- -- --
-------- -------- -------- -------- -------- ------- -------
Total Distributions....................... (.0504) (.0546) (.0352) (.0284) (.0382) (.0612) (.0775)
-------- -------- -------- -------- -------- ------- -------
Net Asset Value, End of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======= =======
Total Return.............................. 5.16% 5.61% 3.59% 2.87% 3.90% 6.31% 8.04%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)....... $113,747 $213,177 $135,769 $169,877 $148,363 $62,842 $19,815
Ratio of Expenses to Average Net Assets... .44%(1) .43%(1) .43%(1) .45%(1) .52% .55% .55%(1)
Ratio of Net Investment Income to Average
Net Assets.................................. 5.04% 5.46% 3.51% 2.83% 3.66% 6.11% 7.75%
<CAPTION>
1989 1988 1987
------- ----- -- -------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.00 $ 1. 00 $ 1.00
------- ----- -- -------
Income From Investment Operations:
Net Investment Income......................... .0866 .06 78 .0589
Net Capital Gains............................. -- -- --
------- ----- -- -------
Total From Investment Operations.............. .0866 .06 78 .0589
------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income......................... (.0866) (.0678) (.0589)
Net Capital Gains............................. -- -- --
------- ------- -------
Total Distributions........................... (.0866) (.0678) (.0589)
------- ------- -------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return.................................. 9.04% 7.02% 6.05%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)........... $15,473 $35,741 $29,372
Ratio of Expenses to Average Net Assets....... .55%(1) .55%(1) .55%(1)
Ratio of Net Investment Income to Average Net
Assets...................................... 8.66% 6.77% 5.87%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .55%, .54%, .55%, .52%,
.59%, .60%, .57% and .57%, respectively, for each of the years ended October
31, 1996, 1995, 1994, 1993, 1990, 1989, 1988 and 1987, respectively, for
FedFund Dollar Shares.
4
<PAGE> 8
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities (in addition to direct
Treasury obligations) and repurchase agreements relating to such obligations.
Portfolio obligations held by the Fund have remaining maturities of 397 days
(thirteen months) or less (with certain exceptions), subject to the quality,
diversification, and other requirements of Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act") and other rules of the
Securities and Exchange Commission (the "SEC").
The "instrumentalities" or "agencies" of the U.S. Government the
obligations of which may be purchased by FedFund include: the Central Bank for
Cooperatives, Export-Import Bank of the United States, Farmers Home
Administration, Federal Farm Credit Banks, Federal Financing Bank, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Housing
Administration, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Financing Corporation, General Services
Administration, Government National Mortgage Association, International Bank for
Reconstruction and Development, Maritime Administration, Private Export Funding
Corp., Resolution Trust Company, Small Business Administration, Student Loan
Marketing Association, Tennessee Valley Authority and Washington D.C. Armory
Board. Obligations of certain agencies or instrumentalities of the U.S.
Government are backed by the full faith and credit of the United States; others
are backed by the right of the issuer to borrow from the U.S. Treasury or are
backed only by the credit of the agency or instrumentality issuing the
obligation.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. Certain government securities held by the Fund may have remaining
maturities exceeding thirteen months if such securities provide for adjustments
in their interest rates not less frequently than every thirteen months. To the
extent consistent with its investment objectives, the Fund may invest in
Treasury receipts and other "stripped" securities issued or guaranteed by the
U.S. Government, where the principal and interest components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. Currently, the Fund only invests in
"stripped" securities issued or guaranteed by the U.S. Government which are
registered under the STRIPS program. The principal and interest components may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
The Fund may purchase government securities from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase
5
<PAGE> 9
agreement will be required to maintain the value of the securities subject to
the agreement at not less than the repurchase price. Default by or bankruptcy of
the seller would, however, expose the Fund to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations.
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, the Fund would sell portfolio securities to
financial institutions and agree to repurchase them at an agreed upon date and
price. The Fund would consider entering into reverse repurchase agreements to
avoid otherwise selling securities during unfavorable market conditions in order
to meet redemptions. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities sold by the Fund may decline below the
price of the securities the Fund is obligated to repurchase.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
The Fund may also lend its portfolio securities to financial institutions
in accordance with the investment restrictions described below. Such loans would
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's investment adviser to be of good standing and
only when, in the adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a change in the investment objectives, shareholders
should consider whether the Fund remains an appropriate investment in light of
their then current financial position and needs. The Fund's investment
limitations summarized below may not be changed without the affirmative vote of
the holders of a majority of its outstanding shares. (A full list of the
complete investment limitations that cannot be changed without a vote of
shareholders is contained in the Statement of Additional Information under
"Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the
6
<PAGE> 10
dollar amounts borrowed or 10% of the value of the Fund's total assets at the
time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies, may enter into repurchase
agreements for securities and may lend portfolio securities against collateral
consisting of cash or securities which are consistent with the Fund's permitted
investments, which is equal at all times to at least 100% of the value of the
securities loaned. There is no investment restriction on the amount of
securities that may be loaned, except that payments received on such loans,
including amounts received during the loan on account of interest on the
securities loaned, may not (together with all non-qualifying income) exceed 10%
of the Fund's annual gross income (without offset for realized capital gains)
unless, in the opinion of counsel to the Company, such amounts are qualifying
income under federal income tax provisions applicable to regulated investment
companies.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business (a
"Business Day") and must be transmitted to PFPC in Wilmington, Delaware, by
telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's
computer access program. Orders accepted before 12:00 noon, Eastern time, for
which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 3:00 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time,
if payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order. (Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending institution.) The Fund may in
its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for FedFund Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for FedFund
Shares for specific institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3 million minimum and
warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
7
<PAGE> 11
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's FedFund
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption under certain special circumstances described in
the Statement of Additional Information under "Additional Purchase and
Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares of the Company's
other investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An
8
<PAGE> 12
institution purchasing or redeeming Fund shares on behalf of its customers is
responsible for transmitting orders to the Fund in accordance with its customer
agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest managers of mutual funds, with
assets currently under management in excess of $30 billion. PIMC was organized
in 1977 by PNC Bank to perform advisory services for investment companies and
has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of the largest bank
managers of investments for individuals in the United States, and together with
its predecessors has been in the business of managing the investments of
fiduciary and other accounts since 1847. PNC Bank is a wholly-owned, indirect
subsidiary of PNC Bank Corp., and has its principal offices at 1600 Market
Street, Philadelphia, Pennsylvania 19103. In 1973, Provident National Bank
(predecessor to PNC Bank) commenced advising the first institutional money
market mutual fund--a U.S. dollar-denominated constant net asset value
fund--offered in the United States. PIMC and PNC Bank also serve as investment
adviser and sub-adviser, respectively, to the Company's T-Fund, Federal Trust
Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average net assets. PIMC and the
administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1996, the Fund paid investment advisory fees
aggregating .08% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
9
<PAGE> 13
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Funds' computer access program. For the
fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .08% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to FedFund Shares except that they bear the service fees described
below and enjoy certain exclusive voting rights on matters relating to
10
<PAGE> 14
these fees. The Fund will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Organizations Servicing
the Dollar Shares," include aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PFPC; processing dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing their positions in
Dollar Shares; and providing sub-accounting or the information necessary for
subaccounting with respect to Dollar Shares beneficially owned by customers.
Under the terms of the agreements, Service Organizations are required to provide
to their customers a schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. FedFund Shares are sold to
institutions that have not entered into servicing agreements with the Fund in
connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1996, the Fund's total
expenses with respect to FedFund Shares and Dollar Shares were .19% and .44% of
the average net assets of the FedFund Shares and the FedFund Dollar Shares,
respectively. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
11
<PAGE> 15
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through the day
before such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
the different classes.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
12
<PAGE> 16
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders,
"yields" and "effective yields" for FedFund Shares and Dollar Shares may be
quoted. Yield quotations are computed separately for each separate class or
sub-class of shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective-yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; and, such
fees, if charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (FedFund Shares code: 30; FedFund Dollar Shares code: 31) to obtain
current yield information.
13
<PAGE> 17
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in October, 1975.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of nine classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, T-Fund Plus, Federal Trust,
Federal Trust Dollar, Treasury Trust and Treasury Trust Dollar. The Declaration
of Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S T-FUND,
FEDERAL TRUST FUND AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE
PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's FedFund Shares and FedFund Dollar Shares will vote
in the aggregate and not by class or sub-class on all matters, except where
otherwise required by law and except that only Dollar Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally
14
<PAGE> 18
liable (as if they were partners) for the obligations of the trust. The
Company's Declaration of Trust provides for indemnification out of the trust
property of any shareholder of the Fund held personally liable solely by reason
of being or having been a shareholder and not because of any acts or omissions
or some other reason.
15
<PAGE> 19
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 9
Dividends....................... 12
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 14
</TABLE>
PIF-P-003
FEDFUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
LOGO
Prospectus
February 28, 1997
<PAGE> 20
TRUST FOR FEDERAL SECURITIES
(T-Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 21
T-Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call:
Suite 100 800-441-7450 (in Delaware: 302-791-5350).
Wilmington, DE 19809 For yield information call: 800-821-6006
(T-Fund shares code: 60; T-Fund Dollar
shares code: 61).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. This Prospectus describes two classes of shares ("T-Fund
Shares" and "T-Fund Dollar Shares") in the T-Fund portfolio (the "Fund"), a
money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury and repurchase
agreements relating to direct Treasury obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. T-Fund
"Dollar Shares" accrue daily dividends in the same manner as T-Fund Shares but
bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares. (See "Management
of the Fund--Organizations Servicing the Dollar Shares.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1997, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 22
BACKGROUND AND EXPENSE INFORMATION
Three classes of shares are offered by the Fund: T-Fund Shares, T-Fund
Dollar Shares and T-Fund Plus Shares. Shares of each class represent equal, pro
rata interests in the Fund and accrue daily dividends in the same manner except
that the Dollar Shares bear fees payable by the Fund (at the rate of .25% of
average daily net assets per annum) to institutional investors for services they
provide to the beneficial owners of such shares and Plus Shares also bear these
fees as well as a distribution fee for distribution and sales support services.
(See "Management of the Fund--Organizations Servicing the Dollar Shares.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
T-FUND
T-FUND DOLLAR
SHARES SHARES
------------ ------------
ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers)............................ .08% .08%
Other Expenses.............................................. .12% .37%
Administration Fees (net of waivers)................... .08% .08%
Shareholder Servicing Fees............................. 0 % .25%
Miscellaneous.......................................... .04% .04%
--- ---
Total Fund Operating Expenses (net of waivers).............. .20% .45%
=== ===
</TABLE>
- ------------
<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) a 5% annual return and
(2) redemption at the end of each time period with
respect to the following shares:
T-Fund Shares: $2 $ 6 $11 $26
T-Fund Dollar Shares: $5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
T-Fund Shares and Dollar Shares during the last fiscal year, restated to reflect
the expenses which each class of shares expects to incur during the current
fiscal year. In addition, institutional investors may charge fees for providing
administrative services in connection with their customers' investment in Dollar
Shares. Absent fee waivers, Total Fund Operating Expenses for the T-Fund Shares
and Dollar Shares would have been .30% and .55%, respectively. (For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information.) The
investment adviser and administrators may from time to time waive the investment
advisory and administration fees otherwise payable to them or may reimburse the
fund for its operating expenses. The foregoing table has not been audited by the
Fund's independent accountants.
2
<PAGE> 23
FINANCIAL HIGHLIGHTS
The following financial highlights are for T-Fund Shares and T-Fund Dollar
Shares have been derived from the financial statements of the Fund for the
fiscal year ended October 31, 1996, and for each of the nine preceding fiscal
years. The financial highlights for the fiscal years set forth below have been
audited by Coopers & Lybrand L.L.P. independent accountants whose report on the
financial statements and financial highlights (for the most recent five years)
of the Fund is incorporated by reference into the Statement of Additional
Information. The tables should be read in conjunction with the financial
statements and related notes incorporated by reference into the Statement of
Additional Information. Further information about the performance of the Fund is
available in the annual report to shareholders, which may be obtained without
charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
Financial Highlights
(For a Share Outstanding Throughout Each Period)
T-FUND SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................. .0528 .0565 .0368 .0303 .0392 .0626 .0799
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total From Investment Operations...... .0528 .0565 .0368 .0303 .0392 .0626 .0799
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................. (.0528) (.0565) (.0368) (.0303) (.0392) (.0626) (.0799)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions................... (.0528) (.0565) (.0368) (.0303) (.0392) (.0626) (.0799)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total Return............................ 5.40% 5.80% 3.75% 3.07% 3.99% 6.44% 8.29%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)... $1,507,603 $1,211,220 $1,035,172 $1,361,624 $1,327,743 $1,592,750 $1,497,476
Ratio of Expenses to Average Net
Assets.............................. .19%(1) .18%(1) .18%(1) .20%(1) .28% . 30% .30%(1)
Ratio of Net Investment Income to
Average Net Assets.................. 5.26% 5.66% 3.65% 3.03% 3.93% 6.26% 7.99%
<CAPTION>
1989 1988 1987
---------- ---------- ----------
<S> <<C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Income From Investment Operations:
Net Investment Income................. .0880 .0692 .0606
---------- ---------- ----------
Total From Investment Operations...... .0880 .0692 .0606
---------- ---------- ----------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................. (.0880) (.0692) (.0606)
---------- ---------- ----------
Total Distributions................... (.0880) (.0692) (.0606)
---------- ---------- ----------
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total Return............................ 9.17% 7.14% 6.23%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)... $1,422,788 $1,793,479 $1,737,258
Ratio of Expenses to Average Net
Assets.............................. .30%(1) .30%(1) .30%(1)
Ratio of Net Investment Income to
Average Net Assets.................. 8.80% 6.91% 6.05%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .30%, .29%, .29%, .28%,
.34%, .35%, .33%, and .33%, respectively, for each of the years ended
October 31, 1996, 1995, 1994, 1993, 1990, 1989, 1988 and 1987, respectively,
for T-Fund Shares.
3
<PAGE> 24
TRUST FOR FEDERAL SECURITIES
Financial Highlights
(For a Share Outstanding Throughout Each Period)
T-FUND DOLLAR SHARES
<TABLE>
<CAPTION>
T-FUND DOLLAR SHARES
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- ------- -------
Income From Investment Operations:
Net Investment Income............................ .0503 .0540 .0343 .0278 .0367 .0601 .0774
-------- ------- ------- ------- ------- ------- -------
Total From Investment Operations................. .0503 .0540 .0343 .0278 .0367 .0601 .0774
-------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income............................ (.0503) (.0540) (.0343) (.0278) (.0367) (.0601) (.0774)
-------- ------- ------- ------- ------- ------- -------
Total Distributions.............................. (.0503) (.0540) (.0343) (.0278) (.0367) (.0601) (.0774)
-------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ======= =======
Total Return..................................... 5.15% 5.55% 3.50% 2.82% 3.74% 6.19% 8.04%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s).............. $351,271 $82,502 $22,195 $13,328 $ 4,915 $40,372 $27,116
Ratio of Expenses to Average Net Assets.......... .44%(1) .43%(1) .43%(1) .45%(1) .53% .55% .55%(1)
Ratio of Net Investment Income to Average Net
Assets......................................... 5.07%(2) 5.41% 3.40% 2.78% 3.68% 6.01% 7.74%
<CAPTION>
1989 1988 1987
------- ------- -------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income From Investment Operations:
Net Investment Income................................. .0855 .0667 .0581
------- ------- -------
Total From Investment Operations...................... .0855 .0667 .0581
------- ------- -------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income................................. (.0855) (.0667) (.0581)
------- ------- -------
Total Distributions................................... (.0855) (.0667) (.0581)
------- ------- -------
Net Asset Value, End of Period......................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return.......................................... 8.92% 6.89% 5.98%
Ratios/Supplemental Data
Net Assets, End of Period (in 000s)................... $42,439 $52,083 $30,686
Ratio of Expenses to Average Net Assets............... .55%(1) .55%(1) .55%(1)
Ratio of Net Investment Income to Average Net
Assets.............................................. 8.55% 6.66% 5.80%
</TABLE>
- ---------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .55%, .54%, .54%, .53%,
.59%, .60%, .58% and .58%, respectively, for each of the years ended October
31, 1996, 1995, 1994, 1993, 1990, 1989, 1988 and 1987, respectively, for
T-Fund Dollar Shares.
4
<PAGE> 25
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes and repurchase agreements
relating to direct Treasury obligations. Portfolio obligations held by the Fund
have remaining maturities of 397 days (thirteen months) or less (with certain
exceptions), subject to the quality, diversification, and other requirements of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act")
and other rules of the Securities and Exchange Commission (the "SEC").
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. To the extent
consistent with its investment objectives, the Fund may invest in Treasury
receipts and other "stripped" securities issued or guaranteed by the U.S.
Government, where the principal and interest components are traded independently
under the Separate Trading of Registered Interest and Principal of Securities
program ("STRIPS"). Under the STRIPS program, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently. Currently, the Fund only invests in "stripped"
securities issued or guaranteed by the U.S. Government which are registered
under the STRIPS program. The principal and interest components may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
The Fund may purchase government securities from primary dealers of the
Federal Reserve Bank of New York, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the underlying securities subject to the agreement at not less than 102% of the
repurchase price. Default by or bankruptcy of the seller would, however, expose
the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes or
as a means of leverage, but only in furtherance of its investment objective.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a
5
<PAGE> 26
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. The Fund's investment limitations summarized below may not
be changed without the affirmative vote of the holders of a majority of its
outstanding shares. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes, some of which may be subject to repurchase
agreements.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies and may enter into
repurchase agreements for securities.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business (a
"Business Day") and must be transmitted to PFPC in Wilmington, Delaware, by
telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's
computer access program. Orders accepted before 12:00 noon, Eastern time, for
which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 5:30 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon), will be executed at 5:30 P.M., Eastern time,
if payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 5:30 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order. (Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending institution.) Between 3:00 P.M.
and 5:30 P.M., Eastern time, purchase orders may only be transmitted by
telephone, and the Fund reserves the right to limit the amount of such orders.
The Fund may in its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for T-Fund Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for T-Fund
Shares for specific
6
<PAGE> 27
institutions whose aggregate relationship with the Provident Institutional Funds
is substantially equivalent to this $3 million minimum and warrants this
reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures," except that redemption orders
placed between 3:00 P.M. and 5:30 P.M., Eastern time may only be transmitted by
telephone. Shares are redeemed at the net asset value per share next determined
after PFPC's receipt of the redemption order. Telephone instructions for
redemptions received between 3:00 P.M. and 5:30 P.M., Eastern time, on a
Business Day are received for execution on that same day; however, the Fund
reserves the right to make payment for such redemptions the next Business Day.
While the Fund intends to use its best efforts to maintain its net asset value
per share at $1.00, the proceeds paid to a shareholder upon redemption may be
more or less than the amount invested depending upon a share's net asset value
at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 5:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received on a day when PNC Bank is closed is normally wired in
federal funds on the next day following redemption that PNC Bank is open for
business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's T-Fund
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption under certain special circumstances described in
the Statement of Additional Information under "Additional Purchase and
Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 5:30 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
7
<PAGE> 28
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares of the Company's
other investment portfolios. Under the 1940 Act, the Fund may postpone the date
of payment of any redeemable security for up to seven days.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (predecessor to PNC Bank) commenced advising the first
institutional money market fund--a U.S. dollar-denominated constant net asset
value fund--offered in the United States. PIMC and PNC Bank also serve as
investment adviser and sub-adviser, respectively, to the Company's FedFund,
Federal Trust Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's
8
<PAGE> 29
financial accounts and records and computes the Fund's net asset value and net
income. For the investment advisory services provided and expenses assumed by
it, PIMC is entitled to receive a fee, computed daily and payable monthly, based
on the Fund's average net assets. PIMC and the administrators may from time to
time reduce the investment advisory and administration fees otherwise payable to
them or may reimburse the Fund for its operating expenses. Any fees waived or
expenses reimbursed by PIMC and the administrators with respect to a particular
fiscal year are not recoverable. For the fiscal year ended October 31, 1996, the
Fund paid investment advisory fees aggregating .08% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI whose principal business address is Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Funds' computer access program. For the
fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .08% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
9
<PAGE> 30
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to T-Fund Shares except that they bear the service fees described below
and enjoy certain exclusive voting rights on matters relating to these fees. The
Fund will enter into an agreement with each Service Organization which purchases
Dollar Shares requiring it to provide support services to its customers who are
the beneficial owners of such shares in consideration of the Fund's payment of
.25% (on an annualized basis) of the average daily net asset value of the Dollar
Shares held by the Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of Additional
Information under "Management of the Funds--Organizations Servicing the Dollar
Shares," include aggregating and processing purchase and redemption requests
from customers and placing net purchase and redemption orders with PFPC;
processing dividend payments from the Fund on behalf of customers; providing
information periodically to customers showing their positions in Dollar Shares;
and providing sub-accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by customers. Under the terms
of the agreements, Service Organizations are required to provide to their
customers a schedule of any fees that they may charge customers in connection
with their investments in Dollar Shares. T-Fund Shares are sold to institutions
that have not entered into servicing agreements with the Fund in connection with
their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1996, the Fund's total
expenses with respect to T-Fund Shares and Dollar Shares were .19% and .44% of
the average net assets of the T-Fund Shares and the Dollar Shares, respectively.
With regard to fees paid exclusively by Dollar Shares, see "Service
Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not
10
<PAGE> 31
prohibit such a holding company or affiliate or banks generally from acting as
investment adviser, transfer agent or custodian to such an investment company,
or from purchasing shares of such a company for or upon the order of customers.
PNC Bank, PIMC and PFPC, as well as some Service Organizations, are subject to
such banking laws and regulations, but believe they may perform the services for
the Fund contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws or
regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through the day
before such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
the different classes.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment
11
<PAGE> 32
company taxable income for such year. In general, the Fund's investment company
taxable income will be its taxable income (including interest and short-term
capital gains, if any), subject to certain adjustments and excluding the excess
of any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. The Fund intends to distribute
substantially all of its investment company taxable income each year. Such
distributions will be taxable as ordinary income to the Fund's shareholders that
are not currently exempt from federal income taxes, whether such income is
received in cash or reinvested in additional shares. (Federal income taxes for
distributions to an IRA or a qualified retirement plan are deferred under the
Code.) It is anticipated that none of the Fund's distributions will be eligible
for the dividends received deduction for corporations. The Fund does not expect
to realize long-term capital gains and, therefore, does not contemplate payment
of any "capital gain dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or reports to Shareholders, "yields"
and "effective yields" for T-Fund Shares, Dollar Shares and Plus Shares may be
quoted. Yield quotations are computed separately for each separate class or
sub-class of shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class of Fund shares is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The
12
<PAGE> 33
yield of any investment is generally a function of portfolio quality and
maturity, type of investment and operating expenses. Any fees charged by Service
Organizations or other institutional investors directly to their customers in
connection with investments in Fund shares are not reflected in the Fund's
yield; such fees, if charged, would reduce the actual return received by
customers on their investments. The methods used to compute the Fund's yields
are described in more detail in the Statement of Additional Information.
Investors may call 800-821-6006 (T-Fund Shares code 60: T-Fund Dollar Shares
code 61) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in March, 1980.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of nine classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, T-Fund Plus, Federal Trust,
Federal Trust Dollar, Treasury Trust and Treasury Trust Dollar. The Declaration
of Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
FEDERAL TRUST FUND AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE
PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's T-Fund Shares, Dollar Shares and Plus Shares will
vote in the aggregate and not by class or sub-class on all matters, except (i)
where otherwise required by law, (ii) only Dollar Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to Service
Organizations providing services to those shares, and (iii) only Plus Shares
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to certain organizations providing services to and/or certain fees
applicable to those shares. Further, shareholders of all of the Company's
portfolios will vote in the aggregate and not by portfolio except as otherwise
required by law or when the Board of Trustees determines that the matter to
13
<PAGE> 34
be voted upon affects only the interests of the shareholders of a particular
portfolio. (See the Statement of Additional Information under "Additional
Description Concerning Fund Shares" for examples where the 1940 Act requires
voting by portfolio.) Shareholders of the Company are entitled to one vote for
each full share held (irrespective of class, sub-class, or portfolio) and
fractional votes for fractional shares held. Voting rights are not cumulative
and, accordingly, the holders of more than 50% of the aggregate shares of the
Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
14
<PAGE> 35
[THIS PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 36
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 6
Management of the Fund.......... 8
Dividends....................... 11
Taxes........................... 11
Yields.......................... 12
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-006
T-FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
February 28, 1997
<PAGE> 37
TRUST FOR FEDERAL SECURITIES
(T-Fund Plus Shares)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 38
T-Fund
Plus Shares
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center 400 For purchase and redemption orders only call:
Bellevue Parkway Suite 100 Wilmington, 800-441-7450 (in Delaware: 302-791-5350).
DE 19809 For yield information call: 800-821-6006 (T-Fund
Plus shares code: 32). For other information
call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. This Prospectus describes one class of shares ("T-Fund
Plus Shares") in the T-Fund portfolio (the "Fund"), a money market portfolio.
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests in a portfolio consisting of U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury and repurchase
agreements relating to direct Treasury obligations.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. T-Fund
Plus Shares bear fees payable by the Fund to the institutional investors for
certain services they provide to the beneficial owners of those Shares. T-Fund
Plus Shares also bear distribution fees payable by the Fund to the distributor
for distribution and sales support services. (See "Management of the
Fund--Distribution and Service Plan.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1997 has been filed with the Securities and Exchange Commission and
is available to investors without charge by calling the Fund at 800-821-7432.
The Statement of Additional Information, as amended from time to time, is
incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 39
BACKGROUND AND EXPENSE INFORMATION
Three classes of shares are offered by the Fund: T-Fund Plus Shares, T-Fund
Shares and T-Fund Dollar Shares. Shares of each class represent equal, pro rata
interests in the Fund and accrue daily dividends in the same manner, except that
T-Fund Plus Shares (as well as T-Fund Dollar Shares) bear fees payable by the
Fund (at the rate of .25% of average daily net assets per annum) to
institutional investors for services they provide to the beneficial owners of
such shares, and T-Fund Plus Shares also bear distribution fees (at the rate of
.15% of average daily net assets per annum) payable by the Fund to PDI for
distribution and sales support services. (See "Management of the
Fund--Distribution and Service Plan.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
T-FUND
PLUS SHARES
(ESTIMATED)
------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (net of waivers)....................................... .08%
---
12b-1 Fees............................................................. .15%
Other Expenses......................................................... .37%
---
Administration Fees (net of waivers).............................. .08%
---
Shareholder Servicing Fees........................................ .25%
Miscellaneous..................................................... .04%
---
Total Fund Operating Expenses (net of waivers)......................... .60%
===
</TABLE>
- ------------
<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) a 5% annual return and
(2) redemption at the end of each time period with
respect to T-Fund Plus Shares: $ 6 $19 $33 $75
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The foregoing table sets forth certain information
regarding estimated operating expenses expected to be incurred by T-Fund Plus
Shares. Actual expenses may vary. In addition, institutional investors may
charge fees for providing administrative services in connection with their
customers' investment in T-Fund Plus Shares. Absent fee waivers, Management
Fees, Administration Fees and Total Fund Operating Expenses for T-Fund Plus
Shares would be .13% (estimated), .13% (estimated) and .70% (estimated),
respectively. No T-Fund Plus Shares were outstanding during the year ended
October 31, 1996. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information.) The investment adviser and administrators may from time
to time waive the advisory and administration fees otherwise payable to them or
may reimburse the Fund for its operating expenses. The foregoing table has not
been audited by the Fund's independent accountants.
2
<PAGE> 40
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes and repurchase agreements
relating to direct Treasury obligations. Portfolio obligations held by the Fund
have remaining maturities of 397 days (thirteen months) or less (with certain
exceptions), subject to the quality, diversification, and other requirements of
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act")
and other rules of the Securities and Exchange Commission (the "SEC").
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. To the extent
consistent with its investment objectives, the Fund may invest in Treasury
receipts and other "stripped" securities issued or guaranteed by the U.S.
Government, where the principal and interest components are traded independently
under the Separate Trading of Registered Interest and Principal of Securities
program ("STRIPS"). Under the STRIPS program, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently. Currently, the Fund only invests in "stripped"
securities issued or guaranteed by the U.S. Government which are registered
under the STRIPS program. The principal and interest components may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
The Fund may purchase government securities from primary dealers of the
Federal Reserve Bank of New York, subject to the seller's agreement to
repurchase them at an agreed upon time and price ("repurchase agreements"). The
securities subject to a repurchase agreement may bear maturities exceeding
thirteen months, provided the repurchase agreement itself matures in one year or
less. The Fund will not invest more than 10% of the value of its net assets in
repurchase agreements which do not provide for settlement within seven days. The
seller under a repurchase agreement will be required to maintain the value of
the underlying securities subject to the agreement at not less than 102% of the
repurchase price. Default by or bankruptcy of the seller would, however, expose
the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes or
as a means of leverage, but only in furtherance of its investment objective.
