NEWPOINT GOVERNMENT MONEY MARKET FUND
(FORMERLY, PORTAGE GOVERNMENT MONEY MARKET FUND)
A PORTFOLIO OF NEWPOINT FUNDS
PROSPECTUS
Newpoint Government Money Market Fund (the "Fund") is a diversified portfolio in
Newpoint 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.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIRST
NATIONAL BANK OF OHIO, OR ANY OF ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED
BY FIRST NATIONAL BANK OF OHIO, OR ANY OF ITS AFFILIATES, AND ARE NOT INSURED BY
THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. 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.
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,
1995, 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, 1995
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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FINANCIAL HIGHLIGHTS--INVESTMENT SHARES 3
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GENERAL INFORMATION 4
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INVESTMENT INFORMATION 4
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Investment Objective 4
Investment Policies 4
Investment Limitations 6
NEWPOINT FUNDS INFORMATION 7
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Management of Newpoint Funds 7
Distribution of Fund Shares 7
Administration of the Fund 8
NET ASSET VALUE 8
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INVESTING IN THE FUND 9
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Share Purchases 9
Minimum Investment Required 9
What Shares Cost 9
Systematic Investment Program 9
Certificates And Confirmations 10
Dividends 10
Capital Gains 10
EXCHANGE PRIVILEGE 10
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Exchange-By-Telephone 11
REDEEMING SHARES 11
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Through First National Bank of Ohio 11
Systematic Withdrawal Program 13
Accounts With Low Balances 13
SHAREHOLDER INFORMATION 13
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Voting Rights 13
Massachusetts Partnership Law 13
EFFECT OF BANKING LAWS 14
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TAX INFORMATION 15
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Federal Income Tax 15
PERFORMANCE INFORMATION 15
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FINANCIAL STATEMENTS 16
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 24
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ADDRESSES 25
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)......................................... None
Exchange Fee............................................................................................... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1).......................................................................... 0.30%
12b-1 Fees (2)............................................................................................. 0.00%
Other Expenses............................................................................................. 0.47%
Total Fund Operating Expenses (3)................................................................. 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%.
(2) As of February 1, 1994, Investment Shares were no longer offered and ceased
to exist. Previously, the Trust had adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, which
provided that the Fund could incur distribution expenses up to 0.25 of 1% of
the average daily net assets of the Investment Shares, annually, to
compensate Federated Securities Corp. ("FSC"), the Trust's distributor. In
addition, the Plan was discontinued, as of February 1, 1994, contemporaneous
with the termination of the offering of the Investment Shares class. When
the Plan was in effect, FSC chose to voluntarily waive its fees. As a
result, the Fund did not pay any fees under the Plan.
(3) The Annual Fund Operating Expenses were 0.77% for the fiscal year ended
November 30, 1994. Total Fund Operating Expenses would have been 0.97%
absent the voluntary waivers. The Annual Fund Operating Expenses in the
table above are based on expenses expected during the fiscal year ending
November 30, 1995. 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 "Newpoint 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 $25 $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.
PORTAGE GOVERNMENT MONEY MARKET FUND
(EFFECTIVE JANUARY 31, 1995, NEWPOINT 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 24.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
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1994 1993 1992 1991*
<S> <C> <C> <C> <C>
- ----------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.03 0.02 0.03 0.04
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.03) (0.02) (0.03) (0.04)
- ----------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN** 3.25% 2.47% 3.23% 3.87%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.77% 0.74% 0.73% 0.57%(b)
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Net investment income 3.24% 2.44% 3.21% 5.26%(b)
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Expense waiver/reimbursement (a) 0.20% 0.20% 0.20% 0.26%(b)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $63,868 $48,897 $54,111 $64,140
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</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 ($1,346) was distributed to Federated
Administrative Services.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
As of February 1, 1994, Investment Shares were no longer offered and ceased to
exist. Prior to that date, the Fund had 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
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 24.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------
1994* 1993 1992 1991**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.004 0.02 0.03 0.04
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.004) (0.02) (0.03) (0.04)
- ------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN*** 0.40% 2.47% 3.23% 3.87%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.79%(b) 0.74% 0.73% 0.57%(b)
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Net investment income 2.37%(b) 2.44% 3.13% 5.26%(b)
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Expense waiver/reimbursement (a) 0.45%(b) 0.45% 0.46% 0.51%(b)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $0 $10,315 $14,114 $7,933
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</TABLE>
* Reflects operations for the period from December 1, 1993 to January 31,
1994.
** 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 ($1,346) was distributed to Federated
Administrative Services.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
As of February 1, 1994, Investment Shares were no longer offered and ceased to
exist. Prior to that date, the Fund had 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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Newpoint Funds were established as a Massachusetts business trust under a
Declaration of Trust dated November 12, 1990. Effective January 31, 1995, the
Trust changed its name from "Portage Funds" to "Newpoint Funds," and the Fund
changed its name from "Portage Government Money Market Fund" to "Newpoint
Government Money Market Fund." 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. As of the date of this prospectus, the Trust offers
shares in two portfolios: Newpoint Equity Fund and the Fund. This prospectus
relates only to the Fund. Prior to February 1, 1994, the Fund offered two
classes of shares, called Trust Shares and Investment Shares. Effective February
1, 1994, the Fund no longer offered separate classes of shares. The Fund is
designed for customers of First National Bank of Ohio and its 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 Farm Credits System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; 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 investment adviser, First National
Bank of Ohio (the "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.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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.
NEWPOINT FUNDS INFORMATION
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MANAGEMENT OF NEWPOINT 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
subject to direction by the Trustees. The Adviser continually conducts
investment research and supervision for the Fund and is responsible for the
purchase or sale of portfolio instruments, for which it receives an annual fee
from the Fund.
ADVISORY FEES. The Adviser 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 FirstMerit
Corp. (formerly known as "First Bancorporation of Ohio"). Through its
subsidiaries and affiliates, FirstMerit Corp. 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, 1994, the Trust Division of First National Bank of Ohio
had approximately $2.5 billion in assets under administration, of which it
had investment discretion over $1.1 billion. First National Bank of Ohio
has served as the Fund's investment adviser since the Fund's inception.
As part of its regular banking operations, First National Bank of Ohio may
make loans to public companies. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which are
also lending clients of First National Bank of Ohio. The lending
relationship will not be a factor in the selection of securities.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp., Pittsburgh, Pennsylvania, 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, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Administrative Services
provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE NEWPOINT FUNDS
<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 be at least $50,000
for the Fund. Federated Administrative Services may choose voluntarily to waive
a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, a
subsidiary of Federated Investors, Pittsburgh, Pennsylvania, is transfer agent
for the shares of the Fund and dividend disbursing agent for the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from 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
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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 purchased 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 FIRSTMERIT SECURITIES, 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 FirstMerit Securities, Inc. at 216-384-7230. An account may be opened
by completing a new account application form available from FirstMerit
Securities, 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. (Eastern time) 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 load 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 FirstMerit Securities, 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 FirstMerit Securities, Inc., as
appropriate. Share purchase settlements received by the transfer agent's 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.
EXCHANGE PRIVILEGE
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A shareholder may exchange shares of Newpoint Government Money Market Fund for
shares of Newpoint Equity Fund by calling or sending a written request to
FirstMerit Securities, Inc. In addition, shares of Newpoint Government Money
Market Fund may also be exchanged for certain other funds distributed by
Federated Securities Corp. that are not advised by First National Bank of Ohio
("Federated Funds"). For further information on the availability of Federated
Funds for exchanges, call FirstMerit Securities, Inc. Exchanges are subject to
the minimum initial investment requirements of the fund into which the exchange
is being made. Prior to any exchange, the shareholder must receive a copy of the
current prospectus of the fund into which an exchange is to be effected.
Shares may be exchanged at net asset value, plus the difference between the
Fund's sales load (if any) already paid and any sales load of the fund into
which Fund shares are to be exchanged, if higher.
When an exchange is made from a fund with a sales load to a fund with no sales
load, the shares exchanged and additional shares which have been purchased by
reinvesting dividends on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges; thus, an exchange
of such shares for shares of a fund with a sales load would be at net asset
value.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore,
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange
privilege of any shareholder who makes more than six exchanges of shares of the
Fund in a year, or three in a calendar quarter. Shareholders would be notified
prior to any modification or termination.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, Fund shares submitted for
exchange will be redeemed at the next-determined net asset value.
Written exchange instructions may require a signature guarantee. Exercise of
this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The exchange privilege may be terminated at any time. Shareholders
will be notified of the termination of the exchange privilege. A shareholder may
obtain further information on the exchange privilege by calling FirstMerit
Securities, Inc. at 216-384-7230.
EXCHANGE-BY-TELEPHONE
Instructions for exchanges between portfolios which are part of the Newpoint
Funds may be given by telephone to FirstMerit Securities, Inc. at 216-384-7230.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Orders for exchanges received prior to 3:30 p.m. (Eastern time) on any day that
the Fund is open for business will be executed as of the close of business that
day. Orders for exchanges received after 3:30 p.m. (Eastern time) on any
business day will be executed at the close of the next business day. The
telephone exchange privilege may be modified or terminated at any time.
Shareholders will be notified of such modification or termination.
Telephone exchange instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
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
FirstMerit Securities, 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 FirstMerit
Securities, Inc. may redeem shares by telephoning 216-384-7230. For calls
received by FirstMerit Securities, 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 FirstMerit Securities, 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 FirstMerit Securities, 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 FirstMerit
Securities, Inc. Call FirstMerit Securities, 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 FirstMerit Securities, Inc.
With a Fund checking account, shares may be redeemed simply by writing a check
for $50 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 to redeem shares. Canceled checks are
sent to the shareholder each month upon request.
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 FirstMerit Securities, 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 6, 1995, Parcol & Co., First National Bank
of Ohio, Akron, Ohio, owned approximately 49,925,115 shares (83.44%) 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 for such
acts or obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the Trust or
its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder 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. 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.
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.
