VISION FIDUCIARY MONEY MARKET FUND
(A PORTFOLIO OF VISION FIDUCIARY FUNDS, INC.)
PROSPECTUS
Vision Fiduciary Money Market Fund (the "Fund") is a portfolio offered by Vision
Fiduciary Funds, Inc. (the "Company"), a no-load, diversified, open-end
management investment company (a mutual fund), investing in high-quality money
market instruments with remaining maturities of 397 days or less to seek current
income with liquidity and stability of principal.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE, HOWEVER, THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The shares offered by this prospectus are not deposits or obligations of
Manufacturers and Traders Trust Company ("M & T Bank"), are not endorsed or
guaranteed by M & T Bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency.
This Prospectus contains the information you should read and know before you
invest in the Fund. Keep this Prospectus for future reference.
Shares of the Fund ("shares") are sold by Federated Securities Corp. ("FSC")
only to M&T Bank and its affiliated banks, acting on behalf of certain customers
("Customer Accounts") for which they exercise substantial investment discretion.
The Fund has also filed a Statement of Additional Information dated June 30,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
Prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing or calling the Fund.
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.
Prospectus dated June 30, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Foreign Investments 3
Repurchase Agreements 4
Variable Amount Demand Master Notes 4
Asset-Backed Securities 4
Other Investment Techniques 4
Credit Enhancement 4
Demand Features 4
Investment Limitations 4
Regulatory Compliance 5
FUND INFORMATION 6
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Management of the Fund 6
Board of Directors 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 6
Glass-Steagall Act 6
Distribution of Fund Shares 6
Administration of the Fund 6
Administrative Services 6
Custodian 7
Transfer Agent and Dividend
Disbursing Agent 7
Legal Counsel 7
Independent Auditors 7
NET ASSET VALUE 7
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INVESTING IN THE FUND 7
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Share Purchases 7
By Wire 7
Minimum Investment Required 7
What Shares Cost 7
Customer Agreements 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
Retirement Plans 8
REDEEMING SHARES 8
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Telephone Redemption 8
Written Requests 9
Signatures 9
Receiving Payment 9
Involuntary Redemption 9
DESCRIPTION OF FUND SHARES 9
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Voting Rights 9
TAX INFORMATION 10
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Federal Income Tax 10
MARYLAND CORPORATION INFORMATION 10
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PERFORMANCE INFORMATION 11
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FINANCIAL STATEMENTS 12
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INDEPENDENT AUDITORS' REPORT 19
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ADDRESSES Inside Back Cover
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SUMMARY OF THE FUND'S EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)........... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)................... None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee........................................................................ 0.00%
12b-1 Fees............................................................................ None
Other Expenses........................................................................ 0.30%
Total Fund Operating Expenses............................................... 0.30%
</TABLE>
The Annual Fund Operating Expenses were 0.28% for the fiscal year ended
April 30, 1994. The Annual Fund Operating Expenses in the table above are based
on estimated expenses expected during the fiscal year ending April 30, 1995.
The table above can help you understand the various costs and expenses that
a shareholder in the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses see the section "Fund
Information" on page 6. Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.
As noted in the table above, the Fund charges
no redemption fees............................ $3 $ 10 $ 17 $38
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
VISION FIDUCIARY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors on page
19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
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1994 1993 1992 1991 1990 1989*
------- -------- ------- ------- ------- -------
<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 0.03 0.03 0.05 0.07 0.08 0.07
- ---------------------------------------- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
- ----------------------------------------
Dividends to shareholders from net
investment income (0.03) (0.03) (0.05) (0.07) (0.08) (0.07)
- ---------------------------------------- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------- ----- ----- ----- ----- ----- -----
TOTAL RETURN** 3.02% 3.25% 5.22% 7.64% 8.85% 7.70%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
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Expenses 0.28% 0.32% 0.21% 0.41% 0.47% 0.56%(a)
- ----------------------------------------
Net investment income 2.97% 3.18% 5.14% 7.38% 8.45% 8.14%(a)
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $86,586 $109,596 $58,760 $78,138 $87,682 $73,417
- ----------------------------------------
</TABLE>
* Reflects operations for the period from June 1, 1988 (date of initial public
offering) to April 30, 1989.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Company was organized as a Maryland corporation on February 23, 1988, and
the Fund commenced operations on June 1, 1988. The Company's Articles of
Incorporation permit the Company to offer separate series of shares of capital
stock in separate portfolios of securities of which the Fund is such a
portfolio. This Prospectus relates only to the Fund. The Fund is designed as a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio limited to money market instruments maturing in 397 days
or less.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek current income with liquidity
and stability of principal by investing in high quality money market
instruments. The Fund pursues this investment objective by investing in a broad
range of government, bank and commercial obligations (money market instruments)
maturing in 397 days or less, although securities subject to repurchase
agreements may bear longer maturities. The average maturity of the money market
instruments in the Fund's portfolio, computed on a dollar-weighted basis, will
be 90 days or less. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this Prospectus. The investment objective and the policies and
limitations described below cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests in high-quality money market
instruments which include, but are not limited to, the following:
- commercial paper (short-term promissory notes issued by corporations)
rated A-2 or better by Standard & Poor's Corporation, Prime-2 or better
by Moody's Investors Service, Inc., money market instruments (including
commercial paper) which are not rated but are determined by Manufacturers
and Traders Trust Company ("M&T Bank"), the Fund's investment adviser, to
be of comparable quality pursuant to guidelines approved by the Board of
Directors, and variable amount demand master notes;
- instruments of domestic banks and savings and loans (such as certificates
of deposit, time deposits, and bankers' acceptances) if they have
capital, surplus, and undivided profits of over $100,000,000 and if their
deposits are insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), both of which are administered by
the Federal Deposit Insurance Corporation ("FDIC"). The Fund may also
make interest-bearing savings deposits in commercial and savings banks
not in excess of 5% of the Fund's total assets. In addition, the Fund may
purchase bank obligations, including U.S. dollar-denominated instruments
issued or supported by the credit of U.S. or foreign banks or savings
institutions having total assets at the time of purchase in excess of $1
billion;
- obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including certain of these obligations purchased on a
when-issued or delayed delivery basis; and
- repurchase agreements.