INVESTMENT LIMITATIONS
The Fund's investment objective and policies described above are not
fundamental and may be changed by the Company's Board of Trustees without a vote
of shareholders. If there is a change in the investment objective, shareholders
should consider whether the Fund remains an
3
<PAGE> 41
appropriate investment in light of their then current financial position and
needs. The Fund's investment limitations summarized below may not be changed
without the affirmative vote of the holders of a majority of its outstanding
shares. (A full list of the complete investment limitations that cannot be
changed without a vote of shareholders is contained in the Statement of
Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S.
Treasury such as Treasury bills and notes, some of which may be subject to
repurchase agreements.
2. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the Fund's total assets, or
mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Fund's total assets at the time
of such borrowing.
3. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective and policies and
may enter into repurchase agreements for securities.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
T-Fund Plus Shares are sold exclusively to institutional investors, such as
brokers or dealers, banks, savings and loan associations and other financial
institutions, and other industry professionals ("Service Organizations"), acting
on behalf of themselves or their customers and customers of their affiliates
("customers"). The customers, which may include individuals, trusts,
partnerships and corporations, must maintain accounts (such as demand deposit,
custody, trust or escrow accounts) with the Service Organization. Service
Organizations (or their nominees) will normally be the holders of record of
T-Fund Plus Shares, and will reflect their customers' beneficial ownership of
shares in the account statements provided by them to their customers. The
exercise of voting rights and the delivery to customers of shareholder
communications from the Fund will be governed by the customers' account
agreements with the Service Organizations. Investors wishing to purchase T-Fund
Plus Shares should contact their account representatives.
Purchase orders must be transmitted by a Service Organization directly to
PFPC, the Fund's transfer agent. All such transactions are effected pursuant to
procedures established by the Service Organization in connection with a
customer's account. T-Fund Plus Shares are sold at the net asset value per share
next determined after acceptance of a purchase order by PFPC.
Purchase orders for shares are accepted only on days on which both the New
York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for
business (a "Business Day") and must be transmitted to PFPC in Wilmington,
Delaware, by telephone (800-441-7450; in Delaware: 302-791-5350) or through the
Fund's computer access program. Orders accepted before 12:00 noon, Eastern time,
for which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 5:30 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon), will be executed at 5:30 P.M., Eastern time,
if payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which
4
<PAGE> 42
payment has not been received by 5:30 P.M. Eastern time, will not be accepted,
and notice thereof will be given to the institution placing the order. (Payment
for orders which are not received or accepted will be returned after prompt
inquiry to the sending institution.) Between 3:00 P.M. and 5:30 P.M., Eastern
time, purchase orders may only be transmitted by telephone, and the Fund
reserves the right to limit the amount of such orders. The Fund may in its
discretion reject any order for shares.
Payment for T-Fund Plus Shares may be made only in federal funds or other
funds immediately available to PNC Bank. The minimum initial investment by a
Service Organization is $3 million for T-Fund Plus Shares; however, Service
Organizations may set a higher minimum for their customers. There is no minimum
subsequent investment. The Fund, at its discretion, may reduce the minimum
initial investment for T-Fund Plus Shares for specific Service Organizations
whose aggregate relationship with the Provident Institutional Funds is
substantially equivalent to this $3 million minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in T-Fund Plus Shares. (See also "Management of the Fund--Distribution and
Service Plan.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in T-Fund Plus Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures," except that redemption orders
placed between 3:00 P.M. and 5:30 P.M., Eastern time, may only be transmitted by
telephone. Shares are redeemed at the net asset value per share next determined
after PFPC's receipt of the redemption order. Telephone instructions for
redemptions received between 3:00 P.M. and 5:30 P.M., Eastern time, on a
Business Day are received for execution on that same day; however, the Fund
reserves the right to make payment for such redemptions the next Business Day.
While the Fund intends to use its best efforts to maintain its net asset value
per share at $1.00, the proceeds paid to a shareholder upon redemption may be
more or less than the amount invested depending upon a share's net asset value
at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 5:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received on a day when PNC Bank is closed is normally wired in
federal funds on the next day following redemption that PNC Bank is open for
business.
The Fund shall have the right to redeem shares in any account if, as a
result of redemptions, the value of the account is less than $1,000 after
sixty-days' prior written notice to the shareholder. Any such redemption shall
be effected at the net asset value per share next determined after the
redemption order is entered. If during the sixty-day period the shareholder
increases the value of its account to $1,000 or more, no such redemption shall
take place. Moreover, if a shareholder's T-Fund Plus Shares account falls below
an average of $100,000 in any particular calendar month, the account may be
charged an account maintenance fee with respect to that month. In addition, the
Fund may also redeem shares involuntarily or suspend the right of
5
<PAGE> 43
redemption under certain special circumstances described in the Statement of
Additional Information under "Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 5:30 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the outstanding shares of
each class. In computing net asset value, the Fund uses the amortized cost
method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares of the Company's
other investment portfolios. Under the 1940 Act, the Fund may postpone the date
of payment of any redeemable security for up to seven days.
Fund shares are sold and redeemed without charge by the Fund. Service
Organizations purchasing or holding T-Fund Plus Shares for their customer
accounts may charge customer fees for cash management and other services
provided in connection with their accounts. In addition, if a customer has
agreed with a particular Service Organization to maintain a minimum balance in
its account with the Service Organization and the balance in such account falls
below that minimum, the customer may be obliged by the Service Organization to
redeem all or part of its shares in the Fund to the extent necessary to maintain
the required minimum balance in such account. A customer should, therefore,
consider the terms of its account with a Service Organization before purchasing
T-Fund Plus Shares. A Service Organization purchasing or redeeming Fund shares
on behalf of its customers is responsible for transmitting orders to the Fund in
accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp. and has
6
<PAGE> 44
its principal offices at 1600 Market Street, Philadelphia, Pennsylvania 19103.
In 1973, Provident National Bank (predecessor to PNC Bank) commenced advising
the first institutional money market mutual fund - a U.S. dollar-denominated
constant net asset value fund - offered in the United States. PIMC and PNC Bank
also serve as investment adviser and sub-adviser, respectively, to the Company's
FedFund, Federal Trust Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average net assets. PIMC and the
administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1996, the Fund paid investment advisory fees
aggregating .08% (estimated) of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
7
<PAGE> 45
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Funds' computer access program. For the
fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .08% (estimated) of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent.
DISTRIBUTION AND SERVICE PLAN
Under the Fund's Distribution and Service Plan (the "Plan"), T-Fund Plus
Shares bear the expense of distribution fees of up to .25% and shareholder
servicing fees of up to .25%, on an annualized basis, of the average daily net
asset value of the outstanding T-Fund Plus Shares.
The distribution fees consist of payments made to PDI for distribution and
sales support services. The distribution fees will be used to compensate PDI for
distribution services and sales support services provided in connection with the
offering and sale of T-Fund Plus Shares. The distribution fees may also be used
to reimburse PDI for related expenses, including payments to Service
Organizations for sales support services and related expenses. The Fund
currently intends to limit the distribution fees to no more than .15% (on an
annualized basis) of the average daily net asset value of the outstanding T-Fund
Plus Shares. Payments under the Plan are not tied directly to out-of-pocket
expenses and therefore may be used by the recipients as they choose (for
example, to defray their overhead expenses).
The shareholder servicing fees are paid to Service Organizations which
enter into service agreements with the Fund to render certain support services
to their customers who are the beneficial owners of T-Fund Plus Shares. In
consideration for a shareholder servicing fee of up to .25% (annualized) of the
average daily net asset value of T-Fund Plus Shares owned by their customers,
Service Organizations provide services to their customers including: responding
to customer inquiries relating to the services performed by the Service
Organization and to customer inquiries concerning their investments in T-Fund
Plus Shares; providing information periodically to customers showing their
positions in T-Fund Plus Shares; and other similar shareholder liaison services.
Service Organizations may charge their clients additional fees for account
services. As previously noted, customers who are beneficial owners of T-Fund
Plus Shares should read this Prospectus in light of the terms and fees governing
their accounts with Service Organizations.
8
<PAGE> 46
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. With regard to fees paid exclusively by T-Fund Plus Shares, see
"Distribution and Service Plan" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to T-Fund Plus Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through the day
before such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
the different classes.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of T-Fund Plus Shares at the net asset
value of such shares on the payment date. Reinvested dividends receive the same
tax treatment as dividends paid in cash. Such election, or any revocation
thereof, must be made in writing to PFPC at P.O. Box 8950, Wilmington, Delaware
19885-9628, and will become effective after its receipt by PFPC with respect to
dividends paid.
9
<PAGE> 47
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or reports to shareholders, "yields"
and "effective yields" for T-Fund Plus Shares may be quoted. Yield quotations
are computed separately for each separate class or sub-class of shares. The
"yield" for T-Fund Plus Shares refers to the income generated by an investment
in such shares over a specified period (such as a seven-day period). This income
is then "annualized"; that is, the amount of income generated by the investment
during that period is assumed to be generated for each such period over a
52-week or one year period and is shown as a percentage of the investment. The
"effective yield" is calculated similar but, when annualized, the income earned
by an investment in T-Fund Plus Shares is assumed to
10
<PAGE> 48
be reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations directly to their
customers in connection with investments in T-Fund Plus Shares are not reflected
in the Fund's yield for those shares; such fees, if charged, would reduce the
actual return received by customers on their investments. The methods used to
compute the Fund's yields are described in more detail in the Statement of
Additional Information. Investors may call 800-821-6006 (T-Fund Plus Shares
code: 32) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in March, 1980.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of nine classes of shares designated as
FedFund, FedFund Dollar, T-Fund, T-Fund Dollar, T-Fund Plus, Federal Trust,
Federal Trust Dollar, Treasury Trust and Treasury Trust Dollar. The Declaration
of Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO T-FUND PLUS
SHARES OF THE FUND. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING
THE FUND'S OTHER CLASSES OF SHARES OR THE COMPANY'S FEDFUND, FEDERAL TRUST FUND
AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING
THOSE PORTFOLIOS BY CALLING 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
11
<PAGE> 49
Each Fund share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's T-Fund Plus Shares, T-Fund Shares and T-Fund
Dollar Shares will vote in the aggregate and not by class or sub-class on all
matters, except (i) where otherwise required by law, (ii) only T-Fund Dollar
Shares will be entitled to vote on matters submitted to a vote of shareholders
pertaining to certain organizations providing services to those shares, (iii)
only T-Fund Plus Shares will be entitled to vote on matters submitted to a vote
of shareholders pertaining to the Fund's arrangements with Service Organizations
and (iv) only T-Fund Plus Shares will be entitled to vote on matters submitted
to a vote of shareholders pertaining to distribution fees. Further, shareholders
of all of the Company's portfolios will vote in the aggregate and not by
portfolio except as otherwise required by law or when the Board of Trustees
determines that the matter to be voted upon affects only the interests of the
shareholders of a particular portfolio. (See the Statement of Additional
Information under "Additional Description Concerning Fund Shares" for examples
where the 1940 Act requires voting by portfolio.) Shareholders of the Company
are entitled to one vote for each full share held (irrespective of class,
sub-class, or portfolio) and fractional votes for fractional shares held. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
12
<PAGE> 50
(THIS PAGE INTENTIONALLY LEFT BLANK)
13
<PAGE> 51
(THIS PAGE INTENTIONALLY LEFT BLANK)
14
<PAGE> 52
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 53
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Investment Objective and
Policies...................... 3
Purchase and Redemption of
Shares........................ 4
Management of the Fund.......... 6
Dividends....................... 9
Taxes........................... 10
Yields.......................... 10
Description of Shares and
Miscellaneous................. 11
</TABLE>
PIF-P-006P
T-FUND
PLUS SHARES
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
Prospectus
February 28, 1997
<PAGE> 54
FEDFUND AND T-FUND
Investment Portfolios Offered By
Trust for Federal Securities
Statement of Additional Information
February 28, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
THE COMPANY............................................................................................. 1
INVESTMENT OBJECTIVES AND POLICIES...................................................................... 1
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.......................................................... 5
MANAGEMENT OF THE FUNDS................................................................................. 8
ADDITIONAL INFORMATION CONCERNING TAXES................................................................ 20
DIVIDENDS............................................................................................... 22
ADDITIONAL YIELD INFORMATION............................................................................ 22
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES........................................................... 26
COUNSEL................................................................................................. 27
AUDITORS................................................................................................ 27
MISCELLANEOUS........................................................................................... 27
APPENDIX A.............................................................................................. A-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for FedFund and T-Fund, each dated February
28, 1997, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of FedFund or T-Fund should be made solely
upon the information contained herein. Copies of the Prospectuses for FedFund
and T-Fund may be obtained by calling 800-821-7432. Capitalized terms used but
not defined herein have the same meanings as in the Prospectuses.
<PAGE> 55
THE COMPANY
Trust for Federal Securities (Trust for Short-Term Federal Securities
prior to March 2, 1987) is a no-load, diversified, open-end investment company
designed primarily as a vehicle by which institutional investors can invest
cash reserves in a choice of portfolios consisting of government securities.
Trust for Federal Securities (the "Company") consists of four separate
investment portfolios--FedFund, T-Fund, Federal Trust Fund and Treasury Trust
Fund. This Statement of Additional Information relates primarily to the
Company's FedFund and T-Fund portfolios (the "Funds").
The securities held by FedFund consist of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations. Securities held by T-Fund
are limited to U.S. Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements relating to direct Treasury
obligations. Although both Funds have the same investment adviser and have
comparable investment objectives, their yields normally will differ due to
their differing cash flows and differences in the specific portfolio securities
held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUNDS' PROSPECTUSES
RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUNDS.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDERAL
TRUST FUND OR TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES
DESCRIBING THOSE PORTFOLIOS BY CALLING THE DISTRIBUTOR AT 800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of each
Fund is to seek current income with liquidity and security of principal. The
following policies supplement the description in the Prospectuses of the
investment objectives and policies of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees, PNC
Institutional Management Corporation ("PIMC"), the Funds' investment adviser,
is responsible for, makes decisions with respect to and places orders for all
purchases and sales of portfolio securities for the Funds. Purchases and sales
of portfolio securities are usually principal transactions without brokerage
commissions. In making portfolio investments, PIMC seeks to obtain the best net
price and the most favorable
<PAGE> 56
execution of orders. To the extent that the execution and price offered by more
than one dealer are comparable, PIMC may, in its discretion, effect
transactions in portfolio securities with dealers who provide the Company with
research advice or other services. Although the Funds will not seek profits
through short-term trading, PIMC may, on behalf of the Funds, dispose of any
portfolio security prior to its maturity if it believes such disposition is
advisable.
Investment decisions for the Funds are made independently from those
for other investment company portfolios or accounts advised or managed by PIMC.
Such other portfolios may invest in the same securities as the Funds. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other portfolios, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which PIMC believes
to be equitable to each portfolio, including either Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained for a Fund. To the extent permitted
by law, PIMC may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for such other investment company portfolios
in order to obtain best execution.
Portfolio securities will not be purchased from or sold to and the
Funds will not enter into repurchase agreements or reverse repurchase
agreements with PIMC, PNC Bank, National Association ("PNC Bank"), PFPC Inc.
("PFPC"), Provident Distributors, Inc. ("PDI") or any affiliated person (as
such term is defined in the Investment Company Act of 1940 (the "1940 Act") of
any of them, except to the extent permitted by the Securities and Exchange
Commission (the "SEC"). Furthermore, with respect to such transactions,
securities and repurchase agreements, the Funds will not give preference to
Service Organizations with whom the Funds enter into agreements concerning the
provision of support services to their customers. (See the Prospectuses,
"Management of the Fund--Service Organizations" and "Distribution and Service
Plan.")
The Funds do not intend to seek profits through short-term trading.
The Funds' annual portfolio turnover rates will be relatively high but the
Funds' portfolio turnover is not expected to have a material effect on its net
incomes. The portfolio turnover rate for each of the Funds is expected to be
zero for regulatory reporting purposes.
-2-
<PAGE> 57
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
The repurchase price under the repurchase agreements described in the
Funds' Prospectuses generally equals the price paid by a Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements will be held by the Funds'
custodian, sub-custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered to be loans by the Funds under the 1940
Act.
Whenever FedFund enters into reverse repurchase agreements as
described in its Prospectus, it will place in a segregated custodial account
liquid assets having a value equal to the repurchase price (including accrued
interest) and will subsequently monitor the account to ensure such equivalent
value is maintained. Reverse repurchase agreements are considered to be
borrowings by FedFund under the 1940 Act.
As stated in the Funds' Prospectuses, the Funds may purchase
securities on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
when-issued securities, its custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case such Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Funds will set aside cash or liquid assets
to satisfy their respective purchase commitments in the manner described, such
a Fund's liquidity and ability to manage its portfolio might be affected in the
event its commitments to purchase when-issued securities ever exceeded 25% of
the value of its assets. Neither Fund intends to purchase when-issued
securities for speculative purposes but only in furtherance of its investment
objectives. The Funds reserve the right to sell the securities before the
settlement date if it is deemed advisable.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
With respect to loans by FedFund of its portfolio securities as
described in its Prospectus, the Fund would continue
-3-
<PAGE> 58
to accrue interest on loaned securities and would also earn income on loans. Any
cash collateral received by FedFund in connection with such loans would be
invested in short-term U.S. government obligations to the extent permitted by
the Fund's investment limitations, below.
Neither Fund will invest more than 10% of the value of its assets in
investments which are not readily marketable if such investment occurs
immediately after the purchase of a security which is not a readily marketable
security. Securities for purposes of this limitation do not include securities
which have been determined to be liquid by the Fund's Board of Trustees based
upon the trading markets for such securities.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a "majority
of the outstanding shares" of the respective Fund (as defined below under
"Miscellaneous"). Below is a complete list of the Funds' investment limitations
that may not be changed without such a vote of shareholders.
1. FedFund may not purchase securities other than U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, some of which may be subject to repurchase
agreements. There is no limit on the amount of FedFund's assets which may be
invested in the securities of any one issuer of such obligations.
2. T-Fund may not purchase securities other than direct obligations of
the U.S. Treasury such as Treasury bills and notes, some of which may be
subject to repurchase agreements. There is no limit on the amount of T-Fund's
assets which may be invested in securities of any one issuer of such
obligations.
FedFund and T-Fund may not:
3. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the particular Fund's total assets,
or mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the particular Fund's total assets at the time
of such borrowing. (This borrowing provision is not for investment leverage,
but solely to facilitate management of each Fund by enabling the Company to
meet redemption requests where the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous.) Borrowing may take the form of a
sale of portfolio securities accompanied by a
-4-
<PAGE> 59
simultaneous agreement as to their repurchase. Interest paid on borrowed funds
will not be available for investment.
4. Act as an underwriter.
5. Make loans except that the Funds may purchase or hold debt
obligations in accordance with their respective investment objective and
policies, may enter into repurchase agreements for securities, and may lend
portfolio securities against collateral consisting of cash or securities which
are consistent with the lending Fund's permitted investments, which is equal at
all times to at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned, except
that payments received on such loans, including amounts received during the
loan on account of interest on the securities loaned, may not (together with
all non-qualifying income) exceed 10% of the Fund's annual gross income
(without offset for realized capital gains) unless, in the opinion of counsel
to the Company, such amounts are qualifying income under federal income tax
provisions applicable to regulated investment companies.
6. The Company will not purchase or sell real estate or commodities or
commodity contracts.
Although Investment Limitation No. 5 above would permit each Fund to
lend its portfolio securities, T-Fund has no current policy permitting such
activity.
* * *
Neither Fund will invest in inverse floaters, range notes or mortgage
derived interest-only notes.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem a Fund's shares is included
in its Prospectus. The issuance of shares is recorded on the books of the
Funds, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes
that the purchase of FedFund shares and T-Fund shares by such national banks
acting on behalf of their fiduciary accounts is not contrary to applicable
regulations if consistent with the particular account and proper under the law
governing the administration of the account.
-5-
<PAGE> 60
Prior to effecting a redemption of shares represented by certificates,
PFPC, the Funds' transfer agent, must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank, a member of a major stock exchange
or other eligible guarantor institution, unless other arrangements satisfactory
to the Funds have previously been made. The Funds may require any additional
information reasonably necessary to evidence that a redemption has been duly
authorized.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Funds may
also suspend or postpone the recordation of the transfer of their shares upon
the occurrence of any of the foregoing conditions.)
In addition, the Funds may redeem shares involuntarily in certain
other instances if the Board of Trustees determines that failure to redeem may
have material adverse consequences to a Fund's shareholders in general. Each
Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the
Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Board of Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in securities or other property, valued
in the same way as the Fund determines net asset value. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.) Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may incur transaction costs if
they sell such securities or property, and may receive less than the redemption
value of such securities or property upon sale, particularly where such
securities are sold prior to maturity.
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or classes
of shares must maintain a separate Master Account for each portfolio and class
of shares. Sub-accounts may be established by name or number either when the
Master Account is opened or later.
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<PAGE> 61
NET ASSET VALUE
Net asset value per share of each class of shares in a particular Fund
is calculated by adding the value of all portfolio securities and other assets
belonging to a Fund that are attributable to a class, subtracting the Fund's
liabilities attributable to the class, and dividing the result by the number of
outstanding shares in the class. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares together with all income,
earnings, profits and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange or liquidation of such investments, any
funds or payments derived from any reinvestment of such proceeds, and a portion
of any general assets of the Company not belonging to a particular portfolio.
Assets belonging to a particular Fund are charged with the direct liabilities
of that Fund and with a share of the general liabilities of the Company
allocated in proportion to the relative net assets of such Fund and the
Company's other portfolios. Determinations made in good faith and in accordance
with generally accepted accounting principles by the Board of Trustees as to
the allocations of any assets or liabilities with respect to a Fund are
conclusive. The expenses that are charged to a Fund are borne equally by each
share of the Fund except for payments to Service Organizations under the
Shareholder Services Plan that are borne solely by Dollar Shares and payments
to Service Organizations under the Distribution and Service Plan that are borne
solely by Plus Shares.
As stated in the Funds' Prospectuses, in computing the net asset value
of shares of the Funds for purposes of sales and redemptions, the Funds use the
amortized cost method of valuation. Under this method, the Funds value each of
their portfolio securities at cost on the date of purchase and thereafter
assume a constant proportionate amortization of any discount or premium until
maturity of the security. As a result, the value of a portfolio security for
purposes of determining net asset value normally does not change in response to
fluctuating interest rates. While the amortized cost method provides certainty
in portfolio valuation, it may result in valuations for the Funds' securities
which are higher or lower than the market value of such securities.
In connection with their use of amortized cost valuation, each of the
Funds limits the dollar-weighted average maturity of its portfolio to not more
than 90 days and does not purchase any instrument with a remaining maturity of
more than thirteen months (with certain exceptions). In determining the average
weighted portfolio maturity of each Fund, a variable rate obligation that is
issued or guaranteed by the U.S. Government, or an agency or instrumentality
thereof, is deemed to have a maturity equal to the period remaining until the
obligation's next interest
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<PAGE> 62
rate adjustment. The Company's Board of Trustees has also established
procedures, pursuant to rules promulgated by the SEC, that are intended to
stabilize the net asset value per share of each Fund for purposes of sales and
redemptions at $1.00. Such procedures include the determination at such
intervals as the Board deems appropriate, of the extent, if any, to which each
Fund's net asset value per share calculated by using available market
quotations or a matrix believed to provide reliable values deviates from $1.00
per share. In the event such deviation exceeds 1/2 of 1% with respect to
either Fund, the Board will promptly consider what action, if any, should be
initiated. If the Board believes that the amount of any deviation from the
$1.00 amortized cost price per share of a Fund may result in material dilution
or other unfair results to investors or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity; shortening the Fund's
average portfolio maturity; withholding or reducing dividends; redeeming shares
in kind; or utilizing a net asset value per share determined by using available
market quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses, ages,
principal occupations during the past five years and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Municipal Fund for Temporary
Investment ("Muni"). In addition, Messrs. Fortune and Pepper are directors of
Independence Square Income Securities, Inc. ("ISIS") and Managing General
Partners of Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and
Johnson are directors of Municipal Fund for California Investors, Inc. ("Cal
Muni"); and Mr. Johnson is a director of Municipal Fund for New York Investors,
Inc. ("New York Muni") and a director of the International Dollar Reserve Fund
("IDR").
Each of the Company's officers, with the exception of Mr. McConnel,
holds like offices with Temp and Muni. In addition, Mr. McConnel is Secretary
of Temp. Mr. Roach is Treasurer of Chestnut, President and Treasurer of The RBB
Fund, Inc. and New York Muni, and Vice President and Treasurer of ISIS and Cal
Muni; Mr. Pepper is President and Chairman of the Board of Cal Muni; and
Mr. Fortune is President and Chairman of the Boards of ISIS and Chestnut.
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<PAGE> 63
<TABLE>
<CAPTION>
Principal Occupations
Position with the During Past 5 Years
Name and Address Company and Other Affiliations
- ---------------- ----------------- ----------------------
<S> <C> <C>
G. NICHOLAS BECKWITH, III Trustee President and Chief Executive
Beckwith Machinery Company Officer, Beckwith Machinery Company;
Post Office Box 8718 Chairman of the Board of Trustees,
Pittsburgh, PA 15221 Age 52 Shadyside Hospital; Vice Chairman
of the Board of Trustees, Shadyside
Academy; Trustee, Claude Washington
Benedum Foundation; Trustee, Chatham College.
PHILIP E. COLDWELL2,3,4 Trustee Economic Consultant; Chairman,
Coldwell Financial Coldwell Financial Consultants, Member
Consultants of the Board of Governors of the Federal
3330 Southwestern Blvd. Reserve System, 1974 to 1980; President,
Dallas, Texas 75225 Federal Reserve Bank of Dallas, 1968 to
Age 74 1974; Director, Maxus Energy
Corporation (energy products)
(1989 - 1993); Director, Diamond
Shamrock Corp. (energy and chemical
products) until 1987.
ROBERT R. FORTUNE2,3,4 Trustee Financial Consultant; Chairman,
2920 Ritter Lane President and Chief Executive Officer
Allentown, PA 18104 of Associated Electric & Gas Insurance
Age 80 Services Limited, 1984-1993;
Member of the Financial Executives
Institute and American Institute of
Certified Public Accountants;
Director, Prudential Utility Fund, Inc.
and Prudential Structured
Maturity Fund, Inc.
JERROLD B. HARRIS Trustee President and Chief
706 Haldane Drive Executive Officer, VWR
Kennett Square, PA 19348 Corporation 1990 to present.
Age 54
</TABLE>
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<PAGE> 64
<TABLE>
<S> <C> <C>
RODNEY D. JOHNSON3,4 Trustee President, Fairmount Capital Advisors, Inc.
Fairmount Capital (financial advising) since 1987; Treasurer,
Advisors, Inc. North Philadelphia Health System (formerly
1435 Walnut Street Girard Medical Center), 1988 to 1992; Member,
Drexel Building Board of Education, School District of
Philadelphia, PA 19102 Philadelphia, 1983 to 1988; Treasurer,
Age 55 Cascade Aphasia Center, 1984 to 1988.
G. WILLING PEPPER1,2 Chairman of the Retired; Chairman of the Board, The Institute
128 Springton Lake Road Board, President for Cancer Research until
Media, PA 19063 and Trustee 1979; Director, Philadelphia National Bank
Age 88 until 1978; President, Scott Paper Company,
1971 to 1973; Chairman of the Board, Specialty
Composites Corp. until May 1984.
EDWARD J. ROACH President Certified Public Accountant; Vice Chairman
Bellevue Park Corporate and Treasurer of the Board, Fox Chase Cancer Center; Trustee
Center Emeritus, Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata College; Officer
Suite 100 of various investment companies advised by
Wilmington, DE 19809 PNC Institutional Management Corporation;
Age 72 Director of Bradford Funds, Inc.
W. BRUCE McCONNEL, III Secretary Partner of the law firm of Drinker
PNB Building Biddle & Reath Philadelphia, Pennsylvania.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age 53
</TABLE>
___________
1 This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
2 Executive Committee Member.
3 Audit Committee Member.
4 Nominating Committee Member.
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<PAGE> 65
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the management
of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various advisory
and other services from PIMC and PNC Bank. Of the above-mentioned funds, PDI
provides distribution services to Temp, Muni, Cal Muni, New York Muni and IDR.
Of the above-mentioned funds, the administrators provide administration services
to Temp, Muni, Cal Muni and New York Muni.