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
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--56.3%
- --------------------------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--12.5%
-----------------------------------------------------------------------------------
$ 8,000,000 3.83%-5.70%, 3/1/95-9/1/95 $ 8,000,579
----------------------------------------------------------------------------------- -------------
FEDERAL HOME LOAN BANK--7.9%
-----------------------------------------------------------------------------------
5,000,000 7.875%, 3/27/95 5,039,178
----------------------------------------------------------------------------------- -------------
FEDERAL HOME LOAN BANK DISCOUNT NOTES--21.8%
-----------------------------------------------------------------------------------
14,000,000 4.84%-5.64%, 12/14/94-2/8/95 13,923,784
----------------------------------------------------------------------------------- -------------
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTE--4.7%
-----------------------------------------------------------------------------------
3,000,000 4.89%, 12/2/94 2,999,593
----------------------------------------------------------------------------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES--9.4%
-----------------------------------------------------------------------------------
6,000,000 4.74%-4.93%, 12/6/94-12/19/94 5,990,836
----------------------------------------------------------------------------------- -------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 35,953,970
----------------------------------------------------------------------------------- -------------
U.S. TREASURY BILL--4.7%
- --------------------------------------------------------------------------------------------------
3,000,000 12/22/94 2,991,250
----------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENTS--39.0%
- --------------------------------------------------------------------------------------------------
11,909,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.65%, dated 11/30/94,
due 12/1/94 11,909,000
-----------------------------------------------------------------------------------
3,000,000 Sanwa-BGK Securities, Inc., 5.55%, dated 11/30/94, due 12/1/94 3,000,000
-----------------------------------------------------------------------------------
10,000,000 Smith Barney, Inc., 5.60%, dated 11/30/94, due 12/1/94 10,000,000
----------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS 24,909,000
----------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 63,854,220+
----------------------------------------------------------------------------------- -------------
</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
($63,868,217) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 24,909,000
- -----------------------------------------------------------------------------------
Investments in other securities 38,945,220
- ----------------------------------------------------------------------------------- -------------
Total investments, at amortized cost and value $ 63,854,220
- --------------------------------------------------------------------------------------------------
Cash 382
- --------------------------------------------------------------------------------------------------
Interest receivable 187,446
- --------------------------------------------------------------------------------------------------
Due from Bank 21,069
- --------------------------------------------------------------------------------------------------
Deferred expenses 7,652
- -------------------------------------------------------------------------------------------------- -------------
Total assets 64,070,769
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Dividends payable 186,246
- -----------------------------------------------------------------------------------
Payable for Fund shares redeemed 300
- -----------------------------------------------------------------------------------
Accrued expenses 16,006
- ----------------------------------------------------------------------------------- -------------
Total liabilities 202,552
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 63,868,217 shares of beneficial interest outstanding $ 63,868,217
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($63,868,217 / 63,868,217 shares of beneficial interest outstanding) $ 1.00
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income $ 2,462,550
- ---------------------------------------------------------------------------------------------------
EXPENSES--
- ---------------------------------------------------------------------------------------------------
Investment advisory fee $ 309,110
- ---------------------------------------------------------------------------------------
Trustees' fees 5,557
- ---------------------------------------------------------------------------------------
Administrative personnel and services fees 92,733
- ---------------------------------------------------------------------------------------
Custodian fees 26,966
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 42,289
- ---------------------------------------------------------------------------------------
Fund share registration fees 29,934
- ---------------------------------------------------------------------------------------
Auditing fees 18,100
- ---------------------------------------------------------------------------------------
Legal fees 8,300
- ---------------------------------------------------------------------------------------
Printing and postage 11,500
- ---------------------------------------------------------------------------------------
Insurance premiums 4,987
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 41,343
- ---------------------------------------------------------------------------------------
Distribution services fees 4,069
- ---------------------------------------------------------------------------------------
Miscellaneous 8,421
- --------------------------------------------------------------------------------------- ----------
Total expenses 603,309
- ---------------------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 123,644
- ---------------------------------------------------------------------------
Waiver of distribution services fees 4,069 127,713
- --------------------------------------------------------------------------- ---------- ----------
Net expenses 475,596
- --------------------------------------------------------------------------------------------------- ------------
Net investment income $ 1,986,954
- --------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 1,986,954 $ 1,474,158
- ------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income
- -------------------------------------------------------------------------------
Trust Shares (1,947,673) (1,166,502)
- -------------------------------------------------------------------------------
Investment Shares (39,281) (307,656)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from distributions
to shareholders (1,986,954) (1,474,158)
- ------------------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 174,363,488 168,898,811
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 265,707 277,391
- -------------------------------------------------------------------------------
Cost of shares redeemed (169,972,634) (178,189,402)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from Fund share transactions 4,656,561 (9,013,200)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 4,656,561 (9,013,200)
- ------------------------------------------------------------------------------- --------------- ---------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 59,211,656 68,224,856
- ------------------------------------------------------------------------------- --------------- ---------------
End of period $ 63,868,217 $ 59,211,656
- ------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PORTAGE GOVERNMENT MONEY MARKET FUND
(EFFECTIVE JANUARY 31, 1995, NEWPOINT GOVERNMENT MONEY MARKET FUND)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Portage Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end, management investment company. The
Trust consists of two diversified portfolios, Newpoint Equity Fund and Portage
Government Money Market Fund. The financial statements included herein present
only those of Portage Government Money Market Fund (the "Fund"). Effective
January 31, 1995, the Trust will change its name to "Newpoint Funds," and the
Fund will change its name to "Newpoint Government Money Market Fund." The
financial statements of the other portfolio are presented separately. The assets
of each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
As of February 1, 1994, Investment Shares were no longer offered and ceased to
exist. Prior to that date, the Fund had offered 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 adopted in accordance with the Act's Rule 12b-1.
(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. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (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.
PORTAGE GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) 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, 1994, capital paid-in aggregated $63,868,217.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
TRUST SHARES 1994 1993
<S> <C> <C>
Shares sold 171,031,425 146,033,254
- --------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 246,984 29,061
- --------------------------------------------------------------------------------
Shares redeemed (156,307,374) (151,276,060)
- -------------------------------------------------------------------------------- -------------- --------------
Net change resulting from Trust Share transactions 14,971,035 (5,213,745)
- -------------------------------------------------------------------------------- -------------- --------------
</TABLE>
PORTAGE GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
INVESTMENT SHARES 1994* 1993
<S> <C> <C>
Shares sold 3,332,063 22,865,557
- ---------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 18,723 248,330
- ---------------------------------------------------------------------------------
Shares redeemed (13,665,260) (26,913,342)
- --------------------------------------------------------------------------------- ------------- -------------
Net change resulting from Investment Share transactions (10,314,474) (3,799,455)
- --------------------------------------------------------------------------------- ------------- -------------
Net change resulting from Fund Share transactions 4,656,561 (9,013,200)
- --------------------------------------------------------------------------------- ------------- -------------
</TABLE>
*For the period from December 1, 1993 to January 31, 1994.
As of February 1, 1994 Investment Shares were no longer offered and ceased to
exist.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--First National Bank of Ohio, the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive all or a portion of its fee. The Adviser can modify
or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate daily net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION PLAN--As of February 1, 1994, Investment Shares were no longer
offered and ceased to exist. In addition, the Distribution Plan (the "Plan") was
discontinued. Under the terms of the Plan, the Fund compensated Federated
Securities Corp. ("FSC"), the Trust's distributor, from the net assets of the
Investment Shares to finance activities intended to result in the sale of the
Fund's Investment Shares subject to the Plan. The Plan provided that the Fund
could incur distribution expenses of up to 0.25 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC. When the Plan was
in effect, FSC chose to voluntarily waive its fees. As a result, the Fund did
not pay any fees under the Plan.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($114,169) were borne initially
by FAS. The Fund has agreed to reimburse FAS at an annual rate of .005 of 1% of
average daily net assets for organizational expenses, until either expenses
initially borne by FAS are fully reimbursed or the
PORTAGE GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
expiration of five years after January 8, 1991 (the date the Trust's
registration statement first became effective), whichever occurs earlier. For
the year ended November 30, 1994, the Fund paid $3,074 pursuant to this
agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
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 Portage Funds, a
Massachusetts business trust), including the schedule of portfolio of
investments, as of November 30, 1994, 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 3 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, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Portage Government Money Market Fund, an investment portfolio of Portage Funds,
as of November 30, 1994, and the results of its operations for the year then
ended, and the changes in net assets, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 18, 1995
ADDRESSES
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Newpoint Government Money Market Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
First National Bank of Ohio 106 South Main Street
Akron, Ohio 44308-1444
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Custodian
State Street Bank P.O. Box 1713
and Trust Company Boston, Massachusetts 02105
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Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
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</TABLE>
NEWPOINT GOVERNMENT
MONEY MARKET FUND
(FORMERLY, PORTAGE GOVERNMENT
MONEY MARKET FUND)
A PORTFOLIO OF NEWPOINT FUNDS
PROSPECTUS
An Open-end, Diversified
Management Investment Company
January 31, 1995
NEWPOINT EQUITY FUND
A PORTFOLIO OF NEWPOINT FUNDS
PROSPECTUS
Newpoint Equity Fund (the "Fund") is a diversified portfolio in Newpoint Funds
(the "Trust"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to achieve growth of capital and income. The
Fund pursues this investment objective by investing primarily in equity
securities of U.S. companies.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIRST
NATIONAL BANK OF OHIO, ANY OF ITS AFFILIATES, OR ANY BANK, ARE NOT ENDORSED OR
GUARANTEED BY FIRST NATIONAL BANK OF OHIO, ANY OF ITS AFFILIATES, OR ANY BANK,
AND ARE NOT INSURED BY THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER FEDERAL OR STATE GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
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,
1995, 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 to 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, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Limitation 8
NEWPOINT FUNDS INFORMATION 8
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Management of Newpoint Funds 8
Distribution of Fund Shares 9
Administration of the Fund 10
Brokerage Transactions 11
Expenses of the Fund 11
NET ASSET VALUE 12
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INVESTING IN THE FUND 12
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Share Purchases 12
Minimum Investment Required 12
What Shares Cost 13
Eliminating or Reducing
the Sales Load 14
Systematic Investment Program 15
Subaccounting Services 15
Certificates and Confirmations 15
Dividends and Capital Gains 15
EXCHANGE PRIVILEGE 16
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Exchange-By-Telephone 16
REDEEMING SHARES 17
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Through First National Bank of
Ohio or FirstMerit Securities, Inc. 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 19
EFFECT OF BANKING LAWS 19
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TAX INFORMATION 20
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Federal Income Tax 20
PERFORMANCE INFORMATION 20
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FINANCIAL STATEMENTS 22
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 31
- ------------------------------------------------------
ADDRESSES 32
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................................................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)....................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1).............................................................. 0.00%
12b-1 Fees (2)................................................................................. 0.00%
Total Other Expenses........................................................................... 1.50%
Shareholder Services Fees (3).............................................................. 0.00%
Total Fund Operating Expenses (4)..................................................... 1.50%
</TABLE>
- ------------
(1) The estimated management fee of the Fund has been reduced to reflect the
anticipated voluntary waiver by the investment adviser. The adviser can
terminate its voluntary waiver of fees at any time at its sole discretion.
The maximum management fee is 0.75%.