FOREIGN INVESTMENTS. While the Fund will invest in an obligation of a foreign
bank or a foreign branch of a U.S. bank only if the investment adviser deems the
instrument to present minimal credit risks, such an investment may nevertheless
subject the Fund to risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory,
and economic systems and conditions. Such risks include future adverse political
and economic developments, the possible imposition of withholding taxes on
interest income, the possible seizure or nationalization of foreign deposits,
the possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks. Investments by the
Fund in the obligations of foreign banks and foreign branches of U.S. banks will
be limited to less than 25% of the value of the Fund's total assets at the time
of purchase.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time of sale
to repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. The Fund or its custodian will take possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions approved by the Board of Directors.
VARIABLE AMOUNT DEMAND MASTER NOTES. Variable amount demand master notes
represent a borrowing arrangement between a commercial paper issurer (borrower)
and an institutional lender such as the Fund (lender). These notes are payable
upon demand. The lender typically has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement. Both the
lender and borrower have the right to reduce the amount of outstanding
indebtedness at any time. In some instances, however, the lender and borrower
may agree that the amount of outstanding indebtedness remain fixed. Variable
amount demand master notes provide that the interest rate on the amount
outstanding varies depending upon a stated short-term interest rate index.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial interest in
a special purpose trust, limited partnership interests or commercial paper or
other debt securities issued by a special interest corporation. Although the
securities often have some form of credit or liquidity enhancement, payments on
the securities depend predominantly upon collections of the loans and
receivables held by the issuers.
OTHER INVESTMENT TECHNIQUES
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have been
credit enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes. However, under certain circumstances
applicable regulations may require the Fund to treat the securities as having
been issued by both the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the quality
and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
INVESTMENT LIMITATIONS
The Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of outstanding shares of the Fund. Other investment
limitations that can be changed only with such a vote of shareholders are
contained in the Statement of Additional Information under "Investment Objective
and Policies."
The Fund may not:
- borrow money or issue senior securities, except, that the Fund may borrow
from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge or hypothecate any 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 its borrowing. The Fund will not
purchase securities while its borrowings (including reverse repurchase
agreements) are outstanding;
- purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities, domestic bank certificates of deposit,
bankers' acceptances, and repurchase agreements secured by domestic bank
instruments or obligations of the U.S. government, its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (c)
utilities will be divided according to their services; for example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
- invest more than 5% of its total assets in securities of one issuer
(other than obligations of the U.S. government, its agencies or
instrumentalities), except that up to 25% of the value of the Fund's
total assets may be invested without regard to this limitation; or
- enter into repurchase agreements providing for settlement more than seven
days after notice, if such investment, together with other illiquid
securities in the Fund, exceed 10% of the Fund's total assets.
REGULATORY COMPLIANCE
The Fund is a money market fund. The Fund's investment policies, which are
fundamental and cannot be changed without vote of shareholders, were constructed
so as to comply with Rules promulgated by the Securities and Exchange Commission
("SEC") governing mutual funds' use of the amortized cost method of accounting
as were in effect at the time the Fund was created. (The section of the
Statement of Additional Information entitled "Determining Net Asset Value"
provides a more complete discussion of the amortized cost method of accounting.)
The SEC subsequently revised Rule 2a-7 under the Investment Company Act of 1940
which governs money market funds' use of the amortized cost method of
accounting. As a result of the revisions, the Fund will adhere to certain
nonfundamental operating policies in order to comply with revised Rule 2a-7.
Since the Fund may follow such operating policies without violating its
fundamental investment policies and limitations, the Fund does not presently
intend to ask for shareholder approval of changes to the Fund's investment
policies or limitations.
The Fund will invest in money market instruments (as described under "Acceptable
Investments" above) that are either rated in one of the two highest short-term
rating categories by one or more national recognized statistical rating
organizations ("NRSROs") or are of comparable quality to securities having such
rating. The two highest rating categories for NRSROs are determined without
regard to sub-categories and gradations. A description of the ratings categories
can be found in the Appendix to the Statement of Additional Information. The
Fund will limit its investments in securities rated in the second highest
short-term rating category, e.g., A-2 by Standard & Poor's Corporation, Prime-2
by Moody's Investors Service, Inc. or F-2 by Fitch Investors Service, Inc., to
not more than 5% of its total assets, with not more than 1% invested in the
securities of any one issuer. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated as
being in the highest short-term rating category.
In addition, with limited exceptions, the Fund will not invest more than 5% of
the Fund's total assets in the securities of any one issuer, although the Fund's
investment limitation requires such 5% diversification with respect to 75% of
its assets. The Fund will invest more than 5% of its assets in any one issuer
only under the circumstances permitted by Rule 2a-7. The Fund will also
determine the effective maturity of its investments, as well as its ability to
consider a security as having received the requisite short-term ratings by
NRSROs, according to Rule 2a-7. The Fund may change these operating policies to
reflect changes in the laws and regulations without the approval of its
shareholders, unless such changes are more permissive than the Fund's
fundamental policies.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Investment decisions for the Fund are made by M&T Bank, the
Fund's investment adviser, subject to direction by the Directors. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments
ADVISORY FEES. Pursuant to its advisory agreement with M&T Bank, the Fund pays
no fee for the services of or expenses assumed by M&T Bank as investment
adviser. As investment adviser, M&T Bank manages the Fund's investment portfolio
and is responsible for all purchases and sales of the Fund's portfolio
securities. M&T Bank has agreed to pay all expenses incurred by it in connection
with its advisory activities, other than the cost of securities (including any
brokerage commissions) purchased for the Fund.
ADVISER'S BACKGROUND. The current investment advisory contract between the Fund
and M&T Bank, previously approved by shareholders of the Fund, was executed on
April 25, 1988.
M&T Bank is the primary banking subsidiary of First Empire State Corporation, a
$10.4 billion bank holding company, as of December 31, 1993, headquartered in
Buffalo, New York. M&T Bank had $8.6 billion in assets, as of December 31, 1993,
and over 120 offices throughout New York State plus offices in New York City and
the Bahamas. First Empire State Corporation also owns The East New York Savings
Bank, which has 19 offices throughout metropolitan New York City as of December
31, 1993.
M&T Bank was founded in 1856 and provides comprehensive banking and financial
services to individuals, governmental entities and businesses throughout New
York State. The Fund's investments are managed through the Trust & Investment
Services Division of M&T Bank. As part of its regular banking operations, M&T
Bank may make loans to public companies. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which are also
lending clients of M&T Bank. The lending relationship will not be a factor in
the selection of securities.
