RIGGS FUNDS, 485APOS, 1999-06-18

RIGGS FUNDS
485APOS, 1999-06-18

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1933 Act File No. 33-40428
1940 Act File No. 811-6309

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ........................ _
-------- ---

Post-Effective Amendment No. 13 ........................... X
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 13 ............................................... X
---- ---

RIGGS FUNDS
(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7910
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) _ on _____________________
pursuant to paragraph (b) _X_ 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i) 75 days after filing pursuant to paragraph
(a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies To:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037

Prospectus

RIGGS FUNDS

CLASS B SHARES
Riggs Stock Fund
Riggs Small Company Stock Fund

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

Contents
Fund Goals, Strategies, Performance and Risk
The Funds' Fees and Expenses
Principal Securities in Which the Funds Invest
Specific Risks of Investing in the Funds
What do Shares Cost?
How are the Funds Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Funds?
Financial Information

august ____, 1999

<PAGE>

FUND GOALS, STRATEGIES, PERFORMANCE AND RISK

Riggs Funds offer five portfolios, including two equity funds, one
income fund and two money market funds. The following describes the investment
goals, strategies, and principal risks of the Riggs Stock Fund and the Riggs
Small Company Stock Fund (the "Funds"). There can be no assurance that a Fund
will achieve its goal.

The investment objective of each Fund described in this section may
only be changed upon the approval of a majority of the outstanding shares of the
Fund that would be affected by the change. The investment strategies are not
fundamental and may be changed without shareholder approval.

riggs Stock fund

Goal: Seeks to provide growth of capital and income.

Strategy: The Fund pursues its investment objective by investing at
least 65% of its assets in common stocks, and securities convertible into common
stocks, of high quality, large capitalization U.S. companies. These will
generally be readily recognizable companies whose earnings and dividends are
growing at above average rates. The investment adviser uses the "value" style of
investing, selecting stocks based on such factors as low price/earnings ratios
relative to earnings growth and history; rising earnings estimates; relative
price strength; high or improved earnings, and credit quality.

riggs small company Stock fund

Goal: Seeks to provide long-term capital appreciation.

Strategy: The Fund pursues its investment objective by investing at
least 65% of its assets in a diversified portfolio of stocks of small-sized U.S.
companies which are traded on a recognized securities exchange and which, in the
opinion of the Fund's investment adviser, have potential to become industry
leaders. The Fund seeks to invest primarily in companies whose market
capitalizations are less than $1.2 billion. In selecting securities, the
investment adviser uses the "value" style of investing described above with
respect to Riggs Stock Fund.

<PAGE>

PRINCIPAL RISKS OF THE FUNDS
In addition to the risks set forth below that are specific to an investment in a
particular Fund, there are risks common to all
mutual funds.

For example, a Fund's share price may decline and an investor could lose money.
Also, there is no assurance that a Fund will achieve its investment objective.
The Shares offered by this prospectus are not deposits or obligations of any
bank including Riggs Bank N.A., are not endorsed or guaranteed by the U.S.
government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency.

- ------------------------------ --------------------- ------------------------
Risks Stock Fund Small Company Stock
Fund
- ------------------------------ --------------------- ------------------------
Stock Market Risks (1) o o
- ------------------------------ --------------------- ------------------------
- ------------------------------ --------------------- ------------------------
Liquidity Risks (2) o o
- ------------------------------ --------------------- ------------------------
- ------------------------------ --------------------- ------------------------
Risks Related to Investing o o
for Value (3)
- ------------------------------ --------------------- ------------------------
- ------------------------------ --------------------- ------------------------
Risks Related to Company o
Size (4)
- ------------------------------ --------------------- ------------------------
- ------------------------------ --------------------- ------------------------
Risks of Foreign Investing o o
(5)
- ------------------------------ --------------------- ------------------------

<PAGE>

What are the Fund's Fees and Expenses?
RIGGS FUNDS, CLASS B SHARES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Class B Shares of the Funds.
Shareholder Fees Stock Small Company
Fees Paid Directly From Your Investment Fund Stock
Fund
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase
price or redemption proceeds, as applicable) ............................................... 5.00% 5.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions)
(as a percentage of offering price)......................................................... None
None
Redemption Fee (as a percentage of amount redeemed, if applicable).......................... None
None
Exchange Fee................................................................................ None
None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as percentage of average net assets)
Management Fee ............................................................................. 0.75%
0.80%
Distribution (12b-1) Fee ................................................................... 0.75%
0.75%
Shareholder Services Fee 2 ................................................................. 0.25%
0.25%
Other Expenses ............................................................................. 0.41%
0.53%
Total Annual Fund Operating Expenses ....................................................... 2.16% 2.33%
- -----------------------------------------------------------------------------------------
</TABLE>

1 Although not contractually obligated to do so, the shareholder
services provider waived certain amounts. These are shown below along
with the net expenses the Funds actually paid for the fiscal year
ended April 30, 1999. Total Waivers of Fund Expenses
....................................................................
0.19% 0.20%

Total Annual Fund Operating Expenses (after
waiver)........................................... 1.97% 2.13% 2 The shareholder
services provider voluntarily waived a portion of the shareholder services fee
for the Stock Fund and the Small Company Stock Fund. The shareholder service
provider can terminate this voluntary reduction at any time. The shareholder
services fees paid by the Stock Fund and the Small Company Stock Fund (after the
voluntary reduction) were 0.06% and 0.05% respectively, for the fiscal year
ended April 30, 1999. EXAMPLE This Example is intended to help you compare the
cost of investing in Class B Shares of the Funds with the cost of investing in
other mutual funds.
The Example assumes that you invest $10,000 in the Funds' Class B Shares for
the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that each of the
Funds' Class B Shares operating expenses are before waivers as shown in the
table and remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:

<S> <C> <C> <C> <C> <C>
............................................
.................. ..............
.................. .................1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------
Stock Fund.......................... ....
- -------------------------------------------------------------------------------------------------
Assuming redemption.................$719.... $976 $1,259 $2,493
- -------------------------------------------------------------------------------------------------
Assuming no redemption..............$219.... $676 $1,159 $2,493
- -------------------------------------------------------------------------------------------------
Small Company Stock Fund....................
- ----------------------------------------------------------------------------------------
Assuming redemption.................$736.... $1,027 $1,345 $2,666
- -------------------------------------------------------------------------------------------------
Assuming no redemption..............$236.... $727 $1,245 $2,666
- -------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class R Shares of Riggs Stock Fund as of the calendar
year-end for each of six years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 45.00%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Class R Shares start of business through the
calendar year ended December 31, 1998. The light gray shaded chart features six
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Fund's Class R Shares
for each calendar year is stated directly at the top of each respective bar, for
the calendar years 1993 through 1998. The percentages noted are: 18.51%, 3.44%,
37.59%, 19.90%, 27.75% and 16.50%.

The total returns shown here are for Class R Shares which is another class of
shares offered by the Stock Fund. Class R Shares are not offered in this
prospectus for the Fund's Class B Shares. The total returns for Class R Shares
are disclosed here because Class B Shares have only been offered since July 19,
1998. These total returns would be substantially similar to the annual returns
for Class B Shares over the same period and would differ only to the extent that
the two classes do not have the same expenses. It is anticipated that expenses
of Class B Shares will exceed those of the Class R Shares.

The bar chart shows the variability of the Fund's Class R Shares total returns
on a calendar year-end basis.

The Fund's Class R Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class R Shares total return from January 1, 1999 to March 31, 1999
was -1.45%.

Within the period shown in the Chart, the Fund's Class R Shares highest
quarterly return was 22.00% (quarter ended December 31, 1998). Its lowest
quarterly return was -14.71% (quarter September 30, 1998).

Average Annual Total Return Table
The following table represents the Fund's Class R Shares Average Annual Total
Returns for the calendar periods ending December 31, 1998.

Calendar Period Class R Shares S&P 500
1 Year 14.50% 28.58%
5 Years 20.32% 23.89%
Start of Performance1 18.67% 20.41%
1 The Fund's Class R Shares start of performance date was May 11, 1992.
The table shows the Fund's Class R Shares total returns averaged over a period
of years relative to the Standard & Poor's 500 Index ("S&P 500"), a broad-based
market index. Indexes are unmanaged, and it is not possible to invest directly
in an index.

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class R Shares of Riggs Small Company Stock Fund as of
the calendar year-end for each of three years.

The `y' axis reflects the "% Total Return" beginning with "-15.00%" and
increasing in increments of 5% up to 45.00%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Class R Shares start of business through this
calendar year ended December 31, 1998. The light gray shaded chart features
three distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund's
Class R Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1996 through 1998. The percentages noted
are: 21.92%, 38.85% and -10.44%.

The total returns shown here are for Class R Shares which is another class of
shares offered by the Small Company Stock Fund. Class R Shares are not offered
in the prospectus for the Fund's Class B Shares. The total returns for Class R
Shares are disclosed here because Class B Shares have only been offered since
July 17, 1998. These total returns would be substantially similar to the annual
returns for Class B Shares over the same period and would differ only to the
extent that the two classes do not have the same expenses. It is anticipated
that expenses of Class B Shares will exceed those of the Class R Shares.

The bar chart shows the variability of the Fund's Class R Shares total returns
on a calendar year-end basis.

The Fund's Class R Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class R Shares total return from January 1, 1999 to March 31, 1999
was -11.75%

Within the period shown in the Chart, the Fund's Class R Shares highest
quarterly return was 23.16% (quarter ended September 30, 1997). Its lowest
quarterly return was -29.19% (quarter ended September 30, 1998).

Average Annual Total Return Table
The following table represents the Fund's Class R Shares Average Annual Total
Returns for the calendar periods ending December 31, 1998.

Calendar Period Class R Shares Russell 2000
1 Year -11.98% -2.55%
Start of Performance1 17.63% 15.78%
1 The Fund's Class R Shares start of performance date was February 27, 1995.
The table shows the Fund's Class R Shares total returns averaged over a period
of years relative to the Russell 2000 Index ("Russell 2000"), a broad-based
market index. Indexes are unmanaged, and it is not possible to invest directly
in an index.

<PAGE>

Portfolio Turnover

The Funds actively trade their portfolio securities in an attempt to achieve
their investment objectives. Active trading will cause a Fund to have an
increased portfolio turnover rate, which is likely to generate shorter-term
gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases a
Fund's trading costs and may have an adverse impact on a Fund's performance.

Temporary Defensive Investments
The Funds may temporarily depart from their principal investment strategies by
investing their assets in cash, cash items, and shorter-term, higher-quality
debt securities and similar obligations. They may do this to minimize potential
losses and maintain liquidity to meet shareholder redemptions during adverse
market conditions. This may cause the Funds to give up greater investment
returns to maintain the safety of principal, that is, the original amount
invested by shareholders.

PRINCIPAL SECURITIES IN WHICH THE FUNDS INVEST
Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Funds cannot predict the income they will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the principal types of equity securities in which the Funds
may invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock.
Convertible Securities
Convertible securities are fixed income securities that the Funds have the
option to exchange for equity securities at a specified conversion price. The
option allows the Funds to realize additional returns if the market price of the
equity securities exceeds the conversion price. For example, a Fund may hold
fixed income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, a Fund could realize an additional $2 per share by converting
its fixed income securities. Convertible securities have lower yields than
comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the
underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit a Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment. The Funds treat convertible securities as both fixed income
and equity securities for purposes of its investment policies and limitations,
because of their unique characteristics. (PORTFOLIO MGR. TO CONFIRM) Foreign
Securities Foreign securities are securities of issuers based outside the United
States. The Funds consider an issuer to be based outside the United States if: o
it is organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o it (or its subsidiaries) derived in its most current fiscal year
at least 50% of its total assets, capitalization, gross
revenue or profit from goods produced, services performed, or sales made in
another country.
The foreign securities in which the Funds invest are primarily denominated in
U.S. dollars. Along with the risks normally associated with domestic securities
of the same type, foreign securities are subject to currency risks and risks of
foreign investing.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. Depositary receipts involve
many of the same risks of investing directly in foreign securities,
including currency risks and risks of foreign investing.

SPECIFIC RISKS OF INVESTING IN THE FUNDS
Stock Market Risks
o The value of equity securities in each Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. A
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, a Fund's share
price may decline.
o The Adviser attempts to manage market risk by limiting the amount a Fund
invest in each company's equity securities. However, diversification will
not protect a Fund against widespread or prolonged declines in the stock
market.
Liquidity Risks

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Funds may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Funds' performance. Infrequent trading of securities may also lead to an
increase in their price volatility.

o Liquidity risk also refers to the possibility that a Fund may not be able
to sell a security or close out a derivative contract when it wants to. If
this happens, a Fund will be required to continue to hold the security or
keep the position open, and a Fund could incur losses.

o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts. Risks Related to Investing for Value o Due to their
relatively low valuations, value stocks are typically less volatile than growth
stocks. For instance, the
price of a value stock may experience a smaller increase on a forecast of
higher earnings, a positive fundamental development, or positive market
development. Further, value stocks tend to have higher dividends than
growth stocks. This means they depend less on price changes for returns and
may lag behind growth stocks in an up market.
Risks Related to Company Size
o Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.

o Companies with smaller market capitalizations also tend to have unproven
track records, a limited product or service base and limited access to
capital. These factors also increase risks and make these companies more
likely to fail than companies with larger market capitalizations.

Risks of Foreign Investing
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S.
investors.
o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than United
States companies by market analysts and the financial press. In addition,
foreign countries may lack uniform accounting, auditing and financial
reporting standards or regulatory requirements comparable to those
applicable to U.S. companies. These factors may prevent the Funds and their
Adviser from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.
o Foreign countries may have restrictions on foreign ownership of securities
or may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of a Fund's
investments.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Class B Shares any day the New York Stock
Exchange (NYSE) is open. When a Fund receives your transaction request in proper
form, it is processed at the next calculated net asset value (NAV). The Funds do
not charge a front-end sales charge. The NAV for the Funds is determined at the
end of regular trading (normally 4:00 p.m. Washington, D.C. time) each day the
NYSE is open.

The minimum initial investment in each Fund is $1000, except for an Individual
Retirement Account ("IRA") which requires a minimum initial investment of $500.
Subsequent investments must be in amounts of at least $100, except for an IRA,
which must be in amounts of at least $50. An investor's minimum investment will
be calculated by combining all mutual fund accounts it maintains in the Riggs
Funds.

The minimum investment required may be waived for purchases by employees or
retirees of the Riggs National Corporation and/or its subsidiaries, and their
spouses and children under the age of 21. The minimum investment may also be
waived for investors participating in a payroll deduction program.

SALES CHARGE WHEN YOU REDEEM
Shareholders redeeming Class B Shares (and any Class R Shares of Riggs Prime
Money Market Fund acquired in exchange for Class B Shares) from the Funds within
five years of the purchase date will be charged a CDSC. The CDSC will be
deducted from the redemption proceeds otherwise payable to the shareholder and
will be retained by the distributor. In determining the applicability of the
CDSC, the required holding period for new shares received through an exchange
will include the period for which the original shares were held. Any applicable
CDSC will be imposed on the lesser of the net asset value of the redeemed shares
at the time of purchase or the net asset value of the redeemed shares at the
time of redemption in accordance with the following schedule:

Year of Redemption Contingent Deferred
After Purchase Sales Charge
- ---------------- ------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%

You will not be charged a CDSC when redeeming Shares:

o purchased with reinvested dividends or capital gains;

o following the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, of the last surviving shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70 1/2;

o if a Fund redeems your Shares and closes your account for not meeting
the minimum balance; and

o which are qualifying redemptions of shares under a Systematic
Withdrawal Program.

To keep the sales charge as low as possible, the Funds redeem your Shares in
this order:

o Shares that are not subject to a CDSC; and

o Shares held the longest .

o The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW ARE THE FUNDS SOLD?

The Funds' Distributor, Federated Securities Corp. (Distributor) markets the
Shares described in this prospectus. The Funds offer three share classes: Class
B Shares, Class R Shares and Class Y Shares, each representing interests in a
single portfolio of securities. This prospectus relates only to Class B Shares.
Class B Shares are sold primarily to retail customers through broker/dealers
which are not affiliated with Riggs Bank. Each share class has different
expenses which affect their performance. For more information concerning Class R
Shares and Class Y Shares, contact Riggs Investment Corp. at (202) 835-5300 or
outside the Washington, D.C. metropolitan area toll-free at 1-800-934-3883.

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN
The Funds have adopted a Rule 12b-1 Plan, which allows them to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Funds' Class B Shares at an annual rate of up to
0.75% of the average net assets. Because these Shares pay marketing fees on an
ongoing basis, your investment cost may be higher over time than other shares
with different sales charges and marketing fees.

HOW TO PURCHASE SHARES

You may purchase Shares through Riggs Investment Corp., Riggs Bank, a Riggs
affiliated broker/dealer or through an exchange from another Riggs Fund. The
Funds reserve the right to reject any request to purchase or exchange Shares.
Shares will be purchased at net asset value after the Fund receives the purchase
request from Riggs Investment Corp. Purchase requests through authorized brokers
and dealers must be received by Riggs Investment Corp. and transmitted to the
Funds before 3:00 p.m. (Washington, D.C. time) in order for shares to be
purchased at that day's public offering price.

THROUGH riggs investment corp.

By Wire
To purchase shares of a Fund by wire, call Riggs Investment Corp.

Payment by wire must be received by Riggs Investment Corp. before 3:00 p.m.
(Washington, D.C. time) on the next business day after placing the order. You
cannot purchase Shares by wire on holidays when wire transfers are restricted.

<PAGE>

By Check
Make your check payable to Riggs Funds, note the name of the Fund and the share
class on the check, and mail it to:

Riggs Investment Corp.
P.O. Box 96656
Washington, D.C. 20090-6656

If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

Riggs Investment Corp.
808 17th Street, N.W. - 11th Floor
Washington, D.C. 20006
Orders received by mail are considered received after payment by check is
converted by Riggs Investment Corp. into federal funds. This is normally the
next business day.

through riggs-affiliated broker/Dealers
An investor may place an order through Riggs-affiliated broker/dealers to
purchase shares of a Fund. Shares will be purchased at the public offering price
next determined after the Fund receives the purchase request from the
broker/dealer. Purchase requests through Riggs-affiliated broker/dealers must be
received by the broker/dealer before 3:00 p.m. (Washington, D.C. time) in order
for shares to be purchased at that day's public offering price.

THROUGH AN EXCHANGE
You may purchase Class B Shares of the Funds through an exchange from Class B
Shares of another Riggs Fund and for Class R Shares of Riggs Prime Money Market
Fund. You must meet the minimum initial investment requirement for purchasing
Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn on a periodic schedule from the shareholder's checking
or savings account or an account in one of the Riggs Funds and invested in Fund
shares at the net asset value next determined after an order is received.
Shareholders may apply for participation in this program through Riggs
Investment Corp., Riggs Bank or an authorized broker or dealer.

BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

Through RIGGS FUNDS ONLINE sm
You may purchase Fund shares via the Internet through Riggs Funds OnLine SM at
www.______________.com. See "Fund Transactions through Riggs Funds OnLine sm" in
the Account and Share Information Section.

RETIREMENT INVESTMENTS

Shares of the Funds can be purchased as an investment for retirement plans or
for IRA accounts. For further details, contact Riggs Investment Corp. and
consult a tax adviser.

Conversion of Class B Shares
Class B Shares will automatically convert into Class R Shares after six full
years from the purchase date. Such conversion will be on the basis of the
relative net asset value per share, without the imposition of any charges. Class
B Shares acquired by exchange from Class B Shares of another fund will convert
into Class R Shares based on the time of the initial purchase.

HOW TO REDEEM AND EXCHANGE SHARES

Each Fund redeems Class B Shares (and any Class R Shares of Riggs Prime Money
Market Fund acquired in exchange for Class B Shares) at their net asset value,
less any applicable CDSC, next determined after Riggs Investment Corp. receives
the redemption request.

Redemptions will be made on days on which both the New York Stock Exchange and
Federal Reserve Wire system are open for business. Telephone or written requests
for redemption must be received in proper form by Riggs Investment Corp.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by calling Riggs Investment Corp. once you
have completed the appropriate authorization form for telephone transactions.
Although Riggs Investment Corp. does not charge for telephone redemptions, it
reserves the right to charge a fee for the cost of wire-transferred redemptions
of less than $5,000, or in excess of one per month.

Redemption requests must be received before the end of regular trading on the
NYSE (normally 4:00 p.m. Washington, D.C. time) in order for shares to be
redeemed at that day's NAV.

By Mail
You may redeem or exchange Shares by mailing a written request to:

Riggs Investment Corp.
P.O. Box 96656
Washington, D.C. 20090-6656

Send requests by private courier or overnight delivery service to:

Riggs Investment Corp.
808 17th Street, N.W. - 11th Floor
Washington, D.C. 20006

All requests must include:

o Fund Name, Share Class and account number;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

<PAGE>

Signature Guarantees Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days; or

o if exchanging (transferring) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

o an electronic transfer to your account at a financial institution that
is an ACH member; or

o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind
Although the Funds intend to pay Share redemptions in cash, they reserve the
right to pay the redemption price in whole or in part by a distribution of the
Funds' portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Funds'
ability to manage their assets.

You will not accrue interest or dividends on uncashed checks from a Fund if
those checks are undeliverable and returned to the Fund.

REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in a Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.

systematic withdrawal program
You may automatically redeem Shares in a minimum amount of $50 on a regular
basis. To be eligible to participate in this program, a shareholder must have an
account value of at least $10,000. A shareholder may apply for participation in
this program through Riggs Bank or an authorized broker or dealer. This program
may reduce, and eventually deplete, your account. Payments should not be
considered yield or income.

EXCHANGE PRIVILEGES
A shareholder may generally exchange Class B Shares of one Fund for Class B
Shares of another Fund in the Trust, or exchange Class B Shares of one Fund for
Class R Shares of Riggs Prime Money Market Fund at net asset value. Exchanges
can be made by writing to or calling Riggs Investment Corp. at (202) 835-5300 or
outside the Washington, D.C. metropolitan area toll-free at 1-800-934-3883. A
contingent deferred sales charge ("CDSC") is not assessed in connection with
such exchanges, but if the shareholder redeems shares within five years of the
original purchase, a CDSC will be imposed. For purposes of computing the CDSC,
the length of time the shareholder has owned shares will be measured from the
date of original purchase and will not be affected by the exchange.

Orders for exchanges received by a Fund prior to 4:00 p.m. (Washington, D.C.
time) on any day that Fund is open for business will be executed as of the close
of business that day. Orders for exchanges received after 4:00 p.m. (Washington,
D.C. time) on any business day will be executed at the close of the next
business day.

To execute an order to exchange you must first:

o complete an authorization form permitting a Fund to accept telephone
exchange requests;

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements;

o specify the dollar value or number of shares to be exchanged; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Funds may modify or terminate the exchange privilege at any time. The Funds'
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to a Fund and other shareholders. If this occurs, a Fund may
terminate the availability of exchanges to that shareholder.

Shareholders may obtain further information on the exchange privilege by calling
Riggs Funds Shareholder Services at (202) 835-5300 or outside the Washington,
D.C. metropolitan area toll-free at 1-800-934-3883.

Systematic exchange program
Shareholders who desire to automatically exchange shares of a predetermined
amount on a monthly, quarterly or annual basis may take advantage of a
systematic exchange privilege. The minimum amount that may be exchanged is $50.
Shareholders interested in participating in this program should contact Riggs
Funds Shareholder Services.

ADDITIONAL CONDITIONS

Telephone Transactions
The Funds will record your telephone instructions. If a Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

Share Certificates
The Funds no longer issues share certificates. If you are redeeming or
exchanging Shares represented by certificates previously issued by a Fund, you
must return the certificates with your written redemption or exchange request.
For your protection, send your certificates by registered or certified mail, but
do not endorse them.

ACCOUNT AND SHARE INFORMATION

Fund Transactions Through Riggs Funds OnLine SM.
If you have previously established an account with the Funds, and have signed an
OnLine SM Agreement, you may purchase, redeem or exchange shares through the
Riggs Funds Internet Site on the World Wide Web (http://www.____________.com)
(the Web Site). You may also check your Fund account balance(s) and historical
transactions through the Web Site. You cannot, however, establish a new Fund
account through the Web Site--you may only establish a new Fund account under
the methods described in the How to Purchase Shares section.