For the fiscal year ended October 31, 1996, the Company paid a total
of $85,452 to its officers and trustees in all capacities of which $56,879 was
allocated to the Funds. In addition, the Company contributed $3,184 during its
last fiscal year to its retirement plan for employees (which included Mr.
Roach) of which $2,225 was allocated to the Funds. Drinker Biddle & Reath, of
which Mr. McConnel is a partner, receives legal fees as counsel to the
Company. No employee of PDI, PIMC, PFPC or PNC Bank receives any compensation
from the Company for acting as an officer or trustee of the Company. The
trustees and officers of the Company as a group beneficially own less than 1%
of the shares of the Company's FedFund, T-Fund, Federal Trust Fund and Treasury
Trust Fund portfolios.
By virtue of the responsibilities assumed by PDI, PIMC, PFPC and PNC
Bank under their respective agreements with the Company, the Company itself
requires only one part-time employee in addition to its officers.
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<PAGE> 66
The table below sets forth the compensation actually received from the
Fund Complex of which the Company is a part by the trustees for the fiscal year
ended October 31, 1996:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued as Estimated Annual and Fund
Name of Person, Compensation Part of Fund Benefits Upon Complex1 Paid to
Position from Registrant Expenses Retirement Trustees
-------------- --------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
G. Nicholas Beckwith, III,5 $ 9,450 0 N/A (3)2 $ 30,975
Trustee
Philip E. Coldwell, Trustee 14,400 0 N/A (4)2 48,075
Robert R. Fortune, Trustee 15,300 0 N/A (6)2 68,975
Jerrold B. Harris,5 Trustee 10,350 0 N/A (3)2 33,675
Rodney D. Johnson, 15,300 0 N/A (6)2 60,975
Trustee
G. Willing Pepper, Trustee 24,300 0 N/A (7)2 100,225
and Chairman
David R. Wilmerding, Jr.,3 0 0 N/A (6)2 50,525
Trustee
Anthony M. Santomero,4 0 0 N/A (6)2 55,025
Trustee
</TABLE>
- ------------
1. A Fund Complex means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies.
2. Total number of such other investment companies the trustee served on
within the Fund Complex during the fiscal year ended October 31, 1996.
3. Mr. Wilmerding resigned as trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as trustee of the Company on January 4, 1996.
5. Messrs. Beckwith and Harris were elected to the Board of Trustees of
the Company on March 22, 1996.
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and PNC Bank
are described in the Funds' Prospectuses. For the advisory services provided
and expenses assumed by it, PIMC is entitled to receive a fee, computed daily
and payable monthly,
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<PAGE> 67
based on the combined average net assets of the Funds (including Federal Trust
Fund and Treasury Trust Fund) as follows:
The Funds' Combined
Annual Fees Average Net Assets
----------- ------------------
.175%...................of the first $1 billion
.150%....................of the next $1 billion
.125%....................of the next $1 billion
.100%....................of the next $1 billion
.095%....................of the next $1 billion
.090%....................of the next $1 billion
.085%....................of the next $1 billion
.080% ...... of amounts in excess of $7 billion.
The advisory fee is allocated between these Funds in proportion to their
relative net assets.
PIMC and the administrators have each agreed that if, in any fiscal
year, the expenses borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the public, they will
each reimburse such Fund for one-half of any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would be
accrued and paid on the same basis that the advisory and administration fees
are accrued and paid by such Fund.
For the fiscal years ended October 31, 1994, 1995 and 1996, the
Company paid fees (net of waivers) for advisory services aggregating $924,760,
$1,136,719 and $1,092,318 with respect to FedFund, and $819,525, $911,096 and
$1,199,099 with respect to T-Fund, respectively. For the same fiscal years,
PIMC voluntarily waived advisory fees aggregating $807,814, $855,806 and
$764,599 with respect to FedFund, and, $655,034, $709,383 and $798,740 with
respect to T-Fund, respectively. PIMC and PNC Bank also serve as the adviser
and sub-adviser, respectively, to the Company's Federal Trust Fund and
Treasury Trust Fund portfolios.
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<PAGE> 68
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in the Funds' Prospectuses. PIMC, PNC Bank and PFPC
believe that they may perform the services for the Funds contemplated by their
respective agreements, Prospectuses and this Statement of Additional Information
without violation of applicable banking laws or regulations. It should be noted,
however, that future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as further interpretations of
present requirements, could prevent PIMC and PFPC from continuing to perform
such services for the Funds and PNC Bank from continuing to perform such
services for PIMC and the Funds. If PIMC, PFPC, or PNC Bank were prohibited from
continuing to perform such services, it is expected that the Company's Board of
Trustees would recommend that the Funds enter into new agreements with other
qualified firms. Any new advisory agreement would be subject to shareholder
approval as required by the 1940 Act.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
ADMINISTRATOR
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising the Funds' operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising and mailing of
purchase and redemption order confirmations to shareholders of record, providing
and supervising the operation of an automated data processing system to process
purchase and redemption orders, maintaining a back-up procedure to reconstruct
lost purchase and redemption data, providing information concerning the Funds to
their shareholders of record, handling shareholder problems, supervising the
services of individuals whose principal responsibility and function is to
preserve and strengthen shareholder relations, and monitoring the arrangements
pertaining to the Funds' agreements with Service Organizations; (ii) assure that
persons are available to receive and transmit purchase and redemption orders;
(iii) participate in the periodic updating of the Funds' Prospectuses and
Registration Statements; (iv) assist in maintaining the Funds' Wilmington,
Delaware office; (v) perform administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Funds; (vi) accumulate information for and coordinate the preparation of
reports to the Funds' shareholders and the SEC; (vii) maintain the registration
or qualification of the Funds' shares for sale under state securities laws;
(viii) prepare or review, and provide advice with respect to, all sales
literature (advertisements, brochures and shareholder communications) for each
of the Funds and any class or sub-class
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<PAGE> 69
thereof; and (ix) assist in the monitoring of regulatory and legislative
developments which may affect the Company, participate in counseling and
assisting the Company in relation to routine regulatory examinations and
investigations, and work with the Company's counsel in connection with
regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive fees from the four Funds referred to above (including Federal
Trust Fund and Treasury Trust Fund) determined and allocated in the same manner
as PIMC's advisory fee set forth above. As stated in their Prospectuses, each
administrator is also reimbursed for its reasonable out-of-pocket expenses
incurred in connection with the Fund's computer access program. For the fiscal
year ended October 31, 1996, the FedFund and T-Fund paid fees (net of waivers)
for administration fees aggregating $1,092,318 and $1,199,099, respectively. For
the same fiscal year, PFPC and PDI voluntarily waived adminin- stration fees
aggregating $764,599 with respect to FedFund and $798,740 with respect to
T-Funds. For the fiscal year ended October 31, 1995, the Company paid fees (net
of waivers) for administration fees aggregating $1,136,718 with respect to
FedFund and $911,096 with respect to T-Fund. For the same fiscal year, PFPC and
PDI voluntarily waived administration fees aggregating $855,806 with respect to
FedFund and $709,383 with respect to T-Fund. For the fiscal year ended October
31, 1994, the Company paid fees (net of waivers) for administration fees
aggregating $924,760 with respect to FedFund and $807,814 with respect to
T-Fund. For the same fiscal year, PFPC and PDI voluntarily waived administration
fees aggregating $819,525 with respect to FedFund and $655,034 with respect to
T-Fund, respectively.
PFPC, a wholly owned, indirect subsidiary of PNC Bank provides
administrative or and/or sub-administrative services to investment companies
which are distributed by PDI. PFPC and PDI also serve as co-administrators of
the Company's Federal Trust Fund and Treasury Trust Fund portfolios.
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. Each Fund's shares
are sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. PDI will prepare or review,
provide advice with respect to, and file with the federal and state agencies or
other organization as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Funds
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<PAGE> 70
(excluding preparation and printing expenses necessary for the continued
registration of Fund shares) and of preparing, printing and distributing all
sales literature. PDI also serves as the distributor for the Company's Federal
Trust Fund and Treasury Trust Fund portfolios. PDI is a Delaware corporation,
with its principal place of business located at Four Falls Corporate Center,
6th Floor, West Conshohocken, Pennsylvania 19428.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian. Under the Agreement, PNC Bank has agreed to provide the following
services: (i) maintain a separate account or accounts in the name of the Funds;
(ii) hold and disburse portfolio securities on account of the Funds; (iii)
collect and make disbursements of money on behalf of the Funds; (iv) collect
and receive all income and other payments and distributions on account of the
Funds' portfolio securities; and (v) make periodic reports to the Board of
Trustees concerning the Funds' operations. The Custodian Agreement permits PNC
Bank, on 30 days' notice, to assign its rights and delegate its duties
thereunder to any other affiliate of PNC Bank or PNC Bank Corp., provided that
PNC Bank remains responsible for the performance of the delegate under the
Custodian Agreement.
The Funds reimburse PNC Bank for its direct and indirect costs and
expenses incurred in rendering custodial services. Under the Custodian
Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000
of such Fund's average daily gross assets, which fee declines as such Fund's
average daily gross assets increase. In addition, each Fund pays the custodian
certain types of transaction charges and reimburses the custodian for
out-of-pocket expenses incurred on behalf of the Fund. For the fiscal years
ended October 31, 1994, 1995 and 1996 FedFund paid fees for custodian services
aggregating $220,443, $238,805 and $227,936, respectively. For the same fiscal
years, T-Fund paid fees for custodian services aggregating, $202,087, $212,601
and $238,530, respectively. PNC Bank also serves as custodian for the Company's
Federal Trust Fund and Treasury Trust Fund portfolios. PNC Bank's principal
business address is 1600 Market Street, Philadelphia, Pennsylvania 19103.
PFPC also serves as the Funds' transfer agent, registrar and dividend
disbursing agent pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer and redeem
shares of the Funds; (iii) disburse dividends and distributions, in the manner
described in each Fund's Prospectus, to shareholders of the Fund; (iv) transmit
all communications by
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<PAGE> 71
the Funds to their shareholders or their authorized representatives, including
reports to shareholders, distribution and dividend notices and proxy materials
for meetings of shareholders; (v) prepare and file with the appropriate taxing
authorities reports or notices relating to dividends and distributions made by
the Funds; (vi) respond to correspondence by shareholders, security brokers and
others relating to its duties; (vii) maintain shareholder accounts; and (viii)
make periodic reports to the Company's Board of Trustees concerning the Funds'
operations. The Transfer Agency Agreement permits PFPC, on 30-days' notice, to
assign its rights and duties thereunder to any other affiliate of PNC Bank or
PNC Bank Corp., provided that PFPC remains responsible for the performance of
the delegate under the Transfer Agency Agreement.
Under the Transfer Agency Agreement, each Fund pays PFPC fees at an
annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00
for each purchase or redemption transaction by an account (other than a
purchase transaction made in connection with the automatic reinvestment of
dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such services. In
addition, the Funds reimburse PFPC for out-of-pocket expenses related to such
services. For the fiscal years ended October 31, 1994, 1995 and 1996 FedFund
paid fees for transfer agency services aggregating, $189,439, $99,287 and
$129,101, respectively. For the same fiscal years, T-Fund paid fees for
transfer agency services aggregating, $81,291, $65,092 and $119,290,
respectively. PFPC also serves as transfer agent, registrar and dividend
disbursing agent for the Company's Federal Trust Fund and Treasury Trust Fund.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
FedFund and T-Fund each currently offer a series of shares, Dollar
shares, which, as stated in the Funds' Prospectuses, the Funds will enter into
an agreement with each Service Organization which purchases Dollar shares
("Dollar Share Service Organizations") requiring it to provide support services
to its customers who beneficially own Dollar shares in consideration of the
Funds' payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar shares held by the Dollar Share Service Organization for
the benefit of customers. Such services include: (i) aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with the transfer agent; (ii) providing customers with a
service that invests the assets of their accounts in Dollar shares; (iii)
processing dividend payments from the Funds on behalf of customers; (iv)
providing information periodically to customers showing their positions in
Dollar shares; (v) arranging for bank wires; (vi) responding to customer
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<PAGE> 72
inquiries relating to the services performed by the Dollar Share Service
Organization; (vii) providing sub-accounting with respect to Dollar shares
beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Funds
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers, if
required by law; and (ix) other similar services if requested by the Funds. For
the fiscal years ended October 31, 1995 and 1996, the Company paid $256,849 and
$630,864 in servicing fees to an affiliate of the Company's adviser
(representing 50.2% and 42.7%, respectively, of the aggregate servicing fees
paid by the Company) of which $45,165 and $421,267 was allocated to FedFund and
T-Fund, respectively, pursuant to the service agreements discussed above in
effect during such period.
Each Fund's agreements with Dollar Share Service Organizations are
governed by a Shareholder Services Plan (the "Plan") that has been adopted by
the Company's Board of Trustees. Pursuant to each Plan, the Board of Trustees
reviews, at least quarterly, a written report of the amounts expended under the
Fund's agreements with Dollar Share Service Organizations and the purposes for
which the expenditures were made. In addition, the Funds' arrangements with
Dollar Share Service Organizations must be approved annually by a majority of
the Company's trustees, including a majority of the trustees who are not
"interested persons" of the Company as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the Funds' arrangements with Dollar
Share Service Organizations based on information provided by the Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Funds and their shareholders by affording the Funds greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner. Any material amendment to the
Funds' arrangements with Dollar Share Service Organizations must be approved by
a majority of the Company's Board of Trustees (including a majority of the non-
interested trustees). So long as the Funds' arrangements with Dollar Share
Service Organizations are in effect, the selection and nomination of the
members of the Company's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the discretion of
such non- interested trustees.
DISTRIBUTION AND SERVICE PLAN
Pursuant to T-Fund's Distribution and Service Plan (the "Plus Shares
Plan"), the Fund may pay PDI fees for distribution and sales support services.
Currently, as described further
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<PAGE> 73
below, only T-Fund Plus Shares bear the expense of distribution fees under the
Plus Shares Plan. In addition, the Fund may pay PDI fees for the provision of
personal services to shareholders and the processing and administration of
shareholder accounts. PDI, in turn, determines the amount of the service fee to
be paid to other Service Organizations that purchase Plus Shares ("Plus Share
Service Organizations"). The Plus Shares Plan provides, among other things,
that: (i) the Board of Trustees shall receive quarterly reports regarding the
amounts expended under the Plus Shares Plan and the purposes for which such
expenditures were made; (ii) the Plus Shares Plan will continue in effect for
so long as its continuance is approved at least annually by the Board of
Trustees in accordance with Rule 12b-1 under the 1940 Act; (iii) any material
amendment thereto must be approved by the Board of Trustees, including the
trustees who are not "interested persons" of the Fund (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plus Shares Plan or any agreement entered into in connection with the Plus
Shares Plan (the "12b-1 Trustees"), acting in person at a meeting called for
said purpose; (iv) any amendment to increase materially the costs which T-Fund
Plus Shares may bear for distribution services pursuant to the Plus Shares Plan
shall be effective only upon approval by a vote of a majority of the
outstanding shares of such class and by a majority of the 12b-1 Trustees; and
(v) while the Plus Shares Plan remains in effect, the selection and nomination
of the Company's trustees who are not "interested persons" of the Company shall
be committed to the discretion of such non-interested trustees.
The Plus Shares Plan is terminable without penalty at any time by a
vote of a majority of the 12b-1 Trustees, or by vote of the holders of a
majority of T-Fund Plus Shares. Similarly, any agreement entered into pursuant
to the Plus Shares Plan with a Plus Share Service Organization is terminable
without penalty, at any time, by T-Fund or by the Plus Share Service
Organization upon written notice to the other. Each such agreement will
terminate automatically in the event of its assignment.
The distribution fee payable under the Plus Shares Plan (at an annual
rate of .25% of the average daily net asset value of the outstanding T-Fund
Plus Shares) is used, among other things, to pay Plus Share Service
Organizations for sales support services and related expenses. It is currently
contemplated that the distribution fee would only be charged at an annual rate
of .15% of the average daily net asset value of the outstanding T-Fund Plus
Shares. No T-Fund Plus Shares were outstanding during the period ended October
31, 1996.
T-Fund intends to enter into service agreements with Plus Share
Service Organizations pursuant to which they will render certain support
services to their customers ("Customers") who are the beneficial owners of
T-Fund Plus Shares. Such
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services will be provided to Customers who are the beneficial owners of T-Fund
Plus Shares and are intended to supplement the services provided by T-Fund's
administrators and transfer agent to the Fund's shareholders of record. In
consideration for payment of up to .25% (on an annualized basis) of the average
daily net asset value of the T-Fund Plus Shares owned beneficially by their
Customers, Plus Share Service Organizations may provide general shareholder
liaison services, including, but not limited to (i) answering shareholder
inquiries regarding account status and history, the manner in which purchases,
exchanges and redemptions of shares may be effected and certain other matters
pertaining to the shareholders' investments; and (ii) assisting shareholders in
designating and changing dividend options, account designations and addresses.
EXPENSES
The Funds' expenses include taxes, interest, fees and salaries of the
Company's trustees and officers, SEC fees, state securities registration fees,
rating agency fees, costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareholders, advisory and administration fees,
charges of the custodian, transfer agent and dividend disbursing agent,
shareholder servicing fees, distribution fees, certain insurance premiums,
outside auditing and legal expenses, costs of the Funds' computer access
program, costs of shareholder reports and shareholder meetings and any
extraordinary expenses. The Funds also pay for brokerage fees and commissions
(if any) in connection with the purchase of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in
each Fund's Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Funds or their shareholders or possible legislative
changes, and the discussion here and in each Fund's Prospectus is not intended
as a substitute for careful tax planning. Investors should consult their tax
advisors with specific reference to their own tax situations.
Each Fund of the Company is treated as a separate corporate entity
under the Internal Revenue Code of 1986, as amended (the "Code") and intends to
qualify each year as a regulated investment company under the Code. In order to
so qualify for a taxable year, each Fund must satisfy the distribution
requirement described in its Prospectus, derive at least 90% of its gross
income for the year from certain
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qualifying sources, comply with certain diversification requirements and derive
less than 30% of its gross income from the sale or other disposition of
securities and certain other investments held for less than three months.
Interest (including original issue discount and accrued market discount)
received by a Fund upon maturity or disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of this requirement.
However, any other income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of
securities for this purpose.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to distribute currently an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year a Fund does not qualify for tax treatment as a
regulated investment company, all of its taxable income will be subject to
federal income tax at regular corporate rates, without any deduction for
distributions to Fund shareholders. In such event, dividend distributions would
be taxable as ordinary income to Fund shareholders to the extent of that Fund's
current and accumulated earnings and profits and would be eligible for the
dividends received deduction in the case of corporate shareholders.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to any
shareholder who has failed to provide a correct tax identification number in
the manner required, who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of taxable
interest or dividends, or who has failed to certify to the Fund when required
to do so that he is not subject to backup withholding or that he is an "exempt
recipient."
Depending upon the extent of the Funds' activities in states and
localities in which their offices are maintained, in which their agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws. Shareholders are
advised to
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<PAGE> 76
consult their tax advisors concerning the application of state and local taxes.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
Net income of each of the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to
the Fund and the general expenses (e.g., legal, accounting and trustees' fees)
of the Company prorated to the Fund on the basis of its relative net assets. In
addition, Dollar shares bear exclusively the expense of fees paid to Dollar
Share Service Organizations and T-Fund Plus Shares bear exclusively the
expenses of fees paid to PDI and Plus Share Service Organizations. (See
"Management of the Funds--Organizations Servicing the Dollar Shares" and
"Distribution and Service Plan.")
As stated, the Company uses its best efforts to maintain the net asset
value per share of FedFund and T-Fund at $1.00. As a result of a significant
expense or realized or unrealized loss incurred by either Fund, it is possible
that the Fund's net asset value per share may fall below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated separately for each
class of shares of each Fund and in accordance with the formulas prescribed by
the SEC. The seven-day yield for each class of shares is calculated by
determining the net change in the value of a hypothetical pre-existing account
in the particular Fund which has a balance of one share of the class involved
at the beginning of the period, dividing the net change by the value of the
account at the beginning of the period to obtain the base period return, and
multiplying the base period return by 365/7. The net change in the value of an
account in a Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on the original share
and any such additional shares, net of all fees charged to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include gains and losses or unrealized appreciation
and depreciation. In addition, an effective annualized yield quota-
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<PAGE> 77
tion may be computed on a compounded basis with respect to each class of its
shares by adding 1 to the base period return for the class involved (calculated
as described above), raising that sum to a power equal to 365/7, and
subtracting 1 from the result. Similarly, based on the calculations described
above, the Funds' 30-day (or one-month) yields and effective yields may also be
calculated.
For the seven-day period ended October 31, 1996, the yields on FedFund
shares and T-Fund shares were 5.19% and 5.17%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares were 5.33% and 5.30%,
respectively; the yields on FedFund Dollar shares and T-Fund Dollar shares were
4.94% and 4.92%, respectively, and the compounded effective yields on FedFund
Dollar shares and T-Fund Dollar shares were 5.07% and 5.04%, respectively.
During this seven-day period, the Funds' adviser and administrator voluntarily
waived a portion of its advisory and administration fees payable by the Funds.
Without these waivers, for the same period the yields on FedFund shares and
T-Fund shares would have been 5.08% and 5.06%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares would have been 5.21% and
5.19%, respectively, the yield on FedFund Dollar Shares and T-Fund Dollar
Shares would have been 4.96% and 4.93%, respectively, and the compounded
effective yields on FedFund Dollar Shares and T-Fund Dollar Shares would have
been 5.08% and 5.05%, respectively.*
For the 30-day period ended October 31, 1996, the yields on FedFund
shares and T-Fund shares were 5.15% and 5.13%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares were 5.28% and 5.26%,
respectively; the yields on FedFund Dollar shares and T-Fund Dollar shares were
4.90% and 4.88%, respectively, and the compounded effective yields on FedFund
Dollar shares and T-Fund Dollar shares were 5.02% and 5.00%, respectively.
During this 30-day period, the Funds' adviser and administrator voluntarily
waived a portion of the advisory and administration fees payable by the Funds.
Without these waivers, for the same period the yields on FedFund shares and
T-Fund shares would have been 5.04% and 5.02%, respectively, and the compounded
effective yields on FedFund shares and T-Fund shares would have been 5.17% and
5.15%, respectively, the yield on FedFund Dollar Shares and T-Fund Dollar
Shares would have been 4.79% and 4.77%, respectively, and the compounded
effective yields on FedFund Dollar Shares and T-Fund Dollar Shares would have
been 4.90% and 4.88%, respectively.*
- --------
* No T-Fund Plus shares have been issued as of February 28, 1997.
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<PAGE> 78
From time to time, in advertisements or in reports to shareholders,
the performance of the Funds may be quoted and compared to that of other money
market funds or accounts with similar investment objectives, to stock or other
relevant indices and to other reports or analyses that relate to yields,
interest rates, total return, market performance, etc. For example, the yields
of the Funds may be compared to the IBC/Donoghue's MONEY FUND AVERAGE, which is
an average compiled by IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA
01746, a widely recognized independent publication that monitors the
performance of money market funds, or to the average yields reported by the
Bank Rate Monitor from money market deposit accounts offered by the 50 leading
banks and thrift institutions in the top five standard metropolitan statistical
areas.
THE FUNDS' YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD
NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUNDS.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of the kind and quality of the
investments held in a Fund, portfolio maturity, operating expenses net of
waivers and expense reimbursements, and market conditions. Any fees charged by
Dollar Share or Plus Share Service Organizations or other institutional
investors with respect to customer accounts in investing in shares of the Funds
will not be included in calculations of yield and performance; such fees, if
charged, would reduce the actual performance and yield from that quoted.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding"
refers to the fact that, if dividends or other distributions on a Fund
investment are reinvested by being paid in additional Fund shares, any future
income or capital appreciation of a Fund would increase the value, not only of
the original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, the Funds may also include in Materials discussions
and/or illustrations of the potential investment goals of a prospective
investor (including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action
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<PAGE> 79
plans offering investment alternatives), investment management strategies,
techniques, policies or investment suitability of a Fund, economic conditions,
the relationship between sectors of the economy and the economy as a whole,
various securities markets, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds and
Treasury securities, and hypothetical investment returns based on certain
assumptions. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Fund), as well as the views of the advisers as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund. In addition, selected indices may be used to illustrate
historical performance of select asset classes. The Funds may also include in
Materials charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the Funds
and/or other mutual funds, or illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to,
stocks, bonds, Treasury securities and shares of a Fund and/or other mutual
funds. Materials may include a discussion of certain attributes or benefits to
be derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments),
shareholder profiles and hypothetical investor scenarios, timely information on
financial management, designations assigned a Fund by various rating or ranking
organizations, Fund identifiers (such as CUSIP numbers or NASDAQ symbols), tax
and retirement planning and investment alternatives to certificates of deposit
and other financial instruments. Such Materials may include symbols, headlines
or other material which highlight or summarize the information discussed in
more detail therein.
Materials may include lists of representative clients of the Funds'
investment adviser, may include discussions of other products or services, may
contain information regarding average weighted maturity or other maturity
characteristics, and may contain information regarding the background,
expertise, etc. of the investment adviser or of a Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Funds may compare their total returns to
rankings prepared by independent services or other financial or industry
publications that monitor the
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<PAGE> 80
performance of mutual funds. For example, such data is found in IBC/Donoghue's
Money Fund Report and reports prepared by Lipper Analytical Services, Inc.
Total return is the change in value of an investment in a Fund over a
particular period, assuming that all distributions have been reinvested. SUCH
RANKINGS REPRESENT THE FUNDS' PAST PERFORMANCE AND SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE RESULTS.
The following information has been provided by the Funds' distributor:
In managing each Fund's portfolio, the investment adviser
utilizes a "pure and simple" approach, which may include
disciplined research, stringent credit standards and careful
management of maturities.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the removal of one or more trustees and other certain matters. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
As stated in the Prospectuses for the Funds, holders of the Company's
FedFund and FedFund Dollar shares will vote in the aggregate and not by class
on all matters, except where otherwise required by law and except that only
FedFund Dollar shares will be entitled to vote on matters submitted to a vote
of shareholders pertaining to the Fund's arrangements with Dollar Share Service
Organizations. Holders of the Company's T-Fund, T- Fund Dollar and T-Fund Plus
shares will also vote in the aggregate and not by class except as described
above and only T- Fund Plus Shares will be entitled to vote on matters
submitted to a vote of shareholders pertaining to distribution fees. (See
"Management of the Funds--Service Organizations" and "Distribution and Service
Plan.") Further, shareholders of all of the Company's portfolios will vote in
the aggregate and not by portfolio except as otherwise required by law or when
the Board of Trustees determines that the matter to be voted upon affects only
the interests of the shareholders of a particular portfolio. Rule 18f-2 under
the 1940 Act provides that any matter required to be submitted by the
provisions of such Act or applicable state law, or otherwise, to the holders of
the outstanding securities of an investment company such as the Company shall
not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each portfolio
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affected by the matter. Rule 18f-2 further provides that a portfolio shall be
deemed to be affected by a matter unless it is clear that the interests of each
portfolio in the matter are identical or that the matter does not affect any
interest of the portfolio. Under the Rule the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a portfolio only if approved by the
holders of a majority of the outstanding voting securities of such portfolio.
However, the Rule also provides that the ratification of the selection of
independent accountants, the approval of principal underwriting contracts and
the election of trustees are not subject to the separate voting requirements
and may be effectively acted upon by shareholders of the investment company
voting without regard to portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107- 3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
AUDITORS
The financial statements and financial highlights of the Funds
incorporated by reference into this Statement of Additional Information have
been audited by Coopers & Lybrand L.L.P., independent accountants. Coopers &
Lybrand L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103.
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Prospectuses for the Funds, a "majority of the outstanding shares" of a Fund or
of any other portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the vote of the lesser of (1) 67% of the shares of such Fund
(irrespective of class) or of the portfolio represented at a meeting at which
the holders of more than 50% of the outstanding shares of such Fund or
portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund (irrespective of class) or of the portfolio.