GLASS-STEAGALL ACT. The Glass-Steagall Act limits the ability of a depository
institution (such as a commercial bank or savings bank) to become an underwriter
or distributor of securities. The Glass-Steagall Act also limits the ability of
affiliates of a bank that is a member of the Federal Reserve System (such as M&T
Bank) to become an underwriter or distributor of securities.
Under current judicial and regulatory interpretations of the Glass-Steagall Act,
banks and their affiliates are allowed to act as investment advisers to mutual
funds and to act as agents for customers in the purchase or redemption of shares
of mutual funds. If the Glass-Steagall Act were amended or interpreted in the
future to prohibit depository institutions from acting in the capacities
described herein or to increase the allowable activities of banks and their
affiliates, the Directors will consider appropriate changes in the services,
which may affect the services of M&T Bank described herein.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
Shares of the Fund are sold on a continuous basis by Federated Securities Corp.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with certain administrative personnel and
services necessary to operate the Fund.
Such services include shareholder servicing and certain legal and accounting
services. Federated Administrative Services provides these services at an annual
rate as specified below.
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE COMPANY
- --------------------- ------------------------------------
<S> <C>
.15% of 1% on the first $250 million
.125% of 1% on the next $250 million
.10% of 1% on the next $250 million
.075% of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors, is the transfer
agent for the shares of the Fund, and dividend disbursing agent responsible for
distributing dividends to the Fund's shareholders.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, PA and Dickstein, Shapiro & Morin, L.L.P., Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. Under this
method of valuation, the portfolio value of the assets normally will not change
in response to fluctuating interest rates. In connection with its use of this
valuation method, however, the Fund monitors the deviation between the amortized
cost value of its assets and their market value (which can be expected to vary
inversely with change in the prevailing interest rates). The Fund, of course,
cannot guarantee that its net asset value will always remain at $1.00 per share.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on all business days except on days which the New York
Stock Exchange is closed and federal holidays restricting wire transfers. Shares
may be purchased either by wire or mail.
To purchase shares of the Fund, contact the Trust Division of M&T Bank at
800-365-6332. Shares of both Portfolios are sold to customer accounts in which
M&T Bank's Trust Division or an affiliate exercises investment discretion. Texas
residents must purchase shares through Federated Securities Corp. at
1-800-618-8573.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call M&T
Bank's Trust Division before 11:00 a.m. (Buffalo time) to place an order. The
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Buffalo time) that same day. Shares cannot be
purchased by Federal Reserve wire on Columbus Day, Veterans Day, or Martin
Luther King Day.
MINIMUM INVESTMENT REQUIRED
There is no minimum initial investment requirement in the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
The Fund's net asset value is determined at 12:00 noon (Buffalo time), 3:00 p.m.
(Buffalo time), and 4:00 p.m. (Buffalo time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days on which no shares are tendered for redemption and no orders to purchase
shares
are received; or (iii) the following holidays: New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.
CUSTOMER AGREEMENTS
Prospective purchasers of Fund shares will normally acquire shares through
different types of customer accounts at M&T Bank and its affiliates. This
Prospectus should, therefore, be read together with any agreement between the
customer and the institution with regard to the services provided, the fees
charged for those services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund in writing.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Buffalo time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted into
federal funds.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If for some extraordinary reason the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months. The Fund does not foresee realizing any capital gains and,
therefore, does not foresee paying any "capital gains dividends" as described in
the Internal Revenue Code.
RETIREMENT PLANS
Individuals can purchase shares of the Fund as an investment for their
retirement plans or for their IRA accounts. For further details, including
prototype retirement plans, contact an M&T Bank account representative and
consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund may be redeemed by contacting the Trust Division of M&T Bank.
The Fund redeems shares at their net asset value per share next determined after
the Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange is closed or on federal
holidays restricting wire transfers. Redemption requests must be received in
proper form and can be made by telephone request or by written request with
respect to Fund shares.
TELEPHONE REDEMPTION
Provided no share certificates have been issued, a shareholder of record may
have the payment of redemption requests wired directly to M&T Bank or another
domestic commercial bank account previously designated by the shareholder.
Shareholders of record may redeem their shares by telephoning M&T Bank's Mutual
Fund Services at 800-365-6332 before 11:00 a.m. (Buffalo time). The proceeds
will be wired the same day to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. The Fund reserves the right
to charge a fee for wire transfers to a commercial bank other than M&T Bank.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 11:00 a.m. (Buffalo time). However, the proceeds are not wired
until the following business day. Redemption requests received before 11:00 a.m.
(Buffalo time) will be paid the same day but will not be entitled to that day's
dividend. If at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from M&T Bank. Telephone redemption instructions may be recorded.
While shareholders may withdraw various amounts by telephone, check, or written
request, accounts may only be closed by written request.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered, such as "Written Requests."
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Fund shares may also be redeemed by writing the Trust Division of M&T Bank.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, a transfer of registration, or a redemption payable other than to the
shareholder of record must have signatures on written redemption requests
guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agent have received payment
from the shareholder.
INVOLUNTARY REDEMPTION
The Fund may redeem shares involuntarily or make payment for redemption in
securities if it otherwise appears appropriate to do so in light of the Fund's
responsibilities under the Investment Company Act of 1940.
DESCRIPTION OF FUND SHARES
- --------------------------------------------------------------------------------
The Company has authorized capital of 10 billion shares of Common Stock, $.001
par value per share, of which 2 billion shares have been classified into two
classes of 1 billion shares each. Shares of Class A Common Stock represent
interest in the Fund. Shares of Class B Common Stock represent interest in the
Company's Vision Fiduciary New York Tax-Free Money Market Fund (the "Tax-Free
Portfolio"). The Tax-Free Portfolio no longer has any assets or shares
outstanding.
Each Fund share represents an equal proportionate interest in the Fund with
other shares of the same class, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to the Fund as
are declared in the discretion of the Company's Board of Directors. Shareholders
of the Fund are entitled to one vote for each full share held, and fractional
votes for fractional shares held, and will vote in the aggregate and not by
class except as otherwise expressly required by law or when the Board of
Directors determines that the matter to be voted upon effects only the interests
of the shareholders of a particular class. (See the Statement of Additional
Information under "Description of Fund Shares" for examples where the Investment
Company Act of 1940 requires voting by class.) Voting rights are not cumulative
and, accordingly, the holders of more than 50% of the aggregate number of shares
of the Fund may elect all of the Directors if they choose to do so and, in such
event, the holders of the remaining shares would not be able to elect any person
or persons to the Board of Directors.
