PORTAGE GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF THE PORTAGE FUNDS)
PROSPECTUS
Portage Government Money Market Fund (the "Fund") is a diversified portfolio in
the Portage Funds (the "Trust"), an open-end management investment company (a
mutual fund). The Fund is a money market fund which invests in short-term U.S.
government securities to achieve stability of principal and current income
consistent with 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; 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 FIRST
NATIONAL BANK OF OHIO, ARE NOT ENDORSED OR GUARANTEED BY FIRST NATIONAL BANK OF
OHIO, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 31,
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 January 31, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--TRUST SHARES 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
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Lending of Portfolio Securities 4
When-Issued and Delayed Delivery
Transactions 5
Investment Limitations 5
PORTAGE FUNDS INFORMATION 5
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Management of the Portage Funds 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 6
Adviser's Background 6
Distribution of Fund Shares 6
Shareholder Servicing
Arrangements 6
Administration of the Fund 6
Administrative Services 6
Custodian 6
Transfer Agent and
Dividend Disbursing Agent 7
Legal Counsel 7
Independent Public Accountants 7
Expenses of the Fund 7
NET ASSET VALUE 7
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INVESTING IN THE FUND 7
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Share Purchases 7
Through First National Bank of
Ohio and FBOH Investor
Services, Inc. 8
Minimum Investment Required 8
What Shares Cost 8
Systematic Investment Program 8
_____________________________________
Certificates and Confirmations 8
Dividends 8
Capital Gains 9
REDEEMING SHARES 9
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Through First National Bank
of Ohio 9
By Telephone 9
By Mail 9
By Writing a Check 10
Redemption Before Purchase
Instruments Clear 10
Systematic Withdrawal Program 10
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 11
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Voting Rights 11
Massachusetts Partnership Law 11
EFFECT OF BANKING LAWS 11
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TAX INFORMATION 12
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Federal Income Tax 12
PERFORMANCE INFORMATION 13
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FINANCIAL HIGHLIGHTS--INVESTMENT
SHARES 14
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FINANCIAL STATEMENTS 15
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REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 23
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ADDRESSES Inside Back Cover
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SUMMARY OF FUND EXPENSES
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ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C>
Management Fee (after waiver) (1)......................................... 0.30%
12b-1 Fees................................................................ None
Other Expenses............................................................ 0.47%
Total Fund Operating Expenses......................................... 0.77%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
The Annual Fund Operating Expenses were 0.74% for the fiscal year ended
November 30, 1993. The Annual Fund Operating Expenses in the table above are
based on expenses expected during the fiscal year ended November 30, 1994.
Total Fund operating expenses are anticipated to be 0.97% absent the voluntary
waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "PORTAGE FUNDS INFORMATION." 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
- ------- ------ ------- ------- --------
<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. The Fund charges no redemption fees.... $8 $24 $43 $95
</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.
Effective February 1, 1994, separate classes of shares will no longer be
offered.
PORTAGE GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 23.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------
1993 1992 1991*
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.02 0.03 0.04
- ---------------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------
Dividends to shareholders from net (0.02) (0.03) (0.04)
investment income ------- ------- -------
- ----------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------- ------- ------- -------
TOTAL RETURN** 2.47% 3.23% 3.87%
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RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.74% 0.73% 0.57%(a)
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Net investment income 2.44% 3.21% 5.26%(a)
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Expense waiver/reimbursement (b) 0.20% 0.20% 0.26%
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000 omitted) $48,897 $54,111 $64,140
- ----------------------------------------
</TABLE>
* Reflects operations for the period from March 11, 1991 (date of initial
public investment) to November 30, 1991. For the period from the start of
business December 20, 1990 to March 10, 1991, net investment income per share
aggregating $0.0136 per share ($1,364) was distributed to Federated
Administrative Services.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a)Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
Effective February 1, 1994, separate classes of shares will no longer be
offered. From the date of initial public investment the Fund offered two
classes of shares known as Trust Shares and Investment Shares.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Portage Funds were established as a Massachusetts business trust under a
Declaration of Trust dated November 12, 1990. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. Prior to February 1, 1994,
the Fund was offered in both a Trust Shares class and an Investment Shares
class. As of February 1, 1994, the Fund will no longer offer separate classes
of shares. The Fund is designed for customers of First National Bank of Ohio
and their affiliates as a convenient means of participating in a
professionally managed, diversified portfolio limited to short-term U.S.
government securities. A minimum initial investment of $1,000 is required.