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CERTAIN RECORD HOLDERS
On January 31, 1997, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of the Company's FedFund and T-Fund portfolio were as follows:
<TABLE>
<CAPTION>
FedFund
-------
<S> <C>
Mercantile Bank N.A. 5.47%
Trust Securities Unit
P.O. Box 387 Main Post Office
St. Louis, MO 63166
Marine Midland Bank 8.90%
One Marine Midlane Center
Buffalo, NJ 14203
PNC Bank/Saxon & Co. 7.38%
P.O. Box 7780-1888
Philadelphia, PA 19182
Norwest Investment Co. 5.76%
608 2nd Avenue
Suite 800 ms/0153
Minneapolis, MN 55402
</TABLE>
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<PAGE> 83
<TABLE>
<CAPTION>
<S> <C>
T-Fund
------
Harris Trust and Savings Bank 5.14%
111 West Monroe Street
Chicago, IL 60690
Union Bank 6.19%
P.O. Box 5602
San Diego, CA 92186
PNC Bank Corp./Market Street Funding 5.48%
One PNC Plaza, 3rd Floor
249 Fifth Avenue
Pittsburgh, PA 15222
PNC Bank/Saxon & Co. 14.40%
200 Stevens Drive
Lester, PA 19113
PNC Securities 7.60%
Fifth and Wood Street
Pittsburgh, PA 15265
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a "business trust" under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Company provides that
shareholders of the Funds shall not be subject to any personal liability for
the acts or obligations of the Company and that every note, bond, contract,
order or other undertaking made by the Company shall contain a provision to the
effect that the shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of being or having been
a shareholder and not because of any acts or omissions or some other reason.
The Declaration of Trust also provides that the Company shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Company and satisfy any judgment thereon. Thus, the risk of a
shareholder's incurring financial loss beyond its investment on account of
shareholder liability is limited to circumstances in which the Company itself
would be unable to meet its obligations.
The Company's Declaration of Trust provides further that no trustee,
officer or agent of the Company shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or
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<PAGE> 84
the conduct of any business of the Company, nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of bad
faith, willful misfeasance, gross negligence in the performance of any duties
or by reason of reckless disregard of the obligations and duties as trustee. It
also provides that all persons having any claim against the trustees or the
Company shall look solely to the trust property for payment. With the
exceptions stated, the Declaration of Trust provides that a trustee is entitled
to be indemnified against all liabilities and expenses reasonably incurred by
him or her in connection with the defense or disposition of any proceeding in
which the trustee may be involved or with which the trustee may be threatened
by reason of being or having been a trustee, and that the trustees have the
power, but not the duty, to indemnify officers and employees of the Company
unless such person would not be entitled to indemnification had he or she been
a trustee.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the fiscal year ended
October 31, 1996 has been filed with the Securities and Exchange Commission.
The financial statements in such Annual Report (the "Financial Statements") are
incorporated into this Statement of Additional Information by reference. The
Financial Statements included in the Annual Report for the fiscal year ended
October 31, 1996 have been audited by the Company's independent accountants,
Coopers & Lybrand L.L.P., whose report thereon also appears in such Annual
Report and is incorporated herein by reference. The Financial Statements in
such Annual Report have been incorporated herein and the financial highlights
in each Prospectus have been included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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<PAGE> 85
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered
to 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; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
A-1
<PAGE> 86
"Prime-2" - Issuer or related supporting institutions are considered
to 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 alternative
liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D- 1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk
A-2
<PAGE> 87
factors are larger and subject to more variation. Nevertheless, timely payment
is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE> 88
year or less which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which posses a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligations for which there is an uncertainty as to the capacity
to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which
are currently in default.
A-4
<PAGE> 89
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit 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.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
A-5
<PAGE> 90
"CCC" - Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest
is being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
A-6
<PAGE> 91
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds 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 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 considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
A-7
<PAGE> 92
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"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"
A-8
<PAGE> 93
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 an 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.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "BBB" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in
A-9
<PAGE> 94
business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
A-10
<PAGE> 95
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection
A-11
<PAGE> 96
commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 97
TRUST FOR FEDERAL SECURITIES
(Federal Trust Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 98
Federal Trust Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Federal Trust shares code: 11;
Federal Trust Dollar shares code: 12.)
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. The shares described in this Prospectus represent
interests in the Federal Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests in those
obligations issued or guaranteed as to principal and interest by the U.S.
Government or by agencies or instrumentalities thereof the interest income from
which, under current law, generally may not be subject to state income tax by
reason of federal law.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to Federal Trust Shares, investors may purchase Federal Trust "Dollar
Shares" which accrue daily dividends in the same manner as Federal Trust Shares
but bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares. (See "Management
of the Fund--Organizations Servicing the Dollar Shares.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1997, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 99
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: Federal Trust shares
and Federal Trust Dollar shares. Shares of each class represent equal, pro rata
interests in the Fund and accrue daily dividends in the same manner except that
the Dollar shares bear fees payable by the Fund (at the rate of .25% per annum)
to institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Organizations Servicing the Dollar
Shares.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
FEDERAL
FEDERAL TRUST
TRUST DOLLAR
SHARES SHARES
------------ ------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)........................ .06% .06%
Other Expenses.......................................... .14% .39%
Administration Fees (net of waivers)............... .06% .06%
Shareholder Servicing Fees......................... 0% .25%
Miscellaneous...................................... .08% .08%
---- ----
Total Fund Operating Expenses (net of waivers).......... .20% .45%
==== ====
</TABLE>
- ------------
<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) a 5% annual return and (2)
redemption at the end of each time period with respect to
the following shares:
Federal Trust Shares: $2 $ 6 $11 $26
Federal Trust Dollar Shares: $5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Federal Trust Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Total Fund Operating Expenses for Federal
Trust Shares and Dollar Shares would have been .31% and .56%, respectively. (For
more complete descriptions of the various costs and expenses, see "Management of
the Fund" in this Prospectus and the Statement of Additional Information.) The
investment adviser and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
2
<PAGE> 100
FINANCIAL HIGHLIGHTS
The following financial highlights are for Federal Trust Fund Shares and
Federal Trust Dollar Shares have been derived from the financial statements of
the Fund for the fiscal years ended October 31, 1996 and for each of the four
preceding fiscal years and for the fiscal period ended October 31, 1991
(commencement of operations). The financial highlights for the fiscal years set
forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is incorporated by reference into
the Statement of Additional Information. The tables should be read in
conjunction with the financial statements and related notes incorporated by
reference into the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDERAL TRUST SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, DECEMBER 31, 19903
-------------------------------------------------------- TO
1996 1995 1994 1993 1992 OCTOBER 31, 1991
-------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income........... .0523 .0563 .0380 .0302 .0389 .0564
Net Capital Gains............... -- -- -- .0001 .0018 --
-------- -------- -------- -------- -------- --------
Total From Investment
Operations.................... .0523 .0563 .0380 .0303 .0407 .0564
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income......... (.0523) (.0563) (.0380) (.0302) (.0389) (.0564)
Net Capital Gains............. -- -- -- (.0001) (.0018) --
-------- -------- -------- -------- -------- --------
Total Distributions............. (.0523) (.0563) (.0380) (.0303) (.0407) (.0564)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return...................... 5.35% 5.77% 3.87% 3.06% 4.15% 5.79%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in
000s)......................... $273,752 $237,718 $317,769 $257,125 $428,365 $184,063
Ratio of Expenses to Average Net
Assets(1)..................... .19% .18% .18% .18% .20% .12%(2)
Ratio of Net Investment Income
to Average Net Assets......... 5.22% 5.61% 3.85% 3.02% 3.75% 5.93%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets would have
been .31%, .32%, .31%, .29% and .30% respectively, for each of the years
ended October 31, 1996, 1995, 1994, 1993 and 1992, and .39% (annualized) for
the period ended October 31, 1991 for Federal Trust Shares.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 101
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FEDERAL TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, DECEMBER 31, 19903
--------------------------------------------------- TO
1996 1995 1994 1993 1992 OCTOBER 31, 1991
------- ------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income................ .0498 .0538 .0355 .0277 .0364 .0487
Net Capital Gains.................... -- -- -- .0001 .0018 --
-------- -------- -------- -------- -------- --------
Total From Investment Operations..... .0498 .0538 .0355 .0278 .0382 .0487
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income.............. (.0498) (.0538) (.0355) (.0277) (.0364) (.0487)
Net Capital Gains.................. -- -- -- (.0001) (.0018) --
-------- -------- -------- -------- -------- --------
Total Distributions.................. (.0498) (.0538) (.0355) (.0278) (.0382) (.0487)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return........................... 5.10% 5.52% 3.62% 2.81% 3.90% 4.98%(4)
Ratios/Supplemental Data:
Net Assets, End of Period (in
000s).............................. $26,875 $28,402 $ 8,278 $ 1,025 $ 2,442 $ 1,681
Ratio of Expenses to Average Net
Assets(1).......................... .44% .43% .43% .43% .45% .37%(2)
Ratio of Net Investment Income to
Average Net Assets................. 4.97% 5.36% 3.60% 2.77% 3.50% 5.86%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees and without expense
reimbursements, the ratio of expenses to average daily net assets would have
been .56%, .57%, .56%, .54% and .55%, respectively, for each of the years
ended October 31, 1996, 1995, 1994, 1993 and 1992, and .64% (annualized) for
the period ended October 31, 1991 for Federal Trust Dollar Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
4
<PAGE> 102
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The investment objective of the Fund is fundamental
and may not be changed without the approval of the holders of at least a
majority of the outstanding shares of the Fund. The Fund invests in obligations
issued or guaranteed as to principal and interest by the U.S. Government or by
agencies or instrumentalities thereof the interest income from which, under
current law, generally may not be subject to state income tax by reason of
federal law, including securities issued by the U.S. Treasury and by certain
agencies or instrumentalities such as the Federal Home Loan Bank, Federal Farm
Credit Banks Funding Corp. and the Student Loan Marketing Association.
Shareholders in a particular state that imposes an income tax should determine
through consultation with their own tax advisors whether such interest income,
when distributed by the Fund, will be considered by the state to have retained
exempt status, and whether the Fund's capital gain and other income, if any,
when distributed will be subject to the state's income tax. See "Taxes." DUE TO
STATE INCOME TAX CONSIDERATIONS, THE FUND WILL NOT ENTER INTO REPURCHASE
AGREEMENTS.
Portfolio obligations held by the Fund have remaining maturities of 397
days (thirteen months) or less (with certain exceptions), subject to the
quality, diversification, and other requirements of Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act") and other rules of
the Securities and Exchange Commission (the "SEC"). Certain government
securities held by the Fund may have remaining maturities exceeding thirteen
months if such securities provide for adjustments in their interest rates not
less frequently than every thirteen months.
Securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a shareholder owns shares of
the Fund. The Fund may from time to time engage in portfolio trading for
liquidity purposes, in order to enhance its yield or if otherwise deemed
advisable. In selling portfolio securities prior to maturity, the Fund may
realize a price higher or lower than that paid to acquire any given security,
depending upon whether interest rates have decreased or increased since its
acquisition. To the extent consistent with its investment objectives, the Fund
may invest in Treasury receipts and other "stripped" securities issued or
guaranteed by the U.S. Government, where the principal and interest components
are traded independently under the Separate Trading of Registered Interest and
Principal of Securities program ("STRIPS"). Under the STRIPS program, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury at the request of depository financial institutions,
which then trade the component parts independently. Currently, the Fund only
invests in "stripped" securities issued or guaranteed by the U.S. Government
which are registered under the STRIPS program. The principal and interest
components may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are
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<PAGE> 103
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions. The Fund does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objective.
SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of investments;
surveying the market for the best terms at which to buy and sell; receipt,
delivery and safekeeping of securities; and recordkeeping.
INVESTMENT LIMITATIONS
The Fund's investment policies described above may be changed by the
Company's Board of Trustees without a vote of shareholders. The Fund's
investment objective and the investment limitations summarized below may not be
changed without the affirmative vote of the holders of a majority of its
outstanding shares. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase securities other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies.
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<PAGE> 104
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business (a
"Business Day") and must be transmitted to PFPC in Wilmington, Delaware, by
telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's
computer access program. Orders accepted before 12:00 noon, Eastern time, for
which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon) will be executed at 4:00 P.M., Eastern time, if
payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order. (Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending institution.) The Fund may in
its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for Federal Trust Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for Federal
Trust Shares for specific institutions whose aggregate relationship with the
Provident Institutional Funds is substantially equivalent to this $3 million
minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
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<PAGE> 105
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's Federal
Trust Shares account falls below an average of $100,000 in any particular
calendar month, the account may be charged an account maintenance fee with
respect to that month. In addition, the Fund may also redeem shares
involuntarily or suspend the right of redemption under certain special
circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect, subsidiary of PNC Bank, serves as the
Fund's investment adviser. PIMC is one of the largest bank managers of mutual
funds, with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform
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<PAGE> 106
advisory services for investment companies and has its principal offices at 400
Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank serves as the Fund's
sub-adviser. PNC Bank is one of the largest bank managers of investments for
individuals in the United States, and together with its predecessors has been in
the business of managing the investments of fiduciary and other accounts since
1847. PNC Bank is a wholly-owned, indirect subsidiary of PNC Bank Corp. and has
its principal offices at 1600 Market Street, Philadelphia, Pennsylvania 19103.
In 1973, Provident National Bank (predecessor to PNC Bank) commenced advising
the first institutional money market mutual fund--a U.S. dollar-denominated
constant net asset value fund--offered in the United States. PIMC and PNC Bank
also serve as investment adviser and sub-adviser, respectively, to the Company's
FedFund, T-Fund and Treasury Trust Fund portfolios.
PNC Bank Corp., multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average net assets. PIMC and the
administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC or the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1996, the Fund paid advisory fees aggregating
.06% of the Fund's average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in
9
<PAGE> 107
connection with the Fund's computer access program maintained to facilitate
shareholder access to the Fund; accumulating information for and coordinating
the preparation of reports to the Fund's shareholders and the Securities and
Exchange Commission; and maintaining the registration or qualification of the
Fund's shares for sale under state securities laws. PFPC and PDI are each
responsible for carrying out the duties undertaken pursuant to the
Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Funds' computer access program. For the
fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .06% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations") may purchase Dollar Shares. Dollar Shares are identical in all
respects to the Company's Federal Trust Shares except that they bear the service
fees described below and enjoy certain exclusive voting rights on matters
relating to these fees. The Fund will enter into an agreement with each Service
Organization which purchases Dollar Shares requiring it to provide support
services to its customers who are the beneficial owners of such shares in
consideration of the Fund's payment of .25% (on an annualized basis) of the
average daily net assets of the Dollar Shares held by the Service Organization
for the benefit of customers. Such services, which are described more fully in
the Statement of Additional Information under "Management of the
Funds--Organizations Servicing the Dollar Shares," include aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing dividend payments from the
Fund on behalf of customers; providing information periodically to customers
showing their positions in Dollar Shares; and providing sub-accounting or the
information necessary for sub-accounting with respect to Dollar Shares
beneficially owned by customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a schedule of any fees
that they may charge customers in connection with their
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<PAGE> 108
investments in Dollar Shares. Federal Trust Shares are sold to institutions that
have not entered into servicing agreements with the Fund in connection with
their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1996, the Fund's total
expenses with respect to Federal Trust Shares and Dollar Shares were .19% and
.44% of the average net assets of the Federal Trust Shares and Federal Trust
Dollar Shares, respectively. With regard to fees paid exclusively by Dollar
Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or within five business days after
a redemption of all of a shareholder's shares of a particular class. The Fund
does not expect to realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
the different classes.
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<PAGE> 109
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT ARE ATTRIBUTABLE TO INTEREST ON OBLIGATIONS OF THE U.S. TREASURY AND
CERTAIN U.S. GOVERNMENT AGENCIES AND INSTRUMENTALITIES ARE THE FUNCTIONAL
EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE, EXEMPT FROM
STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE APPLICATION OF
THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
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<PAGE> 110
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Federal Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed separately for each separate class or
sub-class of shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class of shares is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; such fees, if
charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (Federal Trust Shares code: 11; Federal Trust Dollar Shares code:
12) to obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in December, 1990.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such
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<PAGE> 111
authority, the Board of Trustees has authorized the issuance of nine classes of
shares designated as Federal Trust, Federal Trust Dollar, FedFund, FedFund
Dollar, T-Fund, T-Fund Dollar, T-Fund Plus, Treasury Trust and Treasury Trust
Dollar. The Declaration of Trust further authorizes the trustees to classify or
reclassify any class of shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND,
T-FUND AND TREASURY TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES
DESCRIBING THESE PORTFOLIOS BY CALLING 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and nonassessable.
Holders of the Company's Federal Trust Shares and Federal Trust Dollar
Shares will vote in the aggregate and not by class or sub-class on all matters,
except where otherwise required by law and except that only Federal Trust Dollar
Shares will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Fund's arrangements with Service Organizations. Further,
shareholders of all of the Company's portfolios will vote in the aggregate and
not by portfolio except as otherwise required by law or when the Board of
Trustees determines that the matter to be voted upon affects only the interests
of the shareholders of a particular portfolio. (See the Statement of Additional
Information under "Additional Description Concerning Fund Shares" for examples
where the 1940 Act requires voting by portfolio.) Shareholders of the Company
are entitled to one vote for each full share held (irrespective of class,
sub-class, or portfolio) and fractional votes for fractional shares held. Voting
rights are not cumulative and, accordingly, the holders of more than 50% of the
aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
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[THIS PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 113
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 8
Dividends....................... 11
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-005
FEDERAL
TRUST FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
LOGO
Prospectus
February 28, 1997
<PAGE> 114
TRUST FOR FEDERAL SECURITIES
(Treasury Trust Fund Portfolio)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 115
Treasury Trust Fund
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Treasury Trust shares code: 62; Treasury
Trust Dollar shares code: 63).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. The shares described in this Prospectus represent
interests in the Treasury Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests solely in U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury.
Fund shares may not be purchased by individuals directly, but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to Treasury Trust Shares, investors may purchase Treasury Trust "Dollar
Shares" which accrue daily dividends in the same manner as Treasury Trust Shares
but bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares (See "Management
of the Fund-- Organizations Servicing the Dollar Shares.")
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated
February 28, 1997, has been filed with the Securities and Exchange Commission
and is available to investors without charge by calling the Fund at
800-821-7432. The Statement of Additional Information, as amended from time to
time, is incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 116
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: Treasury Trust Shares
and Treasury Trust Dollar Shares. Shares of each class represent equal, pro rata
interests in the Fund and accrue daily dividends in the same manner except that
the Dollar Shares bear fees payable by the Fund (at the rate of .25% per annum)
to institutional investors for services they provide to the beneficial owners of
such shares. (See "Management of the Fund--Organizations Servicing the Dollar
Shares.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
TREASURY
TREASURY TRUST
TRUST DOLLAR
SHARES SHARES
------------ ------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------
(as a percentage of average net assets)
Management Fees (net of waivers)............................. .08% .08%
Other Expenses............................................... .12% .37%
Administration Fees (net of waivers)................. .08% .08%
Shareholder Servicing Fees........................... 0% .25%
Miscellaneous........................................ .04% .04%
---- ----
Total Fund Operating Expenses (net of waivers)................. .20% .45%
==== ====
</TABLE>
- ---------------
<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) a 5% annual return and
(2) redemption at the end of each time period with
respect to the following shares:
Treasury Trust Shares: $2 $ 6 $11 $26
Treasury Trust Dollar Shares: $5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Treasury Trust Shares and Dollar Shares during the last fiscal year, restated to
reflect the expenses which each class of shares expects to incur during the
current fiscal year. In addition, institutional investors may charge fees for
providing administrative services in connection with their customers' investment
in Dollar Shares. Absent fee waivers, Total Fund Operating Expenses for the
Treasury Trust Shares and Dollar Shares would have been .30% and .55%,
respectively. (For more complete descriptions of the various costs and expenses,
see "Management of the Fund" in this Prospectus and the Statement of Additional
Information.) The investment adviser and administrators may from time to time
waive the advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The foregoing table has not been
audited by the Fund's independent accountants.
2
<PAGE> 117
FINANCIAL HIGHLIGHTS
The following financial highlights are for Treasury Trust Fund Shares and
for Treasury Trust Fund Dollar Shares for the fiscal year ended October 31, 1996
and for each of the six preceding fiscal years and the fiscal period ended
October 31, 1989 (commencement of operations). The financial highlights for the
fiscal years set forth below have been audited by Coopers & Lybrand L.L.P.
independent accountants whose report on the financial statements and financial
highlights (for the most recent five years) of the Fund is incorporated by
reference into the Statement of Additional Information. The tables should be
read in conjunction with the financial statements and related notes incorporated
by reference into the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
TREASURY TRUST SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, MAY 1, 1989(3)
------------------------------------------------------------------------------ TO
1996 1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
-------- ---------- ---------- ---------- ---------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ---------- ---------- ---------- ---------- ---------- -------- --------
Income From Investment
Operations:
Net Investment Income........ .0508 .0545 .0359 .0292 .0380 .0612 .0777 0.422
-------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total From Investment
Operations................. .0508 .0545 .0359 .0292 .0380 .0612 .0777 0.422
-------- ---------- ---------- ---------- ---------- ---------- -------- --------
Less Distributions:
Dividends to Shareholders from:
Net Investment Income........ (.0508) (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (0.422)
-------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total Distributions.......... (.0508) (.0545) (.0359) (.0292) (.0380) (.0612) (.0777) (0.422)
-------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net Asset Value, End of
Period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========== ========== ========== ========== ========== ======== ========
Total Returns................ 5.20% 5.59% 3.65% 2.96% 3.85% 6.30% 8.05% 4.29%(4)
Ratios/Supplemental Data Net
Assets, End of Period (in
000s)........................ $897,659 $1,101,834 $1,016,635 $1,188,412 $1,552,207 $1,275,545 $692,404 $111,556
Ratio of Expenses to Average
Net Assets(1)................ .19% .18% .18% .18% .20% .20% .20% .20%(2)
Ratio of Net Investment Income
to Average Net Assets........ 5.08% 5.45% 3.57% 2.92% 3.78% 6.00% 7.74% 8.29%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, ratio of expenses to
average daily net assets would have been .30%, .29%, .29%, .28%, .27%, .32%,
and .37%, respectively, for each of the years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and 1990, and .43% (annualized) for the period ended
October 31, 1989 for Treasury Trust Shares.
(2) Annualized.
(3) Commencement of operations.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 118
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
TREASURY TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, JUNE 14, 1989(3)
------------------------------------------------------------------------------ TO
1996 1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
-------- -------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income.. .0483 .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- -------- ------- ------- -------
Total From Investment
Operations........... .0483 .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- -------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
from:
Net Investment Income.. (.0483) (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- -------- ------- ------- -------
Total Distributions.... (.0483) (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======= ======= =======
Total Returns.......... 4.95% 5.34% 3.40% 2.71% 3.60% 6.05% 7.80% 3.13%(4)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000s)....... $294,228 $223,272 $181,934 $258,206 $218,320 $50,729 $61,270 $1,448
Ratio of Expenses to
Average Net
Assets(1).............. .44% .43% .43% .43% .45% .45% .45% .45%(2)
Ratio of Net Investment
Income to Average Net
Assets................. 4.83% 5.20% 3.32% 2.67% 3.53% 5.75% 7.49% 8.19%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been .55%, .54%, .54%, .53%,
.52%, .57% and .62%, respectively, for each of the fiscal years ended
October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, and .68%
(annualized) for the period ended October 31, 1989 for Treasury Trust Dollar
Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
4
<PAGE> 119
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes. The Fund does not enter into
repurchase agreements nor does the Fund purchase obligations of agencies or
instrumentalities of the U.S. Government. Because the Fund invests exclusively
in direct U.S. Treasury obligations, investors may benefit from income tax
exclusions or exemptions that are available in certain states and localities.
See "Taxes." As a fundamental policy, the Fund will invest only in those
instruments which will permit Fund shares to qualify as "short-term liquid
assets" for federally regulated thrifts.
Portfolio obligations held by the Fund have remaining maturities of one
year or less (with certain exceptions), subject to the quality, diversification,
and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act") and other rules of the Securities and Exchange
Commission (the "SEC"). Certain government securities held by the Fund may have
remaining maturities exceeding one year if such securities provide for
adjustments in their interest rates not less frequently than annually.
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. The Fund may from time
to time engage in portfolio trading for liquidity purposes, in order to enhance
its yield or if otherwise deemed advisable. In selling portfolio securities
prior to maturity, the Fund may realize a price higher or lower than that paid
to acquire any given security, depending upon whether interest rates have
decreased or increased since its acquisition. To the extent consistent with its
investment objectives, the Fund may invest in Treasury receipts and other
"stripped" securities issued or guaranteed by the U.S. Government, where the
principal and interest components are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Currently, the Fund only invests in "stripped" securities issued or guaranteed
by the U.S. Government which are registered under the STRIPS program. The
principal and interest components may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
5
<PAGE> 120
SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of investments;
surveying the market for the best terms at which to buy and sell; receipt,
delivery and safekeeping of securities; and recordkeeping.
The Fund's investment policies are intended to qualify Fund shares for the
investment of funds of federally regulated thrifts. The Fund intends to qualify
its shares as "short-term liquid assets" as established in the published
rulings, interpretations, and regulations of the Office of Thrift Supervision.
However, investing institutions are advised to consult their primary regulator
for concurrence that Fund shares qualify under applicable regulations and
policies.
INVESTMENT LIMITATIONS
The Fund's investment objective described above is not fundamental and may
be changed by the Company's Board of Trustees without a vote of shareholders. If
there is a change in the investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund's investment limitations
summarized below may not be changed without the affirmative vote of the holders
of a majority of its outstanding shares. (A full list of the complete investment
limitations that cannot be changed without a vote of shareholders is contained
in the Statement of Additional Information under "Investment Objectives and
Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes which will permit Fund shares to qualify as
"short-term liquid assets" for federally regulated thrifts.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies.
6
<PAGE> 121
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business (a
"Business Day") and must be transmitted to PFPC in Wilmington, Delaware, by
telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's
computer access program. Orders accepted before 12:00 noon, Eastern time, for
which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon) will be executed at 4:00 P.M., Eastern time, if
payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order. (Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending institution.) The Fund may in
its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for Treasury Trust Shares and $5,000 for Dollar
Shares; however, broker-dealers and other institutional investors may set a
higher minimum for their customers. There is no minimum subsequent investment.
The Fund, at its discretion, may reduce the minimum initial investment for
Treasury Trust Shares for specific institutions whose aggregate relationship
with the Provident Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware, in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in Federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is
7
<PAGE> 122
normally wired in federal funds on the next day following redemption that PNC
Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's Treasury
Trust Shares account falls below an average of $100,000 in any particular
calendar month, the account may be charged an account maintenance fee with
respect to that month. In addition, the Fund may also redeem shares
involuntarily or suspend the right of redemption under certain special
circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving, Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
8
<PAGE> 123
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest managers of mutual funds, with
assets currently under management in excess of $30 billion. PIMC was organized
in 1977 by PNC Bank to perform advisory services for investment companies and
has its principal offices at, 400 Bellevue Parkway, Wilmington, Delaware 19809.
PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of the largest bank
managers of investments for individuals in the United States, and together with
its predecessors has been in the business of managing the investments of
fiduciary and other accounts since 1847. PNC Bank is a wholly-owned, indirect
subsidiary of PNC Bank Corp. and has its principal offices at 1600 Market
Street, Philadelphia, Pennsylvania 19103. In 1973, Provident National Bank
(predecessor to PNC Bank) commenced advising the first institutional money
market mutual fund--a U.S. dollar-denominated constant net asset value
fund--offered in the United States. PIMC and PNC Bank also serve as investment
adviser and sub-adviser, respectively, to the Company's FedFund, T-Fund and
Federal Trust Fund Portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average net assets. PIMC and the
administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1996, the Fund paid investment advisory fees
aggregating .08% of its average net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
and other services, PNC Bank is entitled to receive from PIMC an amount equal to
75% of the investment advisory fee paid by the Fund to PIMC (subject to
adjustment in certain circumstances). The sub-advisory fees paid by PIMC to PNC
Bank have no effect on the investment advisory fees payable by the Fund to PIMC.
PNC Bank also serves as the Fund's custodian. The services provided by PNC Bank
and PIMC and the fees payable by the Fund for these services are described
further in the Statement of Additional Information under "Management of the
Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers.
9
<PAGE> 124
The administrative services provided by the administrators, which are described
more fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the Securities and Exchange Commission;
and maintaining the registration or qualification of the Fund's shares for sale
under state securities laws. PFPC and PDI are each responsible for carrying out
the duties undertaken pursuant to the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information on regarding the administrators' fee
waivers and expense reimbursements, see "Investment Adviser and Sub-Adviser"
above.) The Fund also reimburses each administrator for its reasonable out-of-
pocket expenses incurred in connection with the Funds' computer access program.