(2) The Fund has no present intention of paying 12b-1 fees during the fiscal
year ending November 30, 1995. If the Fund were paying 12b-1 fees, the Fund
would be able to pay up to 0.25% of its average daily net assets for 12b-1
fees.
(3) The maximum shareholder services fee is 0.25%.
(4) The Total Fund Operating Expenses are estimated to be 2.50%, absent the
anticipated voluntary waivers explained in footnotes (1) and (2). The Total
Operating Expenses were 1.00% for the fiscal year ended November 30, 1994,
and were 2.72% absent voluntary waivers for the fiscal year ended November
30, 1994.
* Expenses in this table are estimated based on average expenses expected to be
incurred during the fiscal year ending November 30, 1995. During the course
of this period, expenses may be more or less than the average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Newpoint Funds Information" and "Investing in the Fund."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. The Fund charges no redemption fees............. $60 $90
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING NOVEMBER 30, 1995.
NEWPOINT EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 32.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
<S> <C>
- ---------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.05
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.23)
- ---------------------------------------------------------------------------------------------- --------
Total from investment operations (0.18)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.04)
- ---------------------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 9.78
- ---------------------------------------------------------------------------------------------- --------
TOTAL RETURN** (1.76%)
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.00%(b)
- ----------------------------------------------------------------------------------------------
Net investment income 2.36%(b)
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.72%(b)
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $11,614
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate 0%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 13, 1994 (date of initial
public investment) to November 30, 1994. For the period from August 30, 1994
(start of business) to September 12, 1994, the Fund had no investment
activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Newpoint Funds were established as a Massachusetts business trust under a
Declaration of Trust dated November 12, 1990. Effective January 31, 1995, the
Trust changed its name from "Portage Funds" to "Newpoint Funds." 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. This prospectus relates
only to that portfolio of the Trust known as the Newpoint Equity Fund. The
Trust, as of the date of this prospectus, offers shares in one other portfolio,
the Newpoint Government Money Market Fund.
The Fund is designed for customers of First National Bank of Ohio and its
affiliates as a convenient means of accumulating an interest in a professionally
managed, diversified portfolio consisting primarily of equity securities of U.S.
companies. A minimum initial investment of $1,000 is required. Except as
otherwise noted in this prospectus, shares of the Fund are sold at net asset
value plus an applicable sales load and redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve growth of capital and income.
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
Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in equity securities of
U.S. companies. The Fund may also invest in domestic debt securities,
international securities, U.S. government securities, and money market
securities. The Fund's investment adviser, First National Bank of Ohio (the
"Adviser"), attempts to maintain an acceptable level of risk through careful
investment analysis including, but not limited to, the following: the employment
of disciplined value measures (such as price/earnings ratios and price/book
ratios) when selecting equity securities; use of ratings assigned by nationally
recognized statistical rating organizations (where applicable); credit research;
review of issuers' historical performances; examination of issuers' dividend
growth records; and consideration of market trends.
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 securities in which the Fund invests include the
following:
DOMESTIC EQUITY SECURITIES. The domestic equity securities of the Fund
will usually consist of common and preferred stocks of medium to large
capitalization companies and which are listed on the New York or American
Stock Exchanges or traded in the over-the-counter
market. The companies will be selected by the Adviser based on traditional
research techniques and technical factors, including assessment of earnings
and dividend growth prospects and of the risk and volatility of the
company's industry. Other factors, such as product position or market
share, will also be considered by the Adviser.
DOMESTIC DEBT SECURITIES. The Fund may also invest in debt securities,
including bonds, notes, warrants, zero coupon bonds, and convertible
securities of the U.S. companies described above, all of which are rated
investment grade, i.e., Baa or better by Moody's Investors Service, Inc.
("Moody's"), or BBB or better by Standard & Poor's Ratings Group ("S&P") or
Fitch Investors Service, Inc. ("Fitch") (or, if unrated, are deemed to be
of comparable quality by the Adviser). The Fund may also invest in
securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies or instrumentalities. It
should be noted that securities receiving the lowest investment grade
rating are considered to have some speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
securities. In the event that a security which had an eligible rating when
purchased by the Fund is downgraded below Baa or BBB, the Adviser will
promptly reassess whether the continued holding of the security is
consistent with the Fund's objective. The prices of fixed income securities
generally fluctuate inversely to the direction of interest rates.
OTHER ACCEPTABLE INVESTMENTS. The Fund may invest in equity securities of
non-U.S. companies and corporate and government debt securities denominated
in currencies other than U.S. dollars. In addition, the Fund may invest in
zero coupon bonds and zero coupon convertible securities.
MONEY MARKET INSTRUMENTS. For temporary defensive purposes (up to 100% of
total assets) and to maintain liquidity (up to 35% of total assets), the
Fund may invest in U.S. and foreign short-term money market instruments,
including:
commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch, and Europaper (dollar-denominated commercial
paper issued outside the United States) rated A-1, A-2, Prime-1, or
Prime-2;
instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances) if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation ("FDIC"), or
the Savings Association Insurance Fund ("SAIF"), which is also
administered by the FDIC. These instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee
CDs"), and Eurodollar Time Deposits ("ETDs");
obligations of the U.S. government or its agencies or instrumentalities;
repurchase agreements;
securities of other investment companies; and
other short-term instruments which are not rated but are determined by
the Adviser to be of comparable quality to the other obligations in which
the Fund may invest.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities.
U.S. GOVERNMENT SECURITIES. The types of U.S. government securities in
which the Fund may invest generally include direct obligations of the U.S.
Treasury (such as U.S. Treasury bills, notes, and bonds) and obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities are backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Federal Farm Credit Banks;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
securities of other investment companies, but it will not own more than 3% of
the total outstanding voting stock of any investment company, invest more than
5% of its total assets in any one investment company, or invest more than 10% of
its total assets in investment companies in general. The Fund will invest in
other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. It should
be noted that investment companies incur certain expenses, such as management
fees and, therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expenses. The Adviser will waive its
investment advisory fee on assets invested in securities of such investment
companies.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities up to one-third of the value of its total
assets, on a short-term or long-term basis, to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the Adviser
has determined are creditworthy 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.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net assets.
PUT AND CALL OPTIONS. The Fund may purchase both put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds or will be purchasing against decreases
or increases in value. The Fund may purchase call and put options for the
purpose of offsetting previously written call options of the same series. If the
Fund is unable to effect a closing purchase transaction with respect to covered
options it has written, the Fund will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the options
expire or are exercised.
The Fund may also write covered call and put options on all or any portion of
its portfolio to generate income for the Fund. By writing a call option, the
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, the Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is expired.
The Fund will write call
options on securities either held in its portfolio or which it has the right to
obtain without payment of further consideration or for which it has segregated
cash or U.S. government securities in the amount of any additional
consideration.
The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
associations) deemed creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.
FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell futures
contracts to hedge against the effect of changes in the value of portfolio
securities due to anticipated changes in interest rates and market conditions.
Futures contracts call for the delivery of particular instruments at a certain
time in the future. The seller of the contract agrees to make delivery of the
type of instrument called for in the contract, and the buyer agrees to take
delivery of the instrument at the specified future time.
Stock index futures contracts are based on indices that reflect the market value
of common stock of the firms included in the indices. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may also write put options and purchase call options on futures
contracts as a hedge against rising purchase prices of portfolio securities. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a futures contract, the Fund is entitled (but not
obligated) to purchase a futures contract at a fixed price at any time during
the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security, or will make deposits to collateralize the
position as discussed above.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the Adviser could be incorrect in its
expectations about the direction or extent of market factors such as stock
price movements. In these events, the Fund may lose money on the futures
contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract or option at any particular time.
The Fund's ability to establish and close out futures and options positions
depends on this secondary market.
INVESTMENT LIMITATION
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 up to one-third of the value of its total assets and pledge up
to 10% of the value of its total assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
NEWPOINT FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF NEWPOINT FUNDS
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust'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 Adviser receives an annual investment advisory fee
equal to 0.75 of 1% of the Fund's average daily net assets. The fee paid by
the Fund, while higher than the advisory fee paid by other mutual funds in
general, is comparable to fees paid by other mutual funds with similar
objectives and policies. 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 FirstMerit
Corp. (formerly known as "First Bancorporation of Ohio"). Through its
subsidiaries and affiliates, FirstMerit Corp. 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, 1994, the Trust Division of First National Bank of Ohio
had approximately $2.5 billion in assets under administration, of which it
had investment discretion over $1.1 billion. First National Bank of Ohio
has served as the Fund's investment adviser since the Fund's inception.
As part of its regular banking operations, First National Bank of Ohio may
make loans to public companies. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which are
also lending clients of First National Bank of Ohio. The lending
relationship will not be a factor in the selection of securities.
The portfolio manager of the Fund is Wesley C. Meinerding, a Vice President
and Trust Officer with First National Bank of Ohio. Mr. Meinerding manages
corporate and personal trust portfolios at First National Bank of Ohio.
Prior to joining FirstMerit Corp. in December 1982, Mr. Meinerding managed
trust and bank assets at First National Bank in Massillon, corporate and
personal trusts at Harter Bank and Trust, and pension assets at Firestone
Tire and Rubber Company. Mr. Meinerding has managed the Fund since the
Fund's inception.
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
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 (the "Distribution Plan"), the Fund may pay to
the distributor an amount, computed at an annual rate of up to 0.25 of 1% of the
Fund's average daily net asset value, to finance any activity which is
principally intended to result in the sale of shares subject to the Distribution
Plan. The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.
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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Administrative Services
provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE NEWPOINT FUNDS
<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 be at least
$100,000 for the Fund. Federated Administrative Services may choose voluntarily
to waive a portion of its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to shares of the Fund. Under the Services
Plan, financial institutions will enter into shareholder service agreements to
provide administrative support services to their customers who from time to time
may be owners of record or beneficial owners of shares of the Fund. In return
for providing these support services, a financial institution may receive
payments at a rate not exceeding 0.25 of 1% of the average daily net assets of
shares of the Fund beneficially owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel, including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Fund;
assisting clients in changing dividend options, account designations and
addresses; and providing such other services as the Fund reasonably requests.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the Adviser for the
continuing investment of their customers' assets in the Fund. These payments
will be made directly by the Adviser from its assets, and will not be made from
the assets of the Fund or by the assessment of a sales load on Fund shares.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent and dividend disbursing agent for the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
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,
shareholder servicing agents, and registrars; printing, mailing, auditing,
accounting, and legal expenses; reports to shareholders and governmental
agencies; meetings of Trustees and shareholders and proxy solicitations
therefor; distribution fees; 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's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
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 purchased by telephone through procedures established with
First National Bank of Ohio and its affiliates. 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. In connection with the sale of Fund shares, the distributor may
from time to time offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.