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of shareholders.
As of June 4, 1994, Tice & Co., Buffalo, New York, owned 100% of the voting
securities of the Fund, and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. As a Maryland corporation, the
Company is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Fund's operation and for
the election of Directors under certain circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the Fund shall be called by the Directors upon the
written request of shareholders owning at least 10% of the Fund's outstanding
shares.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Company's other portfolio will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions, if
any, received. This applies whether dividends and distributions are received in
cash or as additional shares.
No attempt has been made to present a detailed explanation of the federal,
state, and local income tax treatment of the Fund or its shareholders, and this
discussion is not intended as a substitute for careful tax planning.
Shareholders will be advised annually as to the federal income tax consequences
of distributions made during the year.
MARYLAND CORPORATION INFORMATION
- --------------------------------------------------------------------------------
As a result of an amendment to the Maryland General Corporation Law effective
July 1, 1987, the Fund is not required to hold annual meetings of shareholders
unless the Investment Company Act of 1940 requires action by the shareholders in
such year. Under such act, action by shareholders is required in order to make
changes in the Fund's investment advisory agreement, to replace the Fund's
independent certified public accountants and to elect members of the Board of
Directors under certain circumstances.
As used in this Prospectus, "assets belonging to the Fund" means the
consideration received by the Company upon the issuance or sale of shares in the
Fund, 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, and any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to the Fund or any other existing portfolio of the
Company. Assets belonging to the Fund are charged with the direct liabilities in
respect of the Fund and with a share of the general liabilities of the Company
allocated in proportion to the relative asset values of any other portfolio of
the Company at the time the expense or liability is incurred. The management of
the Company makes determinations with respect to the Fund as to the direct and
allocable liabilities at the time the expense or liability is incurred and as to
the allocable portion of any general assets at the time the asset is acquired.
Such determinations are reviewed and approved annually by the Company's Board of
Directors and are conclusive.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned on an investment in the Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
VISION FIDUCIARY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
*CORPORATE OBLIGATIONS--78.4%
- -----------------------------------------------------------------------------------
BANKING--15.0%
-------------------------------------------------------------------
$4,000,000 BancOne Diversified Services, 3.68%, 5/25/94 $ 3,990,187
-------------------------------------------------------------------
4,000,000 ** Huntington National Bank, 3.76%, 3/15/95 4,000,000
-------------------------------------------------------------------
4,000,000 ** Society Bank, N.A., 3.76%, 3/16/95 4,000,000
-------------------------------------------------------------------
1,000,000 Wachovia Bank, N.A., 4.70%, 10/31/94 1,005,556
------------------------------------------------------------------- -----------
Total 12,995,743
------------------------------------------------------------------- -----------
DIVERSIFIED--4.0%
-------------------------------------------------------------------
3,500,000 General Electric Capital Corp., 3.77%, 5/9/94 3,497,068
------------------------------------------------------------------- -----------
ELECTRONICS--4.0%
-------------------------------------------------------------------
3,500,000 Hewlett Packard Co., 3.58%, 5/11/94 3,496,519
------------------------------------------------------------------- -----------
FINANCE--RETAIL--17.0%
-------------------------------------------------------------------
3,800,000 American General Finance Corp., 3.65%, 5/6/94 3,798,073
-------------------------------------------------------------------
3,900,000 ** Associates Corp. North America, 3.66%, 6/1/94 3,900,000
-------------------------------------------------------------------
4,000,000 ** Beneficial Corp., 4.02%, 1/20/95 4,000,000
-------------------------------------------------------------------
3,000,000 Norwest Financial Inc., 7.95%, 6/15/94 3,015,465
------------------------------------------------------------------- -----------
Total 14,713,538
------------------------------------------------------------------- -----------
FINANCE--AUTOMOTIVE--0.4%
-------------------------------------------------------------------
336,896 Premier Auto Trust, 3.21%, 9/2/94 336,896
------------------------------------------------------------------- -----------
FUNDING CORPORATION--4.6%
-------------------------------------------------------------------
4,000,000 CIESCO LP, 3.70%, 5/3/94 3,999,178
------------------------------------------------------------------- -----------
LEASING--4.6%
-------------------------------------------------------------------
4,000,000 PHH Corp., 3.82%, 5/19/94 3,992,360
------------------------------------------------------------------- -----------
OIL & OIL FINANCE--12.1%
-------------------------------------------------------------------
3,500,000 Texaco Inc., 3.54%, 5/3/94 3,499,312
-------------------------------------------------------------------
3,500,000 Amoco Credit Corp., 3.75%, 5/18/94 3,493,802
-------------------------------------------------------------------
3,500,000 Chevron Oil Finance Co., 3.77%, 5/16/94 3,494,502
------------------------------------------------------------------- -----------
Total 10,487,616
------------------------------------------------------------------- -----------
PHARMACEUTICALS & HEALTH CARE--4.6%
-------------------------------------------------------------------
4,000,000 Abbott Laboratories, 3.83%, 6/14/94 3,981,275
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--3.5%
-------------------------------------------------------------------
3,000,000 Bell South Telecommunications, Inc., 3.75%, 5/9/94 2,997,500
------------------------------------------------------------------- -----------
</TABLE>
VISION FIDUCIARY MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
*CORPORATE OBLIGATIONS--CONTINUED
- -----------------------------------------------------------------------------------
TOBACCO--4.0%
-------------------------------------------------------------------
$3,500,000 BAT Capital Corp., 3.60%, 5/17/94 $ 3,494,400
------------------------------------------------------------------- -----------
UTILITIES--4.6%
-------------------------------------------------------------------
4,000,000 Houston Lighting & Power Co., 3.75%, 5/2/94 3,999,583
------------------------------------------------------------------- -----------
TOTAL CORPORATE OBLIGATIONS 67,991,676
------------------------------------------------------------------- -----------
U.S. GOVERNMENT AGENCIES--3.5%
- -----------------------------------------------------------------------------------
1,500,000 Federal Home Loan Bank, 2.88%, 6/23/94 1,500,000
-------------------------------------------------------------------
1,500,000 ** Student Loan Marketing Association, 4.12%, 5/14/96 1,500,000
------------------------------------------------------------------- -----------
TOTAL U.S. GOVERNMENT AGENCIES 3,000,000
------------------------------------------------------------------- -----------
U.S. TREASURY OBLIGATIONS--6.8%
- -----------------------------------------------------------------------------------
6,000,000 U.S. Treasury Bills, 6/30/94--11/17/94 5,916,806
------------------------------------------------------------------- -----------
***REPURCHASE AGREEMENT--11.3%
- -----------------------------------------------------------------------------------
9,762,000 Kidder, Peabody & Co, Inc., 3.55%, dated 4/29/94, due 5/2/94, (Note
2B) 9,762,000
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS, AT AMORTIZED COST $86,670,482+
------------------------------------------------------------------- -----------
</TABLE>
* Each issue, with the exception of variable rate securities, shows the coupon
or rate of discount at the time of purchase.