Trust customers of Riggs Bank N.A. should contact their account officer for
information on the availability of transactions over the Internet.

You should contact Riggs Funds Shareholder Services (RFSS) at (202) 835-5300 or
outside the Washington D.C. metropolitan area toll-free at 1-800-934-3883 to get
started. RFSS will provide instructions on how to create and activate your
Personal Identification Number (PIN). If you forget or lose your PIN number,
contact RFSS.

Online Conditions
Because of security concerns and costs associated with maintaining the Web Site,
purchases, redemptions, and exchanges through the Web Site are subject to the
following daily minimum and maximum transaction amounts:

.........Minimum..Maximum

Purchases .........$____............$_________

Redemptions .........By ACH: $___.....By ACH: $________

.........By wire: $____...By wire: $_________

Exchanges .........$_______.$_________

Shares may be redeemed or exchanged based on either a dollar amount or number of
shares. If you are redeeming or exchanging based upon number of Fund shares, you
must redeem or exchange enough shares to meet the minimum dollar amounts
described above, but not so much as to exceed the maximum dollar amounts.

Your transactions through the Web Site are effective at the time they are
received by the Fund, and are subject to all of the conditions and procedures
described in this prospectus.

Shareholders may not change their address of record, registration, or wiring
instructions through the Web Site. The Web Site privilege may be modified at any
time, but you will be notified in writing of any termination of the privilege.

Online Risks
Shareholders that utilize the Web Site for account histories or transactions
should be aware that the Internet is an unsecured, unstable, unregulated and
unpredictable environment. Your ability to use the Web Site for transactions is
dependent upon the Internet and equipment, software, systems, data and services
provided by various vendors and third parties (including telecommunications
carriers, equipment manufacturers, firewall providers and encryption system
providers).

While the Funds and their service providers have established certain security
procedures, the Funds, their distributor and transfer agent cannot assure you
that inquiries or trading activity will be completely secure. There may also be
delays, malfunctions or other inconveniences generally associated with this
medium. There may be times when the Web Site is unavailable for Fund
transactions, which may be due to the Internet or the actions or omissions of
any third party--should this happen, you should consider purchasing, redeeming
or exchanging shares by another method. The Riggs Funds, its transfer agent,
distributor and RFSS are not responsible for any such delays or malfunctions,
and are not responsible for wrongful acts by third parties, as long as
reasonable security procedures are followed.

CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges except for
systematic transactions. In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS
Dividends on the Funds are declared and paid quarterly. Unless cash payments are
requested by shareholders in writing to the appropriate Fund or by indication on
the account application, dividends are automatically reinvested in additional
shares of a Fund on payment dates at the ex-dividend date net asset value
without a sales charge.

In addition, the Funds pay any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before a Fund declares a dividend or
capital gain.

ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions or exchanges cause the account balance to fall below the
minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
The required minimum may be waived for employees or retirees of the Riggs
National Corporation and/or its subsidiaries, employees of any broker/dealer
operating on the premises of Riggs Bank, and their spouses and children under
21.

TAX INFORMATION
The Funds send an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in a Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time a Fund holds
its assets.

Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state, and local tax liability.

WHO MANAGES THE FUNDS?

The Board of Trustees governs the Funds. The Board selects and oversees the
Adviser, Riggs Investment Management Corp. ("RIMCO"). The Adviser manages the
Funds' assets, including buying and selling portfolio securities. The Adviser's
address is 800 17th Street N.W., Washington, D.C. 20006.

RIMCO is a subsidiary of Riggs Bank, which is a subsidiary of Riggs National
Corporation, a bank holding company. RIMCO has advised the Riggs Funds since
September 1991, and as of April 30, 1999, provides investment advice for assets
approximating $______ billion. RIMCO has a varied client base of over _____
other relationships including corporate, union and public pension plans,
foundations, endowments and associations.

The Funds' portfolio manager is Philip D. Tasho. Mr. Tasho is the Chief
Executive Officer and Chief Investment Officer of RIMCO and served as the
manager of the Stock Fund from its inception through June 1994. Most recently,
Mr. Tasho was a Vice President at Shawmut Investment Advisers in Boston, MA from
1994 to 1995. Prior to that, Mr. Tasho served as a Managing Director of RIMCO
and was a member of the senior management committee from 1990 to 1994. He also
served as a Senior Portfolio Manager for the Sovran Bank in Bethesda and as
Director of Research for the same bank at its Richmond head office. He started
his career as a Trust Investment Officer for the First American Bank in
Washington. Mr. Tasho earned a B.A. in Russian from Grinnel College and an
M.B.A. in Finance and Investments from George Washington University. He holds a
CFA from the Institute of Chartered Financial Analysts. Mr. Tasho assumed
portfolio management responsibility of the Stock Fund and Small Company Stock
Fund in November 1995.

Advisory Fees
The Adviser receives an annual investment advisory fee at an annual rate of up
to 0.75% of the Stock Fund's and 0.80% of the Small Company Stock Fund's average
net assets. The Adviser may voluntarily waive a portion of its fee or reimburse
the Funds for certain operating expenses.

Year 2000 Readiness
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Funds', that rely on computers.

While it is impossible to determine in advance all of the risks to the Funds,
the Funds could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Funds' service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Funds' investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Funds
may purchase.

The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Funds' financial
performance for its past five fiscal years, or since inception, if the life of a
Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Funds, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Ernst & Young LLP, whose report, along with
the Funds' audited financial statements, is included in the Annual Report.

<PAGE>

RIGGS FUNDS

CLASS B SHARES
Riggs Stock Fund
Riggs Small Company Stock Fund

A Statement of Additional Information (SAI) dated August ___, 1999, is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is contained in the Funds' annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Funds'
performance during their last fiscal year. To obtain the SAI, the annual report,
semi-annual report and other information without charge, call your investment
professional or contact Riggs Funds Shareholder Services at (202) 835-5300 or
outside the Washington, D.C.
metropolitan area toll-free at 1-800-934-3883.

You can obtain information about the Funds (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

Investment Company Act File No. 811-6309

Cusip 76656A 708
Cusip 76656A 880

Prospectus

RIGGS FUNDS

CLASS R SHARES
Riggs U.S. Treasury Money Market Fund
Riggs Prime Money Market Fund
Riggs U.S. Government Securities Fund
Riggs Stock Fund
Riggs Small Company Stock Fund

CLASS Y SHARES
Riggs U.S. Treasury Money Market Fund
Riggs Prime Money Market Fund

august ____, 1999

<PAGE>

FUND GOALS, STRATEGIES, PERFORMANCE AND RISK

Riggs Funds offer five portfolios, including two equity funds, one
income fund and two money market funds. The following describes the investment
goals, strategies, and principal risks of each Fund. There can be no assurance
that a Fund will achieve its goal.

The investment objective of each Fund described in this section may
only be changed upon the approval of a majority of the outstanding shares of the
Fund which would be affected by the change. The investment strategies are not
fundamental and may be changed without shareholder approval.

riggs u.s. treasury money market fund

Goal: Seeks to provide current income consistent with stability of
principal and liquidity.

Strategy: The Fund pursues its investment objective by investing only in a
portfolio of short-term U.S. Treasury obligations and repurchase agreements
fully collateralized by U.S. Treasury obligations. U.S. Treasury obligations are
issued by the U.S. government, and are fully guaranteed as to payment of
principal and interest by the United States. The investment adviser selects
securities after assessing macroeconomic factors, including current and expected
interest rates.

riggs Prime Money market fund

Goal:Seeks to provide current income consistent with stability of principal and
liquidity.

Strategy: The Fund pursues its investment objective by investing
exclusively in a portfolio of corporate, municipal, U.S. government and other
money market instruments (high-quality, short-term debt securities) maturing in
397 days or less. The securities in which the Fund invests must be rated in the
highest short-term category by two recognized rating services or be of
comparable quality to securities having such ratings. The investment adviser
uses macroeconomic credit and market analysis to select portfolio securities. In
so doing , it assesses a variety of factors including the current and expected
U.S. economic growth, interest rates and inflation rates.

riggs u.s. government securities fund

Goal: Seeks to achieve current income.

Strategy: The Fund pursues its investment objective by investing at
least 65% of its assets in U.S. Treasury and government agency securities. The
Fund may also invest in non-governmental debt securities, such as those issued
by corporations or banks, and in privately issued collateralized mortgage
obligations. The adviser uses macroecomomic credit and market analysis to select
portfolio securities. In so doing, it assesses a variety of factors, including
the current and expected U.S. economic growth, interest rates and inflation
rates.

riggs Stock fund

Goal: Seeks to provide growth of capital and income.

<PAGE>

riggs small company Stock fund

Goal: Seeks to provide long-term capital appreciation.

PRINCIPAL RISKS OF THE FUNDS
In addition to the risks set forth below that are specific to an investment in a
particular Fund, there are risks common to all mutual funds. For example, a
Fund's share price may decline and an investor could lose money. Thus, although
the Prime Money Market Fund and the Treasury Money Market Fund seek to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in any of the Riggs Funds. Also, there is no assurance that a Fund
will achieve its investment objective. The Shares offered by this prospectus are
not deposits or obligations of any bank including Riggs Bank N.A., are not
endorsed or guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency.

<TABLE>

- ------------------------------- -------------- ------------- ------------- -------------- -------------
Risks U.S. Prime Money U.S. Stock Fund Small
Treasury Market Fund Government Company
Money Market Securities Stock Fund
Fund Fund
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Stock Market Risks (1) o o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Liquidity Risks (2) o o o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Risks Related to Investing o o
for Value (3)
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Risks Related to Company Size o
(4)
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Risks of Foreign Investing (5) o o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Credit Risks (6) o o o o o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Interest Rate Risks (7) o o o o o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
- ------------------------------- -------------- ------------- ------------- -------------- -------------
Prepayment Risks (8) o
- ------------------------------- -------------- ------------- ------------- -------------- -------------
</TABLE>

(1) The value of equity securities rise and fall.
(2) Limited trading opportunities for certain securities and the inability to
sell a security at will could result in losses to a Fund.
(3) Value stocks depend less on price changes for returns and may lag behind
growth stock in an up market. (4) The smaller the capitalization of a company,
the less liquid its stock and the more volatile its price. (5) Foreign economic,
political or regulatory conditions may be less favorable than those of the
United States. (6) The possibility that an issuer will default on a security by
failing to pay interest or principal when due. (7) Prices of fixed income
securities rise and fall in response to interest rate changes. (8) The relative
volatility of mortgage-backed securities due to the likeliness of prepayments
which increase in a declining interest rate environment and decrease in a
rising interest rate environment.

<PAGE>

WHAT ARE THE FUNDS' FEES AND EXPENSES?

RIGGS FUNDS, CLASS y SHARES AND CLASS r SHARES

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Class Y or Class R Shares of the Funds.

Fees Paid Directly From Your Investment Small
U.S. Treasury Money Market Prime Money U.S. Government Company
Fund Market Fund Securities Fund Stock Fund Stock
Fund
Class Y Class R Class Y Class R Class R Shares Class R Class R
Shares Shares Shares Shares Shares Shares
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)............ None None None None None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, as applicable)................. None None None None 2.00% 2.00% 2.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price)................. None None None None None None None
Redemption Fee
(as a percentage of amount redeemed, if applicable).. None None None None None None None
Exchange Fee..........................................None None None None None None None

Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Management Fee 0.50% 0.50% 0.50% 0.50% 0.75% (2) 0.75% 0.80%
Distribution (12b-1) Fee None 0.50%(3) None 0.50% (3) 0.25% (3) 0.25% (3) 0.25%(3)
Shareholder Services Fee 0.25% (4)0.25% (4) 0.25% (4) 0.25% (4) 0.25% (4) 0.25% (4) 0.25%(4)
Other Expenses 0.22% 0.30% 0.19% 0.24% 0.33% 0.23% 0.33%
Total Annual Fund Operating Expenses 0.97% 1.55% 0.94% 1.49% 1.58% 1.48% 1.63%
</TABLE>

1 Although not contractually obligated to do so, the Adviser, distributor and
shareholder services provider waived certain amounts. These are shown below
along with the net expenses the Funds actually paid for the fiscal year ended
April 30, 1999.

Total Waiver of Fund Expenses 0.25% 0.47% 0.25% 0.46% 0.67% 0.26% 0.26%
Total Annual Operating Expenses (after waivers) 0.72% 1.08% 0.69% 1.03% 0.91% 1.22% 1.37%
</TABLE>

2 The Adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by U.
S. Government Securities Fund (after the voluntary waiver) was 0.35% for the
fiscal year ended April 30, 1999.
3 The distributor waived a portion of the Class R Shares distribution (12b-1)
fee. The distributor can terminate this voluntary waiver at any time. The
distribution fee (12b-1) paid by U.S. Treasury Money Market Fund, Prime Money
Market Fund, U.S. Government Securities Fund, Stock Fund and Small Company
Stock Fund (after voluntary waiver) was 0.25%, 0.25%, 0.15%, 0.15% and 0.15%,
respectively for the fiscal year ended April 30, 1999.
4 The shareholder services provider waived a portion of the Class Y Shares
shareholder services fee. The shareholder services provider can terminate this
voluntary waiver at any time. The shareholder services fee paid by U.S.
Treasury Money Market Fund and Prime Money Market Fund, was 0.00% and 0.00%,
respectively for the fiscal year ended April 30, 1999. The shareholder
services provider also waived a portion of the Class R Shares shareholder
services fee. The shareholder services provider can terminate this voluntary
waiver at any time. The shareholder services fee paid by U.S. Treasury Money
Market Fund, Prime Money Market Fund, U.S. Government Securities Fund, Stock
Fund and Small Company Stock Fund (after voluntary waiver) was 0.03%, 0.04%,
0.08%, 0.09% and 0.09%, respectively for the fiscal year ended April 30, 1999.

EXAMPLE
The following Example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Funds for the time periods
indicated and then redeem all of your shares at the end of those periods.
Expenses assuming no redemption are also shown. The Example also assumes that
your investment has a 5% return each year and that the Funds' operating expenses
are before waivers as shown in the table and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

..........................

Assuming Redemption:.......

U.S. Treasury Prime Money Market Fund,
Money Market Fund
Class Y Class R Class Y Class R U.S. Government Stock Small
Securities Fund Fund Company
Stock Fund
- ---------------------------------------------------------------------------------------------------------------------
1 Year $99 $158 $96 $152 $361 $351 $339
3 Years $309 $490 $300 $471 $699 $668 $634
5 Years $536 $845 $520 $813 $1,060 $1,008 $950
10 Years $1,190 $1,845 $1,155 $1,779 $1,878 $1,768 $1,646

Assuming no Redemption:

1 Year $99 $158 $96 $152 $161 $151 $139
3 Years $309 $490 $300 $471 $499 $468 $434
5 Years $536 $845 $520 $813 $860 $808 $750
10 Years $1,190 $1,845 $1,155 $1,779 $1,878 $1,768 $1,646

</TABLE>

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class Y Shares of Riggs Treasury Money Market Fund as of
the calendar year-end for each of seven years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 3% up to 6%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Class Y Shares start of business through the
calendar year ended December 31, 1998. The light gray shaded chart features
seven distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund's
Class Y Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1992 through 1998. The percentages noted
are: 3.32%, 2.60%, 3.55%, 5.40%, 4.85%, 5.00%, 4.75%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Class Y Shares total
returns on a calendar year-end basis.

The Fund's Class Y Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class Y Shares total return from January 1, 1999 to March 31, 1999
was 1.00%.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 1.38% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.64% (quarter ended December 31, 1993).

Average Annual Total Return Table
The following table represents the Fund's Class Y Shares and Class R Shares
Average Annual Total Returns for the calendar periods ending December 31, 1998.

Calendar Period Class Y Shares Class R Shares
1 Year 4.75% N/A
5 Years 4.71% N/A
Start of Performance1 4.23% 2.09%
1 The Fund's Class Y Shares and Class R Shares start of performance dates were
October 8, 1991 and July 7, 1998, respectively. The Fund's Class Y Shares and
Class R Shares 7-Day Net Yields as of December 31, 1998 were 4.20% and 3.95%,
respectively.

Investors may call the Fund at ____________ to acquire the current 7-Day Net
Yields.

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class Y Shares of Riggs Prime Money Market Fund as of
the calendar year-end for each of seven years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 3% up to 6%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Class Y Shares total
returns on a calendar year-end basis.

The Fund's Class Y Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class Y Shares total return from January 1, 1999 to March 31, 1999
was 1.09%.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 1.43% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.72% (quarter ended December 31, 1993).

Average Annual Total Return Table
The following table represents the Fund's Class Y Shares and Class R Shares
Average Annual Total Returns for the calendar periods ending December 31, 1998.

Calendar Period Class Y Shares Class R Shares
1 Year 4.99% N/A
5 Years 5.00% N/A
Start of Performance1 4.59% 4.73%
1 The Fund's Class Y Shares and Class R Shares start of performance dates were
September 17, 1991 and December 12, 1995, respectively. The Fund's Class Y
Shares and Class R Shares 7-Day Net Yields as of December 31, 1998 were 4.66%
and 4.41%, respectively.

Investors may call the Fund at ____________ to acquire the current 7-Day Net
Yields.

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class R Shares of Riggs U.S. Government Securities Fund
as of the calendar year-end for each of six years.

The `y' axis reflects the "% Total Return" beginning with "-6.00%" and
increasing in increments of 5% up to 34.00%.

The bar chart shows the variability of the Fund's Class R Shares total returns
on a calendar year-end basis.

The Fund's Class R Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class R Shares total return from January 1, 1999 to March 31, 1999
was -1.20%.

Within the period shown in the Chart, the Fund's Class R Shares highest
quarterly return was 6.49% (quarter ended June 30, 1995). Its lowest quarterly
return was -3.03% (quarter ended March 31, 1994).

Average Annual Total Return Table
The following table represents the Fund's Class R Shares Average Annual Total
Returns for the calendar periods ending December 31, 1998.

U.S.
Calendar Period Government LBGCTI
Securities Fund
1 Year 6.88% 9.47%
5 Years 5.89% 7.30%
Start of Performance1 7.43% 8.42%
1 The Fund's start of performance date was May 11, 1992.
The table shows the Fund's Class R Shares total returns averaged over a period
of years relative to the Lehman Brothers Government/Corporate (Total) Index
("LBGCTI"), a broad-based market index. Indexes are unmanaged, and it is not
possible to invest directly in an index.

<PAGE>

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class R Shares of Riggs Stock Fund as of the calendar
year-end for each of six years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 45.00%.

The bar chart shows the variability of the Fund's Class R Shares total returns
on a calendar year-end basis.

The Fund's Class R Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class R Shares total return from January 1, 1999 to March 31, 1999
was -1.45%.

Average Annual Total Return Table
The following table represents the Fund's Class R Shares Average Annual Total
Returns for the calendar periods ending December 31, 1998.

<PAGE>

The `y' axis reflects the "% Total Return" beginning with "-15.00%" and
increasing in increments of 5% up to 45.00%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's Class R Shares start of business through the
calendar year ended December 31, 1998. The light gray shaded chart features
three distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund's
Class R Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1996 through 1998. The percentages noted
are: 21.92%, 38.85% and -10.44%.

The bar chart shows the variability of the Fund's Class R Shares total returns
on a calendar year-end basis.

The Fund's Class R Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's Class R Shares total return from January 1, 1999 to March 31, 1999
was -11.75%

Average Annual Total Return Table
The following table represents the Fund's Class R Shares Average Annual Total
Returns for the calendar periods ending December 31, 1998.

<PAGE>

Portfolio Turnover
The U.S. Government Securities Fund, Stock Fund and Small Company Stock Fund
actively trade their portfolio securities in an attempt to achieve their
investment objectives. Active trading will cause a Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases a Fund's trading costs
and may have an adverse impact on a Fund's performance.

Temporary Defensive Investments
The Stock Fund, Small Company Stock Fund and U.S. Government Securities Fund may
temporarily depart from their principal investment strategies by investing their
assets in cash, cash items, and shorter-term, higher-quality debt securities and
similar obligations. They may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause the Funds to give up greater investment returns to maintain the safety
of principal, that is, the original amount invested by shareholders.

PRINCIPAL SECURITES IN WHICH THE FUNDS INVEST
Equity Securities
The equity securities held by the STOCK FUND and SMALL COMPANY STOCK FUND
represent a share of an issuer's earnings and assets, after the issuer pays its
liabilities. The Funds cannot predict the income they will receive from equity
securities because issuers generally have discretion as to the payment of any
dividends or distributions. However, equity securities offer greater potential
for appreciation than many other types of securities, because their value
increases directly with the value of the issuer's business. The following
describes the principal types of equity securities in which a Fund may invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the principal types of fixed income securities in which a
Fund may invest.
T

<PAGE>

reasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities held by the Funds are generally regarded
as having the lowest credit risks. Agency Securities The Funds, with the
exception of the U.S. Treasury Money Market Fund, may invest in agency
securities. Agency securities are issued or guaranteed by a federal agency
or other government sponsored entity acting under federal authority (a
GSE). The United States supports some GSEs with its full, faith and credit.
Other GSEs receive support through federal subsidies, loans or other
benefits. A few GSEs have no explicit financial support, but are regarded
as having implied support because the federal government sponsors their
activities. Agency securities are generally regarded as having low credit
risks, but not as low as treasury securities.
The Funds treat mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.
Corporate Debt Securities
The Funds, with the exception of the U.S. Treasury Money Market Fund, may
invest in corporate debt securities. Corporate debt securities are fixed
income securities issued by businesses. Notes, bonds, debentures and
commercial paper are the most prevalent types of corporate debt securities.
A Fund may also purchase interests in bank loans to companies. The credit
risks of corporate debt securities vary widely among issuers. In addition,
the credit risk of an issuer's debt security may vary based on its priority
for repayment. For example, higher ranking (senior) debt securities have a
higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event
of bankruptcy, holders of senior securities may receive amounts otherwise
payable to the holders of subordinated securities. Some subordinated
securities, such as trust preferred and capital securities notes, also
permit the issuer to defer payments under certain circumstances. For
example, insurance companies issue securities known as surplus notes that
permit the insurance company to defer any payment that would reduce its
capital below regulatory requirements.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default. Demand Instruments Demand instruments are
corporate debt securities that the issuer must repay upon demand. Other
demand instruments require a third party, such as a dealer or bank, to
repurchase the security for its face value upon demand. The Funds treat
demand instruments as short-term securities, even though their stated
maturity may extend beyond one year.
Mortgage Backed Securities
The mortgage backed securities held by the U.S. GOVERNMENT SECURITIES FUND
represent interests in pools of mortgages. The mortgages that comprise a
pool normally have similar interest rates, maturities and other terms.
Mortgages may have fixed or adjustable interest rates. Interests in pools
of adjustable rate mortgages are known as ARMs. Mortgage backed securities
come in a variety of forms. Many have extremely complicated terms. The
simplest form of mortgage backed securities are pass-through certificates.
An issuer of pass-through certificates gathers monthly payments from an
underlying pool of mortgages. Then, the issuer deducts its fees and
expenses and passes the balance of the payments onto the certificate
holders once a month. Holders of pass-through certificates receive a pro
rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.
Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and interest rate
risks for each CMO class. The degree of increased or decreased
prepayment risks depends upon the structure of the CMOs. However, the
actual returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can
predict and will vary among pools.
Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all
principal payments after the first class is paid off. This process
repeats for each sequential class of CMO. As a result, each class
of sequential pay CMOs reduces the prepayment risks of subsequent
classes. The degree of increased or decreased prepayment risks
depends upon the structure of the CMOs. However, the actual
returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can
predict and will vary among pools.
Bank Instruments
The Funds, with the exception of the U.S. Treasury Money Market Fund, may
invest in bank instruments. Bank instruments are unsecured interest bearing
deposits with banks. Bank instruments include bank accounts, time deposits,
certificates of deposit and banker's acceptances. Yankee instruments are
denominated in U.S. dollars and issued by U.S. branches of foreign banks.
Eurodollar instruments are denominated in U.S. dollars and issued by
non-U.S. branches of U.S. or foreign banks. Credit Enhancement Credit
enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some
cases the company providing credit enhancement makes all payments directly
to the security holders and receives reimbursement from the issuer.
Normally, the credit enhancer has greater financial resources and liquidity
than the issuer. For this reason, the Adviser usually evaluates the credit
risk of a fixed income security based solely upon its credit enhancement.
Certain of the PRIME MONEY MARKET FUND's investments may be credit
enhanced. Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to security's holders. Either form of credit enhancement
reduces credit risks by providing another source of payment for a fixed
income security.
Convertible Securities
Convertible securities are fixed income securities that a Fund has the option to
exchange for equity securities at a specified conversion price. The option
allows the STOCK FUND and SMALL COMPANY STOCK FUND to realize additional returns
if the market price of the equity securities exceeds the conversion price. For
example, a Fund may hold fixed income securities that are convertible into
shares of common stock at a conversion price of $10 per share. If the market
value of the shares of common stock reached $12, a Fund could realize an
additional $2 per share by converting its fixed income securities. Convertible
securities have lower yields than comparable fixed income securities. In
addition, at the time a convertible security is issued the conversion price
exceeds the market value of the underlying equity securities. Thus, convertible
securities may provide lower returns than non-convertible fixed income
securities or equity securities depending upon changes in the price of the
underlying equity securities. However, convertible securities permit a Fund to
realize some of the potential appreciation of the underlying equity securities
with less risk of losing its initial investment. The Funds treat convertible
securities as both fixed income and equity securities for purposes of its
investment policies and limitations, because of their unique characteristics.
(PORTFOLIO MGR. TO CONFIRM)

Foreign Securities
The foreign securities held by the STOCK FUND and SMALL COMPANY STOCK FUND are
securities of issuers based outside the United States. The Funds consider an
issuer to be based outside the United States if: o it is organized under the
laws of, or has a principal office located in, another country; o the principal
trading market for its securities is in another country; or o it (or its
subsidiaries) derived in its most current fiscal year at least 50% of its total
assets, capitalization, gross revenue or profit from goods produced, services
performed, or sales made in another country. The foreign securities in which the
Funds invest are primarily denominated in U.S. dollars. Along with the risks
normally associated with domestic securities of the same type, foreign
securities are subject to risks of foreign investing.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. Depositary receipts involve
many of the same risks of investing directly in foreign securities,
including currency risks and risks of foreign investing.