For the fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .08% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators", also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to Treasury Trust Shares except that they bear the service fees
described below and enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Fund--Organizations Servicing
the Dollar Shares," include aggregating and processing purchase and redemption
requests from customers and placing net purchase and redemption orders with
PFPC; processing dividend payments from the Fund on behalf of customers;
providing information periodically to customers
10
<PAGE> 125
showing their positions in Dollar Shares; and providing sub-accounting or the
information necessary for sub-accounting with respect to Dollar Shares
beneficially owned by customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a schedule of any fees
that they may charge customers in connection with their investments in Dollar
Shares. Treasury Trust Shares are sold to institutions that have not entered
into servicing agreements with the Fund in connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1996, the Fund's total
expenses with respect to Treasury Trust Shares and Dollar Shares were .19% and
.44% of the average net assets of the Treasury Trust Shares and Treasury Trust
Dollar Shares, respectively. With regard to fees paid exclusively by Dollar
Shares, see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Shares begin accruing dividends on the day the purchase order
for the shares is executed and continue to accrue dividends through, and
including, the day before such shares are redeemed. Dividends are paid monthly
by check, or by wire transfer if requested in writing by the shareholder, within
five business days after the end of the month or
11
<PAGE> 126
within five business days after a redemption of all of a shareholder's shares of
a particular class. The Fund does not expect to realize net long-term capital
gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
the different classes.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their Federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an IRA or a
qualified retirement plan are deferred under the Code.) It is anticipated that
none of the Fund's distributions will be eligible for the dividends received
deduction for corporations. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any "capital gains
dividends" as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT
12
<PAGE> 127
ARE ATTRIBUTABLE TO INTEREST ON DIRECT U.S. TREASURY OBLIGATIONS ARE THE
FUNCTIONAL EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE,
EXEMPT FROM STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE
APPLICATION OF THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisors with specific reference to their own
tax situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Treasury Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed separately for each separate class or
sub-class of shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
specified period (such as a seven-day period). This income is then "annualized";
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a class or subclass of Fund shares is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; such fees, if
charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call
800-821-6006 (Treasury Trust Shares code: 62; Treasury Trust Dollar Shares code:
63) to obtain current yield information.
13
<PAGE> 128
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in May, 1989.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of nine classes of shares designated as
Treasury Trust, Treasury Trust Dollar, FedFund, FedFund Dollar, T-Fund, T-Fund
Dollar, T-Fund Plus, Federal Trust and Federal Trust Dollar. The Declaration of
Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE FUND'S OTHER CLASS
OF SHARES OR THE COMPANY'S FEDFUND, T-FUND AND FEDERAL TRUST FUND PORTFOLIOS MAY
OBTAIN SEPARATE PROSPECTUSES DESCRIBING THESE PORTFOLIOS BY CALLING
800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's Treasury Trust Shares and Treasury Trust Dollar
Shares will vote in the aggregate and not by class or sub-class on all matters,
except where otherwise required by law and except that only Dollar Shares will
be entitled to vote on matters submitted to a vote of shareholders pertaining to
the Fund's arrangements with Service Organizations. Further, shareholders of all
of the Company's portfolios will vote in the aggregate and not by portfolio
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for fractional shares held. Voting rights are not
cumulative and, accordingly, the holders of more than 50% of the aggregate
shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
14
<PAGE> 129
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
15
<PAGE> 130
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 5
Purchase and Redemption of
Shares........................ 7
Management of the Fund.......... 8
Dividends....................... 11
Taxes........................... 12
Yields.......................... 13
Description of Shares and
Miscellaneous................. 14
</TABLE>
PIF-P-008
TREASURY
TRUST FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
PROVIDENT INSTITUTIONAL FUNDS LOGO
Prospectus
February 28, 1997
<PAGE> 131
TRUST FOR FEDERAL SECURITIES
(Treasury Trust Fund Dollar Shares)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page .............................. Cover Page
2. Synopsis .............................. Background and Expense
Information
3. Condensed Financial Information .......... Financial Highlights; Yields
4. General Description of Registrant ........ Cover Page; Financial Highlights;
Investment Objective and Policies;
Description of Shares and
Miscellaneous
5. Management of the Fund ................... Management of the Fund; Dividends
6. Capital Stock and Other Securities ....... Cover Page; Financial Highlights;
Dividends; Taxes; Description of
Shares and Miscellaneous
7. Purchase of Securities Being Offered ..... Management of the Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase ................. Purchase and Redemption of Shares
9. Pending Legal Proceedings ................ Inapplicable
</TABLE>
<PAGE> 132
Treasury Trust Fund
Dollar Shares
An Investment Portfolio Offered By
Trust for Federal Securities
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Suite 100 For yield information call: 800-821-6006
Wilmington, DE 19809 (Dollar Shares code: 63).
For other information call: 800-821-7432.
</TABLE>
Trust for Federal Securities (the "Company") is a no-load, diversified,
open-end investment company that currently offers shares in four separate
investment portfolios. This Prospectus describes one class of shares ("Dollar
Shares") in the Treasury Trust Fund portfolio (the "Fund"), a money market
portfolio.
To the extent permissible by federal and state law, the Fund is structured
to provide shareholders with income that is exempt or excluded from taxation at
the state and local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term funds held by
banks, trust companies, corporations, employee benefit plans and other
institutional investors. The investment objective of the Fund is to seek current
income with liquidity and security of principal. The Fund invests solely in U.S.
Treasury bills, notes and direct obligations of the U.S. Treasury.
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor. Dollar
Shares are sold exclusively to and must be purchased through Service
Organizations. Service Organizations provide various shareholder services to
their Customers in connection with their investment in Dollar Shares. (See
"Management of the Fund--Organizations Servicing the Dollar Shares.")
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN ITS
NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
This Prospectus briefly sets forth certain information about the Fund that
investors should know
before investing. Investors are advised to read this Prospectus and retain it
for future reference. Additional information about the Fund, contained in a
Statement of Additional Information currently dated February 28, 1997, has been
filed with the Securities and Exchange Commission and is available to investors
without charge by calling the Fund at 800-821-1432. The Statement of Additional
Information, as amended from time to time, is incorporated in its entirety by
reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
February 28, 1997
<PAGE> 133
BACKGROUND AND EXPENSE INFORMATION
The Company offers two classes of shares in the Fund: Treasury Trust Shares
and Treasury Trust Dollar Shares ("Dollar Shares"). Shares of each class
represent equal, pro rata interests in the Fund and accrue daily dividends in
the same manner except that the Dollar Shares bear fees payable by the Fund (at
the rate of .25% per annum) to Service Organizations for administrative support
services they provide to the beneficial owners of such shares. (See "Management
of the Fund--Organizations Servicing the Dollar Shares.")
EXPENSE SUMMARY--DOLLAR SHARES
<TABLE>
<CAPTION>
DOLLAR
SHARES
------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------------------
<S> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers)...................................... .08%
Other Expenses........................................................ .37%
Administration Fees (net of waivers)............................. .08%
Shareholder Servicing Fees....................................... .25%
Miscellaneous.................................................... .04%
----
Total Fund Operating Expenses (net of waivers)........................ .45%
=====
</TABLE>
- ------------
<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) a 5% annual return and (2)
redemption at the end of each time period with
respect to Dollar Shares: $ 5 $14 $25 $57
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The table is based on expenses incurred by the
Treasury Trust Dollar Shares during the last fiscal year, restated to reflect
the expenses which those shares expect to incur during the current fiscal year.
In addition, institutional investors may charge fees for providing
administrative services in connection with their customers' investment in Dollar
Shares. Absent fee waivers, Total Fund Operating Expenses for Dollar Shares
would have been .55%. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information.) The investment adviser and administrators may from time
to time waive the advisory and administration fees otherwise payable to them or
may reimburse the Fund for its operating expenses. The foregoing table has not
been audited by the Fund's independent accountants.
2
<PAGE> 134
FINANCIAL HIGHLIGHTS
The following financial highlights are for Treasury Trust Fund Dollar
Shares for the fiscal year ended October 31, 1995 and for each of the six
preceding fiscal years and the fiscal period ended October 31, 1989
(commencement of operations). The financial highlights for the fiscal years set
forth below have been audited by Coopers & Lybrand L.L.P. independent
accountants whose report on the financial statements and financial highlights
(for the most recent five years) of the Fund is incorporated by reference into
the Statement of Additional Information. The tables should be read in
conjunction with the financial statements and related notes incorporated by
reference into the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained without charge by calling 800-821-7432.
TRUST FOR FEDERAL SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
TREASURY TRUST DOLLAR SHARES
<TABLE>
<CAPTION>
TREASURY TRUST DOLLAR SHARES
YEAR ENDED OCTOBER 31, JUNE 14, 1989(3)
------------------------------------------------------------------------------------ TO
1996 1995 1994 1993 1992 1991 1990 OCTOBER 31, 1989
-------- -------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ------- ------- -------
Income from Investment
Operations:
Net Investment
Income............... .0483 .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- -------- ------- ------- -------
Total from Investment
Operations........... .0483 .0520 .0334 .0267 .0355 .0587 .0752 .0309
-------- -------- -------- -------- -------- ------- ------- -------
Less Distributions:
Dividends to
Shareholders from:
Net Investment
Income............... (.0483) (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- -------- ------- ------- -------
Total Distributions.... (.0483) (.0520) (.0334) (.0267) (.0355) (.0587) (.0752) (.0309)
-------- -------- -------- -------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======= ======= =======
Total Return........... 4.95% 5.34% 3.40% 2.71% 3.60% 6.05% 7.80% 3.13%(4)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000s)..... $294,228 $223,272 $181,934 $258,206 $218,320 $50,729 $61,270 $ 1,448
Ratio of Expenses to
Average Net
Assets(1)............ .44% .43% .43% .43% .45% .45% .45% .45%(2)
Ratio of Net Investment
Income to Average Net
Assets............... 4.83% 5.20% 3.32% 2.67% 3.53% 5.75% 7.49% 8.19%(2)
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .55%, .54%, .54%,
.53%,.52%,.57% and .62%, respectively, for each of the years ended October
31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, and .68% (annualized) for
the period ended October 31, 1989 for Treasury Trust Dollar Shares.
(2) Annualized.
(3) First issuance of shares.
(4) Total returns are not annualized for periods of less than one year.
3
<PAGE> 135
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek current income with liquidity
and security of principal. The Fund invests solely in direct obligations of the
U.S. Treasury, such as Treasury bills and notes. The Fund does not enter into
repurchase agreements nor does the Fund purchase obligations of agencies or
instrumentalities of the U.S. Government. Because the Fund invests exclusively
in direct U.S. Treasury obligations, investors may benefit from income tax
exclusions or exemptions that are available in certain states and localities.
See "Taxes." As a fundamental policy, the Fund will invest only in those
instruments which will permit Fund shares to qualify as "short-term liquid
assets" for federally regulated thrifts.
Portfolio obligations held by the Fund have remaining maturities of one
year or less (with certain exceptions), subject to the quality, diversification,
and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act") and other rules of the Securities and Exchange
Commission (the "SEC"). Certain government securities held by the Fund may have
remaining maturities exceeding one year if such securities provide for
adjustments in their interest rates not less frequently than annually.
Securities issued or guaranteed by the U.S. Government have historically
involved little risk of loss of principal if held to maturity. However, due to
fluctuations in interest rates, the market value of such securities may vary
during the period a shareholder owns shares of the Fund. The Fund may from time
to time engage in portfolio trading for liquidity purposes, in order to enhance
its yield or if otherwise deemed advisable. In selling portfolio securities
prior to maturity, the Fund may realize a price higher or lower than that paid
to acquire any given security, depending upon whether interest rates have
decreased or increased since its acquisition. To the extent consistent with its
investment objectives, the Fund may invest in Treasury receipts and other
"stripped" securities issued or guaranteed by the U.S. Government, where the
principal and interest components are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Currently, the Fund only invests in "stripped" securities issued or guaranteed
by the U.S. Government which are registered under the STRIPS program. The
principal and interest components may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
The Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund will generally not pay for such
securities or start earning interest on them until they are received. Securities
purchased on a when-issued basis are recorded as an asset and are subject to
changes in value based upon changes in the general level of interest rates. The
Fund expects that commitments to purchase when-issued securities will not exceed
25% of the value of its total assets absent unusual market conditions. The Fund
does not intend to purchase when-issued securities for speculative purposes but
only in furtherance of its investment objective.
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<PAGE> 136
SUITABILITY
The Fund is designed as an economical and convenient vehicle for those
institutional investors seeking to obtain current income with liquidity and
security of principal. The Fund is designed for banks and other institutions
seeking investment of monies held in accounts for which the institution acts in
a fiduciary, advisory, agency, custodial or other similar capacity. The Fund may
also be suitable for the investment of funds held or managed by corporations,
employee benefit plans, insurance companies, unions, hospitals, investment
counselors, professional firms, educational, religious and charitable
organizations, investment bankers, brokers, and others, if consistent with the
objectives of the particular account and any applicable state and federal laws
and regulations.
The Fund offers the advantage of diversification and economies of scale,
thereby avoiding the generally greater expense of executing a large number of
small transactions. Moreover, investment in the Fund relieves the investor of
many management and administrative burdens associated with the direct purchase
and sale of income obligations. These include the selection of investments;
surveying the market for the best terms at which to buy and sell; receipt,
delivery and safekeeping of securities; and recordkeeping.
The Fund's investment policies are intended to qualify Fund shares for the
investment of funds of federally regulated thrifts. The Fund intends to qualify
its shares as "short-term liquid assets" as established in the published
rulings, interpretations, and regulations of the Office of Thrift Supervision.
However, investing institutions are advised to consult their primary regulator
for concurrence that Fund shares qualify under applicable regulations and
policies.
INVESTMENT LIMITATIONS
The Fund's investment objective described above is not fundamental and may
be changed by the Company's Board of Trustees without a vote of shareholders. If
there is a change in the investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund's investment limitations
summarized below may not be changed without the affirmative vote of the holders
of a majority of its outstanding shares. (A full list of the complete investment
limitations that cannot be changed without a vote of shareholders is contained
in the Statement of Additional Information under "Investment Objective and
Policies.")
The Fund may not:
1. Purchase securities other than direct obligations of the U.S. Treasury
such as Treasury bills and notes which will permit Fund shares to qualify as
"short-term liquid assets" for federally regulated thrifts.
2. Borrow money except from banks for temporary purposes and then in an
amount not exceeding 10% of the value of the Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of the Fund's total assets at the time of such borrowing.
3. Make loans except that the Fund may purchase or hold debt obligations in
accordance with its investment objective and policies.
5
<PAGE> 137
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Dollar Shares are sold exclusively to institutional investors, such as
banks and savings and loan associations and other financial institutions,
including affiliates of PNC Financial Corp ("Service Organizations"), acting on
behalf of themselves or their customers and customers of their affiliates
("customers"). The customers, which may include individuals, trusts,
partnerships and corporations, must maintain accounts (such as demand deposit,
custody, trust or escrow accounts) with the Service Organization. Service
Organizations (or their nominees) will normally be the holders of record of
Dollar Shares, and will reflect their customers' beneficial ownership of shares
in the account statements provided by them to their customers. The exercise of
voting rights and the delivery to customers of shareholder communications from
the Fund will be governed by the customers' account agreements with the Service
Organizations. Investors wishing to purchase Dollar Shares should contact their
account representatives.
Purchase orders must be transmitted by a Service Organization directly to
PFPC, the Fund's transfer agent. All such transactions are effected pursuant to
procedures established by the Service Organization in connection with a
customer's account. Shares are sold at the net asset value per share next
determined after acceptance of a purchase order by PFPC.
Purchase orders for shares are accepted by the Fund only on days on which
both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia
are open for business (a "Business Day") and must be transmitted to PFPC in
Wilmington, Delaware, by telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted before 12:00 noon,
Eastern time, for which payment has been received by PNC Bank, the Fund's
custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and
before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for
which payment has not been received by 12:00 noon) will be executed at 4:00
P.M., Eastern time, if payment has been received by PNC Bank by that time.
Orders received at other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof
will be given to the Service Organization placing the order. (Payment for orders
which are not received or accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject any order for
shares.
Payment for Dollar Shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by a Service
Organization is $5,000; however, Service Organizations may set higher minimums
for their customers. There is no minimum subsequent investment.
Conflict of interest restrictions may apply to a Service Organization's
receipt of compensation paid by the Fund in connection with the investment of
fiduciary funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
6
<PAGE> 138
REDEMPTION PROCEDURES
Redemption orders must be transmitted by the Service Organization to PFPC
in Wilmington, Delaware in the manner described under "Purchase Procedures."
Shares are redeemed at the net asset value per share next determined after
PFPC's receipt of the redemption order. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the amount invested
depending upon a share's net asset value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day. Payment for redemption
orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a
day when PNC Bank is closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. In addition, the Fund may also redeem
shares involuntarily or suspend the right of redemption under certain special
circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veteran's
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the outstanding shares of each
class. In computing net asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional Information under
"Additional Purchase and Redemption Information." The Fund's net asset value per
share for purposes of pricing purchase and redemption orders is determined
independently of the net asset values of the shares of the Company's other
investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Service
Organizations purchasing or holding Dollar Shares for their customer accounts
may charge customer fees for cash management and other services provided in
connection with their accounts. In addition, if a customer has agreed with a
particular Service Organization to maintain a minimum balance in its account
with the Service Organization and the balance in such account falls below that
minimum, the customer may be obliged by the Service Organization to redeem all
or part of its shares in the Fund to the extent necessary to maintain the
required minimum balance in such account. A customer should, therefore, consider
the terms of its account with a Service Organization before
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<PAGE> 139
purchasing Dollar Shares. A Service Organization purchasing or redeeming Fund
shares on behalf of its customers is responsible for transmitting orders to the
Fund in accordance with its customer agreements, and to provide customers with
account statements with respect to share transactions for their accounts.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp. and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund--a U.S. dollar-denominated constant net
asset value fund--offered in the United States. PIMC and PNC Bank also serve as
investment adviser and sub-adviser, respectively, to the Company's FedFund,
T-Fund and Federal Trust Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average net assets. PIMC and the
administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1996, the Fund paid investment advisory fees
with respect to Dollar Shares aggregating .08%% of Dollar Shares' average net
assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an
8
<PAGE> 140
amount equal to 75% of the investment advisory fee paid by the Fund to PIMC
(subject to adjustment in certain circumstances). The sub-advisory fees paid by
PIMC to PNC Bank have no effect on the investment advisory fees payable by the
Fund to PIMC. PNC Bank also serves as the Fund's custodian. The services
provided by PNC Bank and PIMC and the fees payable by the Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the Securities and Exchange Commission;
and maintaining the registration or qualification of the Fund's shares for sale
under state securities laws. PFPC and PDI are each responsible for carrying out
the duties undertaken pursuant to the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Funds' computer access program. For the
fiscal year ended October 31, 1996, the Fund paid administration fees
aggregating .08% of its average net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
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<PAGE> 141
ORGANIZATIONS SERVICING THE DOLLAR SHARES
As stated above, Service Organizations may purchase Dollar Shares. Dollar
Shares are identical in all respects to the Company's Treasury Trust Shares
except that Dollar Shares bear the service fees described below and enjoy
certain exclusive voting rights on matters relating to these fees. The Fund will
enter into an agreement with each Service Organization which purchases Dollar
Shares requiring it to provide support services to its customers who are the
beneficial owners of such shares in consideration of the Fund's payment of .25%
(on an annualized basis) of the average daily net asset value of the Dollar
Shares held by the Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of Additional
Information under "Management of the Funds--Organizations Servicing the Dollar
Shares," include aggregating and processing purchase and redemption requests
from customers and placing net purchase and redemption orders with PFPC;
processing dividend payments from the Fund on behalf of customers; providing
information periodically to customers showing their positions in Dollar Shares;
and providing sub-accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by customers. Under the terms
of the agreements, Service Organizations are required to provide to their
customers a schedule of any fees that they may charge customers in connection
with their investments in Dollar Shares.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended October 31, 1996, the Fund's total
expenses with respect to Dollar Shares were .44% of the average net assets of
the Dollar Shares. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not
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<PAGE> 142
anticipated, however, that any change in the Fund's method of operations would
affect its net asset value per share or result in a financial loss to any
customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to its shareholders of record at the close of business on the day
of declaration. Dividends are determined in the same manner for each class of
shares of the Fund but may differ in amount because of the difference in the
expenses paid by the different classes. Shares begin accruing dividends on the
day the purchase order for the shares is executed and continue to accrue
dividends through, and including, the day before such shares are redeemed.
Dividends are paid monthly by check, or by wire transfer if requested in writing
by the shareholder, within five business days after the end of the month or
within five business days after a redemption of all of a shareholder's shares of
a particular class. The Fund does not expect to realize net long-term capital
gains.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19885-9628, and will
become effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least 90% of its investment company taxable income for such
year. In general, the Fund's investment company taxable income will be its
taxable income (including interest and short-term capital gains, if any),
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be taxable
as ordinary income to the Fund's shareholders that are not currently exempt from
federal income taxes, whether such income is received in cash or reinvested in
additional shares. (Federal income taxes for distributions to an Individual IRA
or a qualified retirement plan are deferred under the Code.) It is anticipated
that none of the Fund's distributions will be eligible for the dividends
received deduction for corporations. The Fund does not expect to realize
long-term
11
<PAGE> 143
capital gains and, therefore, does not contemplate payment of any "capital gain
dividends," as described in the Code.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year, in the event such dividends are actually paid during January of the
following year.
TO THE EXTENT PERMISSIBLE BY FEDERAL AND STATE LAW, THE FUND IS STRUCTURED
TO PROVIDE SHAREHOLDERS WITH INCOME THAT IS EXEMPT OR EXCLUDED FROM TAXATION AT
THE STATE AND LOCAL LEVEL. SUBSTANTIALLY ALL DIVIDENDS PAID TO SHAREHOLDERS
RESIDING IN CERTAIN STATES WILL BE EXEMPT OR EXCLUDED FROM STATE INCOME TAX.
MANY STATES, BY STATUTE, JUDICIAL DECISION OR ADMINISTRATIVE ACTION, HAVE TAKEN
THE POSITION THAT DIVIDENDS OF A REGULATED INVESTMENT COMPANY SUCH AS THE FUND
THAT ARE ATTRIBUTABLE TO INTEREST ON DIRECT U.S. TREASURY OBLIGATIONS ARE THE
FUNCTIONAL EQUIVALENT OF INTEREST FROM SUCH OBLIGATIONS AND ARE, THEREFORE,
EXEMPT FROM STATE AND LOCAL INCOME TAXES. INVESTORS SHOULD BE AWARE OF THE
APPLICATION OF THEIR STATE AND LOCAL TAX LAWS TO INVESTMENTS IN THE FUND.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. As
indicated above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders and this discussion is not intended as
a substitute for careful tax planning. Accordingly, potential investors in the
Fund should consult their tax advisors with specific reference to their own tax
situations.
YIELDS
From time to time, in advertisements or in reports to shareholders, the
"yields" and "effective yields" for Treasury Trust Shares and Dollar Shares may
be quoted. Yield quotations are computed separately for each separate class or
sub-class of shares. The "yield" for a particular class or sub-class of Fund
shares refers to the income generated by an investment in such shares over a
particular period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by an investment during
that period is assumed to be generated for each such period over a 52-week or
one year period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a class or sub-class of Fund shares is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to stock or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report(R), The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of
12
<PAGE> 144
investment and operating expenses. Any fees charged by Service Organizations
directly to their customers in connection with investments in Dollar Shares are
not reflected in the Dollar Shares' yields; such fees, if charged, would reduce
the actual return received by Customers on their investments. The methods used
to compute the Fund's yields are described in more detail in the Statement of
Additional Information. Investors may call 800-821-6006 (Treasury Trust Shares
code: 62; Treasury Trust Dollar Shares code: 63) to obtain current yield
information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company is a Pennsylvania business trust established on May 14, 1975.
Effective March 2, 1987, the Company's name was changed from Trust for
Short-Term Federal Securities to Trust for Federal Securities. The Company
commenced operations of the Fund in May, 1989.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more additional classes of shares. Pursuant to such authority, the Board of
Trustees has authorized the issuance of nine classes of shares designated as
Treasury Trust, Treasury Trust Dollar, FedFund, FedFund Dollar, T-Fund, T-Fund
Dollar, T-Fund Plus, Federal Trust and Federal Trust Dollar. The Declaration of
Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS RELATES PRIMARILY TO THE DOLLAR SHARES OF THE FUND AND
DESCRIBES ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND
OTHER MATTERS RELATING TO THE FUND. INVESTORS WISHING TO OBTAIN SIMILAR
INFORMATION REGARDING THE FUND'S OTHER CLASS OF SHARES OR THE COMPANY'S FEDFUND,
T-FUND AND FEDERAL TRUST FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES BY
CALLING 800-998-7633.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Company will call a meeting of shareholders for the purpose of voting upon the
question of removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund Share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's Treasury Trust Shares and Dollar Shares will vote
in the aggregate and not by class on all matters, except where otherwise
required by law and except that only Dollar Shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class, sub-class, or portfolio)
and fractional votes for
13
<PAGE> 145
fractional shares held. Voting rights are not cumulative and, accordingly, the
holders of more than 50% of the aggregate shares of the Company may elect all of
the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of his acts or omissions or some other reason.
14
<PAGE> 146
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<PAGE> 147
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information................... 2
Financial Highlights............ 3
Investment Objective and
Policies...................... 4
Purchase and Redemption of
Shares........................ 6
Management of the Fund.......... 8
Dividends....................... 11
Taxes........................... 11
Yields.......................... 12
Description of Shares and
Miscellaneous................. 13
</TABLE>
PIF-P-022
TREASURY
TRUST FUND
DOLLAR SHARES
AN INVESTMENT PORTFOLIO
OFFERED BY
TRUST FOR FEDERAL SECURITIES
PROVIDENT INSTITUTIONAL FUNDS LOGO
Prospectus
February 28, 1997
<PAGE> 148
FEDERAL TRUST FUND
TREASURY TRUST FUND
Investment Portfolios Offered By
Trust for Federal Securities
Statement of Additional Information
February 28, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
THE COMPANY............................................................................................ 2
INVESTMENT OBJECTIVES AND POLICIES..................................................................... 2
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION......................................................... 5
MANAGEMENT OF THE FUNDS................................................................................ 8
ADDITIONAL INFORMATION CONCERNING TAXES................................................................ 20
DIVIDENDS.............................................................................................. 21
ADDITIONAL YIELD INFORMATION........................................................................... 22
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES.......................................................... 25
COUNSEL................................................................................................ 26
AUDITORS............................................................................................... 26
MISCELLANEOUS.......................................................................................... 27
APPENDIX A.............................................................................................A-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for Federal Trust Fund and Treasury Trust
Fund each dated February 28, 1997 and is incorporated by reference in its
entirety into those Prospectuses. Because this Statement of Additional
Information is not itself a prospectus, no investment in shares of Federal
Trust Fund or Treasury Trust Fund should be made solely upon the information
contained herein. Copies of the Prospectuses for Federal Trust Fund and
Treasury Trust Fund may be obtained by calling 800-821-7432. Capitalized terms
used but not defined herein have the same meanings as in the Prospectuses.
<PAGE> 149
THE COMPANY
Trust for Federal Securities (Trust for Short-Term Federal Securities
prior to March 2, 1987) is a no-load, diversified, open-end investment company
designed primarily as a vehicle by which institutional investors can invest
cash reserves in a choice of portfolios consisting of government securities.
Trust for Federal Securities (the "Company") consists of four separate
investment portfolios--Federal Trust Fund, Treasury Trust Fund, FedFund and
T-Fund. This Statement of Additional Information relates primarily to the
Company's Federal Trust Fund and Treasury Trust Fund portfolios (the "Funds").
The obligations held by Federal Trust Fund are limited to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
The obligations held by Treasury Trust Fund are limited to U.S. Treasury bills,
notes and other direct obligations of the U.S. Treasury. Although the Funds and
the Company's FedFund and T-Fund portfolios have the same investment adviser
and have comparable investment objectives, the Funds differ in that they may
not engage in repurchase agreements; their yields normally will differ due to
their differing cash flows and differences in the specific portfolio securities
held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUNDS' PROSPECTUSES
RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUNDS.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE COMPANY'S FEDFUND
OR T-FUND PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE
PORTFOLIOS BY CALLING THE DISTRIBUTOR AT 800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of each
Fund is to seek current income with liquidity and security of principal. The
following policies supplement the description in the Prospectuses of the
investment objectives and policies of the Funds.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees, PNC
Institutional Management Corporation ("PIMC"), the Funds' investment adviser,
is responsible for, makes decisions with respect to and places orders for all
purchases and sales of portfolio securities for the Funds. Purchases and sales
of portfolio securities are usually principal transactions without brokerage
commissions. In making portfolio investments, PIMC seeks to obtain the best net
price and the most favorable
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<PAGE> 150
execution of orders. To the extent that the execution and price offered by more
than one dealer are comparable, PIMC may, in its discretion, effect
transactions in portfolio securities with dealers who provide the Company with
research advice or other services.
Investment decisions for the Funds are made independently from those
for other investment company portfolios or accounts advised or managed by PIMC.