THROUGH FIRST NATIONAL BANK OF OHIO OR FIRSTMERIT SECURITIES, 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 FirstMerit Securities, Inc. at 216-384-7230. An account may be opened
by completing a new account application form available from FirstMerit
Securities, Inc., 4100 Embassy Parkway, Akron, Ohio 44333.
Payment may be made by 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 3:30 p.m. (Eastern
time) in order for shares to be purchased at that day's price. Purchases by
check are considered received after payment by check is converted into federal
funds and is received by the Fund. When payment is made with federal funds, the
order is considered received when federal funds are received by the Fund. Shares
cannot be purchased on days on which the New York Stock Exchange is closed or on
federal holidays restricting wire transfers.
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
Shares are sold at their net asset value next determined after an order is
received, plus a sales load, as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
The net asset value is determined at 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.
PURCHASES AT NET ASSET VALUE. Shareholders who are trust customers of First
National Bank of Ohio and its subsidiaries are exempt from the sales load. In
addition, the following persons may purchase shares of the Fund at net asset
value, without a sales load: employees and retired employees of First National
Bank of Ohio, Federated Securities Corp., or their affiliates, or any bank or
investment dealer who has a sales agreement with Federated Securities Corp. with
regard to the Fund, and members of the families (including parents,
grandparents, siblings, spouses, children, aunts, uncles, and in-laws) of such
employees or retired employees.
SALES LOAD REALLOWANCE. For sales of shares of the Fund, a dealer will normally
receive up to 85% of the applicable sales load. Any portion of the sales load
which is not paid to a dealer will be retained by the distributor. The
distributor will, periodically, uniformly offer to pay cash or promotional
incentives in the form of trips to sales seminars at luxury resorts, tickets or
other items to all dealers selling shares of the Fund. Such payments will be
predicated upon the amount of shares of the Fund that are sold by the dealer.
The sales load for shares sold other than through registered broker/dealers will
be retained by the distributor. The distributor may pay fees to banks out of the
sales load in exchange for sales and/or administrative services performed on
behalf of the banks' customers in connection with the initiation of customer
accounts and purchases of Fund shares.
ELIMINATING OR REDUCING THE SALES LOAD
The sales load can be eliminated or reduced on the purchase of shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent; or
using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table under "What
Shares Cost," larger purchases eliminate or reduce the sales load paid. The Fund
will combine purchases made on the same day by the investor, the investor's
spouse, and the investor's children under age 21 when it calculates the
applicable sales load. In addition, the sales load, if applicable, can be
eliminated or reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price, the
sales load on the additional purchase according to the schedule now in effect
would be 3.75%, not 4.50%.
To receive the sales load elimination or reduction, FirstMerit Securities, Inc.
or the distributor must be notified by the shareholder in writing at the time
the purchase is made that Fund shares are already owned or that purchases are
being combined. The Fund will reduce the sales load after it confirms the
purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
Fund shares over the next 13 months, the sales load may be eliminated or reduced
by signing a letter of intent to that effect. This letter of intent includes a
provision for a sales load adjustment depending on the amount actually purchased
within the 13-month period and a provision for the Fund's custodian to hold up
to 4.50% of the total amount intended to be purchased in escrow (in shares of
the Fund) until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales load.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
load applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90 days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 60 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load. First
National Bank of Ohio or the distributor must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to
eliminate a sales load. If the shareholder redeems his shares in the Fund, there
may be tax consequences. Shareholders contemplating such transactions should
consult their own tax advisers.
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 FirstMerit Securities, Inc.
Due to the fact that shares are sold with a sales load, it is not advisable for
shareholders to purchase shares while participating in this program.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
shares of the Fund in a fiduciary, agency, custodial, or similar capacity may
charge or pass through subaccounting fees as part of or in addition to normal
trust or agency account fees. They may also charge fees for other services
provided which may be related to the ownership of Fund shares. This prospectus
should, therefore, be read together with any agreement between the customer and
the institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder and dividend confirmations are sent to each shareholder to report
dividends paid.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid monthly. Dividends are declared just prior to
determining net asset value. Capital gains realized by the Fund, if any, will be
distributed at least once every 12 months. Dividends and capital gains will be
automatically reinvested in additional shares on payment dates at the
ex-dividend date net asset value without a sales load, unless cash payments are
requested by writing to the Fund or First National Bank of Ohio or FirstMerit
Securities, Inc., as appropriate.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
A shareholder may exchange shares of Newpoint Equity Fund for shares of Newpoint
Government Money Market Fund by calling or sending a written request to
FirstMerit Securities, Inc. In addition, shares of Newpoint Equity Fund may also
be exchanged for certain other funds distributed by Federated Securities Corp.
that are not advised by First National Bank of Ohio ("Federated Funds"). For
further information on the availability of Federated Funds for exchanges, call
FirstMerit Securities, Inc. Exchanges are subject to the minimum initial
investment requirements of the fund into which the exchange is being made. Prior
to any exchange, the shareholder must receive a copy of the current prospectus
of the fund into which an exchange is to be effected.
Shares may be exchanged at net asset value, plus the difference between the
Fund's sales load (if any) already paid and any sales load of the fund into
which Fund shares are to be exchanged, if higher.
When an exchange is made from a fund with a sales load to a fund with no sales
load, the shares exchanged and additional shares which have been purchased by
reinvesting dividends on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges; thus, an exchange
of such shares for shares of a fund with a sales load would be at net asset
value.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore,
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege of any shareholder who makes more
than six exchanges of shares of the Fund in a year, or three in a calendar
quarter. Shareholders would be notified prior to any modification or
termination.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, Fund shares submitted for
exchange will be redeemed at the next-determined net asset value.
Written exchange instructions may require a signature guarantee. Exercise of
this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The exchange privilege may be terminated at any time. Shareholders
will be notified of the termination of the exchange privilege. A shareholder may
obtain further information on the exchange privilege by calling FirstMerit
Securities, Inc. at 216-384-7230.
EXCHANGE-BY-TELEPHONE
Instructions for exchanges between portfolios which are part of the Newpoint
Funds may be given by telephone to FirstMerit Securities, Inc. at 216-384-7230.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Orders for exchanges received prior to 3:30 p.m. (Eastern time) on any day that
the Fund is open for business will be executed as of the close of business that
day. Orders for exchanges received after 3:30 p.m. (Eastern time) on any
business day will be executed at the close of the next business day. The
telephone exchange privilege may be modified or terminated at any time.
Shareholders will be notified of such modification or termination.
Telephone exchange instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
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
FirstMerit Securities, Inc.
THROUGH FIRST NATIONAL BANK OF OHIO OR FIRSTMERIT SECURITIES, INC.
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 FirstMerit
Securities, Inc. may redeem shares by telephoning 216-384-7300. For calls
received before 3:30 p.m. (Eastern time), proceeds will normally be wired the
following 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. 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
FirstMerit Securities, Inc. Telephone redemption instructions may be
electronically recorded. If reasonable procedures are not followed by the Fund,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
In the event of 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 FirstMerit Securities, Inc.
If, at any time, the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
BY MAIL. Shares may also be redeemed by sending a written request to FirstMerit
Securities, Inc. Call FirstMerit Securities, 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.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record
with the Fund, 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 BIF,
which is administered by the 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 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.
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 FirstMerit Securities, Inc. Depending upon
the amount of the withdrawal payments, the amount of dividends paid and capital
gains distributions with respect to Fund shares, and the fluctuation of the net
asset value of Fund shares redeemed under this program, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in the Fund. Due to the fact that shares are
sold with a sales load, it is not advisable for shareholders to be purchasing
shares of the Fund while participating in this program.
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 of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio, only shares of that portfolio 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 6, 1995, Parcol & Co., First National Bank
of Ohio, Akron, Ohio, owned approximately 1,393,154 shares (100%) 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 for such
acts or obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the Trust or
its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder 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. 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, including capital gains distributions,
received. This applies whether dividends and distributions 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 accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information normally reflects the effect of the maximum sales
load which, if excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/ or compare its performance to certain indices.