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 provide stability of principal and
current income consistent with stability of principal. The investment
objective cannot be changed without approval of shareholders. 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.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
short-term U.S. government securities. The average maturity of U.S. government
securities in the Fund's portfolio, computed on a dollar weighted basis, will
be 90 days or less, and the Fund will invest only in securities with remaining
maturities of 13 months or less at the time of purchase by the Fund.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees (the "Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in
these policies becomes effective.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Fund
invests are either issued or guaranteed by the U.S. government, its agencies,
or instrumentalities. These securities include, but are not limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the Federal Farm Credit Banks, Federal Home
Loan Banks, Government National Mortgage Association, and Student Loan
Marketing Association.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the
U.S. Treasury. No assurances can be given that the U.S. government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. These instrumentalities are supported by:
the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
the credit of the agency or instrumentality.
REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities 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 such as
broker/dealers which are found by the Fund's adviser to be creditworthy.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement the Fund transfers possession of a portfolio instrument
to another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and agrees
that on a stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate.
When effecting reverse repurchase agreements, 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 and maintained until the
transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only
to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or a long-term basis up
to one-third of the value of its total assets
to broker/dealers, banks, or other institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the adviser has determined are creditworthy under
guidelines established by the Trustees, and will receive collateral in the
form of cash or U.S. government securities equal to at least 100% of the value
of the securities loaned at all times.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-
term U.S. government securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities
with payment and delivery scheduled for a future time. The 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. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a
price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets and pledge up to 15% of the
value of its total assets to secure such borrowings.
The above limitation cannot be changed without shareholder approval. The
following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not:
invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements providing for settlement in
more than seven days after notice.
PORTAGE FUNDS INFORMATION
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MANAGEMENT OF THE PORTAGE FUNDS
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Fund are made by First National Bank of
Ohio, the Fund's investment adviser, subject to direction by the Trustees. The
adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to 0.50 of 1% of the Fund's average daily net assets. The
investment advisory contract provides for the voluntary reimbursement of
expenses by the adviser to the extent any Fund expenses exceed such lower
expense limitation as the adviser may, by notice to the Fund, voluntarily
declare to be effective. The adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion. The adviser
has undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. First National Bank of Ohio, a national banking
association formed in 1947, is a wholly-owned subsidiary of First
Bancorporation of Ohio ("FBOH"). Through its subsidiaries and affiliates,
FBOH offers a full range of financial services to the public including
commercial lending, depository services, cash management, brokerage
services, retail banking, credit card services, mortgage banking,
investment advisory services, and trust services.
As of December 31, 1993, the trust division of First National Bank of Ohio
had approximately $2.5 billion under administration of which it had
investment discretion over $1.2 billion. First National Bank of Ohio has no
prior experience in managing mutual funds.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. 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.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions a fee with respect to the average net asset value of shares held
by their customers for providing administrative services. This fee, if paid,
will be reimbursed by the adviser and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Fund with the 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 at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
------------------ -----------------------------------
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 per Fund. Federated Administrative Services may voluntarily
choose to reimburse 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, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the
Fund are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses of the Fund include, but are not limited to, the cost
of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund; taxes and commissions; issuing, purchasing, repurchasing,
and redeeming shares; fees for custodians, transfer agents, dividend
disbursing agents, and registrars; printing, mailing, auditing and certain
accounting and legal expenses; reports to shareholders and governmental
agencies; meetings of Trustees and shareholders and proxy solicitations
therefor; insurance premiums; association membership dues; and such non-
recurring and extraordinary items as may arise. However, the adviser may
voluntarily reimburse the Fund the amount, up to the amount of the advisory
fee, by which operating expenses exceed limitations imposed by certain states.
NET ASSET VALUE
- -------------------------------------------------------------------------------
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
assets and dividing the remainder by the number of shares outstanding. 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 days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. In connection with
qualified account relationships in the Trust Department of First National Bank
of Ohio, Fund shares may be ordered by telephone through procedures
established with First National Bank of Ohio and its affiliates. Such
procedures may include arrangements under which certain accounts are swept
periodically and amounts exceeding an agreed-upon minimum are invested
automatically in the Fund. Individual investors may place orders to purchase
shares either by telephone or by mail. Texas residents should purchase shares
of the Fund through Federated Securities Corp. at 1-800-356-2805. The Fund
reserves the right to reject any purchase request.
THROUGH FIRST NATIONAL BANK OF OHIO AND FBOH INVESTOR SERVICES, INC. Trust
customers placing an order to purchase shares of the Fund, may open an account
by calling First National Bank of Ohio at 216-384-7300. Information needed to
establish the account will be taken over the telephone.
Individual investors placing an order to purchase shares of the Fund may
telephone FBOH Investor Services, Inc. at 216-384-7230. An account may be
opened by completing a new account application form available from FBOH
Investor Services, Inc., 4100 Embassy Parkway, Akron, Ohio 44333.
Payment may be made by either check, transfer from an Automated Clearing House
("ACH") member institution, federal funds or by debiting a customer's account
at First National Bank of Ohio. Purchase orders must be received by 9:30 a.m.