Such other portfolios may invest in the same securities as the Funds. When
purchases or sales of the same security are made at substantially the same time
on behalf of such other portfolios, transactions are averaged as to price, and
available investments allocated as to amount, in a manner which PIMC believes
to be equitable to each portfolio, including either Fund. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained for a Fund. To the extent permitted
by law, PIMC may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for such other investment company portfolios
in order to obtain best execution.
Portfolio securities will not be purchased from or sold to PIMC, PNC
Bank, National Association ("PNC Bank"), PFPC Inc. ("PFPC"), Provident
Distributors, Inc. ("PDI") or any affiliated person (as such term is defined in
the Investment Company Act of 1940 (the "1940 Act") of any of them, except to
the extent permitted by the Securities and Exchange Commission (the "SEC").
Furthermore, with respect to such transactions, the Funds will not give
preference to Service Organizations with whom the Funds enter into agreements
concerning the provision of support services to customers who beneficially own
Federal Trust Dollar shares or Treasury Trust Dollar shares ("Dollar shares").
(See the Prospectuses, "Management of the Fund--Service Organizations.")
As stated in the Funds' Prospectuses, the Funds may purchase
securities on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
when-issued securities, its custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a separate account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case such Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of such Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Funds will set aside cash or liquid assets
to satisfy their respective purchase commitments in the manner described, such
a
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<PAGE> 151
Fund's liquidity and ability to manage its portfolio might be affected in the
event its commitments to purchase when-issued securities ever exceeded 25% of
the value of its assets. Neither Fund intends to purchase when-issued
securities for speculative purposes but only in furtherance of its investment
objectives. The Funds reserve the right to sell the securities before the
settlement date if it is deemed advisable.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
The Funds may seek profits through short-term trading and engage in
short-term trading for liquidity purposes. Increased trading may provide
greater potential for capital gains and losses, and also involves
correspondingly greater trading costs which are borne by the Fund involved.
PIMC will consider such costs in determining whether or not a Fund should
engage in such trading. The portfolio turnover rate for the Funds is expected
to be zero for regulatory reporting purposes.
Neither Fund will invest more than 10% of the value of its assets in
investments which are not readily marketable if such investment occurs
immediately after the purchase of a security which is not a readily marketable
security. Securities for purposes of this limitation do not include securities
which have been determined to be liquid by the Fund's Board of Trustees based
upon the trading markets for such securities.
Currently, Treasury Trust Fund does not invest in securities with
maturities in excess of one year, as the U.S. Treasury does not currently issue
securities with maturities of such lengths. However, if such securities ever
become available, Treasury Trust Fund may purchase them under provisions
consistent with Rule 2a-7 under the 1940 Act and 12 C.F.R. ss.566.1(h) of the
regulations that govern federally regulated thrifts.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a "majority
of the outstanding shares" of the respective Fund (as defined below under
"Miscellaneous"). Below is a complete list of the Funds' investment limitations
that may not be changed without such a vote of shareholders.
1. Federal Trust Fund may not purchase securities other than U.S.
Treasury bills, notes and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
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<PAGE> 152
2. Treasury Trust Fund may not purchase securities other than direct
obligations of the U.S. Treasury such as Treasury bills and notes, which will
permit Fund shares to qualify as "short-term liquid assets" for federally
regulated thrifts.
Federal Trust Fund and Treasury Trust Fund may not:
3. Borrow money except from banks for temporary purposes and then in
an amount not exceeding 10% of the value of the particular Fund's total assets,
or mortgage, pledge or hypothecate its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the particular Fund's total assets at the time
of such borrowing. (This borrowing provision is not for investment leverage,
but solely to facilitate management of the Funds by enabling the Company to
meet redemption requests where the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous.) Interest paid on borrowed funds
will not be available for investment.
4. Act as an underwriter.
5. Make loans except that the Funds may purchase or hold debt
obligations in accordance with their respective investment objective and
policies.
* * *
Neither Fund will invest in inverse floaters, range notes or mortgage
derived interest-only notes.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem a Fund's shares is included
in its Prospectus. The issuance of shares is recorded on the books of the
Funds, and share certificates are not issued unless expressly requested in
writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes the
purchase of Federal Trust shares and Treasury Trust shares by such national
banks acting on behalf of their fiduciary accounts is not contrary to
applicable regulations if consistent with the
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<PAGE> 153
particular account and proper under the law governing the administration of the
account.
Prior to effecting a redemption of shares represented by certificates,
PFPC, the Funds' transfer agent, must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank, a member of a major stock exchange
or other eligible guarantor organization, unless other arrangements
satisfactory to the Funds have previously been made. The Funds may require any
additional information reasonably necessary to evidence that a redemption has
been duly authorized.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Funds may
also suspend or postpone the recordation of the transfer of their shares upon
the occurrence of any of the foregoing conditions.)
In addition, the Funds may redeem shares involuntarily in certain
other instances if the Board of Trustees determines that failure to redeem may
have material adverse consequences to a Fund's shareholders in general. Each
Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the
Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Board of Trustees determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in securities or other property, valued
in the same way as the Fund determines net asset value. (See "Net Asset Value"
below for an example of when such redemption or form of payment might be
appropriate.) Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may incur transaction costs if
they sell such securities or property, and may receive less than the redemption
value of such securities or property upon sale, particularly where such
securities are sold prior to maturity.
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or classes
of shares must maintain a separate Master Account for each portfolio and class
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<PAGE> 154
of shares. Sub-accounts may be established by name or number either when the
Master Account is opened or later.
NET ASSET VALUE
Net asset value per share of each class of shares in a particular Fund
is calculated by adding the value of all portfolio securities and other assets
belonging to a Fund that are attributable to a class, subtracting the Fund's
liabilities attributable to the class, and dividing the result by the number of
outstanding shares in the class. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares together with all income,
earnings, profits and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange or liquidation of such investments, any
funds or payments derived from any reinvestment of such proceeds, and a portion
of any general assets of the Company not belonging to a particular portfolio.
Assets belonging to a particular Fund are charged with the direct liabilities
of that Fund and with a share of the general liabilities of the Company
allocated in proportion to the relative net assets of such Fund and the
Company's other portfolios. Determinations made in good faith and in accordance
with generally accepted accounting principles by the Board of Trustees as to
the allocations of any assets or liabilities with respect to a Fund are
conclusive. The expenses that are charged to a Fund are borne equally by each
share of the Fund except for payments to service organizations that are borne
solely by Dollar Shares.
As stated in the Funds' Prospectuses, in computing the net asset value
of shares of the Funds for purposes of sales and redemptions, the Funds use the
amortized cost method of valuation. Under this method, the Funds value each of
their portfolio securities at cost on the date of purchase and thereafter
assume a constant proportionate amortization of any discount or premium until
maturity of the security. As a result, the value of a portfolio security for
purposes of determining net asset value normally does not change in response to
fluctuating interest rates. While the amortized cost method provides certainty
in portfolio valuation, it may result in valuations for the Funds' securities
which are higher or lower than the market value of such securities.
In connection with their use of amortized cost valuation, each of the
Funds limits the dollar-weighted average maturity of its portfolio to not more
than 90 days. Federal Trust Fund and Treasury Trust Fund do not purchase any
instrument with a remaining maturity of more than thirteen months and one year,
respectively (with certain exceptions). In determining the average weighted
portfolio maturity of each Fund, a variable rate obligation that is issued or
guaranteed by the U.S. Government, or an agency or instrumentality thereof, is
deemed to have a
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<PAGE> 155
maturity equal to the period remaining until the obligation's next interest
rate adjustment. The Company's Board of Trustees has also established
procedures, pursuant to rules promulgated by the SEC, that are intended to
stabilize the net asset value per share of each Fund for purposes of sales and
redemptions at $1.00. Such procedures include the determination at such
intervals as the Board deems appropriate, of the extent, if any, to which each
Fund's net asset value per share calculated by using available market
quotations or a matrix believed to provide reliable values deviates from $1.00
per share. In the event such deviation exceeds 1/2 of 1% with respect to either
Fund, the Board will promptly consider what action, if any, should be
initiated. If the Board believes that the amount of any deviation from the
$1.00 amortized cost price per share of a Fund may result in material dilution
or other unfair results to investors or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity; shortening the Fund's
average portfolio maturity; withholding or reducing dividends; redeeming shares
in kind; or utilizing a net asset value per share determined by using available
market quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses, ages,
principal occupations during the past five years and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Municipal Fund for Temporary
Investment ("Muni"). In addition, Messrs. Fortune and Pepper are directors of
Independence Square Income Securities, Inc. ("ISIS") and Managing General
Partners of Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and
Johnson are directors of Municipal Fund for California Investors,
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<PAGE> 156
Inc. ("Cal Muni"); and Mr. Johnson is a director of Municipal Fund for New York
Investors, Inc. ("New York Muni") and a director of the International Dollar
Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr. McConnel,
holds like offices with Temp and Muni. In addition, Mr. McConnel is Secretary
of Temp; Mr. Roach is Treasurer of Chestnut, President and Treasurer of The RBB
Fund, Inc. and New York Muni and Vice President and Treasurer of ISIS and Cal
Muni; Mr. Pepper is President and Chairman of the Board of Cal Muni; and Mr.
Fortune is President and Chairman of the Boards of ISIS and Chestnut.
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<PAGE> 157
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years
Name and Address the Company and Other Affiliations
- ---------------- ------------- ----------------------
<S> <C> <C>
G. NICHOLAS BECKWITH, III Trustee President and Chief Executive Officer, Beckwith
Beckwith Machinery Company Machinery Company; Chairman of the Board of
Post Office Box 8718 Trustees, Shadyside Hospital; Vice Chairman of
Pittsburgh, PA 15221 the Board of Trustees, Shadyside Academy;
Age 52 Trustee, Claude Washington Benedum Foundation;
Trustee, Chatham College.
PHILIP E. COLDWELL 2,3,4 Trustee Economic Consultant; Chairman, Coldwell
Coldwell Financial Consultants Financial Consultants, Member of the Board of
3330 Southwestern Blvd. Governors of the Federal Reserve System, 1974
Dallas, Texas 75225 to 1980; President, Federal Reserve Bank of
Age 74 Dallas, 1968 to 1974; Director, Maxus Energy
Corporation (energy products) 1989 - 1993;
Director, Diamond Shamrock Corp. (energy and
chemical products) until 1987.
ROBERT R. FORTUNE 2,3,4 Trustee Financial Consultant; Chairman, President and
2920 Ritter Lane Chief Executive Officer of Associated Electric
Allentown, PA 18104 & Gas Insurance Services Limited, 1984-1993;
Age 80 Member of the Financial Executives Institute
and American Institute of Certified Public
Accountants; Director, Prudential Utility Fund,
Inc., and Prudential Structured Maturity Fund, Inc.
JERROLD B. HARRIS Trustee President and Chief
706 Haldane Drive Executive Officer, VWR
Kennett Square, PA 19348 Corporation 1990 to present.
Age 54
</TABLE>
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<PAGE> 158
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years
Name and Address the Company and Other Affiliations
- ---------------- ------------- ----------------------
<S> <C> <C>
RODNEY D. JOHNSON 3,4 Trustee President, Fairmount Capital Advisors, Inc.
Fairmount Capital (financial advising) since 1987; Treasurer,
Advisors, Inc. North Philadelphia Health System (formerly
1435 Walnut Street Girard Medical Center), 1988 to 1992; Member,
Drexel Building Board of Education, School District of
Philadelphia, PA 19102 Philadelphia, 1983 to 1988; Treasurer, Cascade
Age 55 Aphasia Center, 1984 to 1988.
G. WILLING PEPPER 1,2 Chairman of the Retired; Chairman of the Board, The Institute
128 Springton Lake Road Board, President for Cancer Research until 1979; Director,
Media, PA 19063 and Trustee Philadelphia National Bank until 1978;
Age 88 President, Scott Paper Company, 1971 to 1973;
Chairman of the Board, Specialty Composites
Corp. until May 1984.
EDWARD J. ROACH President and Certified Public Accountant; Vice Chairman of
Bellevue Park Corporate Treasurer the Board, Fox Chase Cancer Center; Trustee
Center Emeritus, Pennsylvania School for the Deaf;
400 Bellevue Parkway Trustee Emeritus, Immaculata College, Officer
Suite 100 of various investment companies advised by PNC
Wilmington, DE 19809 Institutional Management Corporation; Director of
Age 72 Bradford Funds, Inc.
W. BRUCE McCONNEL, III Secretary Partner of the law firm of Drinker Biddle &
PNB Building Reath, Philadelphia, Pennsylvania.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age 53
</TABLE>
- ----------------------
1 This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
2 Executive Committee Member.
3 Audit Committee Member.
4 Nominating Committee Member.
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<PAGE> 159
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the management
of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various advisory
and other services from PIMC and PNC Bank. Of the above-mentioned funds, PDI
provides distribution services to Temp, Muni, Cal Muni, New York Muni and IDR.
Of the above-mentioned funds, the administrators provide administration services
to Temp, Muni, Cal Muni and New York Muni.
For the fiscal year ended October 31, 1996, the Company paid a total
of $85,452 to its officers and trustees in all capacities of which $28,573 was
allocated to the Funds. In addition, the Company contributed $3,184 during its
last fiscal year to its retirement plan for employees (which included Mr.
Roach) of which $959 was allocated to the Funds. Drinker Biddle & Reath, of
which Mr. McConnel is a partner, receives legal fees as counsel to the
Company. No employee of PDI, PIMC, PFPC or PNC Bank receives any compensation
from the Company for acting as an officer or trustee of the Company. The
trustees and officers of the Company as a group beneficially own less than 1%
of the shares of the Company's FedFund, T-Fund, Federal Trust Fund and Treasury
Trust Fund portfolios.
By virtue of the responsibilities assumed by PDI, PIMC, PFPC and PNC
Bank under their respective agreements with the Company, the Company itself
requires only one part-time employee in addition to its officers.
The table below sets forth the compensation actually received from the
Fund Complex of which the Company is a part by the trustees for the fiscal year
ended October 31, 1996:
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<PAGE> 160
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Registrant
Aggregate Benefits Accrued as Estimated Annual and Fund
Name of Person, Compensation Part of Fund Benefits Upon Complex1 Paid to
Position from Registrant Expenses Retirement Trustees
--------------- --------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
G. Nicholas Beckwith, III,5 $ 9,450 0 N/A (3)2 $ 30,975
Trustee
Philip E. Coldwell, Trustee 14,400 0 N/A (4)2 48,075
Robert R. Fortune, Trustee 15,300 0 N/A (6)2 68,975
Jerrold B. Harris,5 Trustee 10,350 0 N/A (3)2 33,675
Rodney D. Johnson, 15,300 0 N/A (6)2 60,975
Trustee
G. Willing Pepper, Trustee 24,300 0 N/A (7)2 100,225
and Chairman
David R. Wilmerding, Jr.,3 0 0 N/A (6)2 50,525
Trustee
Anthony M. Santomero,4 0 0 N/A (6)2 55,025
Trustee
</TABLE>
1. A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an investment
adviser that is an affiliated person of the investment adviser of any of the
other investment companies.
2. Total number of such other investment companies the trustee served on within
the Fund Complex during the fiscal year ended October 31, 1996.
3. Mr. Wilmerding resigned as Trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as Trustee of the Company on January 4, 1996.
5. Messrs. Beckwith and Harris were elected to the Board of Trustees of the
Company on March 22, 1996.
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and PNC Bank
are described in the Funds' Prospectuses. For the advisory services provided and
expenses assumed by it, PIMC is entitled to receive a fee, computed daily and
payable monthly, based on the combined average net assets of the Funds
(including FedFund and T-Fund) as follows:
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<PAGE> 161
<TABLE>
<CAPTION>
The Funds' Combined
Annual Fee Average Net Assets
---------- -------------------
<S> <C>
.175%................of the first $1 billion
.150%................of the next $1 billion
.125%................of the next $1 billion
.100%................of the next $1 billion
.095%................of the next $1 billion
.090%................of the next $1 billion
.085%................of the next $1 billion
.080%...........of amounts in excess of $7 billion.
</TABLE>
The advisory fee is allocated between these Funds in proportion to their
relative net assets.
PIMC and the administrators have each agreed that if, in any fiscal
year, the expenses borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the public, they will
each reimburse such Fund for one-half of any excess to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would be
accrued and paid on the same basis that the advisory and administration fees
are accrued and paid by such Fund.
For the fiscal years ended October 31, 1994, 1995 and 1996 Treasury
Trust Fund paid fees (net of waivers) for advisory services aggregating
$991,942, $929,458 and $907,460, respectively. For the same periods, advisory
fees payable by Treasury Trust Fund of $748,721, $751,364 and $653,409,
respectively, were voluntarily waived. For the fiscal years ended October 31,
1994, 1995 and 1996. Federal Trust Fund paid fees (net of waivers) for advisory
services aggregating $175,896, $161,037 and $203,379, respectively. For the same
periods, advisory fees payable by Federal Trust Fund of $197,112, $192,033 and
$170,170, respectively, were voluntary waived. PIMC and PNC Bank also serve as
the adviser and sub-adviser, respectively, to the Company's FedFund and T-Fund
portfolios.
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in each Fund's Prospectus. PIMC, PNC Bank and PFPC
believe that they may perform the
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<PAGE> 162
services for the Funds contemplated by their respective agreements,
Prospectuses and this Statement of Additional Information without violation of
applicable banking laws or regulations. It should be noted, however, that
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as further interpretations of present
requirements, could prevent PIMC and PFPC from continuing to perform such
services for the Funds and PNC Bank from continuing to perform such services
for PIMC and the Funds. If PIMC, PFPC, or PNC Bank were prohibited from
continuing to perform such services, it is expected that the Company's Board of
Trustees would recommend that the Funds enter into new agreements with other
qualified firms. Any new advisory agreement would be subject to shareholder
approval as required by the 1940 Act.
In addition, state securities laws on this issue may differ from the
interpretations of federal laws expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state Law.
ADMINISTRATOR
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising the Funds' operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising and mailing of
purchase and redemption order confirmations to shareholders of record, providing
and supervising the operation of an automated data processing system to process
purchase and redemption orders, maintaining a back-up procedure to reconstruct
lost purchase and redemption data, providing information concerning the Funds to
their shareholders of record, handling shareholder problems, supervising the
services of individuals whose principal responsibility and function is to
preserve and strengthen shareholder relations, and monitoring the arrangements
pertaining to the Funds' agreements with Service Organizations; (ii) assure that
persons are available to receive and transmit purchase and redemption orders;
(iii) participate in the periodic updating of the Funds' Prospectuses; (iv)
assist in maintaining the Funds' Wilmington, Delaware office; (v) perform
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Funds; (vi) accumulate
information for and coordinate the preparation of reports to the Funds'
shareholders and the SEC; and (vii) maintain the registration or qualification
of the Funds' shares for sale under state securities laws; (viii) prepare or
review, and provide advice with respect to, all sales literature
(advertisements, brochures and shareholder communications) for each of the Funds
and any class or sub-class thereof; and (ix) assist in the monitoring of
regulatory and legislative developments which may affect the Company,
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<PAGE> 163
participate in counseling and assisting the Company in relation to routine
regulatory examinations and investigations, and work with the Company's counsel
in connection with regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive a fee from the four Funds referred to above (including
FedFund and T-Fund) determined and allocated in the same manner as PIMC's
advisory fee set forth above. As stated in their Prospectuses, each
administrator is also reimbursed for its reasonable out-of-pocket expenses
incurred in connection with the Fund's computer access program. For the fiscal
year ended October 31, 1996, Treasury Trust Fund and Federal Trust Fund paid
fees (net of waivers) for administration fees to PFPC & PDI aggregating $907,460
and $203,379, respectively. For the same fiscal year, PFPC and PDI voluntarily
waived administration fees aggregating $653,409 with respect to Treasury Trust
Fund and $170,170 with respect to Federal Trust Fund. For the fiscal year ended
October 31, 1995, Treasury Trust Fund and Federal Trust Fund paid fees (net of
waivers) for administrative services to PFPC and PDI aggregating $929,458 and
$161,037, respectively. For the same fiscal year, PFPC and PDI voluntarily
waived administration fees aggregating $751,364 with respect to Treasury Trust
Fund and $192,033 with respect to Federal Trust Fund. For the fiscal year ended
October 31, 1994, Treasury Trust Fund and Federal Trust Fund paid fees (net of
waivers) for administrative services to PFPC and PDI aggregating $991,942 and
$175,896, respectively.
For information regarding the administrators' obligations to reimburse
the Funds in the event their expenses exceed certain prescribed limits, see
"Investment Adviser and Sub-Adviser" above. PFPC, a wholly owned, indirect
subsidiary of PNC Bank, provides advisory, administrative or, in some cases
sub-advisory and/or sub-administrative services to investment companies which
are distributed by PDI. PFPC and PDI also serve as the co-administrators of the
Company's FedFund and T-Fund portfolios.
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. Each Fund's shares
are sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. PDI will prepare or review,
provide advice with respect to, and file with the federal and state agencies or
other organization as required by federal, state, or other applicable laws and
regulations, all sales literature (advertisements, brochures and shareholder
communications) for each of the Funds and any class or sub-class thereof. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Funds
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(excluding preparation and printing expenses necessary for the continued
registration of Fund shares) and of preparing, printing and distributing all
sales literature. No compensation is payable by the Funds to the distributor
for its distribution services. PDI also serves as the distributor for the
Company's FedFund and T-Fund portfolios. PDI is a Delaware corporation, with
its principal place of business located at Four Falls Corporate Center, 6th
Floor, West Conshohocken, Pennsylvania 19428.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian. Under the Agreement, PNC Bank has agreed to provide the following
services: (i) maintain a separate account or accounts in the name of the Funds;
(ii) hold and disburse portfolio securities on account of the Funds; (iii)
collect and make disbursements of money on behalf of the Funds; (iv) collect
and receive all income and other payments and distributions on account of the
Funds' portfolio securities; and (v) make periodic reports to the Board of
Trustees concerning the Funds' operations. The Custodian Agreement permits PNC
Bank, on 30 days' notice, to assign its rights and delegate its duties
thereunder to any other affiliate of PNC Bank or PNC Bank Corp., provided that
PNC Bank remains responsible for the performance of the delegate under the
Custodian Agreement.
The Funds reimburse PNC Bank for its direct and indirect costs and
expenses incurred in rendering custodial services. Under the Custodian
Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000
of such Fund's average daily gross assets, which fee declines as such Fund's
average daily gross assets increase. In addition, each Fund pays the custodian
certain types of transaction charges and reimburses the custodian for
out-of-pocket expenses incurred on behalf of the Fund. For the fiscal years
ended October 31, 1994, 1995 and 1996, Treasury Trust Fund paid fees for
custodian services aggregating $220,900, $216,801 and $206,592, respectively.
For fiscal years ended October 31, 1994, 1995 and 1996, Federal Trust Fund paid
fees for custodian services aggregating $71,103, $68,120 and $70,745,
respectively. PNC Bank also serves as Custodian for the Company's FedFund and
T-Fund portfolios. PNC Bank's principal business address is 1600 Market Street,
Philadelphia, Pennsylvania 19103.
PFPC also serves as the Funds' transfer agent, registrar and dividend
disbursing agent pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer and redeem
shares of the Funds; (iii) disburse dividends and
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distributions, in the manner described in each Fund's Prospectus, to
shareholders of the Fund; (iv) transmit all communications by the Funds to
their shareholders or their authorized representatives, including reports to
shareholders, distribution and dividend notices and proxy materials for
meetings of shareholders; (v) prepare and file with the appropriate taxing
authorities reports or notices relating to dividends and distributions made by
the Funds; (vi) respond to correspondence by shareholders, security brokers and
others relating to its duties; (vii) maintain shareholder accounts; and (viii)
make periodic reports to the Company's Board of Trustees concerning the Funds'
operations. The Transfer Agency Agreement permits PFPC, on 30-days' notice, to
assign its rights and duties thereunder to any other affiliate of PNC Bank or
PNC Bank Corp., provided that PFPC remains responsible for the performance of
the delegate under the Transfer Agency Agreement.
Under the Transfer Agency Agreement, each Fund pays PFPC fees at an
annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00
for each purchase or redemption transaction by an account (other than a
purchase transaction made in connection with the automatic reinvestment of
dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such services. In
addition, the Funds reimburse PFPC for out-of-pocket expenses related to such
services. For the fiscal years ended October 31, 1994, 1995 and 1996, Treasury
Trust Fund paid fees for transfer agency services aggregating $133,142, $94,981
and $94,595, respectively. For the fiscal years ended October 31, 1994, 1995
and 1996, Federal Trust Fund paid fees for transfer agency services aggregating
$36,244, $44,229 and $36,833, respectively. PFPC also serves as transfer agent,
registrar and dividend disbursing agent for the Company's FedFund and T-Fund
portfolios.
ORGANIZATIONS SERVICING THE DOLLAR SHARES
As stated in the Funds' Prospectuses, the Funds will enter into an
agreement with each Service Organization which purchases Dollar Shares
requiring it to provide support services to its customers who beneficially own
Dollar shares in consideration of the Funds' payment of .25% (on an annualized
basis) of the average daily net asset value of the Dollar shares held by the
Service Organization for the benefit of customers. Such services include: (i)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the transfer agent; (ii)
providing customers with a service that invests the assets of their accounts in
Dollar shares; (iii) processing dividend payments from the Funds on behalf of
customers; (iv) providing information periodically to customers showing their
positions in Dollar shares; (v) arranging for bank wires; (vi) responding to
customer
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inquiries relating to the services performed by the Service Organization; (vii)
providing sub-accounting with respect to Dollar shares beneficially owned by
customers or the information necessary for sub-accounting; (viii) forwarding
shareholder communications from the Funds (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to customers, if required by law; and (ix) other similar
services if requested by the Funds. For the fiscal years ended October 31, 1995
and 1996, the Company paid $100,976 and $630,864, respectively in servicing
fees to an affiliate of the Company's adviser (representing 19.8% and 42.7%,
respectively, of the aggregate servicing fees paid by the Company) of which
$147,014 and $17,418 was allocated to the Treasury Trust Fund and Federal Trust
Fund, respectively, pursuant to service agreements in effect during such
period.
Each Fund's agreements with Service Organizations are governed by a
Shareholder Services Plan (the "Plan") that has been adopted by the Company's
Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the creation of the Dollar shares. Pursuant to each Plan, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service Organizations and the
purposes for which the expenditures were made. In addition, the Funds'
arrangements with Service Organizations must be approved annually by a majority
of the Company's trustees, including a majority of the trustees who are not
"interested persons" of the Company as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the Funds' arrangements with
Service Organizations based on information provided by the Funds' service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Funds and their shareholders by affording the Funds greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner. Any material amendment to the
Funds' arrangements with Service Organizations must be approved by a majority
of the Company's Board of Trustees (including a majority of the non-interested
trustees). So long as the Funds' arrangements with Service Organizations are in
effect, the selection and nomination of the members of the Company's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Company will be committed to the discretion of such non-interested trustees.
EXPENSES
The Funds' expenses include taxes, interest, fees and salaries of the
Company's trustees and officers, SEC fees, state
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securities registration fees, rating agency fees, costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders, advisory and administration fees, charges of the custodian,
transfer agent and dividend disbursing agent, Service Organization fees, certain
insurance premiums, outside auditing and legal expenses, costs of the Funds'
computer access program, costs of shareholder reports and shareholder meetings
and any extraordinary expenses. The Funds also pay for brokerage fees and
commissions (if any) in connection with the purchase and sale of portfolio
securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting each Fund and its shareholders that are not described in
each Fund's Prospectus. No attempt is made to present a detailed explanation of
the tax treatment of the Funds or their shareholders or possible legislative
changes, and the discussion here and in each Fund's Prospectus is not intended
as a substitute for careful tax planning. Investors should consult their tax
advisors with specific reference to their own tax situations.
Each Fund of the Company is treated as a separate corporate entity
under the Internal Revenue Code of 1986, as amended (the "Code") and intends to
qualify each year as a regulated investment company under the Code. In order to
so qualify for a taxable year, each Fund must satisfy the distribution
requirement described in its Prospectus, derive at least 90% of its gross
income for the year from certain qualifying sources, comply with certain
diversification requirements, and derive less than 30% of its gross income from
the sale or other disposition of securities and certain other investments held
for less than three months. Interest (including original issue discount and
accrued market discount) received by a Fund upon maturity or disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of this requirement. However, any other income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to distribute currently an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and any capital gain net income each calendar year to avoid liability for this
excise tax.
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If for any taxable year a Fund does not qualify for tax treatment as a
regulated investment company, all of its taxable income will be subject to
federal income tax at regular corporate rates, without any deduction for
distributions to Fund shareholders. In such event, dividend distributions would
be taxable as ordinary income to Fund shareholders to the extent of that Fund's
current and accumulated earnings and profits and would be eligible for the
dividends received deduction in the case of corporate shareholders.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to any
shareholder who has failed to provide a correct tax identification number in
the manner required, or who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of taxable
interest or dividends, or who has failed to certify to the Fund when required
to do so that he is not subject to backup withholding or that he is an "exempt
recipient."