NEWPOINT EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--76.3%
- ---------------------------------------------------------------------------------------------------
BASIC INDUSTRY--9.3%
-------------------------------------------------------------------------------------
1,000 Aluminum Company of America $ 81,625
-------------------------------------------------------------------------------------
3,100 Dow Chemical 198,400
-------------------------------------------------------------------------------------
1,400 duPont (E.I.) deNemours & Co. 75,425
-------------------------------------------------------------------------------------
3,000 Eastman Chemical Co. of Wisconsin 141,375
-------------------------------------------------------------------------------------
4,500 Englehard Corp. 99,000
-------------------------------------------------------------------------------------
2,000 International Paper Co. 143,000
-------------------------------------------------------------------------------------
3,400 Louisiana Pacific Corp. 95,200
-------------------------------------------------------------------------------------
1,500 Monsanto Co. 108,000
-------------------------------------------------------------------------------------
3,000 Morton International, Inc. 82,500
-------------------------------------------------------------------------------------
4,300 Santa Fe Pacific Gold Corp. 54,287
------------------------------------------------------------------------------------- -------------
Total 1,078,812
------------------------------------------------------------------------------------- -------------
CAPITAL GOODS--5.2%
-------------------------------------------------------------------------------------
1,900 Caterpillar, Inc. 102,600
-------------------------------------------------------------------------------------
2,100 General Electric Co. 96,600
-------------------------------------------------------------------------------------
3,500 *Ionics, Inc. 188,562
-------------------------------------------------------------------------------------
5,000 Premier Industrial Corp. 120,625
-------------------------------------------------------------------------------------
4,000 WMX Technologies, Inc. 103,000
------------------------------------------------------------------------------------- -------------
Total 611,387
------------------------------------------------------------------------------------- -------------
CAPITAL GOODS TECHNOLOGY--20.4%
-------------------------------------------------------------------------------------
2,500 Amp, Inc. 180,625
-------------------------------------------------------------------------------------
3,000 Apple Computer, Inc. 111,750
-------------------------------------------------------------------------------------
3,500 Avnet, Inc. 125,563
-------------------------------------------------------------------------------------
2,500 Boeing Co. 111,875
-------------------------------------------------------------------------------------
3,000 *Compaq Computer Corp. 117,375
-------------------------------------------------------------------------------------
2,000 Diebold, Inc. 83,750
-------------------------------------------------------------------------------------
1,500 Hewlett-Packard Co. 147,000
-------------------------------------------------------------------------------------
5,000 Intel Corp. 315,625
-------------------------------------------------------------------------------------
</TABLE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CAPITAL GOODS TECHNOLOGY--CONTINUED
-------------------------------------------------------------------------------------
4,000 *Legent Corp. $ 128,000
-------------------------------------------------------------------------------------
4,000 *Microsoft Corp. 251,500
-------------------------------------------------------------------------------------
2,000 Minnesota Mining & Manufacturing Co. 102,500
-------------------------------------------------------------------------------------
2,000 Motorola, Inc. 112,750
-------------------------------------------------------------------------------------
1,700 Raytheon Co. 106,887
-------------------------------------------------------------------------------------
4,000 *Silicon Graphics, Inc. 123,000
-------------------------------------------------------------------------------------
3,000 *Storage Technology Corp. 92,250
-------------------------------------------------------------------------------------
2,000 United Technologies Corp. 117,000
-------------------------------------------------------------------------------------
1,500 Xerox Corp. 147,375
------------------------------------------------------------------------------------- -------------
Total 2,374,825
------------------------------------------------------------------------------------- -------------
CONSUMER CYCLICAL--4.3%
-------------------------------------------------------------------------------------
4,300 Corning Inc. 129,000
-------------------------------------------------------------------------------------
3,700 General Motors Corp. 141,062
-------------------------------------------------------------------------------------
1,600 J.C. Penney, Inc. 73,600
-------------------------------------------------------------------------------------
2,000 Sears Roebuck & Co. 94,500
-------------------------------------------------------------------------------------
2,700 Wal Mart Stores, Inc. 62,438
------------------------------------------------------------------------------------- -------------
Total 500,600
------------------------------------------------------------------------------------- -------------
CONSUMER GROWTH STAPLES--17.5%
-------------------------------------------------------------------------------------
2,000 American Home Products Corp. 130,250
-------------------------------------------------------------------------------------
5,000 *Amgen, Inc. 291,875
-------------------------------------------------------------------------------------
3,000 Coca-Cola Co. 153,375
-------------------------------------------------------------------------------------
3,500 Columbia/HCA Healthcare Corp. 132,562
-------------------------------------------------------------------------------------
2,000 Eli Lilly & Co. 125,250
-------------------------------------------------------------------------------------
3,000 Gillette Co. 220,500
-------------------------------------------------------------------------------------
3,000 McDonalds Corp. 85,125
-------------------------------------------------------------------------------------
2,500 Medtronic, Inc. 132,500
-------------------------------------------------------------------------------------
3,400 Merck & Co., Inc. 126,650
-------------------------------------------------------------------------------------
5,600 *Perrigo Co. 67,200
-------------------------------------------------------------------------------------
2,000 Pfizer, Inc. 154,750
-------------------------------------------------------------------------------------
1,700 Schering Plough Corp. $ 127,288
-------------------------------------------------------------------------------------
</TABLE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CONSUMER GROWTH STAPLES--CONTINUED
-------------------------------------------------------------------------------------
6,000 *Thermo Cardiosystems, Inc. 93,000
-------------------------------------------------------------------------------------
3,000 Time Warner, Inc. 101,250
-------------------------------------------------------------------------------------
2,400 *Toys R Us, Inc. 87,900
------------------------------------------------------------------------------------- -------------
Total 2,029,475
------------------------------------------------------------------------------------- -------------
CONSUMER STAPLES--7.3%
-------------------------------------------------------------------------------------
2,100 CPC International, Inc. 107,625
-------------------------------------------------------------------------------------
2,100 General Mills, Inc. 112,875
-------------------------------------------------------------------------------------
3,400 Heinz (H.J.) Co. 123,675
-------------------------------------------------------------------------------------
6,000 Pet, Inc. 101,250
-------------------------------------------------------------------------------------
2,500 Procter & Gamble Co. 156,250
-------------------------------------------------------------------------------------
3,000 Rubbermaid, Inc. 81,000
-------------------------------------------------------------------------------------
6,500 Sara Lee Corp. 158,438
------------------------------------------------------------------------------------- -------------
Total 841,113
------------------------------------------------------------------------------------- -------------
CREDIT CYCLICAL--1.6%
-------------------------------------------------------------------------------------
4,000 Masco Corp. 89,000
-------------------------------------------------------------------------------------
3,100 Sherwin Williams Co. 95,325
------------------------------------------------------------------------------------- -------------
Total 184,325
------------------------------------------------------------------------------------- -------------
ENERGY--2.2%
-------------------------------------------------------------------------------------
2,800 Ashland Coal, Inc. 81,200
-------------------------------------------------------------------------------------
1,400 Exxon Corp. 84,525
-------------------------------------------------------------------------------------
7,000 Horsham Corp. 95,375
------------------------------------------------------------------------------------- -------------
Total 261,100
------------------------------------------------------------------------------------- -------------
FINANCE--2.5%
-------------------------------------------------------------------------------------
1,000 American International Group, Inc. 91,625
-------------------------------------------------------------------------------------
2,600 Banc One Corp. 69,875
-------------------------------------------------------------------------------------
2,400 NationsBank Corp. 107,700
-------------------------------------------------------------------------------------
800 PNC Bank Corp. 16,600
------------------------------------------------------------------------------------- -------------
Total 285,800
------------------------------------------------------------------------------------- -------------
TRANSPORTATION--1.4%
-------------------------------------------------------------------------------------
3,000 Santa Fe Pacific Corp. $ 50,250
-------------------------------------------------------------------------------------
</TABLE>
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION--CONTINUED
-------------------------------------------------------------------------------------
6,000 *Southern Pacific Rail Corp. 109,500
------------------------------------------------------------------------------------- -------------
Total 159,750
------------------------------------------------------------------------------------- -------------
UTILITIES--4.6%
-------------------------------------------------------------------------------------
2,000 *Airtouch Communications, Inc. 54,250
-------------------------------------------------------------------------------------
3,000 Alltel Corp. 84,375
-------------------------------------------------------------------------------------
3,000 Consolidated Natural Gas Co. 105,000
-------------------------------------------------------------------------------------
3,600 MCI Communications Corp. 70,200
-------------------------------------------------------------------------------------
2,000 Southwestern Bell Corp. 82,750
-------------------------------------------------------------------------------------
2,500 Telefonos de Mexico SA, ADR 132,500
------------------------------------------------------------------------------------- -------------
Total 529,075
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $9,117,652) 8,856,262
------------------------------------------------------------------------------------- -------------
**REPURCHASE AGREEMENTS--24.7%
- ---------------------------------------------------------------------------------------------------
$ 1,867,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.65%, dated 11/30/94,
due 12/1/94 1,867,000
-------------------------------------------------------------------------------------
1,000,000 Smith Barney, Inc., 5.35%, dated 11/30/94, due 12/1/94 1,000,000
------------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 2,867,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $11,984,652) $ 11,723,262+
------------------------------------------------------------------------------------- -------------
</TABLE>
* Non-income producing securities.
** The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $11,984,652. The
net unrealized depreciation of investments on a federal tax basis amounts to
$261,390, which is comprised of $240,012 appreciation and $501,402
depreciation at November 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($11,614,424) at November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
NEWPOINT EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 2,867,000
- -------------------------------------------------------------------------------------
Investments in other securities 8,856,262
- ------------------------------------------------------------------------------------- ------------
Total Investments in securities, at value
(identified and tax cost $11,984,652) $ 11,723,262
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 24,155
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 3,403
- --------------------------------------------------------------------------------------------------- -------------
Total assets 11,750,820
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased 116,490
- -------------------------------------------------------------------------------------
Payable for Fund shares redeemed 5,000
- -------------------------------------------------------------------------------------
Accrued expenses 14,906
- ------------------------------------------------------------------------------------- ------------
Total liabilities 136,396
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,188,151 shares of beneficial interest outstanding $ 11,614,424
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 11,869,617
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (261,390)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 6,197
- --------------------------------------------------------------------------------------------------- -------------
TOTAL NET ASSETS $ 11,614,424
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE and Redemption Proceeds Per Share:
(net assets of $11,614,424 / 1,188,151 shares of beneficial interest outstanding) $9.78
- --------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price:
Offering Price Per Share (100 / 95.5 of $9.78)* $10.24
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost."
(See Notes which are an integral part of the Financial Statements)
NEWPOINT EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Dividends $ 32,423
- -----------------------------------------------------------------------------------------------------
Interest 46,546
- ----------------------------------------------------------------------------------------------------- -----------
Total income 78,969
- -----------------------------------------------------------------------------------------------------
EXPENSES--
- -----------------------------------------------------------------------------------------------------
Investment advisory fee $ 17,604
- ------------------------------------------------------------------------------------------
Administrative personnel and services fees 21,370
- ------------------------------------------------------------------------------------------
Custodian fees 5,047
- ------------------------------------------------------------------------------------------
Portfolio accounting fees 10,002
- ------------------------------------------------------------------------------------------
Legal fees 2,000
- ------------------------------------------------------------------------------------------
Printing and postage 1,000
- ------------------------------------------------------------------------------------------
Distribution services fees 5,868
- ------------------------------------------------------------------------------------------
Miscellaneous 1,053
- ------------------------------------------------------------------------------------------ ---------
Total expenses 63,944
- ------------------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ 17,604
- -------------------------------------------------------------------------------
Waiver of administrative personnel and services fees 17,000
- -------------------------------------------------------------------------------
Waiver of distribution services fees 5,868 40,472
- ------------------------------------------------------------------------------- --------- ---------
Net expenses 23,472
- ----------------------------------------------------------------------------------------------------- -----------
Net investment income 55,497
- ----------------------------------------------------------------------------------------------------- -----------
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (261,390)
- ----------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations ($ 205,893)
- ----------------------------------------------------------------------------------------------------- -----------
</TABLE>
*For the period from August 30, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
NEWPOINT EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 55,497
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (261,390)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (205,893)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (49,300)
- ----------------------------------------------------------------------------------------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -----------------------------------------------------------------------------------------------
Proceeds from sale of shares 11,906,802
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (37,185)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from Fund share transactions 11,869,617
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 11,614,424
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------------- -----------------
End of period (including undistributed net investment income of $6,197) $ 11,614,424
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
*For the period from August 30, 1994 (start of business) to November 30, 1994.
(See Notes which are an integral part of the Financial Statements)
NEWPOINT EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Portgage Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company. The
Trust consists of two diversified portfolios, Newpoint Equity Fund and Portgage
Government Money Market Fund. Effective January 31, 1995, the Trust will change
its name to "Newpoint Funds," and the Portage Government Money Market Fund will
change its name to "Newpoint Government Money Market Fund." The financial
statements included herein present only those of Newpoint Equity Fund (the
"Fund"). The financial statements of the other portfolio are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(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. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted and short-term
securities (and private placement securities) are generally valued at the
prices provided by an independent pricing service. Short-term securities
with remaining maturities of sixty days or less may be valued at amortized
cost, which approximates fair market value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (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. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
daily. Bond premium and discount, if applicable, are amortized as required
by the Internal Revenue Code, as amended (the "Code").