(Eastern time). Payment is required before 3:00 p.m. on the same business day
in order to earn dividends for that day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
may be in amounts of $100 or more. The Fund may waive the initial minimum
investment from time to time.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received. There is no sales charge imposed by the Fund.
The net asset value is determined at 12:00 noon (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern 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 during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
SYSTEMATIC INVESTMENT PROGRAM
Shareholders who are individual investors and have opened an account may add
to their investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account or by transfer from an ACH member institution
and invested in shares. A shareholder may apply for participation in this
program through FBOH Investor Services, Inc.
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.
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. Dividends will be reinvested on
payment dates in additional shares unless cash payments are requested by
writing to the Fund or First National Bank of
Ohio or FBOH Investor Services, Inc. as appropriate. Share purchase
settlements received by State Street Bank before 3:00 p.m. (Eastern time) earn
dividends that day.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital
losses, if any, could result in a decrease in dividends. If for some
extraordinary reason the Fund realizes net long-term or short-term capital
gains, it will distribute them at least once every 12 months.
REDEEMING SHARES
- -------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after First
National Bank of Ohio 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 when wire transfers are restricted. Requests for
redemption can be made in person or by telephone for Trust customers.
Individual investors can make requests for redemption in person, by telephone
or by mail through FBOH Investor Services, Inc.
THROUGH FIRST NATIONAL BANK OF OHIO
BY TELEPHONE. A shareholder who is a Trust customer of First National Bank of
Ohio may redeem shares of the Fund by telephoning First National Bank of Ohio
at 216-384-7300. A shareholder who is an individual investor/customer of FBOH
Investor Services, Inc. may redeem shares by telephoning 216-384-7230. For
calls received by FBOH Investor Services, Inc. before 9:30 a.m. (Eastern
time), proceeds will either be wired the same day to the shareholder's account
at First National Bank of Ohio, transferred through ACH to a member
institution, or a check will be sent to the address of record. Those shares
will not be entitled to the dividend declared on the day the redemption
request was received. In no event will proceeds be sent more than seven days
after a proper request for redemption has been received. An authorization form
permitting the Fund to accept telephone requests must first be completed.
Authorization forms and information on this service are available from FBOH
Investor Services, Inc. Telephone redemption instructions may be recorded.
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 utilized, such as a written request to
Federated Services Company or FBOH Investor Services, Inc.
If, at any time, the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shares may also be redeemed by sending a written request to FBOH
Investor Services, Inc. Call FBOH Investor Services, Inc. for specific
instructions before redeeming by letter. The shareholder will be asked to
provide in the request his name, the Fund name, his account number, and the
share or dollar amount requested. If share certificates have been issued, they
must be properly endorsed and should be sent by registered or certified mail
with the written request.
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, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF") which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
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.
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.
BY WRITING A CHECK. At the shareholder's request, Federated Services Company
will establish a checking account for redeeming shares. For further
information, contact FBOH Investor Services, Inc.
With a Fund checking account, shares may be redeemed simply by writing a check
for $250 or more. The redemption will be made at the net asset value on the
date that the check is presented to the Fund. A check may not be written to
close an account. If a shareholder wishes to redeem shares and have the
proceeds available, a check may be written and negotiated through the
shareholder's bank. Checks should never be sent to Federated Services Company
or State Street Bank to redeem shares. Cancelled checks are sent to the
shareholder each month upon request.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or through ACH, the proceeds from the
redemption of those shares are not available, and the shares may not be
exchanged, until the Fund or its agents are reasonably certain that the
purchase check has cleared, which could take up to ten calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a Systematic
Withdrawal Program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. A shareholder may apply for
participation in this program through FBOH Investor Services, Inc.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Fund for vote. All shares in the
Trust have equal voting rights, except that in matters affecting a particular
Fund only shares of that Fund are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or Fund's operation and for the election of Trustees under
certain circumstances. As of January 7, 1994, Parcol & Co, Akron, Ohio, owned
approximately 12,762,331 Trust Shares (25%); and First National Bank of Ohio,
Akron, Ohio owned approximately 2,327,139 Investment Shares (25%) 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.
Trustees may be removed by the shareholders at a special meeting. A special
meeting of the shareholders for this purpose shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the outstanding
shares of all series of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders or such
acts or obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the Trust
or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments against them from its
assets.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing
or controlling a registered, open-end investment company continuously engaged
in the issuance of its shares, and from issuing, underwriting, or distributing
securities in general. Such laws and regulations do not prohibit such a holding
company or bank or non-bank affiliate from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of their customer.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
The Fund's investment adviser, First National Bank of Ohio, is subject to such
banking laws and regulations.