Special Transactions
Repurchase Agreements
The Funds may enter into repurchase agreements. Repurchase agreements are
transactions in which a Fund buys a security from a dealer or bank and
agree to sell the security back at a mutually agreed upon time and price.
The repurchase price exceeds the sale price, reflecting a Fund's return on
the transaction. This return is unrelated to the interest rate on the
underlying security. A Fund will enter into repurchase agreements only with
banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Funds' custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to counterparty risks.

Investment Ratings
The securities in which the Prime Money Market Fund invests must be rated in the
highest short-term category by two recognized rating services or be of
comparable equality to securities having such ratings.

Investment Ratings for Investment Grade Securities
The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, a Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.

SPECIFIC RISKS OF INVESTING IN THE FUNDS
Stock Market Risks
o The value of equity securities in a Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. A
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's
share price may decline.

o The Adviser attempts to manage market risk by limiting the amount a Fund
invest in each company's equity securities. However, diversification will
not protect a Fund against widespread or prolonged declines in the stock
market.

Liquidity Risks

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, a Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on a
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.

o Liquidity risk also refers to the possibility that a Fund may not be able
to sell a security or close out a derivative contract when it wants to. If
this happens, the Fund will be required to continue to hold the security or
keep the position open, and the Fund could incur losses.

Risks Related to Company Size
o Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.

o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than United
States companies by market analysts and the financial press. In addition,
foreign countries may lack uniform accounting, auditing and financial
reporting standards or regulatory requirements comparable to those
applicable to U.S. companies. These factors may prevent a Fund and its
Adviser from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.

o Foreign countries may have restrictions on foreign ownership of securities
or may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of a Fund's
investments.

<PAGE>

Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a
Fund will lose money.

o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, a Fund must rely entirely upon the Adviser's credit
assessment.

o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.

o Credit risk includes the possibility that a party to a transaction
involving a Fund will fail to meet its obligations. This could cause a Fund
to lose the benefit of the transaction or prevent a Fund from selling or
buying other securities to implement its investment strategy.

Interest Rate Risks
o Prices of fixed income securities rise and fall in response to changes in
the interest rate paid by similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may
cause the price of certain fixed income securities to fall while the prices
of other securities rise or remain unchanged.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.

Prepayment Risks

o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
Other economic factors can also lead to increases or decreases in
prepayments. Increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. These factors,
particularly the relationship between interest rates and mortgage
prepayments makes the price of mortgage backed securities held by a Fund
more volatile than many other types of fixed income securities with
comparable credit risks.

o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security is
perceived to have an increased prepayment risk or perceived to have less
market demand. An increase in the spread will cause the price of the
security to decline.

o The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks,
or other less favorable characteristics.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When a Fund receives your transaction request in proper form, it
is processed at the next calculated net asset value (NAV) The Funds do not
charge a front-end sales charge. The NAV for the Stock Fund, Small Company Stock
Fund and U.S. Government Securities Fund is determined at the end of regular
trading (normally 4:00 p.m. Washington, D.C. time) each day the NYSE is open.
The NAV for the U.S. Treasury Money Market Fund and Prime Money Market Fund
(together, the "Money Market Funds") is determined at 12:00 noon and 4:00 p.m.
(Washington, D.C. time).

With the exception of the Class R Shares of the Money Market Funds, the minimum
initial investment in each Fund is $1000, except for an Individual Retirement
Account ("IRA") which requires a minimum initial investment of $500. Subsequent
investments must be in amounts of at least $1,000, with the exception of
investments made through an automatic investment program which must be in
amounts of at least $100. Subsequent investments for an IRA must be in amounts
of at least $50. An investor's minimum investment will be calculated by
combining all mutual fund accounts it maintains in the Riggs Funds. The minimum
investment requirements described above are not applicable to Class R Shares of
the Money Market Funds, for which the minimum investment requirement, if any,
would be specified in the Riggs Bank or Riggs Investment Corp. Service
Agreement.

SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC). Shareholders redeeming Class R
Shares from the Funds (with the exception of the Money Market Funds, unless the
Money Market Fund Shares were acquired in exchange for Class R Shares or Class B
Shares of a Fund which is not a Money Market Fund) within five years of the
purchase date will be charged a CDSC equal to 2.00% or the lesser of the net
asset value of the redeemed shares at the time of purchase or the net asset
value of the redeemed shares at the time of redemption. The CDSC will be
deducted from the redemption proceeds otherwise payable to the shareholder and
will be retained by the distributor. In determining the applicability of the
CDSC, the required holding period for new shares received through an exchange
will include the period for which the original shares were held.

You will not be charged a CDSC when redeeming Shares:

o as a shareholder who acquired Shares prior to July 1, 1998 (including shares
acquired in exchange for shares acquired prior to July 1, 1998);

o purchased with reinvested dividends or capital gains;

o following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of 70
1/2;

o if a Fund redeems your Shares and closes your account for not meeting the
minimum balance; and

o which are qualifying redemptions of shares under a Systematic Withdrawal
Program.

In addition, you will not be charged a CDSC:

o on shares held by Trustees, employees and retired employees of the Funds,
Riggs National Corporation and/or its subsidiaries, or Federated Securities
Corp. and/or its affiliates, and their spouses and children under the age of 21;

o on shares originally purchased (i) through the Trust Division or the Private
Banking Division of Riggs Bank; (ii) through an investment adviser registered
under the Investment Advisers Act of 1940; (iii) through retirement plans where
the third party administrator has entered into certain arrangements with Riggs
Bank or its affiliates; or (iv) by any bank or dealer (in each case for its own
account) having a sales agreement with Federated Securities Corp.; and

o on shares purchased through entities having no transaction fee agreements or
wrap accounts with Riggs Bank or its affiliates.

To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:

o Shares that are not subject to a CDSC; and

o Shares held the longest .

o The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW ARE THE FUNDS SOLD?

The Funds offer three share classes: Class R Shares, Class Y Shares and Class B
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Class R Shares and Class Y Shares. Each share class
has different expenses which affect their performance. For more information
concerning Class B Shares, contact Riggs Investment Corp. at (202) 835-5300 or
outside the Washington, D.C. metropolitan area toll-free at 1-800-934-3883.

The Funds' Distributor, Federated Securities Corp. (Distributor) markets the
Shares described in this prospectus. With respect to the Money Market Funds,
Class R Shares (which are subject to the distribution fee) are sold primarily to
retail customers of Riggs Bank through Riggs Investment Corp., Riggs Bank and
its affiliates, and to other retail customers through non-affiliated, authorized
broker/dealers. Class R Shares of the Money Market Funds are also available to
retail and institutional investors in connection with an Asset Management
Program for automatic investment. Class Y Shares of the Money Market Funds
(which are not subject to the distribution fee) are sold primarily to trusts,
fiduciaries and institutions; and to persons and entities ("Class A
Shareholders") who held Class Y Shares (formerly known as "Class A Shares") on
June 30, 1998 .

Class R Shares of U.S. Government Securities Fund, Stock Fund, and Small Company
Stock Fund are sold primarily to retail and trust customers of Riggs Bank
through Riggs Bank and its affiliates.

RULE 12B-1 PLAN
The Funds have adopted a Rule 12b-1 Plan, which allows them to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Funds' Class R Shares at an annual rate of up to
0.25% of the average daily assets of the U.S. Government Securities Fund, Stock
Fund and Small Company Stock Fund, and up to 0.50% of the average daily assets
of the Money Market Funds. Because these Shares pay marketing fees on an ongoing
basis, your investment cost may be higher over time than other shares with
different sales charges and marketing fees.

HOW TO PURCHASE SHARES

You may purchase Shares through Riggs Investment Corp., Riggs Bank, a
Riggs-affiliated broker/dealer or through an exchange from another Riggs Fund.
The Funds reserve the right to reject any request to purchase or exchange
Shares.

THROUGH riggs investment corp.

To place an order to purchase shares of a Fund, an investor may write to or call
Riggs Investment Corp. at (202) 835-5300 or outside the Washington, D.C.
metropolitan area toll-free at 1-800-934-3883. Representatives are available
from 8:30 a.m. to 5:00 p.m. (Washington, D.C. time). Payment may be made either
by mail or federal funds or by debiting a customer's account at Riggs Bank. With
respect to U.S. Treasury Money Market Fund and Prime Money Market Fund, purchase
orders must be received by Riggs Investment Corp. before 11:00 a.m. (Washington,
D.C. time). Payment is normally required on the same business day. With respect
to Stock Fund, Small Company Stock Fund, and U.S. Government Securities Fund,
purchase orders must be received by Riggs Investment Corp. before 4:00 p.m.
(Washington, D.C. time). Payment is normally required on the next business day.

By Wire
To purchase shares of a Fund by wire, call the number on the front page of this
prospectus.

With respect to U.S. Treasury Money Market Fund and Prime Money Market Fund,
payment by wire must be received by Riggs Investment Corp. before 12:30 p.m.
(Washington, D.C. time) on the same day as the order is placed to earn dividends
for that day. With respect to Stock Fund, Small Company Stock Fund, and U.S.
Government Securities Fund, payment by wire must be received by Riggs Investment
Corp. before 3:00 p.m. (Washington, D.C. time) on the next business day after
placing the order. You cannot purchase Shares by wire on holidays when wire
transfers are restricted.

By Check
Make your check payable to Riggs Funds, note the name of the Fund and the share
class on the check, and mail it to:

Riggs Investment Corp.
P.O. Box 96656
Washington, D.C. 20090-6656

If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

Riggs Investment Corp.
808 17th Street, N.W. - 11th Floor
Washington, D.C. 20006
Orders received by mail are considered received after payment by check is
converted by Riggs Bank into federal funds. This is normally the next business
day.

through automatic investing Programs offered through riggs bank
You may establish an account with Riggs Investment Corp., or Riggs Bank to
automatically purchase Class R Shares of Prime Money Market Fund or U.S.
Treasury Money Market Fund when your bank account reaches a certain level.
Prospective investors in an Automatic Investing Program should refer to the
Riggs Investment Corp. or Riggs Bank Service Agreement for details regarding the
services, fees, restrictions, and limitations related to the Automatic
Investment Program. You should read this prospectus along with the Service
Agreement.

THROUGH AN EXCHANGE
You may purchase Class R Shares of the Funds (with the exception of Prime Money
Market Fund) through an exchange from Class R Shares of another Riggs Fund. You
must meet the minimum initial investment requirement for purchasing Shares and
both accounts must have identical registrations.

Due to the nature of the Automatic Investing Programs, systematic investment
privileges are unavailable to participants in these programs.

RETIREMENT INVESTMENTS

Shares of the Funds can be purchased as an investment for retirement plans or
for IRA accounts. For further details, contact Riggs Investment Corp. and
consult a tax adviser.

HOW TO REDEEM AND EXCHANGE SHARES

Each Fund redeems Class R Shares and Class Y Shares at their net asset value,
less, in the case of Class R Shares (with the exception of the Money Market
Funds, unless the Money Market Fund shares were acquired in exchange for Class R
Shares or Class B Shares of a Fund which is not a Money Market Fund), any
applicable CDSC, next determined after Riggs Investment Corp. receives the
redemption request.

automatic investing programs
Clients who have executed a Riggs Bank or Riggs Investment Corp. Service
Agreement should refer to the Agreement for information about redeeming Class R
Shares of Prime Money Market Fund and U.S. Treasury Money Market Fund purchased
through that program.

DIRECTLY FROM THE FUND

By Telephone
You may redeem or exchange Shares by calling Riggs Investment Corp. An
authorization form permitting a Fund to accept telephone redemption requests
must first be completed. Although Riggs Investment Corp. does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000, or in excess of one per month.

With respect to the Stock Fund, Small Company Stock Fund and U.S. Government
Securities Fund, if you call before the end of regular trading on the NYSE
(normally 4:00 p.m. Washington, D.C. time) you will receive a redemption amount
based on that day's NAV.

With respect to the Money Market Funds, if you call before 11:00 a.m.
(Washington, D.C. time) your redemption will be wired to you the same day. You
will not receive that day's dividend. If you call after 11:00 a.m. (Washington,
D.C. time) your redemption will be wired to you the following business day. You
will receive that day's dividend.

By Mail
You may redeem or exchange Shares by mailing a written request to:

Riggs Investment Corp.
P.O. Box 96656
Washington, D.C. 20090-6656
Send requests by private courier or overnight delivery service to:

Riggs Investment Corp.
808 17th Street, N.W. - 11th Floor
Washington, D.C. 20006

All requests must include:

o Fund Name, Share Class and account number;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Signature Guarantees Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days; or

o if exchanging (transferring) into another fund with a different shareholder
registration.

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Funds'
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund if
those checks are undeliverable and returned to a Fund.

checkwriting
Class R shareholders, and Class Y shareholders who at June 30, 1998 were Class A
shareholders, of U.S. Treasury Money Market Fund and Prime Money Market Fund
with a minimum balance of $5,000 can redeem shares by writing a check in the
amount of at least $100. Shareholders must complete the checkwriting section of
the account application or complete a subsequent checkwriting application form
which can be obtained from Riggs Investment Corp. The Fund will then provide
checks. Checks cannot be used to close a shareholder's account. Checkwriting is
not permitted with respect to shares held in IRA accounts, corporate accounts,
or an Automatic Investing Program. For further information, contact Riggs Funds
Shareholder Services at (202) 835-5300 or outside the Washington, D.C.
metropolitan area toll-free at 1-800-934-3883.

systematic withdrawal program
You may automatically redeem Shares in a minimum amount of $50 on a regular
basis. To be eligible to participate in this program, a shareholder must have an
account value of at least $10,000. Shareholders may make arrangements to have
amounts systematically withdrawn from their accounts in the Money Market Funds
and automatically invested in Class R Shares of one of the other Funds in the
Riggs Funds A shareholder may apply for participation in this program through
Riggs Investment Corp., Riggs Bank or an authorized broker or dealer. This
program may reduce, and eventually deplete, your account. Payments should not be
considered yield or income.

Due to the nature of the Automatic Investment Programs, systematic withdrawal
privileges are not available to participants in those programs.

EXCHANGE PRIVILEGES
A shareholder may generally exchange Class R Shares of one Fund for Class R
Shares of any of the other Funds in the Trust (with the exception of Prime Money
Market Fund) at net asset value by writing to or calling Riggs Funds Shareholder
Services. A CDSC is not assessed in connection with such exchanges, but if the
shareholder redeems shares (other than shares of a Money Market Fund, unless the
Money Market Fund Shares were acquired in exchange for Class R Shares or Class B
Shares of a Fund which is not a Money Market Fund) within five years of the
original purchase, a CDSC will be imposed. For purposes of computing the CDSC,
the length of time the shareholder has owned shares will be measured from the
date of original purchase and will not be affected by the exchange.

To execute an order to exchange you must first:

o complete an authorization form permitting the Fund to accept telephone
exchange requests;

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements;

o specify the dollar value or number of shares to be exchanged; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

Systematic exchange program
Shareholders who desire to automatically exchange shares of a predetermined
amount on a monthly, quarterly or annual basis may take advantage of a
systematic exchange privilege. The minimum amount that may be exchanged is $50.
This privilege is not available to shareholders of Class R Shares of the Money
Market Funds. Shareholders interested in participating in this program should
contact Riggs Funds Shareholder Services.

ADDITIONAL CONDITIONS

ACCOUNT AND SHARE INFORMATION

Fund Transactions Through Riggs Funds OnLine SM.
If you have previously established an account with the Funds, and have signed an
OnLine SM Agreement, you may purchase, or exchange shares through the Riggs
Funds Internet Site on the World Wide Web (http://www.____________.com) (the Web
Site). You may also check your Fund account balance(s) and historical
transactions through the Web Site. You cannot, however, establish a new Fund
account through the Web Site--you may only establish a new Fund account under
the methods described in the How to Purchase Shares section.

Trust customers of Riggs Bank N.A. should contact their account officer for
information on the availability of transactions over the Internet.

.........Minimum..Maximum

Purchases .........$____............$_________

Redemptions .........By ACH: $___.....By ACH: $________

.........By wire: $____...By wire: $_________

Exchanges .........$_______.$_________

Your transactions through the Web Site are effective at the time they are
received by the Fund, and are subject to all of the conditions and procedures
described in this prospectus.

DIVIDENDS AND CAPITAL GAINS
With respect to the Money Market Funds and U.S. Government Securities Fund,
dividends are declared daily and paid monthly. Unless shareholders request cash
payments by so indicating on the account application or by writing to one of
these Funds, dividends are automatically reinvested in additional shares of the
respective Fund on payment dates at net asset value on the ex-dividend date
without a sales charge.

With respect to the Stock Fund and Small Company Stock Fund, dividends are
declared and paid quarterly. Unless cash payments are requested by shareholders
in writing to the appropriate Fund or by indication on the account application,
dividends are automatically reinvested in additional shares of the Fund on
payment dates at the ex-dividend date net asset value without a sales charge.

WHO MANAGES THE FUNDS?

The Funds' portfolio managers are:

Philip D. Tasho is the Chief Executive Officer and Chief Investment Officer of
RIMCO and served as the manager of the Stock Fund from its inception through
June 1994. Most recently, Mr. Tasho was a Vice President at Shawmut Investment
Advisers in Boston, MA from 1994 to 1995. Prior to that, Mr. Tasho served as a
Managing Director of RIMCO and was a member of the senior management committee
from 1990 to 1994. He also served as a Senior Portfolio Manager for the Sovran
Bank in Bethesda and as Director of Research for the same bank at its Richmond
head office. He started his career as a Trust Investment Officer for the First
American Bank in Washington. Mr. Tasho earned a B.A. in Russian from Grinnel
College and an M.B.A. in Finance and Investments from George Washington
University. He holds a CFA from the Institute of Chartered Financial Analysts.
Mr. Tasho assumed portfolio management responsibility of the Stock Fund and
Small Company Stock Fund in November 1995.

Nathan Reischer is Director and Chief Fixed Income Strategist of RIMCO. He is
responsible for formulating the firm's fixed income investment strategy and
directing management of its fixed income portfolios. Mr. Reischer has more than
20 years of fixed income management experience. He was Director and Senior
Domestic Strategist for Barclays Capital, Inc. in New York from 1995 until
joining RIMCO in 1998. From 1983 to 1994, he served as Fixed Income Portfolio
Manager and Director of Cash Management at GM Investment Management Company in
New York. He brings additional asset/liability management experience having been
a consultant to financial institutions at IMA, Inc. in Seattle, and Vice
President and Manager of the Investment Portfolio Department at Seattle First
National Bank. Mr. Reischer earned his B.B.A. in Economics from the University
of Houston and his M.B.A. from Bernard M. Baruch College. He assumed portfolio
management responsibilities for the U.S. Government Securities Fund in September
1998.

Advisory Fees
The Adviser receives an annual investment advisory fee at annual rates equal to
percentages of the relevant Fund's average net assets as follows: Prime Money
Market Fund and U.S. Treasury Money Market Fund - 0.50%; U.S. Government
Securities Fund and Stock Fund - 0.75%; and Small Company Stock Fund - 0.80%.
The Adviser may voluntarily waive a portion of its fee or reimburse the Funds
for certain operating expenses.

The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds.

FINANCIAL INFORMATION

This information has been audited by Ernst & Young LLP whose report, along with
the Funds' audited financial statements, is included in the Annual Report.

<PAGE>

RIGGS FUNDS

CLASS R SHARES
Riggs U.S. Treasury Money Market Fund
Riggs Prime Money Market Fund
Riggs U.S. Government Securities Fund
Riggs Stock Fund
Riggs Small Company Stock Fund

CLASS Y SHARES
Riggs U.S. Treasury Money Market Fund
Riggs Prime Money Market Fund

A Statement of Additional Information (SAI) dated August ___, 1999, is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is contained in the Funds' annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Funds'
performance during their last fiscal year. To obtain the SAI, the annual report,
semi-annual report and other information without charge, call your investment
professional or Riggs Funds Shareholder Services at (202) 835-5300 or outside
the Washington, D.C. metropolitan area toll-free at 1-800-934-3883.

Investment Company Act File No. 811-6309

Cusip 76656A 104 Cusip 76656A 203 Cusip 76656A 302 Cusip 76656A 500 Cusip 76656A
609 Cusip 76656A 807 Cusip 76656A 401

Riggs Funds
Riggs U.S. Treasury Money Market Fund
Class R Shares
Class Y Shares
Riggs Prime Money Market Fund
Class R Shares
Class Y Shares
Riggs U.S. Government Securities Fund
Class R Shares
Riggs Stock Fund
Class R Shares
Class B Shares
Riggs Small Company Stock Fund
Class R Shares
Class B Shares

Statement of Additional Information
August 31, 1999

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses of the Riggs Funds dated August 31,
1999.

This SAI incorporates by reference the Funds' Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling Riggs Funds
Shareholder Services at (202) 835-5300 or outside the Washington, D.C.
metropolitan area toll-free at 1-800-934-3883.

CONTENTS

How Are the Funds Organized?......................................2
Securities in Which the Funds Invest..............................2
What do Shares Cost?..............................................16
How Are the Funds Sold?...........................................16
Redemption in Kind................................................17
Subaccounting Services............................................17
Massachusetts Partnership Law.....................................18
Account and Share Information.....................................18
Tax Information...................................................18
Who Manages and Provides Services to the Funds....................19
Fees Paid by the Funds for Services...............................24
How do the Funds Measure Performance?.............................25
Financial Information.............................................29
Addresses.........................................................30

Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.
_________________(8/99)

<PAGE>

HOW ARE THE FUNDS ORGANIZED

Riggs Funds (Trust) is an open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on April 1,
1991. The Trust may offer separate series of shares representing interests in
separate portfolios of securities. The Board of Trustees (the Board) has
established three classes of shares known as Class R Shares, Class Y Shares and
Class B Shares. This SAI relates to all three classes of Shares. The Funds'
investment adviser is Riggs Investment Management Corp.
(RIMCO) (Adviser).