** Denotes variable rate securities which show current rate and next demand
date.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($86,586,328) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
VISION FIDUCIARY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------
Investments in securities $76,908,482
- -------------------------------------------------------------------
Investment in repurchase agreement (Note 2B) 9,762,000
- ------------------------------------------------------------------- -----------
Total Investments, at amortized cost and value (Note 2A) $86,670,482
- ---------------------------------------------------------------------------------
Cash 1,193
- ---------------------------------------------------------------------------------
Interest receivable 183,005
- --------------------------------------------------------------------------------- -----------
Total assets 86,854,680
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Dividends payable $ 227,753
- -------------------------------------------------------------------
Payable to transfer and dividend disbursing agent (Note 4) 4,292
- -------------------------------------------------------------------
Accrued expenses 36,307
- ------------------------------------------------------------------- -----------
Total liabilities 268,352
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 86,586,328 shares of capital stock outstanding $86,586,328
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
($86,586,328 / 86,586,328 shares of capital stock outstanding) $1.00
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION FIDUCIARY MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $2,992,224
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Administrative personnel and services fees (Note 4) $138,220
- -----------------------------------------------------------------------
Directors' fees 8,578
- -----------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 55,327
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 19,773
- -----------------------------------------------------------------------
Insurance premiums 5,678
- -----------------------------------------------------------------------
Printing and postage 3,799
- -----------------------------------------------------------------------
Auditing fees 13,168
- -----------------------------------------------------------------------
Legal fees 5,828
- -----------------------------------------------------------------------
Taxes 5,010
- -----------------------------------------------------------------------
Miscellaneous 2,707
- ----------------------------------------------------------------------- --------
Total expenses 258,088
- ----------------------------------------------------------------------------------- ----------
Net Investment Income $2,734,136
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION FIDUCIARY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 2,734,136 $ 2,536,765
- -------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income (2,734,136) (2,536,765)
- -------------------------------------------------------------- ------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 3)--
- --------------------------------------------------------------
Net proceeds from sale of shares 217,374,132 237,793,445
- --------------------------------------------------------------
Cost of shares redeemed (240,383,985) (186,957,563)
- -------------------------------------------------------------- ------------- -------------
Change in net assets resulting from capital stock
transactions (23,009,853) 50,835,882
- -------------------------------------------------------------- ------------- -------------
Change in net assets (23,009,853) 50,835,882
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 109,596,181 58,760,299
- -------------------------------------------------------------- ------------- -------------
End of period $ 86,586,328 $ 109,596,181
- -------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION FIDUCIARY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Vision Fiduciary Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Company consists of one diversified portfolio, Vision Fiduciary Money Market
Fund (the "Fund").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value their
portfolio securities is in accordance with Rule 2a-7 under the Investment Company Act of
1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure the value at least equals the principal
amount of the repurchase agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Board of Directors
("Directors"). Risks may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount are amortized as required by the Internal Revenue Code,
as amended ("Code"). Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
VISION FIDUCIARY MONEY MARKET FUND
- --------------------------------------------------------------------------------
(3) CAPITAL STOCK
At April 30, 1994, there were 1,000,000,000 shares of $0.001 par value capital
stock authorized. Capital paid-in aggregated $86,499,742, par value was $86,586.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------
1994 1993
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 217,374,132 237,793,445
- ----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared -- --
- ----------------------------------------------------------------
Shares redeemed (240,383,985) (186,957,563)
- ---------------------------------------------------------------- ------------ ------------
Net change resulting from capital stock transactions (23,009,853) 50,835,882
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Investment advisory services are provided to the Fund
by M&T Bank, the Fund's investment adviser ("Adviser"), pursuant to an
investment advisory agreement dated April 25, 1988. Under the terms of such
agreement, the Fund pays no fee for the services provided by the Adviser.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Company for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type and number of accounts and transactions made by
shareholders.
Certain of the Officers and Directors of the Company are Officers and Directors
or Trustees of the above companies.
VISION FIDUCIARY MONEY MARKET FUND
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
VISION FIDUCIARY MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities of Vision
Fiduciary Money Market Fund, a portfolio of Vision Fiduciary Funds, Inc.,
including the portfolio of investments, as of April 30, 1994, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the six years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Vision
Fiduciary Money Market Fund of Vision Fiduciary Funds, Inc. at April 30, 1994,
and the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the six years in the period then ended, in conformity
with generally accepted accounting principles
ERNST & YOUNG
Pittsburgh, Pennsylvania
June 3, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Vision Fiduciary Money Market Fund P.O. Box 4556
Buffalo, New York 14240-4556
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Manufacturers and Traders One M&T Plaza
Trust Company Buffalo, New York 14240
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8609
Trust Company Boston, Massachusetts 02266-8609
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>
VISION FIDUCIARY
MONEY MARKET FUND
PROSPECTUS
(A Portfolio of Vision Fiduciary Funds,
Inc.)
June 30, 1994
FEDERATED SECURITIES CORP.
MANUFACTURERS AND TRADERS
(LOGO)
- ---------------------------------------------
TRUST COMPANY
Distributor
------------------------------------------
A subsidiary of FEDERATED INVESTORS
Investment Adviser
A subsidiary of First Empire State
Corporation
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
0072401A (6/94)
VISION FIDUCIARY MONEY MARKET FUND
(A PORTFOLIO OF VISION FIDUCIARY FUNDS, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the Prospectus of
the Vision Fiduciary Money Market Fund dated June 30, 1994 into which this
Statement is incorporated by reference. This Statement is not a Prospectus
itself. To receive a copy of the Prospectus, write or call the Vision Fiduciary
Money Market Fund.