First National Bank of Ohio believes, based on the advice of its counsel, that
it may perform the investment advisory services for the Fund contemplated by
its advisory agreement with the Trust without violating the Glass-Steagall Act
or other applicable banking laws or regulations. Such counsel has pointed out,
however, that changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
First National Bank of Ohio from continuing to perform all or a part of the
above services for its customers and/or the Fund. In such event, changes in the
operation of the Fund may occur, including the possible alteration or
termination of any automatic or other Fund share investment and redemption
services then being provided by First National Bank of Ohio, and the Trustees
would consider alternative investment advisers and other means of continuing
available investment services. It is not expected that Fund shareholders would
suffer any adverse financial consequences (if another adviser with equivalent
abilities to First National Bank of Ohio is found) as a result of any of these
occurrences.
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
Trust's other portfolios 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 received. This applies whether dividends
are received in cash or as additional shares. The Fund will provide detailed
tax information for reporting purposes.
Shareholders are urged to consult their own tax advisers regarding the status
of their account under State and local tax laws.
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 by an investment in of 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.
PORTAGE GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 23.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------
1993 1992 1991*
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.02 0.03 0.04
- ---------------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------
Dividends to shareholders from net (0.02) (0.03) (0.04)
investment income ------- ------- -------
- ----------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------- ------- ------- -------
TOTAL RETURN** 2.47% 3.23% 3.87%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.74% 0.73% 0.57%(a)
- ----------------------------------------
Net investment income 2.44% 3.13% 5.26%(a)
- ----------------------------------------
Expense waiver/reimbursement (b) 0.45% 0.46% 0.51%
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000 omitted) $10,315 $14,114 $ 7,933
- ----------------------------------------
</TABLE>
* Reflects operations for the period from March 11, 1991 (date of initial
public investment) to November 30, 1991. For the period from the start of
business December 20, 1990 to March 10, 1991, net investment income per share
aggregating $0.0136 per share ($1,364) was distributed to Federated
Administrative Services.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a)Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
Effective February 1, 1994, separate classes of shares will no longer be
offered. From the date of initial public investment the Fund offered two
classes of shares known as Trust Shares and Investment Shares.
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------------------------------------------- -----------
<C> <S> <C>
U.S. AGENCY OBLIGATIONS--53.4%
---------------------------------------------------------------
FEDERAL FARM CREDIT BANK--10.1%
---------------------------------------------------
$ 6,000,000 3.33%-7.375% $ 6,008,301
---------------------------------------------------
FEDERAL HOME LOAN BANK DISCOUNT NOTE--20.2%
---------------------------------------------------
12,000,000 3.02%-3.19%, 12/15/93-3/10/94 11,941,629
---------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--8.8%
---------------------------------------------------
5,000,000 8.90%, 8/10/94 5,185,783
---------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT
NOTE--14.3%
---------------------------------------------------
8,500,000 3.13%-3.18%, 12/15/93-3/15/94 8,461,761
--------------------------------------------------- -----------
TOTAL U.S. AGENCY OBLIGATIONS 31,597,474
--------------------------------------------------- -----------
U.S. TREASURY OBLIGATIONS--8.3%
---------------------------------------------------------------
U.S. TREASURY NOTES--8.3%
---------------------------------------------------
5,000,000 3.25%, 5/15/94 4,927,617
--------------------------------------------------- -----------
*REPURCHASE AGREEMENTS--39.4%
---------------------------------------------------------------
13,350,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.15%,
dated 11/30/93,
due 12/1/93 13,350,000
---------------------------------------------------
10,000,000 Smith Barney, Harris Upham & Co., Inc., 3.20%,
dated 11/30/93,
due 12/1/93
---------------------------------------------------
10,000,000
-----------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 23,350,000
--------------------------------------------------- -----------
TOTAL INVESTMENTS, AT AMORTIZED COST $59,875,091+
--------------------------------------------------- -----------
</TABLE>
+Also represents cost for federal tax purposes.