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) 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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
<S> <C>
- ----------------------------------------------------------------------------------------------- -----------------
Shares sold 1,191,903
- -----------------------------------------------------------------------------------------------
Shares redeemed (3,752)
- ----------------------------------------------------------------------------------------------- -----------------
Net change resulting from Fund share transactions 1,188,151
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
*For the period from August 30, 1994 (start of business) to November 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--First National Bank of Ohio, the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.75 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive all or a portion of its fee. The Adviser can modify
or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate daily net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION AND SERVICE PLAN--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the Plan, the Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The Plan
provides
NEWPOINT EQUITY FUND
- --------------------------------------------------------------------------------
that the Fund may incur distribution expenses up to 0.25 of 1% of the average
daily net assets of the Fund, annually, to compensate FSC. The Fund did not pay
12b-1 fees during the fiscal year ended November 30, 1994.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $35,000. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following September 3, 1994 (date the Fund first became effective).
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
November 30, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 9,117,652
- ---------------------------------------------------------------------------------------------------- ------------
SALES --
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
PORTAGE FUNDS
(Newpoint Equity Fund):
We have audited the accompanying statement of assets and liabilities of Newpoint
Equity Fund (an investment portfolio of Portage Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of November 30,
1994, and the related statements of operations and changes in net assets, and
the financial highlights (see page 2 of the prospectus) for the period from
August 30, 1994 (start of business) to November 30, 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial 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, 1994, by
correspondence with the custodian and broker. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Newpoint Equity Fund, an investment portfolio of Portage Funds, as of November
30, 1994, and the results of its operations, the changes in its net assets, and
its financial highlights for the period from August 30, 1994 (start of business)
to November 30, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 18, 1995
ADDRESSES
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Newpoint Equity 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 121 South Main Street
Akron, Ohio 44308-1440
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 1713
Trust Company Boston, Massachusetts 02105
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NEWPOINT EQUITY FUND
A PORTFOLIO OF NEWPOINT FUNDS
PROSPECTUS
An Open-end, Diversified
Management Investment Company
January 31, 1995
Newpoint Equity Fund
A Portfolio of Newpoint Funds
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of the Newpoint Equity Fund (the "Fund" ) dated January
31, 1995. This Statement is not a prospectus itself. To receive a
copy of the prospectus, write to First National Bank of Ohio, 121
South Main Street, Akron, Ohio 44308-1440.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated January 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of
Federated Investors
First National Bank of Ohio,
Investment Adviser
General Information About the
Fund 1
Investment Objective and Policies 1
Convertible Securities 1
Zero Coupon Securities 1
Warrants 2
International Securities 2
When-Issued and Delayed
Delivery Transactions 2
Repurchase Agreements 3
Restricted and Illiquid
Securities 3
Futures and Options
Transactions 3
Futures Contracts 3
"Margin" in Futures
Transactions 4
Put Options on Financial
Futures Contracts 4
Stock Index Options 4
Call Options on Financial
Futures Contracts 4
Purchasing Put and Call Options
on Portfolio Securities 5
Writing Covered Put and Call
Options on Portfolio
Securities 5
Over-the-Counter Options 5
Reverse Repurchase Agreements 5
Portfolio Turnover 5
Investment Limitations 6
Newpoint Funds Management 8
The Funds 12
Fund Ownership 12
Officers and Trustees
Compensation 13
Trustee Liability 13
Investment Advisory Services 14
Adviser to the Fund 14
Advisory Fees 14
Administrative Services 14
Purchasing Shares 15
Distribution and Shareholder
Services Plans 15
Conversion to Federal Funds 15
Determining Net Asset Value 15
Determining Market Value of
Securities 15
Trading in Foreign Securities 16
Redeeming Shares 16
Redemption in Kind 16
Tax Status 16
The Fund's Tax Status 16
Foreign Taxes 17
Shareholders' Tax Status 17
Total Return 17
Yield 17
Performance Comparisons 17
Appendix 19
Standard & Poor's Ratings
Group ("S&P") Corporate
Bond Rating Definitions 19
Moody's Investors Service,
Inc. ("Moody's"), Corporate
Bond Rating Definitions 19
Fitch Investors Service,
Inc. ("Fitch"), Long-Term
Debt Rating Definitions 19
Standard & Poor's Ratings
Group Commercial Paper
Rating Definitions 20
Moody's Investors Service,
Inc., Commercial Paper
Rating Definitions 20
Fitch Investors Service,
Inc., Short-Term Debt
Rating Definitions 20
General Information About the Fund
The Fund is a portfolio in Newpoint Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of
Trust dated November 12, 1990. Effective January 31, 1995, the Trust
changed its name from "Portage Funds" to "Newpoint Funds." The
Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate
portfolios of securities.
Investment Objective and Policies
The Fund's investment objective is to achieve growth of capital and
income. The investment objective cannot be changed without the approval
of shareholders. The policies described below may be changed by the
Board of Trustees (the "Trustees") without shareholder approval.
Shareholders will be notified before any material change in these
policies becomes effective.
Convertible Securities
Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to
movements in the underlying equity securities. The holder is entitled to
receive the fixed income of a bond or the dividend preference of a
preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used, in whole
or in part, customarily at full face value, in lieu of cash to purchase
the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before
the bond's maturity. Convertible securities are senior to equity
securities and, therefore, have a claim to assets of the corporation
prior to the holders of common stock in the case of liquidation.
However, convertible securities are generally subordinated to similar
non-convertible securities of the same company. The interest income and
dividends from convertible bonds and preferred stocks provide a stable
stream of income with generally higher yields than common stocks, but
lower than non-convertible securities of similar quality.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances where,
in the opinion of First National Bank of Ohio, the Fund's investment
adviser (the "Adviser"), the investment characteristics of the
underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund will hold or trade the
convertible securities. In selecting convertible securities for the
Fund, the Adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible
security, the Adviser considers numerous factors, including the economic
and political outlook, the value of the security relative to other
investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
Zero Coupon Securities
The Fund may invest in zero coupon bonds and zero coupon convertible
securities, whose prices are more sensitive to fluctuations in interest
rates than are conventional bonds and convertible securities. The Fund
may invest in zero coupon bonds in order to receive the rate of return
through the appreciation of the bond. This application is extremely
attractive in a falling rate environment as the price of the bond rises
rapidly in value as opposed to regular coupon bonds. A zero coupon bond
makes no periodic interest payments and the entire obligation becomes
due only upon maturity.
Zero coupon convertible securities are debt securities which are issued
at a discount to their face amount and do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, interest earned
on zero coupon convertible securities accretes at a stated yield until
the security reaches its face amount at maturity. Zero coupon
convertible securities are convertible into a specific number of shares
of the issuer's common stock. In addition, zero coupon convertible
securities usually have put features that provide the holder with the
opportunity to sell the bonds back to the issuer at a stated price
before maturity.
Federal tax law requires the holder of a zero coupon security to
recognize income from the security prior to the receipt of cash
payments. To maintain its qualification as a regulated investment
company and avoid liability for federal income taxes, the Fund will be
required to distribute income accrued from zero coupon securities which
it owns, and may have to sell portfolio securities (perhaps at
disadvantageous times) in order to generate cash to satisfy these
distribution requirements.
Warrants
The Fund may invest in warrants. Warrants provide an option to purchase
common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific
period of time. Warrants may have a life ranging from less than a year
to twenty years or may be perpetual. However, most warrants have
expiration dates after which they are worthless. In addition, if the
market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the
market price of the underlying common stock. The Fund will not invest
more than 5% of the value of its total assets in warrants. No more than
2% of this 5% may be in warrants which are not listed on the New York or
American Stock Exchanges. Warrants acquired in units or attached to
securities may be deemed to be without value for purposes of this
policy.
International Securities
The international equity securities in which the Fund may invest include
international stocks traded domestically or abroad through various stock
exchanges, American Depositary Receipts ("ADRs"), and International
Depositary Receipts ("IDRs"). The international fixed income securities
will include ADRs, IDRs, and government securities of other nations, and
will be rated investment grade (i.e., Baa or better by Moody's Investors
Service, Inc. or BBB or better by Standard and Poor's Rating Group) or
deemed by the Adviser to be of an equivalent quality. In the event that
an international debt security which had an eligible rating when
purchased is downgraded below the ratings of Baa or BBB, the Adviser
will promptly reassess whether continued holding of the security is
consistent with the Fund's objective. The Fund may also invest in shares
of open-end and closed-end management investment companies which invest
primarily in international securities described above.
Investing in foreign securities carries substantial risks in addition to
those associated with domestic investments. Foreign securities may be
denominated in foreign currencies. Therefore, the value in U.S. dollars
of the Fund's assets and income may be affected by changes in exchange
rates and regulations. Although the Fund values its assets daily in U.S.
dollars, it will not convert its holding of foreign currencies to U.S.
dollars daily. When the Fund converts its holdings to another currency,
it may incur currency conversion costs. Foreign exchange dealers realize
a profit on the difference between the prices at which they buy and sell
currencies.
Other differences between investing in foreign and U.S. companies
include:
- less publicly available information about foreign companies;
- the lack of uniform financial accounting standards applicable to
foreign companies;
- less readily available market quotations on foreign companies;
- differences in government regulation and supervision of foreign
stock exchanges, brokers, listed companies, and banks;
- generally lower foreign stock market volume;
- the likelihood that foreign securities may be less liquid or more
volatile;
- generally higher foreign brokerage commissions;
- possible difficulty in enforcing contractual obligations or
obtaining court judgments abroad because of differences in the
legal systems;
- unreliable mail service between countries; and
- political or financial changes which adversely affect investments
in some countries.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or 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
assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in when-
issued and delayed delivery transactions to an extent that would cause
the segregation of more than 20% of the total value of its assets.
Repurchase Agreements
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 deemed by the Adviser to be creditworthy
pursuant to guidelines established by the Trustees.
Restricted and Illiquid Securities
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission ("SEC") staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance
the liquidity of the secondary market for securities eligible for resale
under the Rule. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to
the Trustees. The Trustees may consider the following criteria in
determining the liquidity of certain restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace
trades.
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933 and treats such commercial paper as liquid. Section 4(2)
commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial
paper is normally resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who
make a market in Section 4(2) commercial paper, thus providing
liquidity.