P.O. BOX 4556
BUFFALO, NEW YORK 14240-4556
Statement dated June 30, 1994
MANUFACTURERS AND TRADERS
TRUST COMPANY
- ----------------------------------------------------
Investment Adviser
A subsidiary of First Empire State Corporation
Federated Securities Corp. is distributor of the fund.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
U.S. Government Obligations 1
When-Issued and Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Asset-Backed Securities 2
Investment Limitations 2
VISION FIDUCIARY FUNDS, INC. MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Directors 4
Fund Ownership 4
Director Liability 4
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 5
ADMINISTRATIVE SERVICES 5
- ---------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT 5
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 6
- ---------------------------------------------------------------
DESCRIPTION OF FUND SHARES 6
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
Conversion to Federal Funds 7
Cash Sweep Program 7
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Use of the Amortized Cost Method 8
REDEEMING SHARES 8
- ---------------------------------------------------------------
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
YIELD 9
- ---------------------------------------------------------------
EFFECTIVE YIELD 9
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
APPENDIX 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Vision Fiduciary Money Market Fund (the "Fund") is a portfolio of Vision
Fiduciary Funds, Inc. (the "Company"). The Company was established as a Maryland
Corporation under Articles of Incorporation dated February 23, 1988.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to seek current income with liquidity and
stability of principal by investing in high-quality money market instruments.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in 397 days or less
and which include, but are not limited to, commercial paper and variable amount
demand master notes, bank instruments, U.S. government obligations, and
repurchase agreements.
The instruments of banks and savings and loans that are members of the Federal
Deposit Insurance Corporation such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances, are not necessarily
guaranteed by those organizations.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
- - the full faith and credit of the U.S. Treasury;
- - the issuer's right to borrow from the U.S. Treasury;
- - the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- - the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- - Federal Farm Credit Banks;
- - Federal Home Loan Banks;
- - Federal National Mortgage Association;
- - Student Loan Market Association; and
- - Federal Home Loan Mortgage Corporation.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase short-term U.S. government obligations on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. The Fund engages in when-issued and delayed
delivery transactions only for the purpose of acquiring portfolio securities
consistent with the Fund's investment objective and policies, not for investment
leverage.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled.
In when-issued and delayed delivery transactions, the Fund relies on the seller
to complete the transactions. The seller's failure to complete the transaction
may cause the Fund to miss a price or yield considered to be advantageous. The
Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
- --------------------------------------------------------------------------------
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
The above investment objective and policies cannot be changed without approval
of a majority of the outstanding shares of the Fund.
ASSET-BACKED SECURITIES
The Fund may invest in asset-backed securities including, but not limited to,
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. These securities may be in the form of
pass-through instruments or asset backed bonds. The securities are issued by
non-governmental entities and carry no direct or indirect government guarantee.
Asset-backed securities generally pay back principal and interest over the life
of the security. At the time the Fund reinvests the payments and any unscheduled
prepayments of principal received, the Fund may receive a rate of interest which
is actually lower than the rate of interest paid on these securities
("prepayment risks"). Asset-backed securities are subject to higher prepayment
risks than most other types of debt instruments with prepayment risks because
the underlying loans or the collateral supporting asset-backed securities may be
prepaid without penalty or premium. Prepayment risks on asset-backed securities
tend to increase during periods of declining interest rates because many
borrowers refinance their obligations to take advantage of the more favorable
rates. Prepayments on asset-backed securities are also affected by other
factors, such as the frequency with which people elect to make unscheduled
payments on their obligations.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of asset-backed securities
backed by motor vehicle installment purchase obligations permit the servicer of
such receivables to retain possession of the underlying obligations. If the
servicer sells these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. Further, if a vehicle is registered in one
state and is then reregistered because the owner and obligor moves to another
state, such reregistration could defeat the original security interest in the
vehicle in certain cases. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on the securities.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of a majority of the outstanding shares of the Fund.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, or participate on a joint or joint and several basis in any
securities trading account.
BORROWING MONEY
The Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the terms described in the
Prospectus. The Fund does not anticipate entering into reverse repurchase
agreements in excess of 5% of its net assets.
PLEDGING SECURITIES
The Fund will not mortgage, pledge, or hypothecate any 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 its borrowing. The Fund will not purchase
securities while its borrowings including reverse repurchase agreements
are outstanding.
INVESTING IN COMMODITIES, COMMODITY CONTACTS, OR REAL ESTATE
The Fund will not invest in commodities, commodity contracts (including
futures contracts), real estate, oil, gas or mineral exploration or
development programs, except that it may purchase marketable securities
of companies that engage in such activities.
- --------------------------------------------------------------------------------
UNDERWRITING
The Fund will not underwrite securities.
LENDING CASH OR SECURITIES
The Fund will not make loans, except that it may purchase or hold debt
instruments, including repurchase agreements in accordance with its
investment objective and policies.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not invest in securities issued by any other investment
company, except as part of a merger, consolidation, reorganization, or
acquisition of assets.
DIVERSIFICATION OF INVESTMENTS
The Fund will not purchase securities issued by any one issuer (other
than cash, cash items, or securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer, except that up to 25% of the value of the Fund's total assets may
be invested without regard to this limitation.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of the value of its total assets
in any one industry. Utilities, however, will be divided according to
their services; for example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry.
In addition, the Fund may invest more than 25% of the value of its total
assets in cash or cash items (including instruments issued by a U.S.
branch of a domestic bank or savings and loan association and bankers'
acceptances), securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest in securities subject to legal or contractual
restrictions.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers or Directors of the Company or its investment adviser owning
beneficially more than 1/2 of 1% of the issuer's securities together own
beneficially more than 5% of such securities.
DEALING IN PUTS AND CALLS
The Fund will not write or purchase put or call options.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 10% of the value of its total assets
in securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
VOTING SECURITIES AND REVENUE BONDS
The Fund will not buy common stock or voting securities of state,
municipal or industrial revenue bond issuers.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not invest in any issuer for purposes of exercising control
or management.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund did not borrow money in excess of 5% of the value of its net assets
during the last fiscal year and has no present intent to do so in the coming
fiscal year.
VISION FIDUCIARY FUNDS, INC. MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Officers and Directors are listed with their addresses, principal occupations
and present positions, including any affiliation with Manufacturers and Traders
Trust Company, Federated Investors, Federated Securities Corp., Federated
Services Company and Federated Administrative Services.