*Repurchase agreements are fully collateralized by U.S. Treasury Obligations
based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($59,211,656) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
- ------------------------------------------------------------------------------
<S> <C> <C>
Investments in securities (Note 2A) $36,525,091
- ------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 23,350,000
- ------------------------------------------------------------------------------
---------------
Total investments, at amortized cost and value $59,875,091
- ------------------------------------------------------------------------------
Cash 679
- ------------------------------------------------------------------------------
Interest receivable 253,780
- ------------------------------------------------------------------------------
Receivable for Trust shares sold 33,392
- ------------------------------------------------------------------------------
Deferred expenses (Note 2F) 14,508
- ------------------------------------------------------------------------------
-------
Total assets 60,177,450
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for Trust shares redeemed 845,517
- ------------------------------------------------------------------------------
Dividends payable 89,759
- ------------------------------------------------------------------------------
Accrued expenses and other liabilities 30,518
- ------------------------------------------------------------------------------
-------------
Total liabilities 965,794
- ------------------------------------------------------------------------------
-------
NET ASSETS for 59,211,656 shares of beneficial interest
outstanding $59,211,656
- ------------------------------------------------------------------------------
-------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
- ------------------------------------------------------------------------------
Trust Shares (net assets of $48,897,182 / 48,897,182
shares $1.00
of beneficial interest outstanding)
- ------------------------------------------------------------------------------
-------
Investment Shares (net assets of $10,314,474 /
10,314,474 shares $1.00
of beneficial interest outstanding)
- ------------------------------------------------------------------------------
-------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income (Note 2C) $1,921,874
- ----------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------
Investment advisory fee (Note 5) $301,679
- ----------------------------------------------------------------------------
Trustees' fees 7,361
- ----------------------------------------------------------------------------
Administrative personnel and services (Note 5) 90,504
- ----------------------------------------------------------------------------
Custodian fees 44,683
- ----------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and ex-
penses (Note 5) 24,377
- ----------------------------------------------------------------------------
Distribution services fees (Note 5) 31,505
- ----------------------------------------------------------------------------
Legal fees 5,220
- ----------------------------------------------------------------------------
Auditing fees 18,398
- ----------------------------------------------------------------------------
Trust share registration costs 45,343
- ----------------------------------------------------------------------------
Insurance premiums 7,164
- ----------------------------------------------------------------------------
Printing and postage 13,922
- ----------------------------------------------------------------------------
Miscellaneous 9,736
- ----------------------------------------------------------------------------
----------
Total expenses 599,892
- ----------------------------------------------------------------------------
DEDUCT--
- ----------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $120,671
- ----------------------------------------------------------------------------
Waiver of distribution service fee (Note 5) 31,505 152,176
- ----------------------------------------------------------------------------
----------
----------
Net expenses 447,716
- ----------------------------------------------------------------------------
----
Net investment income $1,474,158
- ----------------------------------------------------------------------------
----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------
1993 1992
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------------
Net investment income $ 1,474,158 $ 2,364,494
------------- -------------
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------------------
Dividends to shareholders from net investment
income
- -------------------------------------------------------------------------------------
Trust Shares (1,166,502) (1,897,508)
- -------------------------------------------------------------------------------------
Investment Shares (307,656) (466,986)
- -------------------------------------------------------------------------------------------------- -------------
Change in net assets from distributions to (1,474,158) (2,364,494)
shareholders ------------- -------------
- -------------------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------------------
Proceeds from sale of shares 168,898,811 199,346,155
- -------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
electing
to receive payment of distributions in Fund
shares 277,391 452,797
- -------------------------------------------------------------------------------------
Cost of shares redeemed (178,189,402) (203,647,078)
------------- -------------
- -------------------------------------------------------------------------------------
Change in net assets from Fund share (9,013,200) (3,848,126)
transactions ------------- -------------
- -------------------------------------------------------------------------------------
Change in net assets (9,013,200) (3,848,126)
- -------------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------------
Beginning of period 68,224,856 72,072,982
------------- -------------
- -------------------------------------------------------------------------------------
End of period $ 59,211,656 $ 68,224,856
------------- -------------
- -------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Portage Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The
financial statements included herein present only those of Portage Government
Money Market Fund (the "Fund").
Portage Government Money Market Fund provided two classes of shares ("Trust
Shares" and "Investment Shares"). Investment Shares were identical in all
respects to Trust Shares except that Investment Shares were sold pursuant to a
distribution plan ("Plan") adopted in accordance with Investment Company Act
Rule 12b-1. Under the Plan, the Fund paid Federated Securities Corp. (the
"distributor") a fee at an annual rate up to 0.25% of the average net asset
value of Investment Shares to finance any activity which was principally
intended to result in the sale of Investment Shares.
Effective February 1, 1994, Investment Shares will no longer be offered.
(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.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities is
amortized cost. The Fund's use of the amortized cost method to value
portfolio securities is conditioned on its compliance 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 securities to ensure the existence of a proper level of
collateral.
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 Trustees. 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. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest, and discount earned (net of premium) including original
issue discount as required by the Internal Revenue Code, plus realized net
gains, if any, on portfolio securities.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income. Accordingly, no
provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain 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. DEFERRED EXPENSES--Costs incurred by the Fund in connection with its
initial share registration, other than organization expenses, were deferred
and are being amortized on a straight-line basis through December 1995.
G. EXPENSES--Expenses of the Fund (other than distribution services fees) and
waivers and reimbursements, if any, are allocated to each class of shares
based on its relative average net assets for the period.