Depending upon the extent of the Funds' activities in states and
localities in which their offices are maintained, in which their agents or
independent contractors are located or in which they are otherwise deemed to be
conducting business, the Funds may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of the Funds and their shareholders under such laws may
differ from their treatment under federal income tax laws. Shareholders are
advised to consult their tax advisors concerning the application of state and
local taxes.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
Net income of each of the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to
the Fund and the general expenses (e.g., legal, accounting and trustees' fees)
of the Company prorated to the Fund on the basis of its relative net assets. In
addition, Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds--Service Organizations.")
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As stated, the Company uses its best efforts to maintain the net asset
value per share of Federal Trust Fund and Treasury Trust Fund at $1.00. As a
result of a significant expense or realized or unrealized loss incurred by
either Fund is possible that the Fund's net asset value per share may fall
below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated separately for each
class of shares of each Fund and in accordance with the formulas prescribed by
the SEC. The seven-day yield for each class of shares is calculated by
determining the net change in the value of a hypothetical pre-existing account
in the particular Fund which has a balance of one share of the class involved
at the beginning of the period, dividing the net change by the value of the
account at the beginning of the period to obtain the base period return, and
multiplying the base period return by 365/7. The net change in the value of an
account in a Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on the original share
and any such additional shares, net of all fees charged to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include gains and losses or unrealized appreciation
and depreciation. In addition, an effective annualized yield quotation may be
computed on a compounded basis with respect to each class of its shares by
adding 1 to the base period return for the class involved (calculated as
described above), raising that sum to a power equal to 365/7, and subtracting 1
from the result. Similarly, based on the calculations described above, the
Funds' 30-day (or one-month) yields and effective yields may also be
calculated.
For the seven-day period ended October 31, 1996, the yields on Federal
Trust shares and Treasury Trust shares were 5.12% and 5.01%, respectively, and
the compounded effective yields on Federal Trust shares and Treasury Trust
shares were 5.25% and 5.14%, respectively; the yields on Federal Trust Dollar
shares and Treasury Trust Dollar shares were 4.87% and 4.76%, respectively, and
the compounded effective yields on Federal Trust Dollar shares and Treasury
Trust Dollar shares were 4.99% and 4.88%, respectively. During this seven-day
period, the Funds' adviser and administrator voluntarily waived a portion of
the advisory and administration fees payable by the Fund. Without these
waivers, for the same period the yields on Federal Trust shares and Treasury
Trust shares would have been 5.00% and 4.90%, respectively; the compounded
effective yields on Federal Trust shares and Treasury Trust shares would have
been 5.12% and 5.02%, respectively; the yields on Federal Trust Dollar shares
and Treasury Trust Dollar shares would have been 4.75% and 4.65%,
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respectively; and the compounded effective yields on Federal Trust Dollar
shares and Treasury Trust Dollar shares would have been 4.86% and 4.76%,
respectively.
For the 30-day period ended October 31, 1996, the yields on Federal
Trust shares and Treasury Trust shares were 5.12% and 5.00%, respectively, and
the compounded effective yields on Federal Trust shares and Treasury Trust
shares were 5.25% and 5.12%, respectively; the yields on Federal Trust Dollar
shares and Treasury Trust Dollar shares were 4.87% and 4.75%, respectively, and
the compounded effective yields on Federal Trust Dollar shares and Treasury
Trust Dollar shares were 4.99% and 4.86%, respectively. During this 30-day
period, the Funds' adviser and administrator voluntarily waived a portion of
the advisory and administration fees payable by the Fund. Without these
waivers, for the same period the yields on Federal Trust shares and Treasury
Trust shares would have been 5.00% and 4.89%, respectively; the compounded
effective yields on Federal Trust shares and Treasury Trust shares would have
been 5.12% and 5.01%, respectively; the yields on Federal Trust Dollar shares
and Treasury Trust Dollar shares would have been 4.75% and 4.64%, respectively;
and the compounded effective yields on Federal Trust Dollar shares and Treasury
Trust Dollar shares would have been 4.86% and 4.75%, respectively.
From time to time, in advertisements or in reports to shareholders, the
performance of the Funds may be quoted and compared to that of other money
market funds or accounts with similar investment objectives, to stock or other
relevant indices and to other reports or analyses that relate to yields,
interest rates, total return, market performance, etc. For example, the yields
of the Funds may be compared to the IBC/Donoghue's Money Fund Average, which is
an average compiled by IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA
01746, a widely recognized independent publication that monitors the performance
of money market funds, or to the average yields reported by the Bank Rate
Monitor from money market deposit accounts offered by the 50 leading banks and
thrift institutions in the top five standard metropolitan statistical areas.
THE FUNDS' YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD
NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUNDS.
Since yields fluctuate, yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of the kind and quality of the
investments held in a Fund, portfolio maturity, operating expenses net of
waivers and expense reimbursements, and market conditions. Any fees charged by
Service Organizations or other institutional investors with
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respect to customer accounts in investing in shares of the Funds will not be
included in yield calculations; such fees, if charged, would reduce the actual
yield from that quoted.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding"
refers to the fact that, if dividends or other distributions on an investment
are reinvested by being paid in additional Portfolio shares, any future income
or capital appreciation of a Fund would increase the value, not only of the
original investment, but also of the additional shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials discussions
and/or illustrations of the potential investment goals of a prospective
investor (including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action plans
offering investment alternatives), investment management strategies,
techniques, policies or investment suitability of a Fund, economic conditions,
the relationship between sectors of the economy and the economy as a whole,
various securities markets, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds and
Treasury securities, and hypothetical investment returns based on certain
assumptions. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Fund), as well as the views of the advisers as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund. In addition, selected indices may be used to illustrate
historical performance of select asset classes. The Funds may also include in
Materials charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the Funds
and/or other mutual funds, or illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to,
stocks, bonds, Treasury securities and shares of a Fund and/or other mutual
funds. Materials may include a discussion of certain attributes or benefits to
be derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing and the advantages and
disadvantages of investing in tax-deferred and taxable investments),
shareholder profiles and hypothetical investor scenarios, timely information on
financial management,
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designations assigned a Fund by various rating or ranking organizations, Fund
identifiers (such as CUSIP numbers or NASDAQ symbols), tax and retirement
planning and investment alternatives to certificates of deposit and other
financial instruments. Such Materials may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein.
Materials may include lists of representative clients of the Funds'
investment adviser, may include discussions of other products or services, may
contain information regarding average weighted maturity or other maturity
characteristics, and may contain information regarding the background,
expertise, etc. of the investment adviser or of a Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Funds may compare their total returns to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, such
data is found in IBC/Donoghue's Money Fund Report and reports prepared by
Lipper Analytical Services, Inc. Total return is the change in value of an
investment in a Fund over a particular period, assuming that all distributions
have been reinvested. SUCH RANKINGS REPRESENT THE FUNDS' PAST PERFORMANCE AND
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE RESULTS.
The following information has been provided by the Funds' distributor:
In managing each Fund's portfolio, the investment adviser
utilizes a "pure and simple" approach, which may include
disciplined research, stringent credit standards and careful
management of maturities.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the removal of one or more trustees and other certain matters. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
As stated in the Prospectuses for the Funds, holders of the Company's
Federal Trust shares and Federal Trust Dollar shares will vote in the aggregate
and not by class on all
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matters, except where otherwise required by law and except that only Federal
Trust Dollar shares will be entitled to vote on matters submitted to a vote of
shareholders pertaining to the Fund's arrangements with Service Organizations.
(See "Management of the Funds--Service Organizations.") Holders of the
Company's Treasury Trust and Treasury Trust Dollar shares will also vote in the
aggregate and not by class except as described above. Further, shareholders of
all of the Company's portfolios will vote in the aggregate and not by portfolio
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted by the provisions of such Act or applicable
state law, or otherwise, to the holders of the outstanding securities of an
investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of the portfolio. Under the Rule
the approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a portfolio
only if approved by the holders of a majority of the outstanding voting
securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent accountants, the approval of
principal underwriting contracts and the election of trustees are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107- 3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
AUDITORS
The financial statements and financial highlights of the Funds
incorporated by reference into this Statement of Additional Information have
been audited by Coopers & Lybrand L.L.P. independent accountants. Coopers &
Lybrand L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103.
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MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Prospectuses for the Funds, a "majority of the outstanding shares" of a Fund or
of any other portfolio means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the vote of the lesser of (1) 67% of the shares of the Fund
(irrespective of class) or of the portfolio represented at a meeting at which
the holders of more than 50% of the outstanding shares of such Fund or
portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of such Fund (irrespective of class) or of the portfolio.
CERTAIN RECORD HOLDERS
On January 31, 1997, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of the Company's Federal Trust Fund and Treasury Trust Fund portfolios
were as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal Trust Fund
------------------
Saxon & Company 24.88%
200 Stevens Drive
Lester, PA 19113
Chase Manhattan Bank 31.89%
Cudd & Co.
1211 Avenue of the Americas
New York, NY 10036
Santa Barbara Bank & Trust 6.88%
SANBARCO
P.O. Box 2340
Santa Barbara, CA 93120
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Treasury Trust Fund
-------------------
Wells Fargo Bank 8.14%
22610 West Agoura Road
Calabasas, CA 91302
PNC Bank/Saxon & Co. 5.51%
200 Stevens Drive
Lester, PA 19113
Bankers Trust Company 18.48%
210 West 10th Street, 8th Floor
Kansas City, MO 64105
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a "business trust" under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Company provides that
shareholders of the Funds shall not be subject to any personal liability for
the acts or obligations of the Company and that every note, bond, contract,
order or other undertaking made by the Company shall contain a provision to the
effect that the shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any shareholder held personally liable solely by reason of being or having been
a shareholder and not because of any acts or omissions or some other reason.
The Declaration of Trust also provides that the Company shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Company and satisfy any judgment thereon. Thus, the risk of a
shareholder's incurring financial loss beyond its investment on account of
shareholder liability is limited to circumstances in which the Company itself
would be unable to meet its obligations.
The Company's Declaration of Trust provides further that no trustee,
officer or agent of the Company shall be
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personally liable for or on account of any contract, debt, tort, claim, damage,
judgment or decree arising out of or connected with the administration or
preservation of the trust estate or the conduct of any business of the Company,
nor shall any trustee be personally liable to any person for any action or
failure to act except by reason of bad faith, willful misfeasance, gross
negligence in the performance of any duties or by reason of reckless disregard
of the obligations and duties as trustee. It also provides that all persons
having any claim against the trustees or the Company shall look solely to the
trust property for payment. With the exceptions stated, the Declaration of
Trust provides that a trustee is entitled to be indemnified against all
liabilities and expenses reasonably incurred by the trustee in connection with
the defense or disposition of any proceeding in which the trustee may be
involved or with which the trustee may be threatened by reason of being or
having been a trustee, and that the trustees have the power, but not the duty,
to indemnify officers and employees of the Company unless such person would not
be entitled to indemnification had he or she been a trustee.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the fiscal year ended October
31, 1996 has been filed with the Securities and Exchange Commission. The
financial statements in such Annual Report (the "Financial Statements") are
incorporated into this Statement of Additional Information by reference. The
Financial Statements included in the Annual Report for the fiscal year ended
October 31, 1996 have been audited by the Company's independent accountants,
Coopers & Lybrand L.L.P., whose report thereon also appears in such Annual
Report and is incorporated herein by reference. The Financial Statements in
such Annual Report have been incorporated herein and the financial highlights
in each Prospectus have been include herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered
to 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; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered
to have a strong capacity for repayment of short-
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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 alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D- 1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
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"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which are issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
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"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which possess a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligations for which there is an uncertainty as to the capacity
to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or which
are currently in default.
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CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit 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.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
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"CCC" - Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest
is being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
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likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds 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 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 considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
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Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"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"
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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 an 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.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "BBB" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in
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business, economic or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
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"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection
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commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A hereof:
Financial Highlights for:
- FedFund Shares
- FedFund Dollar Shares
- T-Fund Shares
- T-Fund Dollar Shares
- T-Fund Plus Shares
- Federal Trust Fund Shares
- Federal Trust Fund Dollar Shares
- Treasury Trust Fund Shares
- Treasury Trust Fund Dollar Shares
(2) Incorporated by reference in Part B hereof:
The audited financial statements and
related notes thereto as well as the
auditor's report thereon for each of the
FedFund portfolio, T-Fund portfolio,
Federal Trust Fund portfolio and Treasury
Trust Fund portfolio for the fiscal year
ended October 31, 1996 are incorporated
herein by reference to the Annual Report to
Shareholders as filed with Securities and
Exchange Commission on December 19, 1996
pursuant to Rule 30b2-1 of the Investment
Company Act of 1940 (the "1940 Act").
(b) Exhibits:
(1) Amended and Restated Declaration of Trust
dated as of August 9, 1993, relating to its
FedFund, T-Fund, Federal Trust Fund and
Treasury Trust Fund Portfolios is
incorporated herein by reference to Exhibit
(1) of Post-Effective Amendment No. 39 to
Registrant's Registration Statement on Form
N-1A filed on January 28, 1994.
(2) Amended and Restated By-laws dated as of
August 9, 1993, relating to its FedFund,
T-Fund, T-Cash, Federal Trust Fund and
Treasury Trust Fund Portfolios is
incorporated herein by reference to Exhibit
(2) of Post-
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Effective Amendment No. 39 to Registrant's
Registration Statement on Form N-1A filed
on January 28, 1994.
(3) None.
(4) (a) Specimen copy of share certificate
for FedFund shares of beneficial
interest in the FedFund portfolio
is incorporated herein by reference
to Exhibit (4)(a) of Post-Effective
Amendment No. 26 to Registrant's
Registration Statement on Form N-1A
filed on December 2, 1987.
(b) Specimen copy of share certificate
for FedFund Dollar shares of
beneficial interest in the FedFund
portfolio is incorporated herein by
reference to Exhibit (4)(b) of
Post-Effective Amendment No. 26 to
Registrant's Registration Statement
on Form N-1A filed on December 2,
1987.
(c) Specimen copy of share certificate
for T-Fund shares of beneficial
interest in the T-Fund portfolio is
incorporated herein by reference to
Exhibit (4)(c) of Post-Effective
Amendment No. 26 to Registrant's
Registration Statement on Form N-1A
filed on December 2, 1987.
(d) Specimen copy of share certificate
for T-Fund Dollar shares of
beneficial interest in the T-Fund
portfolio is incorporated herein by
reference to Exhibit (4)(d) of
Post-Effective Amendment No. 26 to
Registrant's Registration Statement
on Form N-1A filed on December 2,
1987.
(e) Specimen copy of share certificate
for Treasury Trust shares of
beneficial interest in the Treasury
Trust Fund portfolio is
incorporated herein by reference to
Exhibit (4)(g) of Post-Effective
Amendment No. 31 to Registrant's
Registration Statement on Form N-1A
filed on May 26, 1989.
(f) Specimen copy of share certificate
for Treasury Trust Dollar shares of
beneficial interest in the Treasury
Trust Fund portfolio is
incorporated herein by
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<PAGE> 191
reference to Exhibit (4)(h) of Post-
Effective Amendment No. 31 to
Registrant's Registration Statement
on Form N-1A filed on May 26, 1989.
(g) Specimen copy of share certificate
for Federal Trust shares of
beneficial interest in the Federal
Trust Fund portfolio is
incorporated by reference to
Exhibit (4)(o) of Post-Effective
Amendment No. 34 to Registrant's
Registration Statement on Form N-1A
filed on September 28, 1990.
(h) Specimen copy of share certificate
for Federal Trust Dollar shares of
beneficial interest in the Federal
Trust Fund portfolio is
incorporated by reference to
Exhibit (4)(p) of Post-Effective
Amendment No. 34 to Registrant's
Registration Statement on Form N-1A
filed on September 28, 1990.
(i) See Article V of the Amended and
Restated Declaration of Trust
Incorporated by reference to
Exhibit 1 of Post-Effective
Amendment No. 39 to Registrant's
Registration Statement on Form N-1A
filed on January 28, 1994 with
regard to T-Fund Plus Shares of
beneficial interest in the T-Fund
portfolio.
(5) (a) Investment Advisory Agreement dated
March 11, 1987 between Registrant
and PNC Institutional Management
Corporation relating to its FedFund
and T-Fund portfolios is
incorporated herein by reference to
Exhibit (5)(a) of Post-Effective
Amendment No. 26 to Registrant's
Registration Statement on Form N-1A
filed on December 2, 1987.
(b) Addendum No. 1 to Investment
Advisory Agreement dated June 30,
1988 between Registrant and PNC
Institutional Management
Corporation relating to its
Treasury Trust Fund portfolio is
incorporated herein by reference to
Exhibit (5)(b) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A
filed on January 25, 1989.
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<PAGE> 192
(c) Addendum No. 2 to Investment
Advisory Agreement dated September
7, 1988 between Registrant and PNC
Institutional Management
Corporation relating to its
Intermediate Government and Long
Government Fund portfolios is
incorporated herein by reference to
Exhibit (5)(c) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A
filed on January 25, 1989.
(d) Addendum No. 3 to Investment
Advisory Agreement dated as of
November 1, 1990 between Registrant
and PNC Institutional Management
Corporation relating to its Federal
Trust Fund portfolio is
incorporated herein by reference to
Exhibit (5)(d) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement on Form N-1A
filed on February 28, 1991.
(e) Addendum No. 4 to Investment
Advisory Agreement dated May 9,
1991 between Registrant and PNC
Institutional Management
Corporation relating to its FedCash
and T-Cash portfolios is
incorporated herein by reference to
Exhibit (5)(e) of Post-Effective
Amendment No. 37 to Registrant's
Registration Statement on Form N-1A
filed on November 21, 1991.
(f) Sub-Advisory Agreement dated March
11, 1987 between PNC Institutional
Management Corporation and PNC
Bank, National Association relating
to Registrant's FedFund and T-Fund
portfolios is incorporated herein
by reference to Exhibit (5)(c) of
Post-Effective Amendment No. 26 to
Registrant's Registration Statement
on Form N-1A filed on December 2,
1987.
(g) Addendum No. 1 to Sub-Advisory
Agreement dated June 30, 1988
between PNC Institutional
Management Corporation and PNC
Bank, National Association relating
to Registrant's Treasury Trust Fund
portfolio is incorporated herein by
reference to Exhibit (5)(e) of
Post-
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<PAGE> 193
Effective Amendment No. 30 to
Registrant's Registration Statement
on Form N-1A filed on January 25,
1989.
(h) Addendum No. 2 to Sub-Advisory
Agreement dated September 7, 1988
between PNC Institutional
Management Corporation and PNC
Bank, National Association relating
to Registrant's Intermediate
Government and Long Government Fund
portfolios is incorporated herein
by reference to Exhibit (5)(f) of
Post-Effective Amendment No. 30 to
Registrant's Registration Statement
on Form N-1A filed on January 25,
1989.
(i) Addendum No. 3 to Sub-Advisory
Agreement dated as of November 1,
1990 between PNC Institutional
Management Corporation and PNC
Bank, National Association relating
to its Federal Trust Fund portfolio
is incorporated herein by reference
to Exhibit (5)(h) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement on Form N-1A
filed on February 28, 1991.
(j) Addendum No. 4 to Sub-Advisory
Agreement dated May 9, 1991 between
PNC Institutional Management
Corporation and PNC Bank, National
Association relating to
Registrant's FedCash and T-Cash
portfolios is incorporated herein
by reference to Exhibit (5)(j) of
Post Effective Amendment No. 37 to
Registrant's Registration
Statement on Form N-1A filed on
November 21, 1991.
(6) (a) Distribution Agreement dated
January 31, 1994 between Registrant
and Provident Distributors, Inc.
relating to its FedFund, T-Fund,
FedCash, T-Cash, Federal Trust Fund
and Treasury Trust Fund portfolios
is incorporated herein by reference
to Exhibit (6) of Post-Effective
Amendment No. 39 to Registrant's
Registration Statement on Form
N-1A filed on January 28, 1994.
(b) Addendum No. 1 to Distribution
Agreement dated March 22, 1996
between Registrant and Provident
Distributors, Inc. relating
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<PAGE> 194
to Plus Shares in its T-Fund Portfolio
is incorporated herein by reference
to Exhibit (6)(b) of Post-Effective
Amendment No. 43 to Registrant's
Registration Statement on Form N-1A
filed on April 1, 1996.
(7) Trust for Federal Securities Fund Office
Retirement Profit-Sharing Plan and Trust
Agreement as approved Fall of 1990 is
incorporated herein by reference to Exhibit
(7) of Post-Effective Amendment No. 49 to
Temporary Investment Fund, Inc.'s
Registration Statement on Form N-1A filed
on December 12, 1990.
(8) (a) Custodian Fee Agreement dated May
9, 1991 between Registrant and PNC
Bank, National Association relating
to its FedFund, T-Fund, FedCash,
T-Cash, Federal Trust Fund and
Treasury Trust Fund portfolios is
incorporated herein by reference to
Exhibit (8)(b) of Post-Effective
Amendment No. 37 to Registrant's
Registration Statement on Form N-1A
filed on November 21, 1991.
(b) Custodian Agreement dated June 1,
1989 between Registrant and PNC
Bank, National Association relating
to its FedFund, T-Fund and
Treasury Trust Fund portfolios is
incorporated herein by reference to
Exhibit (8) of Post-Effective
Amendment No. 32 to Registrant's
Registration Statement on Form N-1A
filed on November 21, 1991.
(c) Addendum No. 1 to Custodian Fee
Agreement dated November 1, 1990
between Registrant and PNC Bank,
National Association relating to
its Federal Trust Fund portfolio is
incorporated herein by reference to
Exhibit (8)(d) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement on Form N-1A
filed on November 21, 1991.
(d) Addendum No. 2 to Custodian Fee
Agreement dated May 9, 1991 between
Registrant and PNC Bank, National
Association relating to its FedCash
and T-Cash portfolios is
incorporated herein by reference to
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<PAGE> 195
Exhibit (8)(e) of Post-Effective
Amendment No. 37 to Registrant's
Registration Statement on Form N-1A
filed on November 21, 1991.
(e) Addendum No. 3 to Custodian Fee
Agreement dated March 22, 1996
between Registrant and PNC Bank,
National Association relating to
Plus Shares in its T-Fund
portfolios is incorporated herein
by reference to Exhibit (8)(e) of
Post-Effective Amendment No. 43 to
Registrant's Registration Statement
on Form N-1A filed on April 1,
1996.
(9) (a) Administration Agreement dated
January 18, 1993 between
Registrant and PFPC Inc. and
Provident Distributors, Inc. as
co-administrators, relating to its
FedFund, T-Fund, FedCash, T-Cash,
Federal Trust Fund and Treasury
Trust Fund portfolios is
incorporated herein by reference to
Exhibit (9)(a) of Post-Effective
Amendment No. 39 to Registrant's
Registration Statement on Form N-
1A filed on January 28, 1994.
(b) Addendum No. 1 to the
Administration Agreement dated
March 22, 1996 between the
Registrant, PFPC Inc. and Provident
Distributors, Inc. relating to the
Plus Shares in its T-Fund
portfolios incorporated by
reference to Exhibit (9)(b) of
Post-Effective Amendment No. 43 to
Registrant's Registration Statement
on Form N-1A filed on April 1,
1996.
(c) Transfer Agency Fee Agreement dated
May 9, 1991 between Registrant and
PFPC Inc. relating to its FedFund,
T-Fund, FedCash, T-Cash, Federal
Trust Fund and Treasury Trust Fund
portfolios is incorporated herein
by reference to Exhibit (9)(e) of
Post-Effective Amendment No. 37 to
Registrant's Registration Statement
on Form N-1A filed on November 21,
1991.
(d) Transfer Agency Agreement dated
June 1, 1989 between Registrant and
PFPC Inc. relating to its FedFund,
T-Fund and Treasury Trust Fund
portfolios is
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<PAGE> 196
incorporated herein by reference to
Exhibit (9)(e) of Post-Effective
Amendment No. 33 to Registrant's
Registration Statement on Form N-1A
filed on January 15, 1990.
(e) Addendum No. 1 to Transfer Agency
Agreement dated as of November 1,
1990 between the Registrant and
PFPC Inc. relating to its Federal
Trust Fund portfolio is
incorporated herein by reference to
Exhibit (9)(i) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement on Form N-1A
filed on February 28, 1991.
(f) Addendum No. 2 to Transfer Agency
Agreement dated May 9, 1991 between
the Registrant and PFPC Inc.
relating to its FedCash and T-Cash
portfolios is incorporated herein
by reference to Exhibit (9)(h) of
Post-Effective Amendment No. 37 to
Registrant's Registration Statement
on Form N-1A filed on November 21,
1991.
(g) Addendum No. 3 to Transfer Agency
Agreement dated March 22, 1996
between the Registrant and PFPC
Inc. relating to Plus Shares in its
T-Fund Portfolios is incorporated
herein by reference to Exhibit
(9)(g) of Post-Effective Amend-
ment No. 43 to Registrant's
Registration Statement on Form N-1A
filed on April 1, 1996.
(h) Restated Shareholder Services Plan
including form of Servicing
Agreement reapproved by the Board
of Trustees on November 18, 1992 is
filed herein.
(10) Opinion and Consent of Counsel.
(11) Consent of Coopers & Lybrand.
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(12) None.
(13) Inapplicable.
(14) None.
(15) Form of Distribution and Service Plan and
accompanying Agreement dated March 22, 1996
for Plus Shares in its T-Fund Portfolio is
incorporated herein by reference to Exhibit
(15) of Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form
N-1A filed on April 1, 1996.
(16)
(a) Schedules of Performance
Computations with respect to
FedFund, T-Fund and Treasury Trust
Fund portfolios are incorporated
herein by reference to Exhibit
(16)(a) of Post-Effective Amendment
No. 35 to Registrant's Registration
Statement on Form N-1A filed on
February 28, 1991.
(b) Schedules of Performance
Computations with respect to the
FedCash, T-Cash and Federal Trust
Fund portfolios is incorporated
herein by reference to Exhibit
(16)(b) of Post-Effective Amendment
No. 37 to Registrant's Registration
Statement on Form N-1A filed on
November 21, 1991.
(17) Financial Data Schedule for the fiscal year
ended October 31, 1996.
(18) Plan pursuant to Rule 18f-3 dated March 22,
1996 relating to operation of a Multi-Class
System by Registrant is incorporated herein
by reference to Exhibit (18) of
Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form
N-1A filed on April 1, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Registrant is controlled by its Board of Trustees. Each of
Registrant's trustees serves on the board of directors/trustees of certain
other registered investment companies. See "Management of the Fund - Trustees
and Officers" in Part B hereof.
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is as of January 31, 1997:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
<S> <C>
Shares of beneficial interest in FedFund........................................ 270
Shares of beneficial interest in FedFund
Dollar shares.......................................................... 21
Shares of beneficial interest in T-Fund......................................... 269
Shares of beneficial interest in T-Fund
Dollar shares.......................................................... 21
Shares of beneficial interest in T-Fund
Plus shares............................................................ 0
Shares of beneficial interest in Federal
Trust Fund............................................................. 62
Shares of beneficial interest in Federal
Trust Fund Dollar shares .............................................. 28
Shares of beneficial interest in Treasury
Trust Fund............................................................. 139
Shares of beneficial interest in Treasury
Trust Fund Dollar shares............................................... 18
</TABLE>
ITEM 27. INDEMNIFICATION
Indemnification of Registrant's Principal Underwriter, Custodian and
Transfer Agent against certain stated liabilities is provided for in Section 6
of the Distribution Agreement, included herein by reference as Exhibit (6), and
in Section 22 of the Custodian Agreement and in Section 17 of the Transfer
Agency Agreement, incorporated herein by reference as Exhibits (8)(b) and
(9)(e), respectively.
Registrant has obtained from at least one major insurance carrier a
directors' and officers' liability policy covering certain types of errors and
omissions.
In addition, Section 2 of Article X of Registrant's Amended and
Restated Declaration of Trust dated August 9, 1994 incorporated herein by
reference as Exhibit (l), provides for the indemnification of Registrant's
trustees and officers.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing
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<PAGE> 199
provisions, or otherwise, Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
PIMC performs investment advisory services for Registrant and certain
other investment companies and accounts. PNC Bank and its predecessors have been
in the business of managing the investments of fiduciary and other accounts in
the Philadelphia area since 1847. In addition to its trust business, PNC Bank
provides commercial banking services.