SECURITIES IN WHICH THE FUNDS INVEST
In pursuing their investment strategy, the Funds may invest in the following
securities for any purpose that is consistent with their investment objective.
Following tables indicate which types of securities are a: o P = Principal
investment of a Fund; o A = Acceptable (but not principal) investment of a Fund;
or o N = Not an acceptable investment of a Fund.

- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Securities U.S. Treasury Money Prime Money U.S. Government Stock Fund Small Company
Market Fund Market Fund Securities Fund Stock Fund
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
American Depository Receipts2 N N N A A
------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Agency Securities N P P A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Banking Instruments N P A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Collateralized Mortgage Obligations N N P N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Commercial Paper 4 5 N P A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Common Stocks N N N P P
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Convertible Securities N N N P P
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Corporate Debt Obligations 3 N P A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Credit Enhancement 1 N P N N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Demand Instruments N A A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Foreign Securities N N N A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Futures and Options Transactions N N A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
General Obligation Bonds N A N N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Insurance Contracts N A N N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Mortgage-Backed Securities N N P N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Preferred Stocks N N N A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Private Activity Bonds N A N N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Real Estate Investment Trusts N N N N A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Repurchase Agreements P A A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Reverse Repurchase Agreements A A A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------

<PAGE>

- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Securities of Other Investment Companies A A A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Special Revenue Bonds N A N N N
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Treasury Securities P P P A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Variable Rate Demand Notes N P A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
Warrants N N N A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
When-Issued Transactions A A A A A
- -------------------------------------------- --------------------- -------------- ----------------- ------------ ------------------
</TABLE>

1. The Prime Money Market Fund may have more than 25% of its total assets
invested in securities credit-enhanced by banks. 2. The Stock Fund and Small
Company Stock Fund may invest up to 20% of their total assets in ADRs. 3. The
U.S. Government Securities Fund may invest in corporate debt obligations and
U.S. dollar denominated debt obligations of foreign corporations and governments
rated Baa or better, Aaa, Aa or A by Moody's Investor Services, Inc. (Moody's);
BBB or better, AAA, AA or A by Standard & Poor's (S&P); or BBB or better, AAA,
AA, or A by Fitch IBCA, Inc. (Fitch). The Fund will limit its investment in
bonds rated in the lowest investment grade category to 10% of its total assets.
In the event that any such security is downgraded below the fourth highest
rating category, the Fund will dispose of the security. 4. The U.S. Government
Securities Fund may invest in commercial paper that has at least two high
quality ratings by a nationally recognized statistical rating organization
(NRSRO). 5. The Stock Fund and Small Company Stock Fund may invest in commercial
paper rated A-1 by S&P, Prime-1 by Moody's or F-1+ or F-1 by Fitch.

<PAGE>

SECURITIES DESCRIPTIONS AND TECHNIQUES
Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Funds cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Funds invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock. Preferred Stocks
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock. A Fund may treat such redeemable preferred stock as a fixed income
security. Real Estate Investment Trusts (REITs) REITs are real estate
investment trusts that lease, operate and finance commercial real estate.
REITs are exempt from federal corporate income tax if they limit their
operations and distribute most of their income. Such tax requirements limit
a REIT's ability to respond to changes in the commercial real estate
market. Warrants Warrants give a Fund the option to buy the issuer's equity
securities at a specified price (the exercise price) at a specified future
date (the expiration date). A Fund may buy the designated securities by
paying the exercise price before the expiration date. Warrants may become
worthless if the price of the stock does not rise above the exercise price
by the expiration date. This increases the market risks of warrants as
compared to the underlying security. Rights are the same as warrants,
except companies typically issue rights to existing stockholders.

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which a Fund may
invest.

<PAGE>

Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks. Agency Securities Agency securities are issued or
guaranteed by a federal agency or other government sponsored entity acting
under federal authority (a GSE). The United States supports some GSEs with
its full, faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial
support, but are regarded as having implied support because the federal
government sponsors their activities. Agency securities are generally
regarded as having low credit risks, but not as low as treasury securities.
The Funds treat mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities. A Fund may also purchase interests in bank
loans to companies. The credit risks of corporate debt securities vary
widely among issuers. In addition, the credit risk of an issuer's debt
security may vary based on its priority for repayment. For example, higher
ranking (senior) debt securities have a higher priority than lower ranking
(subordinated) securities. This means that the issuer might not make
payments on subordinated securities while continuing to make payments on
senior securities. In addition, in the event of bankruptcy, holders of
senior securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies
issue securities known as surplus notes that permit the insurance company
to defer any payment that would reduce its capital below regulatory
requirements.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default. Demand Instruments Demand instruments are
corporate debt securities that the issuer must repay upon demand. Other
demand instruments require a third party, such as a dealer or bank, to
repurchase the security for its face value upon demand. The Funds treat
demand instruments as short-term securities, even though their stated
maturity may extend beyond one year.

Mortgage Backed Securities
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the
underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages.
Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and interest rate
risks for each CMO class. The degree of increased or decreased
prepayment risks depends upon the structure of the CMOs. However, the
actual returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can
predict and will vary among pools.
Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all
principal payments after the first class is paid off. This process
repeats for each sequential class of CMO. As a result, each class
of sequential pay CMOs reduces the prepayment risks of subsequent
classes. PACs, TACs and Companion Classes More sophisticated CMOs
include planned amortization classes (PACs) and targeted
amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive
principal payments and prepayments in excess of the specified
rate. In addition, PACs will receive the companion classes' share
of principal payments, if necessary, to cover a shortfall in the
prepayment rate. This helps PACs and TACs to control prepayment
risks by increasing the risks to their companion classes. IOs and
POs CMOs may allocate interest payments to one class (Interest
Only or IOs) and principal payments to another class (Principal
Only or POs). POs increase in value when prepayment rates
increase. In contrast, IOs decrease in value when prepayments
increase, because the underlying mortgages generate less interest
payments. However, IOs tend to increase in value when interest
rates rise (and prepayments decrease), making IOs a useful hedge
against interest rate risks. Floaters and Inverse Floaters Another
variant allocates interest payments between two classes of CMOs.
One class (Floaters) receives a share of interest payments based
upon a market index such as LIBOR. The other class (Inverse
Floaters) receives any remaining interest payments from the
underlying mortgages. Floater classes receive more interest (and
Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and interest rate
risks from the Floater to the Inverse Floater class, reducing the
price volatility of the Floater class and increasing the price
volatility of the Inverse Floater class. Z Classes and Residual
Classes CMOs must allocate all payments received from the
underlying mortgages to some class. To capture any unallocated
payments, CMOs generally have an accrual (Z) class. Z classes do
not receive any payments from the underlying mortgages until all
other CMO classes have been paid off. Once this happens, holders
of Z class CMOs receive all payments and prepayments. Similarly,
REMICs have residual interests that receive any mortgage payments
not allocated to another REMIC class.

Bank Instruments

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement. Common types of credit enhancement
include guarantees, letters of credit, bond insurance and surety bonds. Credit
enhancement also includes arrangements where securities or other liquid assets
secure payment of a fixed income security. If a default occurs, these assets may
be sold and the proceeds paid to security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for a
fixed income security.

Convertible Securities
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities. Convertible securities have lower yields
than comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the
underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit the Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment. The Fund treats convertible securities as both fixed income
and equity securities for purposes of its investment policies and limitations,
because of their unique characteristics.

Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding agreements
and annuities. A Fund treats these contracts as fixed income securities.

Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.

<PAGE>

General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law. Special Revenue Bonds Special revenue bonds are payable
solely from specific revenues received by the issuer such as specific
taxes, assessments, tolls, or fees. Bondholders may not collect from the
municipality's general taxes or revenues. For example, a municipality may
issue bonds to build a toll road, and pledge the tolls to repay the bonds.
Therefore, a shortfall in the tolls normally would result in a default on
the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality
would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient
to repay the bonds. The bonds would be payable solely from the
company's loan payments, not from any other revenues of the
municipality. Therefore, any default on the loan normally would result
in a default on the bonds. The interest on many types of private
activity bonds is subject to the federal alternative minimum tax (AMT).
A Fund may invest in bonds subject to AMT.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the
security for its face value upon demand. The securities also pay interest
at a variable rate intended to cause the securities to trade at their face
value. The Funds treat demand instruments as short-term securities, because
their variable interest rate adjusts in response to changes in market
rates, even though their stated maturity may extend beyond thirteen months.

Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o it (or its subsidiaries) derived in its most current fiscal year
at least 50% of its total assets, capitalization, gross
revenue or profit from goods produced, services performed, or sales made in
another country.
The foreign securities in which the Funds invest are primarily denominated in
U.S. dollars. Along with the risks normally associated with domestic securities
of the same type, foreign securities are subject to risks of foreign investing.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally
or outside the United States. Depositary receipts involve many of the same
risks of investing directly in foreign securities, including currency risks
and risks of foreign investing.
Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, a Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same
date. If the offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may
limit the amount of open contracts permitted at any one time. Such limits may
prevent a Fund from closing out a position. If this happens, a Fund will be
required to keep the contract open (even if it is losing money on the contract),
and to make any payments required under the contract (even if it has to sell
portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm a Fund by preventing it from disposing of or trading
any assets it has been using to secure its obligations under the contract. A
Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty. OTC contracts do not
necessarily have standard terms, so they cannot be directly offset with other
OTC contracts. In addition, OTC contracts with more specialized terms may be
more difficult to price than exchange traded contracts. Depending upon how a
Fund uses derivative contracts and the relationships between the market value of
a derivative contract and the underlying asset, derivative contracts may
increase or decrease a Fund's exposure to market and currency risks, and may
also expose a Fund to liquidity and leverage risks. OTC contracts also expose a
Fund to credit risks in the event that a counterparty defaults on the contract.
A Fund may trade in the following types of derivative contracts.
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts. U.S.
Government Securities Fund, Stock Fund and Small Company Stock Fund may
buy/sell the following types of futures contracts: Financial Futures and
Stock Index Futures.

<PAGE>

Options
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option. The
U.S. Government Securities Fund, Stock Fund and Small Company Stock Fund
may: Buy call options on portfolio securities and on futures contracts in
anticipation of an increase in the value of the underlying asset.; Buy put
options on portfolio securities and on futures contracts in anticipation of
a decrease in the value of the underlying asset.; and Buy or write options
to close out existing options positions. U.S. Government Securities Fund,
Stock Fund and Small Company Stock Fund may also write call options to
generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by
a Fund is exercised, the Fund foregoes any possible profit from an increase
in the market price of the underlying asset over the exercise price plus
the premium received. When a Fund writes options on futures contracts, it
will be subject to margin requirements similar to those applied to futures
contracts.
Special Transactions
Repurchase Agreements
Repurchase agreements are transactions in which a Fund buys a security from
a dealer or bank and agree to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price,
reflecting a Fund's return on the transaction. This return is unrelated to
the interest rate on the underlying security. The Funds will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser. The Funds' custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to counterparty risks. Reverse Repurchase
Agreements Reverse repurchase agreements are repurchase agreements in which
a Fund is the seller (rather than the buyer) of the securities, and agrees
to repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by a Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because a Fund must repurchase
the underlying security at a higher price, regardless of the market value
of the security at the time of repurchase.

Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which a Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the
period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to a Fund. A Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create market risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty
default. These transactions create leverage risks.

Securities Lending
A Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities. The Fund will reinvest cash collateral in securities
that qualify as an acceptable investment for the Fund. However, the Fund
must pay interest to the borrower for the use of cash collateral. Loans are
subject to termination at the option of the Fund or the borrower. The Fund
will not have the right to vote on securities while they are on loan, but
they will terminate a loan in anticipation of any important vote. The Fund
may pay administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash collateral to a
securities lending agent or broker. Securities lending activities are
subject to market risks and credit risks. These transactions create
leverage risks. Asset Coverage In order to secure their obligations in
connection with derivatives contracts or special transactions, a Fund will
either own the underlying assets, enter into an offsetting transaction or
set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets
to set aside, it cannot trade assets used to secure such obligations
without entering into an offsetting derivative contract or terminating a
special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Investing in Securities of Other Investment Companies
A Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

Investment Ratings
An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's ("S&P"), Prime-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1+ or F-1 by Fitch IBCA, Inc.
("Fitch"), are all considered rated in the highest short-term rating category.

INVESTMENT RISKS
There are many factors which may affect an investment in the Funds. The Funds'
risks are described below.

Stock Market Risks
The value of equity securities in a Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. A Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations.
Consequently, the Fund's share price may decline.
The Adviser attempts to manage market risk by limiting the amount a Fund invests
in each company's equity securities. However, diversification will not protect a
Fund against widespread or prolonged declines in the stock market.

Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged. Interest rate changes have a greater effect on the price of
fixed income securities with longer durations. Duration measures the price
sensitivity of a fixed income security to changes in interest rates.

Prepayment Risks
Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. Other economic factors can
also lead to increases or decreases in prepayments. Increases in prepayments of
high interest rate mortgage backed securities, or decreases in prepayments of
lower interest rate mortgage backed securities, may reduce their yield and
price. These factors, particularly the relationship between interest rates and
mortgage prepayments makes the price of mortgage backed securities more volatile
than many other types of fixed income securities with comparable credit risks.
Mortgage backed securities generally compensate for greater prepayment risk by
paying a higher yield. The difference between the yield of a mortgage backed
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security is perceived to have an
increased prepayment risk or perceived to have less market demand. An increase
in the spread will cause the price of the security to decline. A Fund may have
to reinvest the proceeds of mortgage prepayments in other fixed income
securities with lower interest rates, higher prepayment risks, or other less
favorable characteristics.

Risks Related to Investing for Value
Due to their relatively low valuations, value stocks are typically less volatile
than growth stocks. For instance, the price of a value stock may experience a
smaller increase on a forecast of higher earnings, a positive fundamental
development, or positive market development. Further, value stocks tend to have
higher dividends than growth stocks. This means they depend less on price
changes for returns and may lag behind growth stocks in an up market.

Risks Related to Company Size
Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of its
outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital. These
factors also increase risks and make these companies more likely to fail than
companies with larger market capitalizations.

<PAGE>

Liquidity Risks
Trading opportunities are more limited for equity securities that are not widely
held and for fixed income securities that have not received any credit ratings,
have received ratings below investment grade or are not widely held. This may
make it more difficult to sell or buy a security at a favorable price or time.
Consequently, the Fund may have to accept a lower price to sell a security, sell
other securities to raise cash or give up an investment opportunity, any of
which could have a negative effect on the Fund's performance. Infrequent trading
of securities may also lead to an increase in their price volatility. Liquidity
risk also refers to the possibility that a Fund may not be able to sell a
security or close out a derivative contract when it wants to. If this happens, a
Fund will be required to continue to hold the security or keep the position
open, and the Fund could incur losses. OTC derivative contracts generally carry
greater liquidity risk than exchange-traded contracts.

Leverage Risks
Leverage risk is created when an investment exposes the Funds to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Funds' risk of loss and potential for gain. Investments can have
these same results if their returns are based on a multiple of a specified
index, security, or other benchmark.

Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money. Many fixed income securities receive credit ratings from
services such as Standard & Poor's and Moody's Investor Services, Inc. These
services assign ratings to securities by assessing the likelihood of issuer
default. Lower credit ratings correspond to higher credit risk. If a security
has not received a rating, a Fund must rely entirely upon the Adviser's credit
assessment. Fixed income securities generally compensate for greater credit risk
by paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or the
security is perceived to have an increased credit risk. An increase in the
spread will cause the price of the security to decline. Credit risk includes the
possibility that a party to a transaction involving a Fund will fail to meet its
obligations. This could cause a Fund to lose the benefit of the transaction or
prevent a Fund from selling or buying other securities to implement its
investment strategy. Risks of Foreign Investing Foreign securities pose
additional risks because foreign economic or political conditions may be less
favorable than those of the United States. Securities in foreign markets may
also be subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent a Fund and its Adviser from obtaining information concerning foreign
companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States. Foreign countries may have
restrictions on foreign ownership of securities or may impose exchange controls,
capital flow restrictions or repatriation restrictions which could adversely
affect the liquidity of a Fund's investments.

INVESTMENT LIMITATIONS

Issuing Senior Securities and Borrowing Money
The Funds may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act.

Lending Cash or Securities
The Funds may not make loans, provided that this restriction does not prevent
the Funds from purchasing debt obligations, entering into repurchase
agreements, lending its assets to broker/dealers or institutional investors
and investing in loans, including assignments and participation interests.

Investing in Commodities
The Funds may not purchase or sell physical commodities, provided that the
Funds may purchase securities of companies that deal in commodities.

Investing in Real Estate
The Funds may not purchase or sell real estate, provided that this
restriction does not prevent the Funds from investing in issuers which
invest, deal, or otherwise engage in transactions in real estate or interests
therein, or investing in securities that are secured by real estate or
interests therein. The Funds may exercise their rights under agreements
relating to such securities, including the right to enforce security
interests and to hold real estate acquired by reason of such enforcement
until that real estate can be liquidated in an orderly manner.

Diversification of Investments
With respect to securities comprising 75% of the value of its total assets,
the Funds will not purchase securities of any one issuer (other than cash;
cash items; securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities; and securities of other
investment companies) if, as a result, more than 5% of the value of their
total assets would be invested in securities of that issuer, or the Funds
would own more than 10% of the outstanding voting securities of that issuer.

Concentration of Investments
The Funds will not make investments that will result in the concentration of
their investments in the securities of issuers primarily engaged in the same
industry. Government securities, municipal securities and bank instruments
will not be deemed to constitute an industry.

Underwriting
The Funds may not underwrite the securities of other issuers, except that the
Funds may engage in transactions involving the acquisition, disposition or
resale of their portfolio securities, under circumstances where they may be
considered to be an underwriter under the Securities Act of 1933.

The above limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

Pledging Assets
The Funds will not mortgage, pledge, or hypothecate any of their assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities.

Buying on Margin
The Government Fund, Small Company Fund and Stock Fund will not purchase
securities on margin, provided that the Funds may obtain short-term credits
necessary for the clearance of purchases and sales of securities, and further
provided that the Funds may make margin deposits in connection with their use
of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

The Prime Fund and Treasury Fund will not purchase securities on margin,
provided that the Funds may obtain short-term credits necessary for the
clearance of purchases and sales of securities.

Investing in Illiquid Securities
The U.S. Government Securities Fund, Stock Fund, Small Company Stock Fund and
Prime Money Market Fund will not purchase securities for which there is no
readily available market, or enter into repurchase agreements or purchase
time deposits maturing in more than seven days if immediately after and as a
result, the value of such securities would exceed, in the aggregate, 15% of
the net assets of the U.S. Government Securities Fund, Stock Fund, and Small
Company Stock Fund, and 10% of the net assets of the Prime Money Market Fund.

Investing in Securities of Other Investment Companies
The Funds may invest their assets in the securities of other investment
companies.

Except with respect to the Funds' policy of 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.

For purposes of their policies and limitations, the Funds consider certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

PORTFOLIO TURNOVER

(TO BE ADDED)

DETERMINING MARKET VALUE OF SECURITIES

With respect to the Treasury Money Market Fund and the Prime Money Market Fund,
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.
Accordingly, 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 a
Fund computed by dividing the annualized daily income on a 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 opposite may be true.

The Funds' use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and a Fund's investment objective. The 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 0.5 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.

With respect to the U.S. Government Securities Fund, Stock Fund and Small
Company Stock Fund, the market values of the Funds' portfolio securities are
determined as follows:

for equity securities, according to the last sale price in the market
in which they are primarily traded (either a national securities exchange or
the over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on
a national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the-counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities at fair value as determined in good faith by the Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Funds
value foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. 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 NYSE. 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 Funds' Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

You will not be charged a CDSC when redeeming Shares:

o as a shareholder who acquired Shares prior to July 1, 1998 (including
shares acquired in exchange for shares acquired prior to July 1,
1998);

o purchased with reinvested dividends or capital gains;

o following the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, of the last surviving shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70 1/2;

o if a Fund redeems your Shares and closes your account for not meeting
the minimum balance; and

o which are qualifying redemptions of shares under a Systematic
Withdrawal Program.

In addition, (with the exception of the Class B Shares of the Stock Fund and the
Small Company Stock Fund), you will not be charged a CDSC:

o on shares originally purchased (i) through the Trust Division or the Private
Banking Division of Riggs Bank; (ii) through an investment adviser registered
under the Investment Advisers Act of 1940; (iii) through retirement plans
where the third party administrator has entered into certain arrangements
with Riggs Bank or its affiliates; or (iv) by any bank or dealer (in each
case for its own account) having a sales agreement with Federated Securities
Corp.; and

o on shares purchased through entities having no transaction fee agreements or
wrap accounts with Riggs Bank or its affiliates.

HOW ARE THE FUNDS SOLD?

Under the Distributor's Contract with the Funds, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (Class R Shares and Class B Shares)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Funds achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Funds' service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Funds pay for any expenses of the Distributor
that exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

SHAREHOLDER SERVICES
The Funds may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Funds or other
special events at recreational-type facilities, or items of material value.
These payments will be based upon the amount of Shares the investment
professional sells or may sell and/or upon the type and nature of sales or
marketing support furnished by the investment professional.

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares 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 that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

REDEMPTION IN KIND

Although the Funds intend to pay Share redemptions in cash, they reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Funds' portfolio securities.

Because the Funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Funds are obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Funds' Board determines that payment should be in kind. In such a
case, the Funds will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Funds determine their NAV.
The portfolio securities will be selected in a manner that the Funds' Board
deems fair and equitable and, to the extent available, such securities will be
readily marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

<PAGE>

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.

In the unlikely event a shareholder 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.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS
Each share of each Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund
class are entitled to vote.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.

As of ______________________, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: (TO BE ADDED.)

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX
The Funds intend to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by a Fund.

FOREIGN INVESTMENTS
If the Funds purchase foreign securities, their investment income 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 a Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Funds intend to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.

If a Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of a Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year. The Trust is comprised of five funds.

As of June ______, 1999, the Funds' Board and Officers as a group owned less
than 1% of the Funds' outstanding Class Y, R and B Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

<PAGE>

Name Aggregate
Birth Date Compensation
Address From Trust
Position With Trust Principal Occupations
for Past Five Years
John F. Donahue*+ Chief Executive Officer and Director or Trustee of the $0
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Director,
Federated Investors Tower Federated Investors, Inc.; Chairman and Trustee,
1001 Liberty Avenue Federated Investment Management Company; Chairman and
Pittsburgh, PA Director, Federated Investment Counseling, and
CHAIRMAN and TRUSTEE Federated Global Investment Management Corp.; Chairman,
Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $1412..26
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, Ernst
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, Inc.; Director,
TRUSTEE Member of Executive Committee, University of Pittsburgh.

John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $1553.73
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior
Wood/IPC Commercial Dept. Vice President, John R. Wood and Associates, Inc.,
John R. Wood Associates, Inc. Realtors; Partner or Trustee in private real estate
Realtors ventures in Southwest Florida; formerly: President,
3255 Tamiami Trial North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
TRUSTEE
Nicholas Constantakis Director or Trustee of the Federated Fund Complex; $1412.26
Birth Date: September 3, 1939 formerly: Partner, Andersen Worldwide SC.
175 Woodshire Drive
Pittsburgh, PA
TRUSTEE
John F. Cunningham Director or Trustee of some of the Federated Funds; $0
Birth Date: March 5, 1943 Chairman, President and Chief Executive Officer,
353 El Brillo Way Cunningham & Co., Inc. ; Trustee Associate, Boston
Palm Beach, FL College; Director, EMC Corporation; formerly: Director,
TRUSTEE Redgate Communications.

Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.

Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $1412.26
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh;
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical
Suite 1111 Center - Downtown; Hematologist, Oncologist, and
Pittsburgh, PA Internist, University of Pittsburgh Medical Center;
TRUSTEE Member, National Board of Trustees, Leukemia Society of
America.

Peter E. Madden Director or Trustee of the Federated Fund Complex; $1446.23
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts
One Royal Palm Way General Court; President, State Street Bank and Trust
100 Royal Palm Way Company and State Street Corporation.
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation.

Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Funds; $0
Birth Date: April 10, 1945 Management Consultant.
80 South Road
Westhampton Beach, NY Previous Positions: Chief Executive Officer, PBTC
TRUSTEE International Bank; Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank; Senior
Vice President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.

John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $1446.23
S.J.D. President, Law Professor, Duquesne University;
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray.
President, Duquesne University
Pittsburgh, PA Previous Positions: Dean and Professor of Law,
TRUSTEE University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $1412.26
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning.
4905 Bayard Street
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum
TRUSTEE Company of America; business owner.
John S. Walsh Director or Trustee of some of the Federated Funds; $339.20
Birth Date: November 28, 1957 President and Director, Heat Wagon, Inc.; President and
2007 Sherwood Drive Director, Manufacturers Products, Inc.; President,
Valparaiso, IN Portable Heater Parts, a division of Manufacturers
TRUSTEE Products, Inc.; Director, Walsh & Kelly, Inc.;
formerly: Vice President, Walsh & Kelly, Inc.

J. Christopher Donahue+ President or Executive Vice President of the Federated $0
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds
Federated Investors Tower in the Federated Fund Complex; President and Director,
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee,
Pittsburgh, PA Federated Investment Management Company; President and
EXECUTIVE VICE PRESIDENT AND Director, Federated Investment Counseling and Federated
TRUSTEE Global Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services
Company; Director, Federated Services Company.

<PAGE>

Edward C. Gonzales* Trustee or Director of some of the Funds in the
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice $0
Federated Investors Tower President and Treasurer of some of the Funds in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
PRESIDENT AND TREASURER Management Company and Federated Investment
Counseling, Federated Global Investment Management
Corp. and Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.

John W. McGonigle Executive Vice President and Secretary of the Federated $0
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated
1001 Liberty Avenue Investment Management Company; Director, Federated
Pittsburgh, PA Investment Counseling and Federated Global Investment
EXECUTIVE VICE PRESIDENT Management Corp.; Director, Federated Services Company;
Director, Federated Securities Corp.

Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated
Federated Investors Tower Investors, Inc.; formerly: various management positions
1001 Liberty Avenue within Funds Financial Services Division of Federated
Pittsburgh, PA Investors, Inc.
TREASURER

Richard B. Fisher President or Vice President of some of the Funds in the $0
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
- -----------------------------------------------------------------------------

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice President
of the Trust. ++ Mr. Walsh became a member of the Board of Trustees on January
1, 1999. Messrs. Cunningham and Mansfield became members of the Board on June
15, 1999. Messrs. Cunningham and Mansfield did not receive any fees as of the
fiscal year end of the Trust.

INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Funds.

The Adviser shall not be liable to the Trust or any Fund shareholder 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.

Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

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. 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 may select brokers and dealers
based on whether they also offer research services (as described below). 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 Funds
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Funds' Board.

Research Services
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser in advising other accounts. To the extent
that receipt of these services may replace services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Adviser and its affiliates exercise reasonable business judgment in
selecting those brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.

For the fiscal years ended April 30, 1999, 1998 and 1997, the Stock Fund paid
total brokerage commissions of $__________, $245,522 and $175,381, respectively,
and the Small Company Stock Fund paid total brokerage commissions of
$___________, $107,288, and $72,366, respectively.

Investment decisions for the Funds are made independently from those of other
accounts managed by the Adviser. When the Funds and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Funds and the account(s) in
a manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Funds, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Funds.

ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Funds. Federated Services Company provides
these at an annual rate of 0.16% of the average aggregate daily net assets of
the Trust.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN
Riggs Bank, Washington, D.C., is custodian for the securities and cash of the
Funds. Under the Custodian Agreement, Riggs Bank holds the Funds' portfolio
securities in safekeeping and keeps all necessary records and documents relating
to its duties.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Funds pay the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT auditors
Ernst & Young LLP is the independent auditors for the Funds.

<PAGE>

FEES PAID BY THE FUNDs FOR SERVICES
<TABLE>
<CAPTION>

- ------------------------- -------------------------------------- -------------------------------- --------------------------------
Fund Advisory Fee Paid/ Shareholder Services Fee Paid Administrative Fee Paid
Advisory Fee Waived
-------------------------------- --------------------------------
-------------------------------------- -------------------------------- --------------------------------
For the fiscal year ended For the fiscal year ended For the fiscal year ended
April 30, April 30, April 30,
-------------------------------------- -------------------------------- --------------------------------
---------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Money $704,027/ $672,065/ $56,082 $68,994 $186,366 $171,345
Market Fund
$119,268 $173,436
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Prime Money Market Fund $1,803,267/ $1,954,745/ $130,369 $148,946 $478,888 $497,453

$409,724 $676,608
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. Government $246,668/ $255,588/ $59,058 $88,771 $48,888 $51,473
Securities Fund
$131,556 $136,314
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Stock Fund $790,694/ $622,704/ $71,317 $92,259 $139,892 $106,088

$78,554 $99,633
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Small Company Stock Fund $338,723/ $184,690/ $53,392 $71,963 $58,191 $49,978

$36,697 $105,949
- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

- ------------------------------------------------ -------------------------------
Funds For the fiscal year ended
April 30, 1999
-------------------------------
-------------------------------
12b-1 Fee
-------------------------------
---------------- --------------
Class R Shares Class B Shares
- ------------------------------------------------ ---------------- --------------
- ------------------------------------------------ ---------------- --------------
U.S. Treasury Money Market Fund
- ------------------------------------------------ ---------------- --------------
- ------------------------------------------------ ---------------- --------------
Prime Money Market Fund
- ------------------------------------------------ ---------------- --------------
- ------------------------------------------------ ---------------- --------------
U.S. Government Securities Fund
- ------------------------------------------------ ---------------- --------------
- ------------------------------------------------ ---------------- --------------
Stock Fund
- ------------------------------------------------ ---------------- --------------
- ------------------------------------------------ ---------------- --------------
Small Company Stock Fund
- ------------------------------------------------ ---------------- --------------

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

<PAGE>

HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Funds' or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

average Annual Total Returns and Yield and effective yield

<PAGE>

- ------------------- --------------------------------------- ------------------------------ ------------------------------
Fund Average Annual Total Return Yield Effective Yield
for the following periods ended April for the 7-day period ended for the 7-day period ended
30, 1999 April 30, 1999 April 30, 1999
for the 30-day period ended
April 30, 1999
--------------------------------------- ------------------------------ ------------------------------
-------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
Class R Class Y Class B Class R Class Y Class B Class Class Y Class B
Shares Shares Shares Shares Shares Shares R Shares Shares
One Year One Year One Year Shares
Five Year Five Year Five Years
Since Since Since
Inception Inception Inception
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
U.S. Treasury N/A N/A N/A N/A
Money Market Fund
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
Prime Money N/A N/A N/A N/A
Market Fund
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
U.S. Government N/A N/A N/A N/A N/A N/A N/A
Securities Fund
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
Stock Fund N/A N/A N/A N/A N/A
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------
Small Company N/A N/A N/A N/A N/A
Stock Fund
- ------------------- -------------- ----------- ------------ ---------- --------- --------- -------- ----------- ---------

</TABLE>

<PAGE>

TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares 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 NAV 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 charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

yield
With respect to the Stock Fund, Small Company Stock Fund and the U.S. Government
Securities Fund, the yield of Shares is calculated by dividing: (i) the net
investment income per Share earned by the Shares over a 30-day period; by (ii)
the maximum offering price per Share on the last day of the period. This number
is then annualized using semi-annual compounding. This means that the amount of
income generated during the 30-day period is assumed to be generated each month
over a 12-month period and is reinvested every six months. The effective yield
is calculated by compounding the unannualized base-period return by: adding one
to the base-period return, raising the sum to the 365/7th power; and subtracting
one from the result. The yield and effective yield do not necessarily reflect
income actually earned by Shares 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 investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

With respect to the U.S. Treasury Money Market Fund and the Prime Money Market
Fund, the yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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. The effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Funds' returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

Advertising and sales literature for the Funds may also include statements
describing the history of Riggs Bank. For example, reference may be made to
Riggs Bank's heritage of serving historical and political figures and financing
projects that have been important to the growth of the United States.

The Funds may compare their performance, or performance for the types of
securities in which they invest, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.

The Funds may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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 Funds use in advertising may include:

Consumer Price Index (CPI) is the measure of change in consumer prices, as
determined by a monthly survey of the U.S. Bureau of Labor Statistics. Many
pension and employment contracts are tied to changes in consumer prices, as
protection against inflation and reduced purchasing power. Among the CPI
components are housing costs, food, transportation, and electricity. The CPI is
also known as the cost-of-living index.

U.S. TREASURY MONEY MARKET FUND:

o 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 advertising and sales literature.

o 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.

o Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.

PRIME MONEY MARKET FUND:

o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends, if any. From time to time, the
Fund will quote its Lipper ranking in advertising and sales
literature.

o Bank Rate Monitor National Index, Miami Beach, Florida, is a
financial reporting service which publishes weekly average rates of
50 leading bank and thrift institution money market deposit
accounts. The rates published in the index are an average of the
personal account rates offered on the Wednesday prior to the date of
publication by ten of the largest banks and thrifts in each of the
five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and
compounding methods vary. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution.

o 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.

U.S. GOVERNMENT SECURITIES FUND:

o Lehman Brothers Government Index is an unmanaged index comprised of
all publicly issued, non-convertible domestic debt of the U.S.
government, or any agency thereof, or any quasi-federal corporation
and of corporate debt guaranteed by the U.S. government. Only notes
and bonds with a minimum outstanding principal of $1 million and a
minimum maturity of one year are included.

o Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities and
finance. The average maturity of these bonds approximates nine
years. Tracked by Shearson Lehman Brothers, Inc., the index
calculates total returns for one month, three month, twelve month
and ten year periods and year-to-date.

o Lipper Analytical Services, Inc. ranks funds in various fund
categories using total return. Total return assumes the reinvestment
of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of
time. From time to time, the Fund will quote its Lipper ranking in
advertising and sales literature.

o Lehman Brothers Aggregate Bond Index is a total return index
measuring both the capital price changes and income provided by the
underlying universe of securities, weighted by market value
outstanding. The Aggregate Bond Index is comprised of the Shearson
Lehman Government Bond Index, Corporate Bond Index, Mortgage- Backed
Securities Index and the Yankee Bond Index. These indices include:
U.S. Treasury obligations, including bonds and notes; U.S. agency
obligations, including those of the Federal Farm Credit Bank,
Federal Land Bank and the Bank for Co-Operatives; foreign
obligations, U.S. investment grade corporate debt and
mortgage-backed obligations. All corporate debt included in the
Aggregate Bond Index has a minimum S&P rating of BBB, a minimum
Moody's rating of Baa, or a minimum Fitch rating of BBB.

o Merrill Lynch Corporate and Government Index includes issues which
must be in the form of publicly placed, nonconvertible, coupon-
bearing domestic debt and must carry a term of maturity of at least
one year. Par amounts outstanding must be no less than $10 million
at the start and at the close of the performance measurement period.
Corporate instruments must be rated by S&P or by Moody's as
investment grade issues (i.e., BBB/Baa or better).

o Merrill Lynch Corporate & Government Master Index is an unmanaged
index comprised of approximately 4,821 issues which include
corporate debt obligations rated BBB or better and publicly issued,
non-convertible domestic debt of the U.S. government or any agency
thereof. These quality parameters are based on composites of ratings
assigned by Standard and Poor's Ratings Group and Moody's Investors
Service, Inc. Only notes and bonds with a minimum maturity of one
year are included.

o Merrill Lynch Domestic Master Index includes issues which must be in
the form of publicly placed, nonconvertible, coupon-bearing domestic
debt and must carry a term to maturity of at least one year. Par
amounts outstanding must be no less than $10 million at the start and
at the close of the performance measurement period. The Domestic
Master Index is a broader index than the Merrill Lynch Corporate and
Government Index and includes, for example, mortgage related
securities. The mortgage market is divided by agency, type of mortgage
and coupon and the amount outstanding in each agency/type/coupon
subdivision must be no less than $200 million at the start and at the
close of the performance measurement period. Corporate instruments
must be rated by S&P or by Moody's as investment grade issues (i.e.,
BBB/Baa or better).

STOCK FUND:

o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specific period of time. From time to
time, the Fund will quote its Lipper ranking in advertising and
sales literature.

o Dow Jones Industrial Average ("DJIA") represents share prices of
selected blue-chip industrial corporations. The DJIA indicates daily
changes in the average price of stock in these corporations. It also
reports total sales for this group. Because it represents the top
corporations of America, the DJIA index is a leading economic
indicator for the stock market as a whole.

o 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. The Standard & Poor's index
assumes reinvestment of all dividends paid by stocks listed on the
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the Standard & Poor's
figures.

SMALL COMPANY STOCK FUND:

o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in offering price over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the "index funds" category
in advertising and sales literature.

o 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.

o Russell 2000 Index is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be
used to compare to the total returns of funds whose portfolios are
invested primarily in small capitalization stocks.

o Standard & Poor's Small Stock Index is a broadly diversified,
unmanaged, index consisting of approximately 600 small
capitalization common stocks that can be used to compare to the
total returns of funds whose portfolios are invested primarily in
small capitalization common stocks.

FINANCIAL INFORMATION

The Financial Statements for the Funds for the fiscal year ended April 30, 1999,
are incorporated herein by reference to the Annual Report to Shareholders of the
Riggs Funds dated April 30, 1999.

<PAGE>

ADDRESSES

riggs funds

Class R Shares, Class Y Shares, Class B Shares

5800 Corporate Drive
Pittsburgh, PA 15237-7010

Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Investment Adviser
Riggs Investment Management Corp.
800 17th Street N.W.
Washington, D.C. 20006-3950

Custodian
Riggs Bank N.A.
Riggs Funds
5700 RiverTech Court
Riverdale, MD 20737-1250

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Public Accountants
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

Cusip 76656A 104 Cusip 76656A 203 Cusip 76656A 302 Cusip 76656A 500 Cusip 76656A
609 Cusip 76656A 807 Cusip 76656A 401

PART C. OTHER INFORMATION.

Item 23. Exhibits:
(a) Conformed Copy of Declaration of Trust of the Registrant; (1)
(i)Conformed copy of Amendment No. 3 (dated
December 15, 1993) to Registrant's Declaration of Trust; (8)
(ii) Conformed copy of Amendment No. 4 (dated
November 16, 1994) to Registrant's Declaration of Trust; (8)
(iii) Conformed copy of Amendment No. 5 (dated
August 23, 1995) to Registrant's Declaration of Trust;(8)
(b) Copy of By-Laws of the Registrant;(1)
(c) (i) Copy of Specimen Certificate for Shares of Beneficial Interest
of RIMCO Monument U.S. Treasury Money Market Fund, RIMCO Monument
Bond Fund and RIMCO Monument Stock Fund;(2) (ii) Copy of Specimen
Certificate for Shares of Beneficial Interest of RIMCO Monument
Small Capitalization Equity Fund;(6) (iii) Copy of Specimen
Certificate for Shares of Beneficial Interest of RIMCO Monument
Prime Money Market Fund - Class A Shares and Class B Shares; (8)
(d) Conformed copy of Investment Advisory Contract of the Registrant
and Exhibits A through E of the Investment Advisory Contract; (7)
(e) Conformed copy of Distributor's Contract of the Registrant and
Exhibits A and B thereto; (7) (i) Conformed copy of Exhibit C to
Registrant's Distributor's Contract;(10) (ii) Conformed copy of
Exhibits D & E to Registrant's Distributor's Contract; +

+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed May 9, 1991. (File Nos. 33-40428 and
811-6309).

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed July 19, 1991. (File Nos. 33-40428 and
811-6309).

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed June 28, 1994. (File Nos. 33-40428 and
811-6309).

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed June 27, 1995. (File Nos. 33-40428 and
811-6309).

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed October 10, 1995. (File Nos. 33-40428
and 811-6309).

10.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed June 26, 1997. (File Nos. 33-40428 and
811-6309).

<PAGE>

(f) Not applicable;
(g) Conformed copy of Custodian Agreement of the Registrant;(1)
(i) Copy of Custodial Compensation;(11)
(ii) Conformed copy of Custody Agreement between Riggs Bank N.A and The
Bank of New York dated June 8, 1998; + (h) (i) Conformed copy of Transfer Agency
and Service Agreement of the Registrant;(5)
(ii) Conformed copy of Administrative Services
Agreement; (5)
(iii) Conformed copy of Shareholder Services Agreement;(12) (iv) Conformed
Copy of Shareholder Services Plan;(12)
(i) Conformed copy of Opinion and Consent of Counsel as to legality of shares
being registered; (9) (j) Auditors' Consent;(12) (k) Not applicable; (l)
Conformed copy of Initial Capital Understanding; (9) (m) (i) Conformed copy of
Rule 12b-1 Distribution Plan; (8)
(ii) Conformed copy of Exhibits B & C to the Distribution Plan; + (iii)
Copy of Registrant's Rule 12b-1 Agreement; (8)
(n) Copy of Financial Data Schedules;(12)

Item 24. Persons Controlled by or Under Common Control with Registrant:

None

+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed May 9, 1991. (File Nos. 33-40428 and
811-6309).

3. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed August 26, 1992. (File Nos. 33-40428 and
811-6309).

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed June 28, 1994. (File Nos. 33-40428 and
811-6309).

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed October 10, 1995. (File Nos. 33-40428
and 811-6309).

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 27, 1996. (File Nos. 33-40428 and
811-6309).

11.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed April 24, 1998. (File Nos. 33-40428 and
811-6309).

12.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed June 29, 1998. (File Nos. 33-40428 and
811-6309).

<PAGE>

(o) (i) Conformed copy of Registrant's Multiple Class Plan;(10) (ii) Conformed
copy of Registrant's Multiple Class Plan,
as Amended, Effective May 16, 1996;(10)
(iii) Conformed copy of Registrant's Multiple Class Plan, as amended,
effective July 1, 1998;+ (iv) Conformed copy of Multiple Class Plan, as
amended, effective September 1, 1998; +
(p) (i) Conformed copy of Power of Attorney;(12)
(ii) Conformed copy of Power of Attorney of John S. Walsh, Trustee;+

Item 25. Indemnification: (2)

Item 26. Business and Other Connections of Investment Adviser:

For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Funds?" in Part A. The business
address of each of the Officers of the investment adviser is: Riggs
Investment Management Corp., 800 17th Street, N.W., Washington, D.C.
20006-3950

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed July 19, 1991. (File Nos. 33-40428 and
811-6309).

10.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed June 26, 1997. (File Nos. 33-40428 and
811-6309).

12.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed June 29, 1998. (File Nos. 33-40428 and
811-6309).

<PAGE>

The Officers and Directors of the Investment Adviser are:

Other Substantial
Business, Profession,
Name Position with Adviser Vocation or Employment
- --------------------------------- ------------------------------------- ----------------------------------------------

Timothy C. Coughlin Director - Board President, Riggs National
Corporation; Vice Chairman,
Riggs Bank N.A.

Henry A. Dudley, Jr. Director - Board Senior Executive Vice President,
Riggs & Co., a division of Riggs
Bank N.A.

Lawrence I. Hebert Director - Board Director, Riggs National Corporation, Riggs
Bank N.A., Riggs AP Bank Limited, Allied
Capital II Corp.; President and Vice
Chairman of Allbritton Communications and
Perpetual Corporation and Westfield News
Advertiser, Inc.

Philip D. Tasho Chairman of the Board Executive Director, Riggs &
Directors, Chief Co., a division of Riggs Bank
Executive N.A.
Officer and Chief
Investment Officer

Ronald A. Marsilia President and Chief Managing Director, Riggs &
Operating Officer and Co., a division of Riggs
Director - Board Bank N.A.

Nathan Reischer Director - Fixed Income, Chief Managing Director, Riggs & Co., a division
Fixed Income Strategist and of Riggs Bank N.A.
Director-Board

Timothy M. Williams Treasurer and Director Managing Director, Riggs &
of Compliance Co., a division of Riggs Bank N.A.

Owen B. Burman Director - Director, Riggs & Co., a
Equity Research division of Riggs Bank N.A.

Sean C. Fallon Director - Director, Riggs & Co., a
Performance & Fixed division of Riggs Bank N.A.
Income Research

Rainier D. Flores Director - Assistant Director, Riggs & Co., a division
Operations of Riggs Bank N.A.

<PAGE>

Other Substantial
Business, Profession,
Name Position with Adviser Vocation or Employment
- ---------------------------------- ------------------------------------ ----------------------------------------------

Weijiang Ga Assistant Director - Assistant Director, Riggs &
Performance Measurement Co., a division of Riggs Bank N.A.

Philip S. Brown Director - Client Director, Riggs & Co., a
Services division of Riggs Bank N.A.

Danna Maller Director - Marketing Assistant Director, Riggs &
Co., a division of Riggs Bank N.A.

Joseph E. Konrad Director-Technology Director, Riggs & Co., a division of Riggs
Bank, N.A.

Christine J. Kyle Director - Equity Trading Director, Riggs & Co, a division of Riggs
Bank N.A.

Micheal C. Sahakian Assistant Director-Client Services Assistant Director, Riggs & Co., a division
of Riggs Bank N.A.

Spencer C. Smith Assistant Director-Marketing Assistant Director, Riggs & Co., a division
of Riggs Bank N.A.

Elizabeth Shephard Farrar Assistant Director-Client Services Assistant Director, Riggs & Co., a division
of Riggs Bank N.A.

Colleen H. Doremus Fixed Income Management Officer and Director, Riggs & Co., a division of Riggs
Director Bank N.A.

Jeoffrey Strobel Director, Marketing Assistant Director, Riggs & Co., a division
of Riggs Bank N.A.

</TABLE>

<PAGE>

Item 27. Principal Underwriters:

(a)......Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following .... open-end
investment companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

<PAGE>

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Treasurer
Federated Investors Tower President,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas P. Moretti Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of
the following locations:

Registrant 5800 Corporate Drive
Pittsburgh, PA 15237- 7010

Federated Shareholder Services Federated Investors Tower
Company 1001 Liberty Avenue
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper")

Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Riggs Investment Management 800 17th Street, N.W.
Corp. ("Adviser") Washington, D.C. 20006-3950

Riggs Bank N.A. RIMCO Funds
("Custodian") 1120 Vermont Avenue, N.W.
Washington, D.C. 20005-3598
</TABLE>

Item 29. Management Services: Not applicable.

Item 30. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, RIGGS FUNDS, certifies that it
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 18th day of June, 1999.

RIGGS FUNDS

BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
June 18, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/C. Grant Anderson
C. Grant Anderson Attorney In Fact June 18, 1999
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Edward C. Gonzales* President, Treasurer
and Trustee
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee
Nicholas P. Constantakis Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney

Exhibit (o)(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

RIGGS FUNDS
MULTIPLE CLASS PLAN

As Amended, Effective September 1, 1998

This Multiple Class Plan ("Plan") is adopted by RIGGS FUNDS (the "Trust"),
a Massachusetts business trust, with respect to the classes of shares
("Classes") of the portfolios of the Trust (the "Funds") set forth in
exhibits hereto.

Purpose

1. This Plan is adopted pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Rule"), in connection with the
issuance by the Trust of more than one class of shares of any or all
of the Funds ("Covered Classes") in reliance on the Rule.

2. Separate Arrangements/Class Differences

The Funds set forth on the Exhibits offer multiple classes of shares
which are titled Class Y Shares, Class R Shares and Class B Shares.
The Trust has adopted a distribution plan pursuant to Rule 12b-1 with
respect to Class R Shares and Class B Shares. Pursuant to the Rule
12b-1 Plan, Class R Shares and Class B Shares will pay a fee to the
distributor in an amount computed at the following annual rates of
the average daily net assets of such classes:

Class R Shares of Riggs
Class R Shares of Riggs U.S. Government Securities
U.S. Treasury Money Market Fund, Riggs Stock Fund
Fund and Riggs Prime and Riggs Small Company
Money Market Fund (the Stock Fund (the "Stock
"Money Market Funds") and Bond Funds") Class B Shares

0.50% 0.25% 0.75%

Class Y Shares, and Class R Shares of the Money Market Funds, are not
subject to a sales charge. Class R Shares of the Stock and Bond Funds
are subject to a 2% contingent deferred sales charge. Class B Shares
are subject to a maximum 5% contingent deferred sales charge.