H.OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the
calculation of its net asset value at the close of business, declares and
records dividends to shareholders of record at the time of the previous
computation of the Fund's net asset value. Payment of dividends is made
monthly in cash, or in additional shares at the net asset value on the payable
date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At November 30, 1993 capital paid-in aggregated $59,211,656.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------
TRUST SHARES 1993 1992
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares outstanding, beginning of period 54,110,927 64,140,428
- -------------------------------------------------
Shares sold 146,033,254 155,376,246
- -------------------------------------------------
Shares issued to shareholders electing to receive
payment of dividends in Fund Shares 29,061 326
- -------------------------------------------------
Shares redeemed (151,276,060) (165,406,073)
- ------------------------------------------------- ------------ ------------
Shares outstanding, end of period 48,897,182 54,110,927
- ------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------
INVESTMENT SHARES 1993 1992
- ------------------------------------------------- ----------- -----------
<S> <C> <C>
Shares outstanding, beginning of period 14,113,929 7,932,554
- -------------------------------------------------
Shares sold 22,865,557 43,969,909
- -------------------------------------------------
Shares issued to shareholders electing to receive
payment of dividends in Fund Shares 248,330 452,471
- -------------------------------------------------
Shares redeemed (26,913,342) (38,241,005)
- ------------------------------------------------- ----------- -----------
Shares outstanding, end of period 10,314,474 14,113,929
- ------------------------------------------------- ----------- -----------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
First National Bank of Ohio, the Fund's investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to 0.50 of 1%
of the Fund's average daily net assets. Adviser may voluntarily choose to waive
a portion of its fee, limited to the amount of the advisory fee. Adviser can
terminate this voluntary waiver of expenses at any time at its sole discretion.
Adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states. For the fiscal year ended
November 30, 1993, Adviser earned an investment advisory fee of $301,679 of
which $120,671 was voluntarily waived.
Administrative personnel and services were provided by Federated Administrative
Services ("FAS") at an annual rate of 0.15 of 1% on the first $250 million of
average aggregate net assets of the Portage Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the next $250 million; and 0.075 of 1% on average
aggregate net assets in excess of $750 million. FAS may voluntarily waive a
portion of its fee. For the fiscal year ended November 30, 1993, FAS earned
$90,504.
Federated Services Company, the Fund's transfer agent and dividend disbursing
agent received for its services a fee of $24,377 for the fiscal year ended
November 30, 1993.
Expenses of organizing the Fund ($114,169) were borne initially by FAS. The
Fund has agreed to pay FAS, at an annual rate of 0.005 of 1% of average daily
net assets, until the organization expenses initially borne by FAS are
reimbursed or five years from January 8, 1991 (date the Trust's registration
statement first became effective), whichever occurs earlier. For the fiscal
year ended November 30, 1993, the Fund paid organization expenses of $3,086.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
FAS.
The Fund had adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Fund paid Federated Securities
Corp., ("FSC") the principal distributor, from the assets of the Investment
Shares of the Fund to finance activities principally intended to result in the
sale of Investment Shares subject to the Plan. The Plan provided that the Fund
will pay 0.25% of the average daily net assets of the Investment Shares,
annually, to compensate the distributor. FSC may voluntarily waive a portion of
its fee. For the fiscal year ended November 30, 1993, FSC earned distribution
fees of $31,505, all of which were voluntarily waived.
The Fund does not intend to pay any fees under the Plan in the fiscal year
ending 1994.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of PORTAGE FUNDS (Portage Government
Money Market Fund):
We have audited the accompanying statement of assets and liabilities of Portage
Government Money Market Fund (an investment portfolio of the Portage Funds, a
Massachusetts business trust), including the schedule of portfolio investments,
as of November 30, 1993, and the related statement of operations for the year
then ended, and the statement of changes in net assets and the financial
highlights (see pages 2 and 14 of the prospectus) for the periods presented.
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
November 30, 1993 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
Portage Government Money Market Fund, an investment portfolio of the Portage
Funds, as of November 30, 1993, the results of its operations for the year then
ended, and changes in its net assets and financial highlights for the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO
Pittsburgh, Pennsylvania
January 14, 1994
ADDRESSES
- --------------------------------------------------------------------------------
Portage Government Money Market Fund Federated Investors Tower
Pittsburgh, Pennsylvania,
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
First National Bank of Ohio 106 South Main Street
Akron, Ohio 44308-1444
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 1713
Boston, Massachusetts 02105
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent Federated Investors Tower
Federated Services Company Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------
PORTAGE GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF THE PORTAGE FUNDS)
PROSPECTUS
An Open-End, Diversified
Management Investment Company
January 31, 1994
First National Bank of Ohio, Investment
Adviser
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3799
0121703A-I (1/94)
PORTAGE GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF THE PORTAGE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of the Portage Government Money Market Fund (the "Fund")
dated January 31, 1994. This Statement is not a prospectus itself.