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE COMPANY DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Randall I. Benderson Director Senior Vice President and Chief Operating
570 Delaware Avenue Officer, Benderson Development Company, Inc.
Buffalo, NY
- ---------------------------------------------------------------------------------------------------------------
Joseph J. Castiglia Director President and Chief Executive Officer, Pratt &
75 Tonawanda Avenue Lambert, Inc.
Buffalo, NY
- ---------------------------------------------------------------------------------------------------------------
Daniel R. Gernatt, Jr. Director President and CFO of Gernatt Asphalt Products,
Richardson & Taylor Hollow Roads Inc.; Executive Vice President, Dan Gernatt
Collins, NY Gravel Products, Inc.; Vice President,
Countryside Sand & Gravel, Inc.
- ---------------------------------------------------------------------------------------------------------------
George K. Hambleton, Jr. Director President, Brand Name Sales, Inc.; President,
670 Young Street Hambleton & Carr, Inc.
Tonawanda, NY
- ---------------------------------------------------------------------------------------------------------------
Edward C. Gonzales President and Vice President, Treasurer, and Trustee,
Federated Investors Tower Treasurer Federated Investors; Vice President and
Pittsburgh, PA Treasurer, Federated Advisers, Federated
Management, and Federated Research; Executive
Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and
Director, Federated Administrative Services;
Vice President and Treasurer of certain
investment companies organized or advised by
Federated Investors or its affiliates
("Federated Funds"); Trustee or Director of
some of the Federated Funds.
- ---------------------------------------------------------------------------------------------------------------
Charles L. Davis, Jr. Vice President and Director, Private Label Management, Federated
Federated Investors Tower Assistant Treasurer Investors; formerly Vice President, Product
Pittsburgh, PA Management, MNC Financial, Inc.; formerly Vice
President and Director of Investor Relations,
MNC Financial Inc.
- ---------------------------------------------------------------------------------------------------------------
Joseph M. Huber Secretary Corporate Counsel, Federated Investors.
Federated Investors Tower
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding shares. All of
the Company's Directors and officers hold like positions with Vision Group of
Funds, Inc.
As of June 4, 1994, the following shareholder of record owned 5% or more of the
Fund's outstanding shares: Tice & Co., Buffalo, New York, owned approximately
82,866,282 shares (100%).
DIRECTOR LIABILITY
With respect to the removal of a Director of the Company, the Company's By-Laws
provide, in accordance with applicable law, that a Director may be removed from
the Board at a meeting of shareholders called for that purpose upon the majority
vote of the shareholders of the Company entitled to vote at such meeting. Such a
meeting shall be called by the President or the Board of Directors or at the
request in writing of shareholders entitled to cast at least
- --------------------------------------------------------------------------------
ten percent (10%) of the votes entitled to be cast at such meeting. Such
shareholders' request shall state the purpose of the proposed meeting, and the
Company shall inform those shareholders of the reasonably estimated cost of
preparing and mailing a notice of the meeting to the other shareholders and, on
payment of these costs, shall notify each shareholder entitled to notice of the
meeting.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
Investment advisory services are provided to the Fund by Manufacturers and
Traders Trust Company ("M&T Bank") pursuant to an investment advisory agreement
dated April 25, 1988. The advisory services provided and the expenses assumed by
M&T Bank are described in the Fund's Prospectus. M&T Bank receives no fee from
the Fund with respect to such services or expenses.
The investment advisory agreement provides that M&T Bank shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with its performance under the advisory agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of M&T Bank in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder. Because of internal controls maintained by M&T Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of M&T Bank's or its affiliates' lending relationships with an issuer.
Unless sooner terminated, the advisory agreement between the Fund and M&T Bank
will continue in effect from year to year if such continuance is approved at
least annually by the Corporation's Board of Directors, or by vote of a majority
of the outstanding shares of the Fund (as defined in the Prospectus), and by a
majority of the Directors who are not parties to the advisory agreement or
interested persons (as defined in the Investment Company Act of 1940) of any
party to the advisory agreement, by vote cast in person at a meeting called for
such purpose. The advisory agreement is terminable at any time on sixty days'
written notice without penalty by the Directors, by vote of a majority of the
outstanding shares of the Fund, or by M&T Bank. The advisory agreement also
terminates automatically in the event of its assignment, as defined in the
Investment Company Act of 1940.
ADVISORY FEES
The advisory services provided and the expenses assumed by M&T Bank are
described in the Fund's Prospectus. M&T Bank receives no fee from the Fund with
respect to such services or expenses.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services ("FAS"), a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for the fees set
forth in the Prospectus. For the fiscal years ended April 30, 1994, 1993 and
1992, FAS received fees from the Fund equal to $138,220, $119,544 and $100,900,
respectively.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
- --------------------------------------------------------------------------------
Federated Services Company serves as transfer agent for shares of the Fund and
dividend disbursing agent responsible for distributing dividends to the Fund's
shareholders. Prior to March 31, 1994, State Street Bank and Trust Company
served in this capacity. There were no changes in the transfer agency fees
charged as a result of this change.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
Pursuant to the Fund's advisory agreement, M&T Bank determines which securities
are to be sold and purchased by the Fund and which brokers are to be eligible to
execute its portfolio transactions. Portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asking price. While M&T Bank generally seeks competitive spreads or commissions,
the Fund may not necessarily pay the lowest spread or commission available on
each transaction for reasons discussed below.
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Directors.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser. This information is in addition to and not in lieu of services required
to be performed by M&T Bank. Such information may be useful to M&T Bank in
serving both the Fund and other clients, and conversely, supplemental
information obtained by the placement of business of other clients may be useful
to M&T Bank in carrying out its obligations to the Fund. This information may
include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers and dealers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
The Fund will not execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with M&T Bank, or its affiliates, and will not
give preference to M&T Bank's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements and reverse repurchase
agreements. While serving as investment adviser to the Fund, M&T Bank has agreed
to maintain its policy and practice of conducting its Trust and Investment
Services Division independently of its commercial department. The Fund's
advisory agreement provides that, in making investment recommendations for the
Fund, Trust and Investment Services Division personnel will not inquire or take
into consideration whether the issuer of securities proposed for purchase or
sale by the Fund is a customer of the commercial department and, in dealing with
its commercial customers, the commercial department will not inquire or take
into consideration whether securities of such customers are held by the Fund.