Class Y Shares are sold primarily to trusts, fiduciaries and
institutions.

Class R Shares of the Money Market Funds are sold primarily to retail
customers of Riggs Bank through Riggs Bank and its affiliates, and to
other retail customers through non-affiliated, authorized
broker-dealers. Class R Shares of the Money Market Funds are also
available to retail and institutional customers in connection with an
Asset Management Program for automatic investment. Class R Shares of
the Stock and Bond Funds are sold primarily to retail and trust
customers of Riggs Bank through Riggs Bank and its affiliates.

Class B Shares are sold primarily to retail customers through
broker-dealers which are not affiliated with Riggs Bank.

Except for Class R Shares of the Money Market Funds, the minimum
investment for each class is $1,000 ($500 for IRAs); subsequent
investments must be in the amount of $100 ($50 in the case of IRAs.)
With respect to Class R Shares of the Money Market Funds, the minimum
investment requirement, if any, would be specified in the Riggs Bank
Service Agreement.

Shareholders are entitled to one vote for each share held on the
record date for any action requiring a vote by the shareholders and a
proportionate fractional vote for each fractional share held.
Shareholders of the Trust will vote in the aggregate and not by Fund
or class except (i) as otherwise expressly required by law or when
the Trustees determine that the matter to be voted upon affects only
the interests of the shareholders of a particular Fund or class, and
(ii) only holders of Class B Shares will be entitled to vote on
matters submitted to shareholder vote with respect to the Rule 12b-1
Plan applicable to such class, and only holders of Class R Shares
will be entitled to vote on matters submitted to shareholder vote
with respect to the Rule 12b-1 Plan applicable to such class.

3. Expense Allocations

The expenses incurred pursuant to the Rule 12b-1 Plan will be borne
solely by the Class R Shares and Class B Shares class of the
applicable Fund, and expenses incurred pursuant to the Shareholder
Services Plan for the Money Market Funds shall, as of October 1,
1998, be borne as follows: expenses equaling up to 0.10% of the
average daily net assets of the Class R Shares shall be borne solely
by the Class R Shares and no expenses shall be borne by the Class Y
Shares. The foregoing constitute the only expenses allocated to one
class and not the other.

4. Exchange Features

A shareholder may exchange Class R Shares of the Fund for Class R
Shares of any of the other Funds in the Trust (with the exception of
Riggs U.S. Treasury Money Market Fund), and a shareholder may
exchange Class B Shares of one Fule for Class B Shares of another
Fund in the Trust and for Class R Shares of Riggs Prime Money Market
Fund. Shares of Funds with a sales charge may be exchanged at net
asset value for shares of other Funds with an equal sales charge or
no sales charge. Shares of Funds with a sales charge may be exchanged
for shares of Funds with a higher sales charge at net asset value,
plus the additional sales charge. Shares of Funds with no sales
charge, whether acquired by direct purchase, reinvestment of
dividends on such shares, or otherwise, may be exchanged for shares
of Funds with a sales charge at net asset value, plus the applicable
sales charge. When an exchange is made from a Fund with a sales
charge to a Fund with no sales charge, the shares exchanged and
additional shares which have been purchased by reinvesting dividends
or capital gains on such shares retain the character of the exchanged
shares for purposes of exercising further exchange privileges.

Effectiveness

5. This Plan shall become effective with respect to each Class, (i) to
the extent required by the Rule, after approval by a majority vote
of: (a) the Trust's Board of Trustees; (b) the members of the Board
of the Trust who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of the Trust's
Plan; and/or (ii) upon execution of an exhibit adopting this Plan
with respect to such Class.

6. Amendment

This Plan may be amended at any time, with respect to any Class, by a
majority vote of: (i) the Trust's Board of Trustees; and (ii) the
members of the Board of Trustees who are not interested persons of
the Trust and have no direct or indirect financial interest in the
operation of this Plan.

<PAGE>

RIGGS FUNDS

EXHIBIT A
to the
Multiple Class Plan

as amended: September 1, 1998

Riggs Prime Money Market Fund:
Class Y Shares
Class R Shares

Riggs Small Company Stock Fund:
Class B Shares
Class R Shares

Riggs Stock Fund:
Class B Shares
Class R Shares

Riggs U.S. Treasury Money Market Fund:
Class Y Shares
Class R Shares

This Multiple Class Plan is adopted by Riggs Funds with respect to
the Classes of Shares of the portfolios of Riggs Funds set forth above.

Witness the due execution hereof this 1st day of September, 1998.

Riggs Funds

By:/s/ Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

Exhibit (o)(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

RIGGS FUNDS
MULTIPLE CLASS PLAN

As Amended, Effective July 1, 1998

Purpose

2. Separate Arrangements/Class Differences

0.50% 0.25% 0.75%

Class Y Shares are sold primarily to trusts, fiduciaries and
institutions.

Class B Shares are sold primarily to retail customers through
broker-dealers which are not affiliated with Riggs Bank.

3. Expense Allocations

The expenses incurred pursuant to the Rule 12b-1 Plan will be borne
solely by the Class R Shares and Class B Shares class of the
applicable Fund, and constitute the only expenses allocated to one
class and not the other.

4. Exchange Features

Effectiveness

6. Amendment

<PAGE>

RIGGS FUNDS

EXHIBIT A
to the
Multiple Class Plan

Riggs Prime Money Market Fund:
Class Y Shares
Class R Shares

Riggs Small Company Stock Fund:
Class B Shares
Class R Shares

Riggs Stock Fund:
Class B Shares
Class R Shares

Riggs U.S. Treasury Money Market Fund:
Class Y Shares
Class R Shares

This Multiple Class Plan is adopted by Riggs Funds with respect to
the Classes of Shares of the portfolios of Riggs Funds set forth above.

Witness the due execution hereof this 1st day of July, 1998.

Riggs Funds

By: /s/Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

Exhibit m (ii)under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
EXHIBIT B
to the
Distribution Plan

Riggs Funds

Riggs Small Company Stock Fund
Class B Shares

Riggs Stock Fund
Class B Shares

This Distribution Plan is adopted by Riggs Funds with respect to the Class
of Shares of the portfolio of the Trust set forth above.

In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of 0.75 of 1% of the average
aggregate net asset value of the Class B Shares of Riggs Small Company Stock
Fund and Riggs Stock Fund held during the month.

Witness the due execution hereof this 1st day of July, 1998.

Riggs Funds

By:/s/ Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

<PAGE>

EXHIBIT C
to the
Distribution Plan

Riggs Funds

Riggs Small Company Stock Fund
Class R Shares

Riggs Stock Fund
Class R Shares

Riggs U.S. Government Securities Fund
Class R Shares

This Distribution Plan is adopted by Riggs Funds with respect to the Class
of Shares of the portfolio of the Trust set forth above.

In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of 0.25 of 1% of the average
aggregate net asset value of the Class R Shares of Riggs Small Company Stock
Fund, Riggs Stock Fund, and Riggs U.S. Government Securities Fund held during
the month.

Witness the due execution hereof this 1st day of July, 1998.

Riggs Funds

By:/s/ Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

Exhibit (p)(ii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of
RIGGS FUNDS and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them
and in their names, place and stead, in any and all capacities, to sign any and
all documents to be filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as each of them might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/s/ John S. Walsh Trustee April 8, 1999
- --------------------------
John S. Walsh

Sworn to and subscribed before me this 8th day of April, 1999

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit (g)(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

CUSTODY AGREEMENT

Agreement made as of this 8th day of June, 1998, between RIGGS FUNDS, a
Massachusetts business trust organized and existing under the laws of the
Commonwealth of Massachusetts, having its principal office and place of business
at ** (hereinafter called the "Fund"), Riggs Bank, N.A., a national bank having
its principal office and place of business at 800 17th Street, N.W., Washington,
D.C. 20006 (the "Custodian") and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office and place of
business at One Wall Street, New York, New York 10286 (hereinafter called the
"Subcustodian")

W I T N E S S E T H :

WHEREAS, the Custodian acts as the custodian for the securities and money of the
Fund;

WHEREAS, the Fund wishes to reappoint the Custodian as the Custodian
for the securities and money of the Fund pursuant to the terms of a new
agreement concerning the same;

WHEREAS, the Custodian and the Fund desire to appoint the Subcustodian as a
subcustodian of such securities and money; and

WHEREAS, the Subcustodian desires to serve as such subcustodian on the
terms and conditions hereinafter contained in this Custody Agreement;

NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Fund, the Custodian and the Subcustodian agree as follows:

ARTICLE I.

DEFINITIONS

Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

1. "Act of Insolvency", when used with respect to the Custodian or
Subcustodian shall include (i) the appointment of a receiver, conservator,
liquidator or trustee for such person, or the consent by such person to any such
appointment; (ii) a finding or adjudication by a court or agent of competent
jurisdiction of bankruptcy or insolvency of such person; (iii) the filing of a
petition by or against such person under any bankruptcy, reorganization,
arrangement, insolvency, liquidation or similar law of any jurisdiction, or the
consent by such person to the filing of any such petition, which petition is not
dismissed or discharged within fifteen (15) days of the filing thereof; (iv) the
such person's making of an assignment for the benefit of its creditors, or the
admission by such person in writing of its inability to pay its debts as they
become due; or (v) any order or finding by any federal financial institutions
regulatory agency that such person is `critically undercapitalized' within the
meaning of section 38 of the Federal Deposit Insurance Act, as amended.

2. "Authorized Persons" shall be deemed to include any person, whether
or not such person is an officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Subcustodian from time to time.

3. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.

4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.

5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian or Subcustodian which is actually received by the Custodian or
Subcustodian and signed on behalf of the Fund by any two Authorized Persons, and
the term Certificate shall also include Instructions.

6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Subcustodian to be such a clearing
member.

7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian or
Subcustodian as security for, and in consideration of, the Custodian's or
Subcustodian's issuance of (a) any Put Option guarantee letter or similar
document described in paragraph 8 of Article V herein, or (b) any receipt
described in Article V or VII herein.

8. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.

9. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon time exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.

10. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.

11. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian or the Subcustodian.

12. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.

13. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.

14. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.

15. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.

16. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Authorized Person or unsigned) and
tested telex.

17. "Investment Company Act" shall mean the federal Investment Company
Act of 1940, as amended, and the rules and regulations adopted thereunder.

18. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Subcustodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's or
Subcustodian's effecting an appropriate entry in its books and records.

19. "Money Market Security" shall be deemed to include without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.

20. "O.C.C" shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.

21. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.

22. "Oral Instructions" shall mean verbal instructions actually
received by the Subcustodian from an Authorized Person or from a person
reasonably believed by the Custodian or Subcustodian to be an Authorized Person.

23. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.

24. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.

25. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.

26. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian or Subcustodian in connection with
such transactions as the Fund may from time to time determine.

27. "Series" shall mean the various portfolios, if any, of the Fund listed
on Appendix B hereto as amended from time to time.

28. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a particular
Series.

29. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.

30. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.

ARTICLE II.

APPOINTMENT OF CUSTODIAN AND SUBCUSTODIAN

1. The Fund hereby constitutes an appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period of
this Agreement, and delivered or caused to be delivered to the Custodian by the
Fund.

2. The Fund and the Custodian hereby constitute and appoint the
Subcustodian as subcustodian of the Securities and money at any time owned by
the Fund during the period of this Agreement and delivered or caused to be
delivered to the Subcustodian by the Fund or the Custodian. The Custodian, in
turn, will deliver or cause to be delivered such Securities and money to the
Subcustodian subject to the same specifications made by the Fund as described in
the previous sentence. At the direction of the Custodian, the Fund shall deliver
or cause to be delivered all Securities or money owned by it directly to the
Subcustodian, without the Custodian taking possession thereof, and in so doing
the Fund shall make the same specifications as previously provided in this
paragraph 2.

3. The Custodian and Subcustodian hereby accept their respective
appointments as Custodian and Subcustodian, respectively and agree to perform
the duties thereof as hereinafter set forth.

4. The Custodian specifically authorizes the Fund to communicate
directly with the Subcustodian concerning any and all matters pertaining to the
custody of Securities and money of the Fund, and matters properly relating
thereto, including those matters provided in Articles IV through XVIII of this
Agreement, and the Subcustodian shall be authorized to rely and act on any
Instruction or Certificate given by the Fund to the Subcustodian pursuant to any
provision thereof, so long as the Subcustodian continues to perform its duties
and responsibilities hereunder. Custodian shall have no authority under this
Agreement to alter, countermand or modify without the written consent of the
Fund any Instruction or Certificate given directly by the Fund to the
Subcustodian. The Fund agrees to promptly transmit to Custodian a copy of any
Instructions or Certificate given to Subcustodian. It is expressly understood
that nothing in this Agreement shall act to relieve Custodian of its duties and
responsibilities as such to the Fund, except as provided in Article XIX of this
Agreement; provided however, that Custodian shall have no liability or
responsibility for any act or omissions of any Foreign Sub-Custodian other than
to take such actions, in cooperation with Subcustodian, as are provided in
Paragraph 8 of Article XVII hereof.

5. For the performance of its duties and responsibilities specified
hereunder, the Custodian shall be paid such compensation by the Fund, out of the
net assets of the Fund, as the Fund and the Custodian shall agree in writing
signed by both parties, which writing shall refer to and incorporate the
provisions of this Agreement. In turn, for the performance of its duties and
responsibilities specified hereunder, the Subcustodian shall be paid such
compensation, which shall be paid by the Custodian, as the Custodian and the
Subcustodian shall agree in writing signed by both parties, which writing shall
refer to and incorporate the provisions of this Agreement. At the election of
the Custodian, the Custodian may direct the Fund, with the Fund's consent, to
pay directly to the Custodian, out of the compensation owned to it by the Fund
hereunder, the compensation owed by the Custodian to the Subcustodian. Any
compensation paid by the Fund hereunder shall be treated as an expense thereof
which shall be apportioned among the Series of the Fund in the manner provided
in paragraph 9 of Article XIX hereof.

ARTICLE III.

AUTHORITY OF THE CUSTODIAN AND SUBCUSTODIAN

1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated.

2. The Custodian specifically authorizes the Fund to communicate
directly with the Subcustodian concerning any and all matters pertaining to the
custody of Securities and money of the Funds, and matters properly relating
thereto, including those matters provided in Article IV through XVIII of this
Agreement, and the Subcustodian shall be authorized to rely and act on any
Instruction or Certificate given by the Fund to the Subcustodian pursuant to any
provision thereof, so long as the Subcustodian continues to perform its duties
and responsibilities hereunder. Custodian shall have no authority under this
Agreement to alter, countermand or modify without the written consent of the
Fund any Instruction or Certificate given directly by the Fund to the
Subcustodian. The Fund agrees to promptly transmit to Custodian a copy of any
Instructions or Certificate given to Subcustodian. It is expressly understood
that nothing in this Agreement shall act to relieve Custodian of its duties and
responsibilities as such to the Fund, except as provided in Article XIX of this
Agreement; provided however, that Custodian shall have no liability or
responsibility for any act or omissions of any Foreign Sub-Custodian, as are
provided in Paragraph 8 of Article XVII hereof.

3. For the performance of its duties and responsibilities specified
hereunder, the Custodian shall be paid such compensation by the Fund, out of the
net assets of the Fund, as the Fund and the Custodian shall agree in writing
signed by both parties, which writing shall refer to and incorporate the
provisions of this Agreement. In turn, for the performance of its duties and
responsibilities specified hereunder, the Subcustodian shall be paid such
compensation, which shall be paid by the Custodian, as the Custodian and
Subcustodian shall agree in writing signed by both parties, which writing shall
refer to and incorporate the provisions of this Agreement. At the election of
the Custodian, the Custodian may direct the Fund, with the Fund's consent, to
pay directly to the Custodian, out of the compensation owed to it by the Fund
hereunder, the compensation owed by the Custodian to the Subcustodian. Any
compensation paid by the Fund hereunder shall be treated as an expense thereof
which shall be apportioned among the Series of the Fund in the manner provided
in paragraph 9 of Article XIX hereof.

4. The Custodian and the Subcustodian shall subject to the provisions
of this Article and to Article XVII hereof, segregate, keep and maintain the
assets of each Series separate and apart from assets held by the Custodian or
the Custodian in any other capacity, and from assets of other Series. The
Custodian or the Subcustodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian and the Subcustodian
a certified resolution of the Board of Trustees of the Fund, substantially in
the form of Exhibit A hereto, approving, authorizing and instructing the
Custodian and the Subcustodian on a continuous and on-going basis to deposit
therein, regardless of the Series to which the same are specifically allocated
and to utilize the Book-Entry System to the extent possible in connection with
its performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the Fund shall
deliver to the Custodian and the Subcustodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of Exhibit B hereto,
approving, authorizing and instructing the Custodian and the Subcustodian on a
continuous and ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian and the Subcustodian to deposit in the
Depository all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent possible with
respect to such Securities in connection with its performance hereunder,
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
securities collateral. Securities and money deposited in either the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Custodian or the Subcustodian for customers, including, but
not limited to, accounts in which the Custodian or the Subcustodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's or the Subcustodian's books to the separate account for the
applicable Series. Prior to the Custodian's or the Subcustodian accepting,
utilizing and acting with respect to Clearing Member confirmations for Options
and transactions in Options for a Series as provided in this Agreement, the
Custodian or the Subcustodian shall have received a certified resolution of the
Fund's Board of Trustees, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian or the Subcustodian on a
continuous and on-going basis, until instructed to the contrary by a Certificate
actually received by the Custodian, or the Subcustodian to accept, utilize and
act in accordance with such confirmations as provided in this Agreement with
respect to such Series.

5. Except as otherwise specifically provided in this Agreement,
including, without limitation, as provided in paragraph 6 of Article IV hereof,
or in another valid and binding agreement between Custodian and the Fund, or in
Written Instructions delivered by the Fund, neither Custodian or Subcustodian
shall (i) commingle or cause to be commingled Securities held for the Fund with
securities or other assets of Custodian or Subcustodian or any Affiliate of
Custodian or Subcustodian, (ii) take any action, or cause, suffer or permit the
taking of any action, which results or would result in the creation, filing,
attachment or placement of any right, charge, security interest, lien,
encumbrance or claim of any kind (other than for the account of Custodian,
Subcustodian or any Foreign Sub-Custodian as specifically permitted under this
Agreement) with respect to any securities or cash held for the Fund, or (iii)
otherwise receive, hold or transfer any Securities or assets of the Fund in a
manner inconsistent with the requirements of the Investment Company Act;
provided, however, that neither Custodian nor Subcustodian shall not be deemed
to be in violation of this representation and warranty insofar as it takes any
action, or refrains to take any action, pursuant to Oral or Written Instructions
or a Certificate.

<PAGE>

ARTICLE IV.

CUSTODY OF SECURITIES AND MONEY

1. The Subcustodian shall establish and maintain separate accounts, in
the name of each Series, and shall credit to the separate account for each
Series all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Subcustodian only:

(a) as hereinafter provided;

(b) pursuant to Certificates setting froth the name and
address of the person to whom the payment is to be made, the Series account from
which payment is to be made and the purpose for which payment is to be made; or

(c) in payment of the fees and in reimbursement of the
expenses and liabilities of the Subcustodian attributable to such Series.

2. Promptly after the close of business on each day, the Subcustodian
shall furnish the Fund and the Custodian with confirmations and a summary, on a
per Series basis, of all transfers to or from the account of the Fund for a
Series, either hereunder or with any co-custodian or subcustodian appointed in
accordance with this Agreement during said day. Where Securities are transferred
to the account of the Fund for a Series, the Subcustodian shall also by
book-entry or otherwise identify as belonging to such Series a quantity of
Securities in a fungible bulk of Securities registered in the name of the
Subcustodian (or its nominee) or shown on the Subcustodian's account on the
books of the Book-Entry System or the Depository. At least monthly and from time
to time, the Subcustodian shall furnish the Fund and the Custodian with a
detailed statement, on a per Series basis, of the Securities and money held by
the Subcustodian for the Fund.

3. Except as otherwise provided in paragraph 6 of this Article and in
Article IX, all Securities held by the Subcustodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Subcustodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Subcustodian as the Subcustodian
may from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Subcustodian appropriate instruments to enable the
Subcustodian to hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the Book-Entry System or
the Depository any Securities which it may hold hereunder and which may from
time to time be registered in the name of the Fund. The Subcustodian shall hold
all such Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.

4. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Subcustodian by itself, or
through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with preceding paragraph 3:

(a) collect all income, dividends and distributions due or
payable;

(b) give notice to the Fund and present payment and collect
the amount payable upon such Securities which are called, but only if either (i)
the Subcustodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix C annexed
hereto, which may be amended at any time by the Subcustodian without the prior
notification or consent of the Fund, (it being agreed Subcustodian shall
promptly send notice to Custodian and the Fund of any amendment it has made);

(d) surrender Securities in temporary form for definitive
Securities;

(e) execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;

(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Subcustodian for such Series hereunder; and

(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Subcustodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating that manner in which proxies or consents are to be voted.

5. Upon receipt of a Certificate and not otherwise, the Subcustodian,
directly or through the use of the Book-Entry System or Depository, shall:

(a) execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Subcustodian hereunder for the Series specified in such Certificate may be
exercised;

(b) deliver any Securities held by the Subcustodian hereunder
for the Series specified in such Certificate in exchange for other Securities or
cash issue or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;

(c) deliver any Securities held by the Subcustodian hereunder
for the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments as
may be issued to it to evidence such delivery;

(d) make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and

(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 4(b) of this Article which may
be called as specified in the Certificate.

6. Notwithstanding any provision elsewhere contained herein, the
Subcustodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Subcustodian such a Certificate no
later than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Subcustodian shall comply with
Section 17(f) of the Investment Company Act in connection with the purchase,
sale, settlement, closing-out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Subcustodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Subcustodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Subcustodian (or any nominee of
the Subcustodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Subcustodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Subcustodian of such instrument or such certificate,
and deliver and Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Subcustodian of payment therefor. Any such instrument or certificate delivered
to the Subcustodian shall be held by the Subcustodian hereunder in accordance
with, and subject to, the provisions of this Agreement.

ARTICLE V.

PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS

1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Subcustodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Subcustodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.

2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Subcustodian (i) with
respect to each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each sale: (a) the
Series to which such Securities were specifically allocated; (b) the name of the
issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest, if any; (d) the date of sale; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Subcustodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such Sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.

ARTICLE VI.

OPTIONS

1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Subcustodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of the Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase, (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Subcustodian shall pay upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Subcustodian (or any duly appointed and registered
nominee of the Subcustodian) as subcustodian for the Fund, out of money held for
the account of the Series to which such Option is to be specifically allocated,
the total amount payable upon such purchase to the Clearing Member through whom
the purchase was made, provided that the same conforms to the total amount
payable as set forth in such Certificate.

2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Subcustodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Subcustodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Subcustodian of the total amount payable to the Fund, provided
that the same conforms to the total amount payable as set forth in such
Certificate.

3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Subcustodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Subcustodian shall, upon receipt of the Securities underlying the Call
Option was exercised. The Subcustodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay out of the money held for
the account of the Series to which such Call Option was specifically allocated
the total amount payable to the Clearing Member through whom the Call Option was
exercised, provided that the same conforms to the total amount payable as set
forth in such Certificates.

4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Subcustodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Subcustodian shall, upon receipt of the amount payable upon the exercise of
the Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.

5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Subcustodian a Certificate specifying with respect to such Stock Index
Option: (a) the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the number of
Options being exercised; (d) the stock index to which such Option relates; (e)
the expiration date; (f) the exercise price: (g) the total amount to be received
by the Fund in connection with such exercise; and (h) the Clearing Member from
whom such payment is to be received. The Subcustodian shall make payment of the
exercise price as so specified to the indicated Clearing Member, and upon
receipt of the so specified total amount to be received credit the same to the
account of the indicated Series.

6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Subcustodian a Certificate specifying with respect to
such Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Subcustodian
shall deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Subcustodian has
the right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Subcustodian and not
deposited with the Depository underlying a Covered Call Option.