(a) To Registrant's knowledge, none of the directors or officers of
PIMC or PNC Bank, except those set forth below, is, or has been at any time
during Registrant's past two fiscal years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers and certain executives of PIMC and PNC Bank also hold
various positions with, and engage in business for, PNC Bank Corp., which
indirectly owns all the outstanding stock of PIMC and PNC Bank, or other
subsidiaries of PNC Bank Corp.
(b) The information required by this Item 28 with respect to each
director, officer and partner of PIMC is incorporated by reference to Schedules
A and D of Form ADV filed by PIMC with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-13304).
(c) Set forth below are the names and principal businesses of the
directors and certain executives of PNC Bank who are engaged in any other
business, profession, vocation or employment of a substantial nature.
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<PAGE> 200
PNC Bank, National Association
Directors
<TABLE>
<CAPTION>
Position with Type
PNC Bank Name Other Business Connections of Business
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of Medical
Health & Professor of Pediatrics
Medical College of PA
Hahnemann University
430 East Sedgwick St.
Philadelphia, PA 19119
Director Eberhard Faber IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bearcreek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
413 Woodland Road
Sewickley, PA 15143
Director Thomas H. O'Brien Chairman Banking
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Dr. J. Dennis O'Connor Provost, The Smithsonian Education
Institution
1000 Jefferson Drive, S.W.
Room 230, MRC 009
Washington, DC 20560
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems, Inc.
P.O. Box 715
Mechanicsburg, PA 17055
Director Jane G. Pepper President Horticulture
Pennsylvania Horticulture Society
325 Walnut Street
Philadelphia, PA 19106
Director Robert C. Robb, Jr. President, Lewis, Eckert, Robb Financial and
</TABLE>
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<PAGE> 201
<TABLE>
<S> <C> <C>
& Company Management
425 One Plymouth Meeting Consultants
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding
PNC Bank, National Association Company
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National
Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman, President and C.E.O. Airline
USAir Group, Inc. and USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
PNC Bank, National Association
Officers
</TABLE>
<TABLE>
<CAPTION>
Name Position with PNC Bank
<S> <C>
John E. Alden Senior Vice President
James C. Altman Senior Vice President
Lila M. Bachelier Senior Vice President
R. Perrin Baker Chief Market Counsel, Northwest PA
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
George Brikis Executive Vice President
Michael Brundage Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President
Craig T. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Edward V. Caruso Executive Vice President
</TABLE>
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<PAGE> 202
<TABLE>
<S> <C>
Peter K. Classen President & CEO, PNC Bank, Northwest, Pa
James P. Conley Senior Vice President/Credit Policy
Andra D. Cochran Senior Vice President
Sharon Coghlan Coordinating Market Chief Counsel,
Philadelphia
John F. Calligan Senior Vice President
James P. Conley Senior Vice President
C. David Cook Senior Vice President
Alfred F. Cordasco Suprevising Counsel, Pittsburgh, PA
Robert Crouse Senior Vice President
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
John J. Daggett Senior Vice President
Peter J. Donchak Senior Vice President
Anuj Dhanda Senior Vice President
Victor M. DiBattista Chief Regional Counsel
Frank H. Dilenschneider Senior Vice President
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatteis Senior Vice President
James Dionise Senior Vice President and C.F.O.
Patrick S. Doran Vice President, Head of Consumer Lending
Robert D. Edwards Senior Vice President
David J. Egan Senior Vice President
J. Lynn Evans Senior Vice President & Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
Charles J. Ferrero Senior Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoney Coordinating Market Chief Counsel,
Northeast PA
Brian K. Garlock Senior Vice President
</TABLE>
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<PAGE> 203
<TABLE>
<S> <C>
George D. Gonczar Senior Vice President
Richard C. Grace Senior Vice President
James S. Graham Senior Vice President
Michael J. Hannon Senior Vice President
Stephen G. Hardy Senior Vice President
Michael J. Harrington Senior Vice President
Marva H. Harris Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Sylvan M. Holzer Senior Vice President
Bruce C. Iacobucci Senior Vice President
John M Infield Senior Vice President
Philip C. Jackson Senior Vice President
William J. Johns Controller
William R. Johnson Audit Director
Edward P. Junker, III Vice Chairman
Robert D. Kane Senior Vice President
Michael D. Kelsey Chief Compliance Counsel
Jack Kelly Senior Vice President
Geoffrey R. Kimmel Senior Vice President
Randall C. King Senior Vice President
Christopher M. Knoll Senior Vice President
Richard C. Krauss Senior Vice President
Frank R. Krepp Senior Vice President & Chief Credit Policy
Officer
Kenneth P. Leckey Senior Vice President & Cashier
Marilyn R. Levins Senior Vice President
Carl J. Lisman Executive Vice President
George Lula Senior Vice President
Jane E. Madio Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
John A. Martin Senior Vice President
</TABLE>
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<PAGE> 204
<TABLE>
<S> <C>
David O. Matthews Senior Vice President
Walter B. McClellan Senior Vice President
James F. McGowan Senior Vice President
Charlotte B. McLaughlin Senior Vice President
James C. Mendelson Senior Vice President
James W. Meighen Senior Vice President
Scott C. Meves Senior Vice President
Ralph S. Michael, III Executive Vice President
J. William Mills Senior Vice President
Barbara A. Misner Senior Vice President
Marlene D. Mosco Senior Vice President
Scott Moss Senior Vice President
Peter F. Moylan Senior Vice President
Michael B. Nelson Executive Vice President
Thomas J. Nist Senior Vice President
Thomas H. O'Brien Chairman
James F. O'Day Senior Vice President
Cynthia G. Osofsky Senior Vice President
Thomas E. Paisley, III Senior Vice President
Barbara Z. Parker Executive Vice President
George R. Partridge Senior Vice President
Daniel J. Panlick Senior Vice President
David M. Payne Senior Vice President
Charles C. Pearson, Jr. President and CEO, PNC Bank, Central PA
Helen P. Pudlin Senior Vice President
Edward V. Randall, Jr. President and CEO, PNC Bank, Pittsburgh
Arthur F. Rodman, III Senior Vice President
Richard C. Rhoades Senior Vice President
Bryan W. Ridley Senior Vice President
James E. Rohr President and Chief Executive Officer
Gary Royer Senior Vice President
</TABLE>
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<PAGE> 205
<TABLE>
<S> <C>
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Alfred J. Schiavetti Senior Vice President
David W. Schoffstall Executive Vice President
Seymour Schwartzberg Senior Vice President
Timothy G. Shack Senior Vice President
Douglas E. Shaffer Senior Vice President
Alfred A. Silva Senior Vice President
George R. Simon Senior Vice President
Richard L. Smoot President and CEO of PNC Bank, Philadelphia
Timothy N. Smyth Senior Vice President
Kenneth S. Spatz Senior Vice President
Darcel H. Steber Senior Vice President
William F. Strome Senior Vice President and Secretary
Robert L. Tassome Senior Vice President
Jane B. Tompkins Senior Vice President
Robert B. Trempe Senior Vice President
Kevin M. Tucker Senior Vice President
Alan P. Vail Senior Vice President
Frank T. VanGrofski Executive Vice President
Ronald H. Vicari Senior Vice President
William A. Wagner Senior Vice President
Patrick M. Wallace Senior Vice President
Annette M. Ward-Kredel Senior Vice President
Robert S. Wrath Senior Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
George L. Ziminski, Jr. Senior Vice President
</TABLE>
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<PAGE> 206
ITEM 29. PRINCIPAL UNDERWRITER
(a) Provident Distributors, Inc. currently acts as distributor for, in
addition to the Company, Temporary Investment Fund, Inc., Municipal Fund for
Temporary Investment, Municipal Fund for California Investors, Inc. and
Municipal Fund for New York Investors, Inc.
(b) The information required by this Item 29 with respect to each
director, officer or partner of Provident Distributors, Inc. is incorporated by
reference to Schedule A of FORM BD filed by Provident Distributors, Inc. with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 (SEC File No. 8-46564).
(c) The following represents all commissions and other compensation
received by each principal underwriter who is not an affiliated person of the
registrant:
<TABLE>
<CAPTION>
NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION AND BROKERAGE OTHER
UNDERWRITER COMMISSIONS REPURCHASE COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Provident
Distributors, Inc. $0 $0 $0 $0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) PNC Bank, National Association, 1600 Market Street,
Philadelphia, Pennsylvania 19103 (records
relating to its functions as sub-investment
adviser).
(2) PNC Bank, National Association, 200 Stevens Drive,
Suite 440, Lester, Pennsylvania 19113 (records
relating to its functions as custodian).
(3) PNC Institutional Management Corporation, Bellevue
Park Corporate Center, 400 Bellevue Parkway, 4th
Floor, Wilmington, Delaware 19809 (records relating
to its functions as investment adviser).
(4) Provident Distributors, Inc., Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania
19428 (relating to its function as administrator
and distributor).
(5) PFPC Inc., Bellevue Park Corporate Center, 400
Bellevue Parkway, Wilmington, Delaware 19809
(records relating to its functions as administrator,
transfer agent, registrar and dividend disbursing
agent).
(6) Drinker Biddle & Reath, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107-3496 (Registrant's Declaration of
Trust, Bylaws and Minutes Books).
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ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
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<PAGE> 208
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 44 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 44 to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Wilmington, and State of Delaware, on February
27, 1997.
TRUST FOR FEDERAL SECURITIES
/s/ Edward J. Roach
--------------------------------------------------
Edward J. Roach
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 44 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
* G. Nicholas Beckwith, III Trustee February 27, 1997
- ------------------------------
G. Nicholas Beckwith, III
* Philip E. Coldwell Trustee February 27, 1997
- ------------------------------
Philip E. Coldwell
* Robert R. Fortune Trustee February 27, 1997
- ------------------------------
Robert R. Fortune
* Jerrold B. Harris Trustee February 27, 1997
- ------------------------------
Jerrold B. Harris
* Rodney D. Johnson Trustee February 27, 1997
- ------------------------------
Rodney D. Johnson
/s/ G. Willing Pepper Chairman of February 27, 1997
- ------------------------------ the Board and
G. Willing Pepper President
/s/ Edward J. Roach Vice President February 27, 1997
- ------------------------------ and Treasurer
Edward J. Roach (Principal Financial
and Accounting
Officer)
*By: /s/ Edward J. Roach
--------------------------
Edward J. Roach
Attorney-in-Fact
<PAGE> 209
TRUST FOR FEDERAL SECURITIES
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of TRUST FOR FEDERAL
SECURITIES (Registration No. 2-53808) to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on February 24, 1997.
/s/ G. Nicholas Beckwith, III
-----------------------------
G. Nicholas Beckwith, III
<PAGE> 210
TRUST FOR FEDERAL SECURITIES
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of TRUST FOR FEDERAL
SECURITIES (Registration No. 2-53808) to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on February 18, 1997.*
/s/ Philip E. Coldwell
-----------------------
Philip E. Coldwell
* With the understanding that all amendments will be sent to me in
advance.
<PAGE> 211
TRUST FOR FEDERAL SECURITIES
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of TRUST FOR FEDERAL
SECURITIES (Registration No. 2-53808) to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on February 19, 1997.
/s/ Jerrold B. Harris
-----------------------
Jerrold B. Harris
<PAGE> 212
TRUST FOR FEDERAL SECURITIES
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of TRUST FOR FEDERAL
SECURITIES (Registration No. 2-53808) to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on February 21, 1997.
/s/ Rodney D. Johnson
-----------------------
Rodney D. Johnson
<PAGE> 213
TRUST FOR FEDERAL SECURITIES
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of TRUST FOR FEDERAL
SECURITIES (Registration No. 2-53808) to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, and generally to do and
perform all things necessary to be done in that connection.
I have signed this Power of Attorney on February 21, 1997.
/s/ Robert R. Fortune
-----------------------
Robert R. Fortune
<PAGE> 214
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
(9)(h) Restated Shareholder Services Plan,
including form of Servicing Agreement
(10) Opinion and Consent of Counsel
(11) Consent of Coopers & Lybrand L.L.P.
(17) Financial Data Schedules
<PAGE> 1
EXHIBIT 9(h)
TRUST FOR FEDERAL SECURITIES
(Dollar Shares)
RESTATED SHAREHOLDER SERVICES PLAN
Section 1. Upon the recommendation of Provident Financial Processing
Corporation ("PFPC" or the "Administrator"), a co-administrator of Trust for
Federal Securities (the "Company"), any officer of the Company is authorized to
execute and deliver, in the name and on behalf of the Company, written
agreements in substantially the form attached hereto or in any other form duly
approved by the Board of Trustees ("Servicing Agreements") with institutional
shareholders of record ("Service Organizations") of a sub-class of the
Company's shares of beneficial interest ("Dollar Shares") of the FedFund,
T-Fund, FedCash, T-Cash, Federal Trust Fund, Treasury Trust Fund, Short
Government Fund, Intermediate Government Fund or Long Government Fund
portfolios (specifically, the FedFund Dollar shares, T-Fund Dollar shares,
FedCash Dollar shares, T-Cash Dollar shares, Federal Trust Dollar shares,
Treasury Trust Dollar shares, Short Government Dollar shares, Intermediate
Government Dollar shares or Long Government Dollar shares). Such Servicing
Agreements shall require the Service Organizations to provide support services
as set forth therein to their customers who beneficially own such Dollar Shares
(as described in the Company's respective Prospectuses) in consideration for a
fee, computed daily and paid monthly in the manner set forth in the Servicing
Agreements, at the annual rate of .25% of the average daily net asset value of
the Dollar Shares held by the Service Organizations on behalf of their
customers. All expenses incurred by the Company with respect to Dollar Shares
of a particular investment portfolio in connection with the Servicing
Agreements and the implementation of this Plan shall be borne entirely by the
holders of such portfolio's Dollar Shares.
Section 2. The Administrator shall monitor the arrangements pertaining
to the Company's Servicing Agreements with Service Organizations in accordance
with the terms of the administration agreement with the Company. The
Administrator shall not, however, be obliged by this Plan to recommend, and the
Company shall not be obliged to execute, any Servicing Agreement with any
qualifying Service Organization.
Section 3. So long as this Plan is in effect, the Administrator shall
provide to the Company's Board of Trustees, and the trustees shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such expenditures were made.
<PAGE> 2
Section 4. This Plan shall become effective as of January 18, 1993 upon
the approval of the Plan (and the form of Servicing Agreement attached hereto)
by a majority of the Board of Trustees, including a majority of the trustees
who are not "interested persons" as defined in the Investment Company Act of
1940 (the "Act") of the Company and have no direct or indirect financial
interest in the operation of this Plan or in any Servicing Agreements or other
agreements related to this Plan (the "Disinterested Trustees"), pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of this Plan (and form of Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue until
March 31, 1994, and thereafter shall continue automatically for successive
annual periods provided such continuance is approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board of
Trustees, provided that any material amendments of the terms of this Plan shall
become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of
the Disinterested Trustees.
Section 8. While this Plan is in effect, the selection and nomination
of those trustees who are not "interested persons" (as defined in the Act) of
the Company shall be committed to the discretion of the Disinterested Trustees.
Section 9. The Company has reapproved this restated Shareholder
Services Plan November 18, 1992 effective as of January 18, 1993.
Section 10. All persons dealing with the Company or the "Trustees" of
the Company must look solely to the Company's property for the enforcement of
any claims against the Company, as neither the Trustees, officers, agents nor
shareholders assume any personal liability for obligations entered into on the
Company's behalf.
-2-
<PAGE> 3
TEMPORARY INVESTMENT FUND, INC.
TRUST FOR FEDERAL SECURITIES
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
MUNICIPAL FUND FOR NEW YORK INVESTORS, INC.
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
(the "Companies")
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
SERVICING AGREEMENT
(Dollar Shares)
Ladies and Gentlemen:
This is a Servicing Agreement between each of the registered investment
companies which has executed this Agreement (each a "Company") and whose name
is set forth below and you as the Servicer named below concerning the provision
of support services to your customers and customers of affiliated banks
(collectively, "customers") who may from time to time beneficially own Dollar
Shares of one or more of a Company's investment portfolios (individually, a
"Fund" and collectively, the "Funds"). Each of the Funds whose shares are
currently being offered are listed on Appendix A. As used herein, "you" means
the Servicer which has executed this Agreement and "we" (or "us") means each
Company which has executed this Agreement singly and not as a group, and each
Company shall for all purposes have responsibilities hereunder only with respect
to the Dollar Shares of its Fund or Funds and under no circumstances have any
liability or obligation with respect to any other Fund or Company,
notwithstanding the use of the word "us" or "we."
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide the following support services to customers who
may from time to time beneficially own a Fund's Dollar Shares;:(i) aggregating
and processing purchase and redemption requests for Dollar Shares from
customers and placing net purchase and redemption orders with our distributor;
(ii) providing customers with a service that invests the assets of their
accounts in Fund's Dollar Shares pursuant to specific or pre-authorized
instructions; (iii) processing dividend payment from us on behalf of customers;
(iv) providing information periodically to customers showing their positions in
a Fund's Dollar Shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by you; (vii) providing
subaccounting with respect to a Fund's Dollar Shares beneficially owned by
customers or the information to us necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from us (such as proxies,
<PAGE> 4
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; and (ix) providing such other
similar services as we may reasonably request to the extent you are permitted
to do so under applicable statutes, rules or regulations. You will provide to
customers a schedule of all fees that you may charge to them relating to the
investment of their assets in a Fund's Dollar Shares.
SECTION 2. You will provide such office space and equipment, telephone and
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services to customers.
SECTION 3. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or a Fund's Dollar Shares
except those contained in our then current prospectus for such shares, copies
of which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
SECTION 4. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Dollar Shares by or on behalf of customers. You and
your employees will, upon request, be available during normal business hours
to consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
SECTION 5. In consideration of the services and facilities provided by you
hereunder, we will pay to you, and you will accept as full payment therefor, a
fee at the annual rate of .25 of 1% of the average daily net asset value of a
Fund's Dollar Shares held of record by you from time to time on behalf of
customers (the "customers' Dollar Shares"), which fee will be computed daily
and payable monthly. For purposes of determining the fees payable under this
Section 5, the average daily net asset value of the customers' Dollar Shares
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of a Fund's Dollar Shares for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by us, in our sole discretion, at any time upon notice to you.
Further, we may, in our discretion and without notice, suspend or withdraw the
sale of such Dollar Shares, including the sale of such shares to you for the
account of any customer(s).
SECTION 6. Any person authorized to direct the disposition of monies paid or
payable by us pursuant to this Agreement will provide to the respective Board
of Directors/Trustees; and the Directors/Trustees will review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made. In addition, you will furnish us or our
designees with such information as we or
2
<PAGE> 5
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to customers of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Directors/Trustees concerning this
Agreement and the monies paid or payable by us pursuant hereto, as well as any
other reports or filings that may be required by law.
SECTION 7. We may enter into other similar Servicing Agreements with any other
person or persons without your consent.
SECTION 8. By your written acceptance of this Agreement, you represent, warrant
and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
us; and (ii) the compensation payable to you hereunder, together with any other
compensation you receive from customers for services contemplated by this
Agreement, will not be excessive or unreasonable under the laws and instruments
governing your relationships with customers.
SECTION 9. This Agreement will become effective on the date a fully executed
copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until the March 31 next occurring
after the date hereof, and thereafter will continue automatically for
successive annual periods provided such continuance is specifically approved at
least annually by us in the manner described in Section 12 hereof. This
Agreement is terminable, without penalty, at any time by us (which termination
may be by vote of a majority of our Disinterested Directors/Trustees as
defined in Section 12 hereof) or by you upon notice to the other party hereto
(or parties, as the case may be).
SECTION 10. All notices and other communications to either you or us will be
duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown above.
SECTION 11. This Agreement will be construed in accordance with the laws of the
State of Delaware and is non-assignable by the parties hereto.
SECTION 12. This Agreement has been approved by vote of a majority of (i) a
Company's Board of Directors/Trustees and (ii) those Directors/Trustees who are
not "interested persons" (as defined in the Investment Company Act of 1940) of
the Company and have no direct or indirect financial interest in the operation
of the Restated Shareholder Services Plan adopted by us regarding the provision
of support services to the beneficial owners of Dollar Shares or in any
agreements related thereto ("Disinterested Directors/Trustees"), cast in person
at a meeting called for the purpose of voting on such approval.
SECTION 13. All persons dealing with "Trust for Federal Securities," "Municipal
Fund For Temporary Investment," "Municipal Fund For California Investors,
Inc.," "Municipal Fund For New York Investors, Inc.," or "Portfolios For
Diversified Investment" or the "Trustees" of any such Company must look solely
to that
3
<PAGE> 6
Company's property for the enforcement of any claims against the Company, as
neither the Trustees, officers, agents nor shareholders assume any personal
liability for obligations entered into on a Company's behalf.
If you agree to be legally bound by the provisions of this Agreement, please
sign a copy of this letter where indicated below and promptly return it to us,
PFPC INC., c/o KATHERINE A. CHUPPE AT BELLEVUE CORPORATE CENTER, 400 BELLEVUE
PARKWAY, WILMINGTON, DE 19809.
Very truly yours,
TEMPORARY INVESTMENT FUND, INC. TRUST FOR FEDERAL SECURITIES, INC.
- ------------------------------- ------------------------------------
Authorized Officer Authorized Officer
MUNICIPAL FUND FOR TEMP INVEST. MUNI FUND FOR NY INVESTORS, INC.
- ------------------------------- ------------------------------------
Authorized Officer Authorized Officer
MUNI FUND FOR CA INVESTORS, INC. PORTFOLIO FOR DIVERSIFIED INVESTMENT
- -------------------------------- ------------------------------------
Authorized Officer Authorized Officer
DATE:
------------------
ACCEPTED AND AGREED TO:
BY:
--------------------
DATE:
------------------
4
<PAGE> 7
APPENDIX A
Please check the appropriate boxes to indicate the Funds of the
Companies for which you wish to act as a Service Organization with respect to
Dollar Shares:
TEMPORARY INVESTMENT FUND, INC.
TempFund Dollar Shares (Class B - Special Series 1)
----------
TempCash Dollar Shares (Class C Shares)
----------
TRUST FOR FEDERAL SECURITIES
FedFund Dollar Shares
----------
T-Fund Dollar Shares
----------
FedCash Dollar Shares
----------
T-Cash Dollar Shares
----------
Federal Trust Dollar Shares
----------
X Treasury Trust Dollar Shares
----------
Short Government Dollar Shares
----------
Intermediate Government Dollar Shares
----------
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
MuniFund Dollar Shares
----------
MuniCash Dollar Shares
----------
Intermediate Municipal Dollar Shares
----------
MUNICIPAL FUND FOR NEW YORK INVESTORS, INC.
New York Money Dollar Shares
----------
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
California Money Dollar Shares
----------
California Intermediate Dollar Shares
----------
PORTFOLIOS FOR DIVERSIFIED INVESTMENT
Fixed Income Dollar Shares
----------
SIGNED:
----------------------- COMPANY:
(TITLE) --------
DATED:
-----------------------
5
<PAGE> 1
Exhibit 10
February 27, 1997
Trust for Federal Securities
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, DE 19809
Re: Trust for Federal Securities/Post-Effective
Amendment No. 44 to Registration Statement on
Form N-1A (Registration No. 2-53808)
Gentlemen:
We have acted as counsel for Trust for Federal Securities, a
Pennsylvania business trust (the "Fund"), and have been informed by the Fund of
the registration of 3,183,844,639 shares of beneficial interest of the Fund
("Shares"), pursuant to Post-Effective Amendment No. 44 to the Fund's
Registration Statement under the Securities Act of 1933. The registration of
such Shares has been made in reliance upon Rule 24e-2 under the Investment
Company Act of 1940. The Fund is an open-end investment company authorized to
issue an unlimited number of Shares, without par value, at all times during the
fiscal year ended October 31, 1996 and remains so classified as of the date of
this opinion. We have reviewed the Fund's Declaration of Trust, as amended, its
By-Laws, resolutions adopted by its Board of Trustees and shareholders and such
other legal and factual matters as we have deemed appropriate.
On the basis of the foregoing, we are of the opinion that the foregoing
Shares of the Fund, when issued for payment as described in the Fund's
Prospectuses, will be validly issued, fully paid and non-assessable by the Fund.
We express no opinion concerning the laws of any jurisdiction other
than the Commonwealth of Pennsylvania and the federal law of the United States
of America.
Under Pennsylvania law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
any written agreement, undertaking or obligation made or issued on behalf of the
Fund. The Declaration of Trust provides for indemnification out of the assets of
the Fund for all loss and expense of any shareholder held personally liable
solely by reason of his or her
<PAGE> 2
Trust for Federal Securities
February 27, 1997
Page 2
being or having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Post-Effective Amendment No. 44 the Fund's
Registration Statement.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 44 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (File No. 2-53808) of our report dated December 6, 1996 on our audit of the
financial statements and financial highlights of Trust for Federal Securities.
We also consent to the reference to our Firm under the caption "Financial
Highlights" in the Prospectus and under the captions "Auditors" and "Financial
Statements" in the Statement of Additional Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 27, 1997
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<ARTICLE> 6
<CIK> 0000034913
<NAME> TRUST FOR FEDERAL SECURITIES
<SERIES>
<NUMBER> 011
<NAME> FED FUND - MAIN CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,520,966,220
<INVESTMENTS-AT-VALUE> 1,520,966,220
<RECEIVABLES> 6,753,747
<ASSETS-OTHER> 41,606
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,527,761,573
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 6,485,893
<TOTAL-LIABILITIES> 6,485,893
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<INTEREST-INCOME> 78,950,220
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<EXPENSES-NET> 3,068,630
<NET-INVESTMENT-INCOME> 75,881,590
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,866,817
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<DISTRIBUTIONS-OF-INCOME> 75,881,590
<DISTRIBUTIONS-OF-GAINS> 0
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,856,917
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,597,828
<AVERAGE-NET-ASSETS> 1,329,670,139
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .053
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NUMBER> 012
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,520,966,220
<INVESTMENTS-AT-VALUE> 1,520,966,220
<RECEIVABLES> 6,753,747
<ASSETS-OTHER> 41,606
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,527,761,573
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,485,893
<TOTAL-LIABILITIES> 6,485,893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,521,557,522
<SHARES-COMMON-STOCK> 1,521,557,522
<SHARES-COMMON-PRIOR> 1,400,505,682
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (281,842)
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<EXPENSES-NET> 3,068,630
<NET-INVESTMENT-INCOME> 75,881,590
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,866,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 75,881,590
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,091,744,511
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<SHARES-REINVESTED> 19,010,856
<NET-CHANGE-IN-ASSETS> (69,004,029)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,856,917
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,597,828
<AVERAGE-NET-ASSETS> 109,705,495
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<SERIES>
<NUMBER> 021
<NAME> T-FUND - MAIN CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,855,725,141
<INVESTMENTS-AT-VALUE> 1,855,725,141
<RECEIVABLES> 11,524,469
<ASSETS-OTHER> 94,950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,867,344,560
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,470,333
<TOTAL-LIABILITIES> 8,470,333
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,858,948,521
<SHARES-COMMON-STOCK> 1,858,948,521
<SHARES-COMMON-PRIOR> 1,376,609,089
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (74,294)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,858,874,227
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 84,397,627
<OTHER-INCOME> 0
<EXPENSES-NET> 3,516,169
<NET-INVESTMENT-INCOME> 80,881,458
<REALIZED-GAINS-CURRENT> (63,912)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 80,817,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,881,458
<DISTRIBUTIONS-OF-GAINS> 32,954
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,069,332,800
<NUMBER-OF-SHARES-REDEEMED> 13,523,973,979
<SHARES-REINVESTED> 19,893,692
<NET-CHANGE-IN-ASSETS> 565,252,513
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 25,917
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,997,839
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,113,649
<AVERAGE-NET-ASSETS> 1,352,586,044
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .053
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<SERIES>
<NUMBER> 022
<NAME> T-FUND - DOLLAR CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,855,725,141
<INVESTMENTS-AT-VALUE> 1,855,725,141
<RECEIVABLES> 11,524,469
<ASSETS-OTHER> 94,950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,867,344,560
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,470,333
<TOTAL-LIABILITIES> 8,470,333
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,858,948,521
<SHARES-COMMON-STOCK> 1,858,948,521
<SHARES-COMMON-PRIOR> 1,376,609,089
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (74,294)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,858,874,227
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 84,397,627
<OTHER-INCOME> 0
<EXPENSES-NET> 3,516,169
<NET-INVESTMENT-INCOME> 80,881,458
<REALIZED-GAINS-CURRENT> (63,912)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 80,817,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,881,458
<DISTRIBUTIONS-OF-GAINS> 32,954
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,069,332,800
<NUMBER-OF-SHARES-REDEEMED> 13,523,973,979
<SHARES-REINVESTED> 19,893,692
<NET-CHANGE-IN-ASSETS> 565,252,513
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