To receive a copy of the prospectus, write First National Bank of
Ohio, 106 South Main Street, Akron, Ohio 44308-1444.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1994
First National Bank of Ohio,
Investment Adviser
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Lending of Portfolio Securities 1
Investment Limitations 1
PORTAGE FUNDS MANAGEMENT 3
- --------------------------------------
Officers and Trustees 3
The Funds 5
Fund Ownership 5
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
- --------------------------------------
Adviser to the Fund 5
Advisory Fees 5
ADMINISTRATIVE SERVICES 6
- --------------------------------------
BROKERAGE TRANSACTIONS 6
- --------------------------------------
PURCHASING SHARES 6
- --------------------------------------
Distribution Plan
(Investment Shares) 6
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Use of the Amortized Cost Method 7
REDEEMING SHARES 7
- --------------------------------------
Redemption in Kind 8
TAX STATUS 8
- --------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
- --------------------------------------
EFFECTIVE YIELD 9
- --------------------------------------
PERFORMANCE COMPARISONS 9
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in the Portage Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust
dated November 12, 1990.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide stability of principal and
current income consistent with stability of principal. This investment
objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. government securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as the 91-day U.S.
Treasury bill rate.
Variable interest rates will reduce the changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not be
greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon the
determination by the Board of Trustees (the "Trustees") that the interest
rate as adjusted will cause the instrument to have a current market value
that approximates its par value on the adjustment date.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. 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.
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.
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 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.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets including the amount borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase
any securities while borrowings in excess of 5% of the value of its total
assets are outstanding.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of
1933 except for certain restricted securities which meet criteria for
liquidity as established by the Trustees.
PLEDGING ASSETS
The Fund will not mortgage, pledge or hypothecate any assets, except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets of the Fund at the time of the pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate including limited partnership
interests, although it may invest in securities secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding bonds,
debentures, notes, certificates of indebtedness or other debt securities,
entering into repurchase agreements or engaging in other transactions
where permitted by its investment objective, policies and limitations or
Declaration of Trust.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement more than seven days after notice and certain restricted
securities determined by the Trustees not to be liquid.
DEALING IN PUTS AND CALLS
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN MINERALS
The Fund will not purchase or sell, oil, gas, or other mineral
exploration or development programs, or leases.
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, issue senior securities, or pledge securities in
excess of 5% of the value of its net assets in the last fiscal year and has no
present intent to do so in the coming fiscal year.
PORTAGE FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with First National Bank of
Ohio, Federated Investors, Federated Securities Corp., Federated Administrative
Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Trustee Trustee, Federated Advisers, Federated Management, and
Tower Federated Research; Director, ^tna Life and Casualty
Pittsburgh, PA Company; Chief Executive Officer and Director, Trustee,
or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company. Mr.
Donahue is the father of J. Christopher Donahue, Vice
President and Trustee of the Trust.
- ----------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate
Associates, Inc., Realtors ventures in Southwest Florida; Director, Trustee, or
3255 Tamiami Trail North Managing General Partner of the Funds; formerly,
Naples, FL President, Naples Property Management, Inc.
- ----------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael
One PNC Plaza Baker, Inc.; Director, Trustee, or Managing General
23rd Floor Partner of the Funds; formerly, Vice Chairman and
Pittsburgh, PA Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
- ----------------------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President and Trustee, Federated Investors; Trustee,
Federated Investors President and Federated Advisers, Federated Management, and Federated
Tower Trustee Research; President and Director, Federated
Pittsburgh, PA Administrative Services; Trustee, Federated Services
Company; President or Vice President of the Funds;
Director, Trustee or Managing General Partner of some of
the Funds; Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
- ----------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund,
571 Hayward Mill Road Inc.; Director, Trustee, or Managing General Partner of
Concord, MA the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- ----------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
- ----------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat 'N Park Restaurants, Inc., and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- ----------------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer and Trustee, Federated
Federated Investors Treasurer Investors; Vice President and Treasurer, Federated
Tower and Trustee Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated Services
Company; Chairman, Treasurer, and Director, Federated
Administrative Services; Trustee or Director of some of
the Funds; Vice President and Treasurer of the Funds.
- -------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Trustee, Lahey Clinic Foundation, Inc.;
Boston, MA Director, Trustee, or Managing General Partner of the
Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.
- -------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the
Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- -------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace, RAND
Learning Corporation, Online Computer Library Center, Inc., and
University of Pittsburgh U.S. Space Foundation; Chairman, Czecho Slovak Management
Pittsburgh, PA Center; Director, Trustee, or Managing General Partner of
the Funds; President Emeritus, University of Pittsburgh;
formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- -------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee,
4905 Bayard Street or Managing General Partner of the Funds.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice Executive Vice President and Trustee, Federated
Federated Investors President Investors; Chairman and Director, Federated Securities
Tower Corp.; President or Vice President of the Funds; Director
Pittsburgh, PA or Trustee of some of the Funds.
- -------------------------------------------------------------------------------------------------------
Margaret P. Demski Vice Vice President, Federated Administrative Services; Vice
Federated Investors President and President and Assistant Treasurer of some of the Funds.