7. Whenever a Covered Call Option is written by the Fund and described
in the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Subcustodian a Certificate instructing the Subcustodian to
deliver, or direct the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which such Covered Call
Option was written; (b) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (c) the Clearing Member to whom the
underlying Securities are to be delivered; and (d) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Subcustodian shall
deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate against payment of the amount to be received as set
forth in such Certificate.

8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Subcustodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option was
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Subcustodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Subcustodian
on the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Subcustodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.

9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Subcustodian a Certificate specifying: (a) the Series to which such Put Option
was written; (b) the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the underlying Securities
are to be received; (d) the total amount payable by the Fund upon such delivery;
(e) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Subcustodian in connection
with such Put Option, the Subcustodian shall pay out of the money held for the
account of the Series to which such Put Option was specifically allocated the
total amount payable to the Clearing Member specified in the Certificate as set
forth in such Certificates against delivery of such Securities, and shall make
the withdrawals specified in such Certificates.

10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Subcustodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Subcustodian shall, upon receipt of the premium specified in
the Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Subcustodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.

11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Subcustodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Subcustodian shall l pay out of the money held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.

12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs 6, 8 or 10 of this Article in a
transaction expressly designed as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Subcustodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Subcustodian's payment of
any premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Subcustodian shall
remove, or direct the Depository to remove, the previously imposed restrictions
on the Securities underlying the Call Option.

13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Subcustodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 2 of Article IV herein,
and upon the return and/or cancellation of any receipts issued by the
Subcustodian, shall make such withdrawals from the Collateral Account, and the
Margin Account and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.

ARTICLE VII.

FUTURES CONTRACTS

1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Subcustodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
contract(s)): (a) the Series for which the Futures contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer or futures commission
merchant to whom such amount is to be paid. The Subcustodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Subcustodian shall make payment
out of the money specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and deposit in the Senior Security Account
for such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.

2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Subcustodian in
accordance with the terms and conditions of the Margin Account Agreement.

(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the
Subcustodian in accordance with the terms and conditions of the Margin Account
Agreement.

3. Whenever a Futures Contract held by the Subcustodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Subcustodian a Certificate specifying:
(a) the Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement amount to
be paid or received, and with respect to a Financial Futures Contract, the
Securities and/or amount of cash to be delivered or received; (c) the broker,
dealer, or futures commission merchant to or from whom payment or delivery is to
be made or received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series. The Subcustodian
shall make the payment or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund pursuant to paragraph
2 of Article IV herein.

4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Subcustodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph 1 of this
Article, and (b) the Futures Contract being offset. The Subcustodian shall make
payment out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the Futures contract
being offset from the statements delivered to the Fund pursuant to paragraph 2
of Article IV herein, and make such withdrawals from the Senior Security Account
for such Series as may be specified in such Certificate. The withdrawals, if
any, to be made from the Margin Account shall be made by the Subcustodian in
accordance with the terms and conditions of the Margin Account Agreement.

5. Notwithstanding any other provision in this Agreement to the
contrary, the Subcustodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Subcustodian shall not be
liable for the acts or omissions of any such futures commission merchant.

ARTICLE VIII.

FUTURES CONTRACT OPTIONS

1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Subcustodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Subcustodian
shall pay out of the money specifically allocated to such Series, the total
amount to be paid upon such purchase to the broker or futures commission
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.

2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Subcustodian a Certificate specifying with respect to each such sale: (a) Series
to which such Futures Contract Option was specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Subcustodian shall consent to the cancellation of
the Futures Contract Option being closed against payment to the Subcustodian of
the total amount payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.

3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Subcustodian a Certificate specifying: (a) the Series to which such Futures
contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Subcustodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Subcustodian in accordance with the terms and conditions of the
Margin Account Agreement.

4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Subcustodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series for which such Futures Contract
Option was written; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom the
premium is to be received ;and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the Senior Security Account for such
Series. The Subcustodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposited into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Subcustodian in accordance with the terms and conditions of the
Margin Account Agreement.

5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Subcustodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant though whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Subcustodian shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Subcustodian in accordance with the terms and conditions of the
Margin Account Agreement.

6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Subcustodian
a Certificate specifying: (a) the Series to which such option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Subcustodian shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.

7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate is position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Subcustodian a Certificate specifying with respect
to the Futures Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f)
the expiration date; (g) the name of the broker or futures commission merchant
to whom the premium is to be paid; and (h) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Senior Security Account
for such Series. The Subcustodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Subcustodian in accordance
with the terms and conditions of the Margin Account Agreement.

8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Subcustodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article VII herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Subcustodian in accordance with the terms
and conditions of the Margin Account Agreement.

9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article
VII hereof.

10. Notwithstanding any other provisions in this Agreement to the
contrary, the Subcustodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act. Each delivery of such a
Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the futures commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Subcustodian shall not be
liable for the acts or omissions of any such futures commission merchant.

ARTICLE IX.

SHORT SALES

1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Subcustodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and the
title of the Security; (c) the number of shares of principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and settlement;
(e) the sale price per unit; (f) the total amount credited to the Fund upon such
sale, if any; (g) the amount of cash and/or the amount and kind of Securities,
if any, which are to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Subcustodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the Fund upon such
sale, if any, as specified in the Certificate is held by such broker for the
account of the Subcustodian (or any nominee of the Subcustodian) as custodian of
the Fund, issue a receipt or make the deposits into the Margin Account and the
Senior Security Account specified in the Certificate.

2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Subcustodian a Certificate specifying with respect to
each such closing-out: (a) the Series for which such transaction is being made;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the broker; (d) the dates
of closing-out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Subcustodian shall,
upon receipt of the net total amount payable to the fund upon such closing-out,
and the return and/or cancellation of the receipts, if any, issued by the
Subcustodian with respect to the short sale being closed-out, pay out of the
money held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.

ARTICLE X.

REVERSE REPURCHASE AGREEMENTS

1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Subcustodian hereunder, the Fund
shall deliver to the Subcustodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker or dealer through or with whom the Reverse Repurchase
Agreement is entered; (d) the amount and kind of Securities to be delivered by
the Fund to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a Senior
Security Account for such Series in connection with such Reverse Repurchase
Agreement. The Subcustodian shall, upon receipt of the total amount payable to
the Fund specified in the Certificate or Oral Instructions make the delivery to
the broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.

2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Subcustodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Security Account for such Series. The Subcustodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.

ARTICLE XI.

LOAN OF PORTFOLIO SECURITIES OF THE FUND

1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Subcustodian hereunder, the Fund shall deliver
or cause to be delivered to the Subcustodian a Certificate specifying with
respect to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery; (e) the total amount to be delivered to the
Subcustodian against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f) the name of
the broker, dealer, or financial institution to which the loan was made. The
Subcustodian shall deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon receipt of the total
amount designated as to be delivered against the loan of Securities. The
Subcustodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a certified or
bank cashier's check payable to the order of the Fund or the Subcustodian drawn
on New York Clearing House funds and may delivery Securities in accordance with
the customs prevailing among dealers in securities.

2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Subcustodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned; (c) the number of shares or the principal amount to be returned; (d)
the date of termination; (e) the total amount to be delivered by the
Subcustodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate), and (f) the name of the
broker, dealer, or financial institution from which the Securities will be
returned. The Subcustodian shall receive all Securities returned from the
broker, dealer, or financial institution to which such Securities were loaned
and upon receipt thereof shall pay, out of the money held for the account of the
Fund, the total amount payable upon such return of Securities as set forth in
the Certificate.

3. Subcustodian may lend securities of the Fund, and invest any
collateral received in exchange for such Securities, only pursuant to a separate
valid and binding securities lending agreement between Subcustodian and the
Fund, the terms and conditions of which agreement shall govern the lending of
any such Securities, the investment of any collateral, and related rights and
obligations thereunder. Such Agreement may provide that in the case of any
inconsistency between the terms of this Agreement and those of any such
securities lending agreement, the terms and conditions of such latter agreement
shall take precedence.

ARTICLE XII.

CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY ACCOUNTS,
AND COLLATERAL ACCOUNTS

The Subcustodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Subcustodian. Such Certificate shall specify the Series for
which such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Subcustodian into, or
withdrawn from, a Senior Security Account, the Subcustodian shall be under no
obligation to make any such deposit or withdrawal and shall so notify the Fund.

2. The Subcustodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.

3. Amounts received by the Subcustodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account Agreement.

4. The Subcustodian shall have a continuing lien and security interest
in and to any property at any time held by the Subcustodian in any Collateral
Account described herein.

In accordance with applicable law the Subcustodian may enforce its lien and
realize on any such property whenever the Subcustodian has made payment or
delivery pursuant to any Put Option guarantee letter or similar document or any
receipt issued hereunder by the Subcustodian. In the event the Subcustodian
should realize on any such property net proceeds which are less than the
Subcustodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Subcustodian
by the Fund within the scope of Article XV herein.

5. On each business day the Subcustodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Subcustodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.

6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Subcustodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the
Subcustodian a Certificate specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Subcustodian's obligations with respect to any outstanding Put
Option guarantee letter or similar document, the fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.

7. It is expressly understood as between Subcustodian and the Fund that
the obligations and liabilities of each Series hereunder shall be maintained
separate and apart from the liabilities and obligations of any other Series, and
that under no circumstances may the assets of one Series be used or applied
hereunder by the Subcustodian for the account or benefit of any other Series.
Subcustodian further agrees that any liens or security interests which it holds
with respect to the securities or assets of one Series may not be used to
satisfy any obligations or claims owed to the Subcustodian under this Article
XII or otherwise by any other Series.

ARTICLE XIII.

PAYMENT OF DIVIDENDS OR DISTRIBUTIONS

1. The Fund shall furnish to the Subcustodian a copy of the resolution
of the Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of dividends and distributions on a daily basis and
authorizing the Subcustodian to rely on Oral Instructions or a Certificate
setting forth the date of the declaration of such dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent on the payment date.

2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Subcustodian shall pay out
of the money held for the account of each Series the total amount payable to the
dividend agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.

ARTICLE XIV.

SALE AND REDEMPTION OF SHARES

1. Whenever the Fund shall sell any Shares, it shall deliver to the
Subcustodian a Certificate duly specifying:

(a) the Series, the number of Shares sold, trade date, and price; and

(b) the amount of money to be received by the Subcustodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.

2. Upon receipt of such money from the transfer agent, the Subcustodian
shall credit such money to the separate account in the name of the Series for
which such money was received.

3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Subcustodian shall pay, out of the money held
for the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.

4. Except as provided hereinafter, whenever the Fund desires the
Subcustodian to make payment out of the money held by the Subcustodian hereunder
in connection with a redemption of any Shares, it shall furnish to the
Subcustodian a Certificate specifying:

(a) the number and Series of Shares redeemed; and

(b) the amount to be paid for such Shares.

5. Upon receipt from the transfer agent of an advice setting forth the
Series and number of Shares received by the transfer agent for redemption and
that such Shares are in good form for redemption, the Subcustodian shall make
payment to the transfer agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.

6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Subcustodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.

<PAGE>

ARTICLE XV.

OVERDRAFTS OR INDEBTEDNESS

1. If the Subcustodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Subcustodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate or Oral Instructions, or
which results in an overdraft in the separate account or such Series for some
other reason, or if the Fund is for any other reason indebted to the
Subcustodian with respect to a Series, including any indebtedness to The Bank of
New York under the Fund's Cash Management and Related Services Agreement (except
a borrowing for investment or for temporary or emergency purposes using
Securities for collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2of this Article), such overdraft or indebtedness shall
be deemed to be a loan made by the Subcustodian to the Fund for such Series
payable on demand and shall bear interest from the date incurred at a rate per
annum (based on a 360-day year for the actual number of days involved) equal to
1/2% over Subcustodian's prime commercial lending rate in effect from time to
time, such rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Subcustodian shall have a continuing
lien, security interest, and security entitlement in and to any property
including any investment property or any financial asset specifically allocated
to such Series at any time held by it for the benefit of such Series or in which
the Fund may have an interest which is then in the Subcustodian's possession or
control or in possession or control of any third party acting in the
Subcustodian's behalf. The Fund authorizes the Subcustodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such
Series' credit on the Subcustodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third party, or
which next succeeds a Business Day on which at the close of business the Fund
had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall
prior to 9 a.m., New York City time, advise the Subcustodian, in writing, of
each such borrowing, shall specify the Series to which the same relates, and
shall not incur any indebtedness not so specified other than from the
Subcustodian.

2. The Fund will cause to be delivered to the Subcustodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the
Subcustodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Subcustodian hereunder as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will loan to
the Fund against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Subcustodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates; (b) the
name of the bank, (c) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note, duly endorsed
by the Fund, or other loan agreement, (d) the time and date, if known, on which
the loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act
and the Fund's prospectus. The Subcustodian shall deliver on the borrowing date
specified in a Certificate the specified collateral and the executed promissory
note, if any, against delivery by the lending bank of the total amount of the
loan payable, provided that the same conforms to the total amount payable as set
forth in the Certificate. The Subcustodian may, at the option of the lending
bank, keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of any promissory
note or loan agreement. The Subcustodian shall deliver such Securities as
additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities relates from collateral status to be returned directly to the
Subcustodian, and the Subcustodian shall receive from time to time such return
of collateral as may be tendered to it. In the event that the Fund fails to
specify in a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular Securities to be
delivered as collateral by the Subcustodian, the Subcustodian shall not be under
any obligation to deliver any Securities.

ARTICLE XVI.

INSTRUCTIONS

1. With respect to any software provided by the Subcustodian to the
Fund in order for the Fund to transmit Instructions to the Subcustodian (the
"Software"), the Subcustodian grants to such Fund a personal, nontransferable
and nonexclusive license to use the Software solely for the purpose of
transmitting Instructions to, and receiving communications from, the
Subcustodian in connection with its account(s). The Fund shall use the Software
solely for its own internal and proper business purposes, and not in the
operation of a service bureau, and agrees not to sell, reproduce, lease or
otherwise provide, directly or indirectly, the Software or any portion thereof
to any third party without the prior written consent of the Subcustodian. The
Fund acknowledges that the Subcustodian and the suppliers have title and
exclusive proprietary rights to the Software, including any trade secrets or
other ideas, concepts, know how, methodologies, or information incorporated
therein and the exclusive rights to any copyrights, trademarks and patents
(including registrations and applications for registration of either) or
statutory or legal protections available with respect thereof. The Fund further
acknowledges that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the Subcustodian or
its suppliers. The Fund shall not take any action with respect to the Software
inconsistent with the foregoing acknowledgments, nor shall the Fund attempt to
decompile, reverse engineer or modify the Software. The Fund may not copy, sell,
lease or provide, directly or indirectly, any of the Software or any portion
thereof to any other person or entity without the Subcustodian's prior written
consent. The Fund may not remove any statutory copyright notice, or other notice
including the software or on any media containing the Software. The Fund shall
reproduce any such notice on any reproduction of the Software and shall add
statutory copyright notice or other notice to the Software or media upon the
Bank's request. Subcustodian agrees to provide reasonable training, instruction
manuals and access to Subcustodian's "help desk" in connection with the Fund's
user support necessary to use of the Software. At the Fund's request,
Subcustodian agrees to permit reasonable testing of the Software by the Fund.

2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Subcustodian. The Subcustodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.

3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Subcustodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Subcustodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Subcustodian all copies
of the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Articles shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.

4. The Subcustodian reserves the right to modify, at its own expense,
the Software from time to time without prior notice and the Fund shall install
new releases of the Software as the Subcustodian may direct. The Fund agrees not
to modify or attempt to modify the Software without the Subcustodian's prior
written consent. The Fund acknowledges that any modifications to the Software,
whether by the Fund or the Subcustodian and whether with or without the
Subcustodian's consent, shall become the property of the Subcustodian.

5. The Subcustodian and its manufacturers and suppliers make no
warranties or representations of any kind with regard to the Software or the
method(s) by which the Fund may transmit Instructions to the Subcustodian,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose.

6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE SUBCUSTODIAN DELIVERS THE SOFTWARE TO THE
FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES
IN ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Subcustodian to report its name and
address to government agencies to which Subcustodian is required to provide such
information by law.

7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Subcustodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Subcustodian shall
not be liable for any failure to act pursuant to such Instructions, the Fund may
not claim that such Instructions were received by the Subcustodian, and the Fund
shall deliver a Certificate by some other means.

8. (a) The Fund agrees that where it delivers to the Subcustodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Subcustodian. The Fund will cause all persons transmitting Instructions to the
Subcustodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the
Subcustodian to act in accordance with and rely on Instructions received by its
pursuant hereto.

(b) The Fund hereby represents, acknowledges and agrees that
it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Subcustodian and that there may be
more secure methods of transmitting instructions to the Subcustodian than the
method(s) selected by the Fund. The Fund hereby agrees that the security
procedures (if any) to be followed in connection with the Fund's transmission of
Instructions provide to it a commercially reasonable degree of protection in
light of its particular needs and circumstances.

9. The Fund hereby represents, warrants and covenants to the
Subcustodian that this Agreement has been duly approved by a resolution of its
Board of Trustees, and that its transmission of Instructions pursuant hereto
shall at all times comply with the Investment Company Act.

10. The Fund shall notify the Subcustodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event, within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Subcustodian shall promptly advise the Fund
whenever the Subcustodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.

11. Subcustodian will indemnify and hold harmless the Fund with respect
to any liability, damages, loss or claim or infringement against any patent,
copyright, license or other property right arising out or by reason of the
Fund's use of the Software in the form provided under this Section. Subcustodian
at its own expense will defend such action or claim brought against the Fund to
the extent that it is based on a claim that the Software in the form provided by
Subcustodian infringes any patents, copyrights, license or other property right,
provided that Subcustodian is provided with reasonable written notice of such
claim, provided that the Fund has not settled, compromised or confessed any such
claim without the Subcustodian's written consent, in which event Subcustodian
shall have no liability or obligation hereunder, and provided Fund cooperates
with and assists Subcustodian in the defense of such claim. Subcustodian shall
have the rights to control the defense of all such claims, lawsuits and other
proceedings. If, as a result of any claim of infringement against any patent,
copyright, license or other property right, Subcustodian is enjoined from using
the Software, or if Subcustodian believes that the System is likely to become
the subject of a claim of infringement, Subcustodian at its option may in its
sole discretion either (a) at its expenses procure the right for the Fund to
continue to use the Software, or (b), replace or modify the Software so as to
make it noninfringing, or (c) may discontinue the license granted herein upon
written notice to Customer.

ARTICLE XVII.

DUTIES OF THE SUBCUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES

1. The Subcustodian is authorized and instructed to employ, as
subcustodian for each Series' Securities for which the primary market is outside
the United States ("Foreign Securities") and other assets, the foreign banking
institutions and foreign securities depositories and clearing agencies designed
on Schedule I hereto ("Foreign Sub-Custodians). The Fund may designate any
additional foreign sub-custodian with which the Subcustodian has an agreement
for such entity to act as the Subcustodian's agent, as its subcustodian and any
such additional foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Subcustodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.

2. Each delivery of a Certificate to the Subcustodian in connection
with a transaction involving the use of a Foreign Sub-Custodian shall constitute
a representation and warranty by the Fund that its Board of Trustees, or its
third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act if any, has determined that use of such Foreign
Sub-Custodian satisfies the requirements of the Investment Company Act and such
Rule 17f-5 thereunder.

3. The Subcustodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Subcustodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.

4. Upon request of the Fund, the Subcustodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Subcustodian on behalf of the Fund.

5. The Subcustodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of each Series held by Foreign Sub-Custodian, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Subcustodian on behalf of the Series.

6. The Subcustodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.

7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.

8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Subcustodian shall be to take appropriate action, in
cooperation with the Custodian, at the Fund's expense to recover such loss or
damage from the Foreign Sub-Custodian. It is expressly understood and agreed
that the Subcustodian's sole responsibility and liability for the actions and
omissions of any Foreign Sub-Custodian shall be limited to amounts so recovered
from the Foreign Sub-Custodian.

9. Subcustodian shall promptly notify the Fund and the Custodian if (a)
any Foreign Sub-Custodian employed under this Agreement ceases to be an
`Eligible Foreign Subcustodian' within the meaning of rule 17f-5 under the
Investment Company Act, or (b) the Subcustodian obtains actual knowledge that a
Foreign Sub-Custodian has committed or become the subject of an Act of
Insolvency.

ARTICLE XVIII.

FX TRANSACTIONS

1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Subcustodian a Certificate or Oral Instructions
specifying with respect the such FX Transaction: (a) the Series to which such FX
Transaction is specifically allocated; (b) the type and amount of Currency to be
purchased by the Fund; (c) the type and amount of Currency to be sold by the
Fund; (d) the date on which the Currency to be purchased is to be delivered; (e)
the date on which the Currency to be sold is to be deliver; and (f) the name of
the person from whom or through whom such currencies are to be purchased or
sold. Unless otherwise instructed by a Certificate or Oral Instructions, the
Subcustodian shall deliver, or shall instruction a Foreign Sub-Custodian to
deliver, the Currency to be sold on the date on which such delivery is to be
made, as set forth in the Certificate, and shall receive, or instruct a Foreign
Sub-Custodian to receive, the Currency to be purchased on the date as set forth
in the Certificate.

2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Subcustodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.

3. Any FX Transaction effected by the Subcustodian in connection with
this Agreement may be entered with the Subcustodian, any office, branch or
subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian
acting as principal or otherwise through customary banking channels, subject to
the terms and conditions of any Instructions or Certificate issued by the Fund.
The Fund may issue a standing Certificate with respect to FX Transaction but the
Subcustodian may establish rules or limitations concerning any foreign exchange
facility made available to the Fund. The Fund shall bear all risks of investing
in Securities or hold Currency. Without limiting the foregoing, the Fund shall
bear the risks that rules or procedures imposed by a Foreign Sub-Custodian or
foreign depositories, exchange controls, asset freezes or other laws, rules,
regulations or orders shall prohibit or impose burdens or costs on the transfer
to, by or for the account of the Fund of Securities or any cash held outside the
Fund's jurisdiction or denominated in Currency other than its home jurisdiction
or the conversion of cash from one Currency into another currency. The
Subcustodian shall not be obligated to substitute another Currency for a
Currency (including a Currency that is a component of a Composite Currency Unit)
whose transferability, convertibility or availability has been affected by such
law, regulation, rule or procedure. Neither the Subcustodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.

ARTICLE XIX.

CONCERNING THE CUSTODIAN AND SUBCUSTODIAN

1. Except as hereinafter provided, or as provided in Article XVII,
neither the Custodian nor the Subcustodian nor any nominee thereof, shall be
liable for any loss or damage, including counsel fees, resulting from its action
or omission to act or otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of its own negligence
or willful misconduct or (ii) breach of the warranties in paragraph 17 of this
Article. In no event shall the Custodian or Subcustodian be liable to the Fund,
or any third party, nor shall the Subcustodian be liable to the Custodian, for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian and the Subcustodian each may, with respect to questions of law
arising hereunder or under any Margin Account Agreement, apply for and obtain
the advice and opinion of counsel to the Fund, or of its own counsel, at the
expense of the Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or opinion. The
Custodian and the Subcustodian each shall be liable to the Fund for any loss or
damage resulting from the use of the Book-Entry System or any Depository arising
by reason of any negligence or willful misconduct on the part of the Custodian
or Subcustodian or any of its employees or agents.

2. Without limiting the generality of the foregoing, neither the
Custodian nor the Subcustodian shall be under any obligation to inquire into,
and shall not be liable under this Agreement for:

(a) the validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the property of the amount paid or received therefor;

(b) the legality of the sale or redemption of any Shares, or
the property of the amount to be received or paid therefor;

(d) the legality of any borrowing by the Fund using Securities
as collateral;

(e) except as is provided in any securities lending agreement
between the Custodian or the Subcustodian and the Fund, the legality of any loan
of portfolio Securities, nor shall the Custodian or the Subcustodian be under
any duty or obligation to see to it that any cash collateral delivered to it by
a broker, dealer, or financial institution or held by it at any time as a result
of such loan of portfolio Securities of the Fund is adequate collateral for the
Fund against any loss it might sustain as a result of such loan. Neither
Custodian nor the Subcustodian specifically, but not by way of limitation, shall
be under any duty or obligation periodically to check or notify the Fund that
the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, neither the Custodian nor the
Subcustodian shall be under any duty or obligation to see that any broker,
dealer or financial institution to which portfolio Securities of the Fund are
lent pursuant to Article XI of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account of the Fund during
the period of such loan or at the termination of such loan, provided, however,
that the Subcustodian shall promptly notify the Fund and the Custodian in the
event that such dividends or interest are not paid and received when due; or

(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, neither the
Custodian nor the Subcustodian shall be under any duty or obligation to see that
any broker, dealer, futures commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar payment which the Fund
may be entitled to receive from such broker, dealer, futures commission merchant
or Clearing Member, to see that any payment received by the Subcustodian from
any broker, dealer, futures commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund of the Subcustodian's
receipt or non-receipt of any such payment.