Investment decisions for the Fund are made independently from those for any
other investment portfolios or accounts managed by M&T Bank. Such other
portfolios or accounts may also invest in the same securities as the Fund. When
a purchase or sale of the same security is made at substantially the same time
on behalf of the Fund and another portfolio or account, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which M&T Bank believes to be equitable to the Fund and such other
portfolio or account. In some instances, this investment procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained or sold by the Fund. To the extent permitted by law, M&T Bank may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other portfolios or accounts in order to obtain the best
execution.
The Fund does not intend to seek profits through short-term trading. The Fund's
annual portfolio turnover will be relatively high but portfolio turnover is not
expected to have a material effect on the net income of the Fund. The Fund's
portfolio turnover rate is expected to be zero for regulatory reporting
purposes.
DESCRIPTION OF FUND SHARES
- --------------------------------------------------------------------------------
The Company's Articles of Incorporation authorize the Board of Directors to
issue up to 10 billion full and fractional shares of Common Stock, of which 2
billion shares have been classified into two classes of 1 billion shares each,
as described in the Fund's Prospectus. Eight billion shares remain unclassified
at this time. Shares of Class A Common Stock represent interest in the Fund and
shares of Class B Common Stock represent interest in the Company's Vision
Fiduciary New York Tax-Free Portfolio, which no longer has any assets or shares
outstanding.
- --------------------------------------------------------------------------------
The Board of Directors may classify or reclassify any unissued shares of the
Company into one or more additional classes by setting or changing in any one or
more respects their respective preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
Shares have no subscription or pre-emptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Fund's Prospectus and this Statement of Additional
Information, the Fund's shares will be fully paid and non-assessable. In the
event of a liquidation or dissolution of the Company, shares of the Fund are
entitled to receive the assets available for distribution belonging to the Fund,
and a proportionate distribution, based upon the relative asset values of the
Fund and any other portfolio of the Company, of any general assets not belonging
to any particular portfolio which are available for distribution.
Rule 18f-2 under the Investment Company Act of 1940 provides that, any matter
required to be submitted to the holders of the outstanding voting 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. A portfolio is
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 Rule 18f-2 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 a majority of the outstanding
shares of such portfolio. However, Rule 18f-2 also provides that the
ratification of independent certified public accountants, the approval of
principal underwriting contracts and the election of directors may be
effectively acted upon by shareholders of the Company voting without regard to
class.
Notwithstanding any provision of Maryland law requiring a greater vote of the
Company's shares (or of any class voting as a class) in connection with any
corporate action, unless otherwise provided by law (for example, by Rule 18f-2)
or by the Company's Articles of Incorporation, the Company may take or authorize
such action upon the favorable vote of the holders of more than 50% of the
outstanding Common Stock of the Fund and any other portfolio of the Company
(voting together without regard to class).
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve wire system are open for business.
The procedure for purchasing shares of the Fund is explained in the Prospectus
under "Investing in the Fund." Shares are sold to customer accounts in which M&T
Bank's Trust Division or an affiliate exercises investment discretion.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. M&T Bank and Federated
Services Company act as the shareholders' agents in depositing checks and
converting them to federal funds.
CASH SWEEP PROGRAM
The Fund reserves the right to create a Cash Sweep Program in the future. For
participating accounts, cash accumulations in demand deposit accounts with M&T
Bank would be automatically invested in shares of the Fund on a day selected by
M&T Bank and its customer, or when the demand deposit account reaches a
predetermined dollar amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS
Participating depository institutions would be responsible for prompt
transmission of orders relating to the program. These depository
institutions would be the record owners of the shares of the Fund.
Depository institutions participating in this program would be able to
charge their customers for services relating to the program. This
Statement of Additional Information should, therefore, be read together
with any agreement between the customer and the depository institution
with regard to the services to be provided, the fees to be charged for
those services, and any restrictions and limitations that would be
imposed. Beneficial ownership of Fund shares held by M&T Bank and other
institutional investors on behalf of their customers would be recorded by
the institutions and reflected in the regular account statements provided
by institutions to their customers.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the Prospectus.
USE OF THE AMORTIZED COST METHOD
The Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value. The
Board of Directors continually assesses this method of valuation and recommends
changes where necessary to assure that the Fund's portfolio instruments are
valued at their fair value as determined in good faith by the Directors.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Directors' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Directors will decide
what, if any, steps should be taken if there is a difference of more than
0.5% between the two values. The Directors will take any steps they
consider appropriate (redemption in kind or shortening the average
portfolio maturity) to minimize any material dilution or other unfair
results arising from differences between the two methods of determining
net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Directors, present minimal credit risk and
have received the requisite rating from one or more nationally recognized
statistical rating organization. If the instruments are not rated, the
Directors must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition,
no instrument with a remaining maturity of more than 397 days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
It is the Fund's usual practice to hold portfolio securities to maturity and
realize par, unless the investment adviser determines that sale or other
disposition is appropriate in light of the Fund's investment objective. Under
the amortized cost method of valuation, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund may be redeemed by contacting the Trust Division of M&T Bank.
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
Prospectus under "Redeeming Shares."
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal regular income tax on dividends received as
cash or additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income. Net
income for dividend purposes includes (i) interest and dividends accrued and
discount earned on the Fund's assets (including both original issue and market
discount), less (ii) amortization of any premium and accrued expenses directly
attributable to the Fund, and the general expenses (e.g. legal, accounting and
directors' fees) of the Company prorated to the Fund on the basis of its
relative net assets.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If for
some extraordinary reason the Fund realizes net long-term capital gains,
it will distribute them at least once every 12 months.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the seven-day period ended April 30, 1994 was 3.43%.
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield for the seven-day period ended April 30, 1994 was
3.49%.
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Fund expenses; and
- - the relative amount of Fund cash flow.
- --------------------------------------------------------------------------------
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "money market
instrument funds" category in advertising and sales literature.
From time to time as it deems appropriate, the Fund may advertise the
performance of its shares using charts, graphs and descriptions, compared to
federally insured bank products, including certificates of deposit and time
deposits, and to money market funds using the Lipper Analytical Services money
market instruments average. Unlike federally insured bank products, the shares
of the Fund are not insured.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
APPENDIX
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STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return of funds employed.
- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE COMMERCIAL PAPER RATING DEFINITIONS
F-1--VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2--GOOD CREDIT QUALITY. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.
0072401B (6/94)