Tower Assistant
Pittsburgh, PA Treasurer
- -------------------------------------------------------------------------------------------------------
John W. McGonigle Vice Vice President, Secretary, General Counsel, and Trustee,
Federated Investors President and Federated Investors; Vice President, Secretary and
Tower Secretary Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Director,
Federated Administrative Services; Executive Vice
President and Director, Federated Securities Corp.; Vice
President and Secretary of the Funds.
- -------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice Vice President and Trustee, Federated Investors;
Federated Investors President Executive Vice President, Federated Securities Corp.;
Tower President and Trustee, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Vice President of the
Funds; Director, Trustee, or Managing General Partner of
some of the Funds; formerly, Vice President, The Standard
Fire Insurance Company and President of its Federated
Research Division.
- -------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investors Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated Growth Trust; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated U.S.
Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Limited Term Trust, Inc.-1999; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds;
Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal
Trust; Signet Select Funds; Star Funds; The Starburst Funds; The Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; Trademark Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of January 7, 1994, the following shareholder of record owned 5% or more of
the outstanding Investment Shares of the Fund: Britton-Gallagher & Assoc. Inc.,
Solon, Ohio, owned approximately 465,353 shares (5%).
As of January 7, 1994, the following shareholder of record owned 5% or more of
the outstanding Trust Shares of the Fund: Parcol & Co., Akron, Ohio, owned
approximately 2,552,057 shares (5%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be liable
for their own willful defaults. If reasonable care has been exercised in the
selection of officers, agents, employees, or investment advisers, a Trustee
shall not be liable for any neglect or wrong doing of any such person. However,
they are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is First National Bank of Ohio. It is a wholly-
owned subsidiary of First Bancorporation of Ohio.
The adviser shall not be liable to the Trust, the Fund or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the adviser receives an annual investment advisory
fee as described in the prospectus.
For the fiscal years ended November 30, 1993 and 1992, and for the period from
March 11, 1991 (date of initial public investment) to November 30, 1991, the
Fund's adviser earned $301,679, $369,754 and $268,815, respectively, of which
$120,671, $147,901 and $107,526, respectively, were voluntarily waived.
STATE EXPENSE LIMITATION
The adviser has undertaken to comply with the expense limitation
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 expense
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, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended November 30, 1993 and
1992, and for the period from March 11, 1991 (date of initial public
investment) to November 30, 1991, the Fund incurred costs for administrative
services of $90,504, $110,926 and $80,644, respectively, of which $0, $0 and
$31,292, respectively, were voluntarily waived.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers may be used by the adviser in advising
the Fund and other accounts. To the extent that receipt of these services may
supplant services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and 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."
DISTRIBUTION PLAN (INVESTMENT SHARES)
With respect to the Investment Shares class of the Fund, the Trust had adopted
a Plan pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940.
For the fiscal years ended November 30, 1993 and 1992, and for the period from
March 11, 1991 (date of initial public investment) to November 30, 1991,
Federated Securities Corp. earned distribution fees of $31,505, $37,265 and
$10,677, respectively, all of which were voluntarily waived. The Fund does not
intend to pay any fees under the Distribution Plan in fiscal year 1994.
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. First National Bank of Ohio
and Federated Services Company act as the shareholder's agent in depositing
checks and converting them to federal funds.
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 is described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees 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 Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions contained in Rule 2a-7 ("The
Rule") under the Investment Company Act of 1940. Under the Rule, the Trustees
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.
MONITORING PROCEDURES
The Trustees' 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 Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as 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 Trustees, present minimal credit risks. 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 13 months 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.
The Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. This policy may, from
time to time, result in high portfolio turnover. 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 are redeemed at the next computed net asset value after the First
National Bank of Ohio receives the redemption request. Redemption procedures
are explained in the prospectus under "Redeeming Shares." Redemption requests
cannot be executed on days on which the New York Stock Exchange is closed or on
federal holidays when wire transfers are restricted.
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the respective
class' net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
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 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.
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 calculates its yield daily for both classes of shares, 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 brokers/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, the performance, will be reduced for those shareholders paying
those fees.
The yield for Trust Shares and Investment Shares of the Fund for the seven-day
period ended November 30, 1993 was 2.39%.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield for both classes of shares is computed by
compounding the unannualized base period return by:
. adding 1 to the base period return;
. raising the sum to the (365/7)th power; and
. subtracting 1 from the result.
The Fund's effective yield for the Investment Shares for the seven-day period
ended November 30, 1993 was 2.41%. The effective yield for the Trust Shares was
2.41% for the same period.
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 net asset value. The
financial publications and/or indices which the Fund uses in advertising may
include:
. DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES, for example, is a
weekly quote of the average daily offering price for selected federal agency
issues maturing in 30 days.
. SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
. 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 "short-term
U.S. government funds" category in advertising and sales literature.
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. The Fund may also advertise its performance compared to federally
insured bank products, such as savings accounts and certificates of deposit.
0121703B-IS (1/94)