3. Neither the Custodian nor the Subcustodian shall be liable for, or
considered to be the Custodian or Subcustodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian or the Subcustodian,
whichever the case may be, actually receives and collects such money directly or
by the final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.

4. Neither the Custodian nor the Subcustodian shall have any
responsibility and shall not be liable for ascertaining or acting upon any
class, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to Securities held in the Depository, unless the Custodian or
the Subcustodian, whichever the case may be, shall have actually received timely
notice from the Depository. In no event shall the Custodian or the Subcustodian
have any responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the Depository of any
amount payable upon Securities deposited in the Depository which may be mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities held
in the Depository the Custodian or the Subcustodian shall make a claim against
the Depository on behalf of the Fund, except that neither the Custodian or the
Subcustodian shall be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by the Depository
which in its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be furnished as often as
may be required.

5. Neither the Custodian nor the Subcustodian shall be under any duty
or obligation to take action to effect collection of any amount due to the Fund
from the transfer agent of the Fund nor to take any action to effect payment or
distribution by the transfer agent of the Fund of any amount paid by the
Custodian or the Subcustodian to the transfer agent of the Fund in accordance
with this Agreement.

6. Neither the Custodian nor the Subcustodian shall be under any duty
or obligation to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall be assured to
its satisfaction of reimbursement of its costs and expenses in connection with
any such action.

7. The Subcustodian, with the consent of the Custodian, may in addition
to the employment of Foreign Sub-Custodians pursuant to Article XVII appoint one
or more banking institutions as Depository or Depositories, as Subcustodian or
Subcustodians, or as Co-Custodian or Co-Custodians including, but not limited
to, banking institutions located in foreign countries, of Securities and money
at any time owned by the Fund, upon such terms and conditions as may be approved
in a Certificate or contained in an agreement executed by the Subcustodian, the
Fund and the appointed institution.

8. Neither the Custodian nor the Subcustodian shall be under any duty
or obligation (a) to ascertain whether any Securities at any time delivered to,
or held by it or by any Foreign Sub-Custodian, for the account of the Fund and
specifically allocated to a Series are such as properly may be held by the Fund
or such Series under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not involving the
Custodian or the Subcustodian, are such transactions as may properly be engaged
in by the Fund.

9. The Custodian and the Subcustodian each shall be entitled to receive
and the Fund agrees to pay to the Custodian and the Subcustodian all
out-of-pocket expenses as may be agreed upon from time to time between and/or
among the Custodian, the Subcustodian and the Fund. The Subcustodian may charge
any expenses with respect to a Series incurred by the Custodian or the
Subcustodian in the performance of its duties pursuant to such agreement against
any money specifically allocated to such Series. Unless and until the Fund
instructs the Custodian or the Subcustodian by a Certificate to apportion any
loss, damage, liability or expense among the Series in a specified manner, the
Custodian or the Subcustodian shall also be entitled to charge against any money
held by it for the account of a Series such Series' pro rata share (based on the
ratio of such Series' net asset value at the time of the charge to the aggregate
net asset value of all Series at that time) of the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. In addition to the
foregoing, the expenses for which the Subcustodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
subcustodians and foreign branches of the Subcustodians incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.

10. The Custodian and the Subcustodian each shall be entitled to rely
upon any Certificate, notice or other instrument in writing received by it and
reasonably believed by it to be a Certificate. The Custodian and the
Subcustodian each shall be entitled to rely upon any Oral Instructions actually
received by it hereinabove provided for. The Fund agrees to forward to the
Custodian and the Subcustodian a Certificate or facsimile thereof confirming
such Oral Instructions in such manner so that such Certificate or facsimile
thereof is received by the Custodian and the Subcustodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian
or the Subcustodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Subcustodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that neither the Custodian nor the Subcustodian shall incur any liability
to the Fund in acting upon Oral Instructions given to the Custodian or the
Subcustodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person.

11. The Custodian and the Subcustodian each shall be entitled to rely
upon any instrument, instruction or notice received by the Custodian or the
Subcustodian and reasonably believed by the Custodian or the Subcustodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, neither the
Custodian nor the Subcustodian shall be under any duty to inquire into, nor
shall be liable for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without limitation, any
specification of any amount to be paid to a broker, dealer, futures commission
merchant or Clearing Member.

12. The books and records pertaining to the Fund which are in the
possession of either the Custodian or the Subcustodian shall be the property of
the Fund. Such books and records shall be prepared and maintained as required by
the Investment Company Act and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's and the Subcustodian's
normal business hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian or the Subcustodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian or the Subcustodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian or the Subcustodian shall provide
in hard copy or on micro-film, whichever the Custodian or the Subcustodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian or the Subcustodian for its expenses of providing such hard copy or
micro-film.

13. The Custodian or the Subcustodian shall provide the Fund with any
report obtained by the Custodian or the Subcustodian on the system of internal
accounting control of the Book-Entry System, the Depository or O.C.C., and with
such reports on its own systems of internal accounting control as the Fund may
reasonably request from time to time.

14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including reasonable attorney's fees, howsoever arising or incurred because of,
or in connection with, this Agreement, including any liability, claim, loss or
demand arising out of or incurred by reason of any Instruction or Certificate
given by the Fund directly to Subcustodian as provided in paragraph 4 of Article
II hereof, except for any such liability, claim, loss or demand arising out of
the Custodian's own negligence or willful misconduct, or breach of the
warranties, if applicable, in paragraph 17 of this Article.

15. The Fund and the Custodian, jointly and severally, each agree to
indemnify the Subcustodian against and save the Subcustodian harmless from all
liability, claims, losses and demands whatsoever, including reasonable
attorney's fees, howsoever arising or incurred because of or in connection with
this Agreement, including the Subcustodian's payment or non-payment of checks
pursuant to paragraph 6 of Article XIV as part of any check redemption privilege
program of the Fund, except for any such liability, claim, loss or demand
arising out of the Subcustodian's own negligence or willful misconduct, or
breach of the warranties in paragraph 17 of this Article.

16. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVII and XVIII the Subcustodian
may deliver and receive Securities, and receipts with respect to such
Securities, and arrange for payment to be made and received by the Subcustodian
in accordance with the customs prevailing from time to time among brokers or
dealers in such Securities. When the Subcustodian is instructed to deliver
Securities against payment, delivery of such Securities and receipt of payment
therefor may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
the Subcustodian's delivery of Securities pursuant to instructions of the Fund,
which responsibility and liability shall continue until final payment in full
has been received by the Subcustodian.

17. (a) Subcustodian represents and warrants that the computer software
and hardware systems ("Systems") that are owned by Subcustodian and are used to
provide services under this Agreement (the "Services") are 2000 Compliant or
will be made 2000 Compliant before December 31, 1998.

As used herein, the term "2000 Compliant" means that the Systems will function
without material error caused by the introduction of dates falling on or after
January 1, 2000, and will not (a) fail or produce incorrect or inconsistent date
results, or (b) cause any other programs or hardware owned by the Subcustodian
to fail or to generate errors.

With respect to software and hardware that the Subcustodian licenses from third
parties and uses in providing the Services ("Third Party Hardware and
Software"), Subcustodian warrants that it has in place a program under which it
will use commercially reasonable efforts either (a) to contact such third
parties or their websites to obtain assurances that such Third Party Hardware
and Software is 2000 Compliant, or (b) to test the same by June 30, 1999 to
certify, in accordance with Subcustodian's standard practices that the Third
Party Hardware and Software is 2000 Compliant.

If Subcustodian cannot so certify or obtain such assurances that any Third Party
Hardware and Software is 2000 Compliant, Subcustodian will use commercially
reasonable efforts to replace such Third Party Hardware and Software with
hardware or software that is warranted or certified by its vendor as 2000
Compliant, if such replacement is available, compatible with Subcustodian's
Systems, and deemed by Subcustodian as appropriate under the circumstances.

In the event that Subcustodian has contracts with third party financial
institution service providers to provide the Services or any portion thereof
("Third Party Services"), Subcustodian warrants that it has in place a program
under which it will use commercially reasonable efforts to contact such
providers of Third Party Services to obtain assurances that such Third Party
Services are 2000 Compliant.

Notwithstanding the foregoing, the Fund and Custodian each acknowledges and
agrees that Subcustodian does not warrant that Systems, Third Party Hardware and
Software, and/or Third Party Services will continue to interface with the
hardware, firmware, software (including operating systems), records or data used
by Customer or third parties, nor does Subcustodian warrant that any public
utility, communications service provider, stock exchange or funds transfer
network will be 2000 Compliant.

Either the Fund or Custodian shall have the right to discuss with Subcustodian
the efforts made by Subcustodian under this Section, and Subcustodian promptly
shall provide reasonable responses. If, during the period of time commencing
December 1, 1998 and ending January 1, 2000, either the Fund or the Custodian in
its sole discretion determines that Subcustodian has not taken sufficient
measures to cause, or has not obtained written assurance that, as the case may
be, the Systems, the Third Party Hardware and Software, or the Third Party
Services are or by the respective dates listed above will be 2000 Compliant,
then either the Fund or the Custodian shall have the right, upon 30 (thirty)
days written notice to Subcustodian, to terminate this Agreement as to the
Subcustodian without penalty at any time prior to January 1, 2000, anything in
this Agreement to the contrary notwithstanding. In the event of any such
termination, Subcustodian shall not charge either the Fund or the Custodian the
costs and expenses of termination incurred by Subcustodian.

(b) The Fund and Custodian's sole remedy in the event of any
breach by Subcustodian of any representation, warranty or agreement contained in
immediately preceding sub-section (a) shall be the right, upon 30 (thirty) days
written notice to Subcustodian, to terminate this Agreement as to the
Subcustodian without penalty at any time, anything in this Agreement to the
contrary notwithstanding. In the event of any such termination, Subcustodian
shall not charge either the Fund or the Custodian the costs and expenses of
termination incurred by Subcustodian. In no event shall Subcustodian be liable
for any direct, indirect, special, consequential or punitive damages relating to
or arising out of any breach by Subcustodian of any such representation,
warranty, or agreement. The provisions of this sub-section (b) shall survive any
termination or expiration of this Agreement.

(c) (1) The Fund hereby makes the same representations and
warranties, and undertakes the same obligations, subject to the same remedy
described in preceding sub-section (b) with respect to computer software or
hardware owned by the Fund, software and hardware the Fund licenses from third
parties, and services obtained by the Fund from third parties, that Subcustodian
has made and undertaken in preceding sub-section (a), in each case to the extent
such software, hardware, or services are utilized by the Fund in fulfilling its
obligations to Subcustodian under this Agreement.

(2) The Fund and the Custodian each agrees to keep
confidential any information obtained from Subcustodian
in or with respect to year 2000 compliance (the "Information"), by using the
same care and discretion that the Fund and Custodian each uses with respect to
its own confidential property and trade secrets, and shall not make nor permit
any disclosure of all or any part of the Information without the prior written
consent of Subcustodian. The Fund and the Custodian each further agrees not to
contact any third party identified in the Information to discuss year 2000
compliance or issues related thereto. The obligation of the Fund and Custodian
each to maintain such confidentiality and not to contact any such third party
shall survive any termination of this Agreement.

(d) If the Custodian uses any Systems to provide any Services
under this Agreement, Custodian shall be deemed to make the same warranties with
respect to such Systems, and subject to the same terms and conditions, as are
made by the Subcustodian under this paragraph 17, and shall be entitled to rely
on the warranties made by the Fund under subparagraph (c)(1) of this paragraph.

ARTICLE XX.

TERMINATION

1. Any of the parties hereto may terminate this Agreement by giving to
the other parties a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $50,000,000 aggregate unimpaired capital,
surplus and undivided profits. In the event such notice is given by the
Custodian or the Subcustodian, the Fund shall, on or before the termination
date, deliver to the Custodian and the Subcustodian a copy of a resolution of
the Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, designating a successor custodian or custodians. In the absence of
such designation by the Fund, the Custodian may designate a successor custodian
which shall be a bake or trust company having not less than $50,000,000
aggregate unimpaired capital, surplus and undivided profits. Upon the date set
forth in such notice this Agreement shall terminate (unless the same shall be
continued as provided in paragraph 3 of this Article), and the Subcustodian
shall upon receipt of a notice of acceptance by the successor custodian on that
date deliver directly to the successor custodian all Securities and money then
owned by the Fund and held by it as Subcustodian, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which it shall
then be entitled.

2. Notwithstanding the foregoing, the Fund may terminate this Agreement
(x) thirty (30) days after the material breach of this Agreement by Custodian or
Subcustodian, which breach is not fully cured within such thirty days time, or
(y) immediately upon and effective as of the commission or occurrence of any Act
of Insolvency by Custodian or Subcustodian. The Custodian similarly may
terminate this Agreement as to Subcustodian for the reasons provided in, and in
accordance with the provisions of, (x) and (y) of this paragraph. If either the
Fund or the Custodian terminates this Agreement by reason of a breach or Act of
Insolvency by Subcustodian, this Agreement shall be deemed terminated as to
Subcustodian only and not as to Custodian, and the provisions of paragraph 3 of
this Article thereupon shall govern this Agreement.

3. Notwithstanding any other provisions of this Article, if either the
Fund or the Custodian terminates this Agreement as to Subcustodian only, or if
the Subcustodian terminates this Agreement as provided in paragraph 1 of this
Article, this Agreement shall continue in full force and effect with respect to
the Fund and the Custodian, and the Fund and the Custodian shall continue to be
bound by the terms and conditions of this Agreement, either with (i) the
Custodian performing all the duties and responsibilities of the Subcustodian
hereunder, including but not limited to those duties and responsibilities
specified in Articles IV through XVIII of this Agreement, and subject in all
respects to the terms, conditions and limitations of this Agreement, or (ii) a
successor Subcustodian which is mutually acceptable to the Fund and the
Custodian and which has agreed in writing to be bound by this Agreement in its
entirety, and perform all the duties and responsibilities specified herein as
Subcustodian hereunder.

4. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Custodian shall upon
the date specified in the notice of termination of this Agreement and upon the
delivery to it by the Subcustodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the Fund) and money then
owned by the Fund be deemed to be its own custodian and the Subcustodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement as of that time.

ARTICLE XXI.

MISCELLANEOUS

1. Annexed hereto as Appendix A is a Certificate signed by one of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to furnish
to the Subcustodian a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Subcustodian shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the Authorized Persons as set forth in the last delivered
Certificate.

2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to (i) the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 800
17th Street, N.W. Washington, DC 20006, or (ii) to the Subcustodian, shall be
sufficiently given if addressed to the Subcustodian and mailed or delivered to
it at its offices at 90 Washington Street, New York, New York 10286, or at such
other place as the Custodian or the Subcustodian may from time to time designate
in writing.

3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.

4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by all parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.

5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian and the Subcustodian, by the Custodian without the written
consent of the Fund and the Subcustodian, authorized or approved by a resolution
of the Fund's Board of Trustees, or by the Subcustodian without the written
consent of the Custodian and the Fund, authorized or approved by a resolution of
the Fund's Board of Trustees.

6. This Agreement shall be construed in accordance with the laws of the
State of New York without given effect to conflict of laws principles thereof.
Each party hereby consents to the nonexclusive jurisdiction of a state or
federal court situated in New York City, New York in connection with any dispute
arising hereunder and hereby waives its right to trial by jury.

7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.

8. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only on the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a particular Series
of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunder affixed, as of the day and year first above
written.

RIGGS FUNDS

[SEAL] By: /s/ Joseph S. Machi

Attest:

/s/ C. Grant Anderson

RIGGS BANK, N.A.,
AS CUSTODIAN

[SEAL] By: /s/ Henry A. Dudley, Jr.
Name: Henry A. Dudley, Jr.
Title: Senior Executive Director
and
Executive Vice President

Attest:

/s/ Mary B. LeMont

THE BANK OF NEW YORK,
AS SUBCUSTODIAN

[SEAL] By: /s/ R. A. Shearer
Name: R. A. Shearer
Title: Senior Vice President

Attest:

not attested

<PAGE>

APPENDIX A

I, C. Grant Anderson, Assistant Secretary of RIGGS FUNDS, a Massachusetts
business trust (the "Fund"), do hereby certify that:

The following persons have been duly authorized in conformity with the Fund's
Declaration of Trust and By-Laws to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund, and the signatures set forth opposite
their respective names are their true and correct signature:

Name Position Signature

Owen B. Burman Director, Equity Research /s/ Owen B. Burman

Sean C. Fallon Director, Performance and /s/ Sean Fallon
Fixed Income Research

E. Shepard Farrar Assistant Director, Client Services /s/ E. Shepard Farrar

Ranier D. Flores Assistant Director, Operations /s/ Ranier D. Flores

Joseph Konrad Director, Operations and /s/ Joseph E. Konrad
Technology

Christine J. Kyle Assistant Director, Equity Trading /s/ Christine J. Kyle

Ronald A. Marsilia President and COO /s/ Ronald A. Marsilia

Kathleen B. Neumann Director, Client Services /s/ Kathleen B. Neumann

Nathan Reischer Director of Fixed Income and /s/ Nathan Reischer
Chief Fixed Income Strategist

Michael Sahakian Assistant Director, Client Services /s/ Michael Sahakian

Philip D. Tasho Chairman, CEO and CIO /s/ Philip D. Tasho

J. Christopher Donahue Executive Vice President /s/ J. Christopher Donahue

Edward C. Gonzales President and Treasurer /s/ Edward C. Gonzales

John W. McGonigle Executive Vice President and /s/ John W. McGonigle
Secretary

C. Grant Anderson Assistant Secretary /s/ C. Grant Anderson

</TABLE>

<PAGE>

APPENDIX B

SERIES

Riggs U.S. Treasury Money Market Fund
Class R Shares
Class Y Shares

Riggs Prime Money Market Fund
Class R Shares
Class Y Shares

Riggs U.S. Government Securities Fund
Class R Shares

Riggs Stock Fund
Class R Shares
Class B Shares

Riggs Small Company Stock Fund
Class R Shares
Class B Shares

<PAGE>

APPENDIX C

I, Richard A. Schearer, a Senior Vice President with THE BANK OF NEW
YORK do hereby designate the following publications:

The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal

<PAGE>

EXHIBIT A

CERTIFICATION

The undersigned, C. Grant Anderson, hereby certifies that he or she is
the duly elected and acting Assistant Secretary of RIGGS FUNDS, a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
August 19, 1998, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.

RESOLVED, that The Bank of New York, as Subcustodian pursuant
to a Custody Agreement between and among The Bank of New York, Riggs
Bank, N.A. and the Fund dated June 8, 1998, (the "Custody Agreement")
and Riggs Bank, as Custodian under the Custody Agreement, each is
authorized and instructed on a continuous and ongoing basis to deposit
in the Book-Entry System, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to
which the same are specifically allocated, and to utilize the
Book-Entry System to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of RIGGS
FUNDS, as of the 20th day of October, 1998.

/s/ C. Grant Anderson

[SEAL]

<PAGE>

EXHIBIT B

CERTIFICATION

RESOLVED, that The Bank of New York, as Subcustodian pursuant
to a Custody Agreement between and among The Bank of New York, Riggs
Bank, N.A. and the Fund dated June 8, 1998, (the "Custody Agreement")
and Riggs Bank, as Custodian under the Custody Agreement, each is
authorized and instructed on a continuous and ongoing basis until such
time as it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated, and to utilize
the Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of RIGGS
FUNDS, as of the 20th day of October, 1998.

/s/ C. Grant Anderson

[SEAL]

<PAGE>

EXHIBIT B-1

CERTIFICATION

RESOLVED, that The Bank of New York, as Subcustodian pursuant
to a Custody Agreement between and among The Bank of New York, Riggs
Bank, N.A. and the Fund dated June 8, 1998, (the "Custody Agreement")
and Riggs Bank, as Custodian under the Custody Agreement, each is
authorized and instructed on a continuous and ongoing basis until such
time as it receives a Certificate, as defined in the Custody Agreement,
to the contrary to deposit in the Participants Trust Company as
Depository, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Participants Trust
Company to the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of RIGGS
FUNDS, as of the 20th day of October, 1998.

/s/ C. Grant Anderson

[SEAL]

<PAGE>

EXHIBIT C

CERTIFICATION

RESOLVED, that The Bank of New York, as Subcustodian pursuant
to a Custody Agreement between and among The Bank of New York, Riggs
Bank, N.A. and the Fund dated June 8, 1998, (the "Custody Agreement")
and Riggs Bank, as Custodian under the Custody Agreement, each is
authorized and instructed on a continuous and ongoing basis until such
time as it receives a Certificate, as defined in the Custody Agreement,
to the contrary, to accept, utilize and act with respect to Clearing
Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such
terms are defined in the Custody Agreement, as provided in the Custody
Agreement.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of RIGGS
FUNDS, as of the 20th day of October, 1998.

/s/ C. Grant Anderson

[SEAL]

<PAGE>

EXHIBIT D

RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Authorized Persons of the Fund as
defined in the Custody Agreement, shall establish internal safekeeping
procedures to safeguard and protect the confidentiality and
availability of user and access codes, passwords and authentication
keys, and shall use Instructions only in a manner that does not
contravene the Investment Company Act or the rules and regulations
thereunder.

IN WITNESS WHEREOF, I have hereunto set my hand and the seal of RIGGS
FUNDS, as of the 20th day of October, 1998.

/s/ C. Grant Anderson

[SEAL]

Exhibit (e)(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit D
to the
Distributor's Contract

RIGGS FUNDS

Riggs Small Company Stock Fund
Class B Shares
Riggs Stock Fund
Class B Shares

The following provisions are hereby incorporated and made part of
the Distributor's Contract dated July 30, 1991, between Riggs Funds and
Federated Securities Corp. with respect to the Class of shares set
forth above:

1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Classes
("Shares"). Pursuant to this appointment, FSC is authorized to select
a group of financial institutions ("Financial Institutions") to sell
Shares at the current offering price thereof as described and set
forth in the respective prospectuses of the Trust.

2. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number
of days that the Agreement is in effect during the month.

3. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class' expenses
exceed such lower expense limitation as FSC may, by notice to the
Trust, voluntarily declare to be effective.

4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC,
in its sole discretion, may pay Financial Institutions a periodic fee
in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such
fees will be paid shall be determined from time to time by FSC in its
sole discretion.

5. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.

In consideration of the mutual covenants set forth in the
Distributor's Contract dated July 30, 1991 between Riggs Funds and
Federated Securities Corp., Riggs Fund Group executes and delivers this
Exhibit on behalf of the Funds, and with respect to the Classes of
Shares thereof, first set forth in this Exhibit.

Witness the due execution hereof this 1st day of July, 1998.

RIGGS FUNDS

By:/s/ Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

FEDERATED SECURITIES CORP.

By:/s/ Byron F. Bowman
Name: Byron F. Bowman
Title: Vice President

<PAGE>

Exhibit E
to the
Distributor's Contract

RIGGS FUNDS

Riggs Small Company Stock Fund
Class R Shares

Riggs Stock Fund
Class R Shares

Riggs U.S. Government Securities Fund
Class R Shares

2. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of .25 of 1% of the average aggregate net asset value of
the Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number
of days that the Agreement is in effect during the month.

Witness the due execution hereof this 1st day of July, 1998.

RIGGS FUNDS

By:/s/ Joseph S. Machi
Name: Joseph S. Machi
Title: Vice President

FEDERATED SECURITIES CORP.

By: /s/ Byron F. Bowman
Name: Byron F. Bowman
Title: Vice President