Futures and Options Transactions
As a means of reducing fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its
portfolio by buying and selling financial futures contracts, buying put
and call options on portfolio securities and put options on financial
futures contracts, and writing call options on futures contracts. The
Fund may also write covered call options on its portfolio securities and
covered put options to attempt to increase its current income. The Fund
will maintain its positions in securities, option rights, and segregated
cash subject to puts and calls until the options are exercised, closed,
or have expired. An option position on financial futures contracts may
be closed out over-the-counter or on a nationally recognized exchange
which provides a secondary market for options of the same series.
Futures Contracts
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and market conditions without
necessarily buying or selling the securities. The Fund also may purchase
and sell stock index futures to hedge against changes in prices. The
Fund will not engage in futures transactions for speculative purposes.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery
of the security ("going long") at a certain time in the future. For
example, in the fixed income securities market, prices move inversely to
interest rates. A rise in rates means a drop in price. Conversely, a
drop in rates means a rise in price. In order to hedge its holdings of
fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a predetermined
price (i.e., "go short") to protect itself against the possibility that
the prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates.
Stock index futures contracts are based on indices that reflect the
market value of common stock of the firms included in the indices. An
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
differences between the value of the index at the close of the last
trading day of the contract and the price at which the index contract
was originally written.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial
margin in futures transactions does not involve the borrowing of funds
by the Fund to finance the transactions. Initial margin is in the nature
of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
Put Options on Financial Futures Contracts
The Fund may purchase listed put options on financial futures contracts
to protect portfolio securities against decreases in value resulting
from market factors, such as an anticipated increase in interest rates.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the
premium paid by the Fund for the original option plus the decrease in
value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would then
deliver the futures contract in return for payment of the strike price.
If the Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and only the premium
paid for the contract will be lost.
Stock Index Options
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stocks
included in the index.
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Fund's portfolio correlate with
price movements of the stock index selected. Because the value of an
index option depends upon movements in the level of the index rather
than the price of a particular stock, whether the Fund will realize a
gain or loss from the purchase of options on an index depends upon
movements in the level of stock prices in the stock market generally or,
in the case of certain indices, in an industry or market segment, rather
than movements in the price of a particular stock. Accordingly,
successful use by the Fund of options on stock indices will be subject
to the ability of the Adviser to predict correctly movements in the
directions of the stock market generally or of a particular industry.
This requires different skills and techniques than predicting changes in
the price of individual stocks.
Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial futures contracts
to hedge its portfolio against an increase in market interest rates.
When the Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling
a futures contract) at the fixed strike price at any time during the
life of the option if the option is exercised. As stock prices fall or
market interest rates rise, causing the prices of futures to go down,
the Fund's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's call
option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can substantially offset the drop in value of the Fund's
portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will
be less than the premium received by the Fund for the initial option.
The net premium income of the Fund will then substantially offset the
decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will
take prompt action to close out a sufficient number of open contracts to
bring its open futures and options positions within this limitation.
Purchasing Put and Call Options on Portfolio Securities
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option gives the
Fund, in return for a premium, the right to buy the underlying
securities from the seller.
Writing Covered Put and Call Options on Portfolio Securities
The Fund may also write covered put and call options to generate income
and thereby protect against price movements in particular securities in
the Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to
deliver the underlying security upon payment of the exercise price. As
the writer of a put option, the Fund has the obligation to purchase a
security from the purchaser of the option upon the exercise of the
option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
Over-the-Counter Options
The Fund may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the
options when options on the portfolio securities held by the Fund are
not traded on an exchange.
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. The use of reverse repurchase
agreements may enable the Fund to avoid selling portfolio instruments at
a time when a sale may be deemed to be disadvantageous, but the ability
to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund
in a dollar amount sufficient to make payment for the obligations to be
purchased are segregated at the trade date. These securities are marked
to market daily and are maintained until the transaction is settled.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever
the Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. For the period from September 13, 1994 to
November 30, 1994, the Fund's portfolio turnover rate was 0%. It is not
anticipated that the portfolio trading engaged in by the Fund will
result in its annual rate of portfolio turnover exceeding 75%.
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 portfolio
securities. The deposit or payment by the Fund of initial or
variation margin in connection with futures contracts or related
options transactions is not considered the purchase of a security
on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities, except that the Fund
may borrow money directly or through reverse repurchase agreements
in amounts up to one-third of the value of its total assets,
including the amount borrowed; and except to the extent that the
Fund may enter into futures contracts. 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 Fund 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 any borrowings in
excess of 5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 10% of the value of total assets at the time of the
pledge. For purposes of this limitation, the following will not be
deemed to be pledges of the Fund's assets: (a) the deposit of
assets in escrow in connection with the writing of covered put or
call options and the purchase of securities on a when-issued
basis; and (b) collateral arrangements with respect to (i) the
purchase and sale of stock options (and options on stock indices)
and (ii) initial or variation margin for futures contracts. Margin
deposits for the purchase and sale of futures contracts and
related options are not deemed to be a pledge.
Diversification of Investments
With respect to securities comprising 75% of the value of its
total assets, the Fund will not purchase securities issued by any
one issuer (other than cash, cash items, or securities issued or
guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by
such securities) if, as a result, more than 5% of the value of its
total assets would be invested in the securities of that issuer,
and will not acquire more than 10% of the outstanding voting
securities of any one issuer.
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 purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or
interests in real estate.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except to the extent
that the Fund may engage in transactions involving financial
futures contracts or options on financial futures contracts.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of the value of its total assets. This
shall not prevent the Fund from purchasing or holding U.S.
government obligations, money market instruments, variable rate
demand notes, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies, and limitations or the
Trust's Declaration of Trust.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total
assets in any one industry (other than securities issued by the
U.S. government, its agencies or instrumentalities).
The above investment limitations cannot be changed without shareholder
approval. The following investment limitations may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers with records of less than three
years of continuous operations, including the operation of any
predecessor.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if the officers and Trustees of the Trust or the Adviser, owning
individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
Investing in Securities of Other Investment Companies
The Fund will limit its investment in other investment companies
to no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of its total assets in
any one investment company, and invest no more than 10% of its
total assets in investment companies in general. The Fund will
purchase securities of investment companies only in open-market
transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, or acquisition of assets.
Investing in Restricted Securities
The Fund will not invest more than 5% of the value of its total
assets in securities subject to restrictions on resale under the
Securities Act of 1933, except for commercial paper issued under
Section 4(2) of the Securities Act of 1933 and certain other
restricted securities which meet the criteria for liquidity as
established by the Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice, non-
negotiable fixed time deposits with maturities over seven days,
over-the-counter options, and certain restricted securities not
determined by the Trustees to be liquid.
Investing in Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may
invest in the securities of issuers which invest in or sponsor
such programs.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for the purpose
of exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of the value of its net
assets in warrants. No more than 2% of this 5% may be warrants
which are not listed on the New York Stock or American Stock
Exchanges.
Investing in Options
The Fund will not purchase put or call options on securities or
futures contracts if more than 5% of the value of the Fund's total
assets would be invested in premiums on open option positions.
Writing Covered Call Options
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or
after segregating cash in the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Fund does not expect to borrow money or pledge securities in excess
of 5% of the value of its total assets in the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan association having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items."
To comply with registration requirements in certain states, the Fund (1)
will limit the aggregate value of the assets underlying covered call
options or put options written by the Fund to not more than 25% of its
net assets, (2) will limit the premiums paid for options purchased by
the Fund to 5% of its net assets, and (3) will limit the margin deposits
on futures contracts entered into by the Fund to 5% of its net assets.
(If state requirements change, these restrictions may be revised without
shareholder notification.)
Newpoint Funds Management
Officers and Trustees are listed with their addresses, principal
occupations, and present positions.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President and Trustee of the Company.
Thomas G. Bigley
28th Floor, One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management 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
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
Craig P. Churman
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of certain investment companies distributed by
Federated Securities Corp.
* This Trustee is deemed to be an "interested person" as defined
in the Investment Company Act of 1940, as amended.
@ Member 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:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; 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 Institutional
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; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; 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; Liberty Term Trust, Inc. -
1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; 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; World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
Officers and Trustees Compensation
NAME , AND AGGREGATE TOTAL COMPENSATION
POSITION WITH THE COMPENSATION FROM PAID TO THE TRUSTEES
FROM THE
TRUST THE TRUST+ TRUST AND FUND
COMPLEX **
John F. Donahue,
Chairman and Trustee $ -0- $ -0- for the Trust
and
69 investment
companies
Thomas G. Bigley,
Trustee $266 $24,991 for the Trust
and
50 investment
companies
John T. Conroy, Jr.
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
William J. Copeland,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
James E. Dowd,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
Lawrence D. Ellis, M.D.,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Edward L. Flaherty, Jr.
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
Edward C. Gonzales,
President and Trustee $ -0- $ -0- for the Trust
and
18 investment
companies
Peter E. Madden,
Trustee $899.50 $104,880 for the
Trust and
65 investment
companies
Gregor F. Meyer,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Wesley W. Posvar,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Marjorie P. Smuts,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
+The aggregate compensation is paid by the Trust, which is comprised of
two portfolios.
**Certain of the Trustees name as Trustees of some, but not all, of the
investment companies that comprise the Federated Funds Complex. In
addition to Messrs. John F. Donahue and Edward C. Gonzales, no other
Officer of the Trust received any compensation from the Trust.
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 wrongdoing 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 FirstMerit Corp. Because of the internal
controls maintained by First National Bank of Ohio to restrict the flow
of non-public information, Fund investments are typically made without
any knowledge of First National Bank of Ohio's or its affiliates'
lending relationships with an issuer.
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 period from
September 13, 1994 to November 30, 1994, the Adviser earned $17,604, all
of which was voluntarily waived because of undertakings to limit the
Fund's expenses.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's
normal operating expenses (including the investment advisory fee,
but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million
of average net assets, and 1 1/2% per year of the remaining
average net assets, the Adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
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 (the "Administrator"), a subsidiary of
Federated Investors, provides administrative personnel and services to
the Fund for a fee as described in the prospectus. For the period from
September 13, 1994 to November 30, 1994, the Administrator earned
$21,370, of which $17,000 was voluntarily waived.
Brokerage Transactions
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 and dealers 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.
For the period from September 13, 1994 to November 30, 1994, the Fund
paid $22,352 in brokerage commissions on brokerage transactions.
Purchasing Shares
Except under certain circumstances described in the prospectus, shares
of the Fund are sold at their net asset value plus a sales charge, if
any, on days the New York Stock Exchange and the Federal Reserve Wire
System are open for business. The procedure for purchasing shares of the
Fund is explained in the prospectus under "Investing in the Fund."
Distribution and Shareholder Services Plans
These arrangements permit the payment of fees to financial institutions
and the distributor to stimulate distribution activities and to cause
services to be provided to shareholders by a representative who has
knowledge of the shareholder's particular circumstances and goals. These
activities and services may include, but are not limited to: marketing
efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts
and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options,
account designations, and addresses.
By adopting the distribution plan, the Trustees expect that the Fund
will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the period from September 13, 1994 to November 30, 1994, no payments
were made pursuant to either the distribution plan or the shareholder
services plan.
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 acts
as the shareholder's agent in depositing checks and converting them to
federal funds.
Determining Net Asset Value
The net asset value generally changes each day. The days on which the
net asset value is calculated by the Fund are described in the
prospectus.
Determining Market Value of Securities
Market or fair values of the Fund's portfolio securities are determined
as follows:
- for equity securities, according to the last sale price on a
national securities exchange, if applicable;
- in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;
- for unlisted equity securities, latest bid prices;
- for bonds and other fixed income securities, as determined by an
independent pricing service;
- for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, or
for short-term obligations with remaining maturities of 60 days or
less at the time of purchase, at amortized cost; or
- for all other securities, at fair value as determined in good
faith by the Trustees.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may reflect:
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.
The Fund will value futures contracts, options and put options on
financial futures at their market values established by the exchanges at
the close of options trading on such exchanges, unless the Trustees
determine in good faith that another method of valuing option positions
is necessary.
Over-the-counter put options will be valued at the mean between the bid
and the asked prices. Covered call options will be valued at the last
sale price on the national exchange on which such option is traded.
Unlisted call options will be valued at the latest bid price as provided
by brokers.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from
the closing of the New York Stock Exchange. In computing its net asset
value, the Fund values foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing
of the New York Stock Exchange. Certain foreign currency exchange rates
may also be determined at the latest rate prior to the closing of the
New York Stock Exchange. Foreign securities quoted in foreign currencies
are translated into U.S. dollars at current rates. Occasionally, events
that affect these values and exchange rates may occur between the times
at which they are determined and the closing of the New York Stock
Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as
determined in good faith by the Trustees, although the actual
calculation may be done by others.
Redeeming Shares
Shares are redeemed at the next computed net asset value after 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 Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the
Trustees determine that payments should be in kind. In such a case, the
Fund will pay all or a portion of the remainder of the redemption in
portfolio instruments, valued in the same way as the Fund determines net
asset value. The portfolio instruments will be selected in a manner that
the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling
them before their maturity could receive less than the redemption value
of their securities and could incur certain transaction costs.
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.
Foreign Taxes
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the
amount of foreign taxes to which the Fund would be subject.
Shareholders' Tax Status
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. The dividends received
deduction for corporations will apply to ordinary income distributions
to the extent the distribution represents amounts that would qualify for
the dividends received deduction to the Fund if the Fund were a regular
corporation and to the extent designated by the Fund as so qualifying.
These dividends and any short-term capital gains are taxable as ordinary
income.
Capital Gains
Shareholders will pay federal tax at capital gains rates on long-
term capital gains distributed to them regardless of how long they
have held Fund shares.
Total Return
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the maximum offering price per share at the
end of the period. The number of shares owned at the end of the period
is based on the number of shares purchased at the beginning of the
period with $1,000, less any applicable sales load, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
Cumulative total return reflects total performance over a specific
period of time. This total return assumes and is reduced by the payment
of the maximum sales load. The Fund's total return is representative of
less than three months of investment activity since the start of
performance.
The Fund's cumulative total return for the period from September 13,
1994 to November 30, 1994, was (6.17%).
Yield
The yield for the Fund is determined by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a
thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated
during the thirty-day period is assumed to be generated each month over
a twelve-month period and is reinvested every six months. The yield does
not necessarily reflect income actually earned by the Fund because of
certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment
in the Fund, the performance will be reduced for those shareholders
paying those fees.
The Fund's yield for the thirty-day period ended November 30, 1994, was
1.63%.
Performance Comparisons
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates and market value of portfolio
securities;
- changes in the Fund's expenses; and
- various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and the maximum offering price per share fluctuate daily. Both
net earnings and offering price per share are factors in the computation
of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "growth and income" category
in advertising and sales literature.
- Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to
the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in Standard & Poor's figures.
- Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over a
specified period of time.
Advertisements may quote performance information which does not reflect
the effect of the sales load.
Appendix
Standard & Poor's Ratings Group ("S&P") Corporate Bond Rating
Definitions
AAA-Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
NR-Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
Plus (+) or Minus (-):-The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
Moody's Investors Service, Inc. ("Moody's"), Corporate Bond Rating
Definitions
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa-Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
NR-Not rated by Moody's.
Fitch Investors Service, Inc. ("Fitch"), Long-Term Debt Rating
Definitions
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on
these bonds, and therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
NR-NR indicates that Fitch does not rate the specific issue.
Standard & Poor's Ratings Group Commercial Paper Rating Definitions
A-1-This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus (+) sign
designation.
A-2-Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's Investors Service, Inc., Commercial Paper Rating Definitions
P-1-Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
- Leading market positions in well established industries;
- High rates of return on funds employed;
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection;
- Broad margins in earning coverage of fixed financial charges and
high internal cash generation; and
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
P-2-Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above,
but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Fitch Investors Service, Inc., Short-Term Debt Rating Definitions
F-1+-(Exceptionally Strong Credit Quality). Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1-(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues
rated F-1+.
F-2-(Good Credit Quality). Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1 ratings.
G00580-02 (1/95)
Newpoint Government Money Market Fund
(formerly, Portage Government Money Market Fund)
A Portfolio of Newpoint Funds
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of the Newpoint Government Money Market Fund (the
"Fund") dated January 31, 1995. 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, 1995
Federated Securities Corp.
Distributor
A subsidiary of
Federated Investors
First National Bank of Ohio,
Investment Adviser
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
Newpoint Funds Management 3
The Funds 7
Fund Ownership 7
Officers and Trustees
Compensation 8
Trustee Liability 8
Investment Advisory Services 9
Adviser to the Fund 9
Advisory Fees 9
Administrative Services 9
Purchasing Shares 10
Distribution Plan 10
Conversion to Federal Funds 10
Determining Net Asset Value 10
Use of the Amortized Cost
Method 10
Redeeming Shares 11
Redemption in Kind 11
Tax Status 11
The Fund's Tax Status 11
Shareholders' Tax Status 11
Yield 12
Effective Yield 12
Performance Comparisons 12
General Information About the Fund
The Fund is a portfolio in Newpoint Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of
Trust dated November 12, 1990. Effective January 31, 1995, the Trust
changed its name from "Portage Funds" to "Newpoint Funds," and the Fund
changed its name from "Portage Government Money Market Fund" to
"Newpoint Government Money Market Fund." 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 no longer offered separate
classes of shares.
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 or yield for the Fund. 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
assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in when-
issued and delayed delivery transactions to an extent that would cause
the segregation of more than 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 the Trust's 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.
Newpoint Funds Management
Officers and Trustees are listed with their addresses, principal
occupations, and present positions.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President and Trustee of the Company.
Thomas G. Bigley
28th Floor, One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management 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
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
Craig P. Churman
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of certain investment companies distributed by
Federated Securities Corp.
* This Trustee is deemed to be an "interested person" as defined
in the Investment Company Act of 1940, as amended.
@ Member 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:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; 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 Institutional
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; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; 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; Liberty Term Trust, Inc. -
1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; The Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; 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; World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of January 6, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: First National Bank of Ohio,
Akron, Ohio, owned approximately 3,857,769 shares (6.45%).
Officers and Trustees Compensation
NAME , AND AGGREGATE TOTAL COMPENSATION
POSITION WITH THE COMPENSATION FROM PAID TO THE TRUSTEES
FROM THE
TRUST THE TRUST+ TRUST AND FUND
COMPLEX **
John F. Donahue,
Chairman and Trustee $ -0- $ -0- for the Trust
and
69 investment
companies
Thomas G. Bigley,
Trustee $266 $24,991 for the Trust
and
50 investment
companies
John T. Conroy, Jr.,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
William J. Copeland,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
James E. Dowd,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
Lawrence D. Ellis, M.D.,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Edward L. Flaherty, Jr.,
Trustee $1,163.75 $136,100 for the
Trust and
65 investment
companies
Edward C. Gonzales,
President and Trustee $ -0- $ -0- for the Trust
and
18 investment
companies
Peter E. Madden,
Trustee $899.50 $104,880 for the
Trust and
65 investment
companies
Gregor F. Meyer,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Wesley W. Posvar,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
Marjorie P. Smuts,
Trustee $1,059.50 $123,600 for the
Trust and
65 investment
companies
+The aggregate compensation is paid by the Trust which is comprised of
two portfolios.
**Certain of the Trustees name as Trustees of some, but not all, of the
investment companies that comprise the Federated Funds Complex. In
addition to Messrs. John F. Donahue and Edward C. Gonzales, no other
Officer of the Trust received any compensation from the Trust.
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 (the
"Adviser"). It is a wholly-owned subsidiary of FirstMerit Corp. Because
of the internal controls maintained by First National Bank of Ohio to
restrict the flow of non-public information, Fund investments are
typically made without any knowledge of First National Bank of Ohio's or
its affiliates' lending relationships with an issuer.
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, 1994, 1993, and 1992, the Adviser earned $309,110,
$301,679, and $369,754, respectively, of which $123,644, $120,671, and
$147,901, respectively, were voluntarily waived.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's
normal operating expenses (including the investment advisory fee,
but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million
of average net assets, and 1 1/2% per year of the remaining
average net assets, the Adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
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,
1994, 1993 and 1992, the Fund incurred costs for administrative services
of $92,733, $90,504, and $110,926, respectively.
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 load 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
As mentioned earlier in this Statement of Additional Information, the
Fund had, prior to February 1, 1994, offered both an Investment Shares
class and Trust Shares class. With respect to the Investment Shares
class of the Fund, the Trust had adopted and implemented a Distribution
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, 1994, 1993 and 1992, Federated
Securities Corp. earned distribution fees of $4,069, $31,505, and
$37,265, respectively, of which $4,069, $31,505, and $37,265 were
voluntarily waived.
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, as
amended. 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 Fund's net asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the
Trustees determine that payments should be in kind. In such a case, the
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, 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 the Fund's shares, the performance will be reduced for
those shareholders paying those fees.
The yield for the Fund for the seven-day period ended November 30, 1994
was 4.52%.
Effective Yield
The Fund's effective yield is computed by compounding the unannualized
base period return by:
- adding 1 to the base period return;
- raising the sum to the (365/7)th power; and
- subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended November 30,
1994 was 4.63%.
Performance Comparisons
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
- the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- 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.
0121703A (1/95)
