PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the first combined Semi-Annual Shareholder's Report of
the First Priority Equity Income Fund and First Priority Balanced Fund for the
reporting period ended May 31, 1995. This report provides you with financial
information for each fund, and includes listings of investments, as well as
complete financial statements.
First Priority Equity Income Fund grew to more than $38 million in total assets,
and paid distributions of more than $360,000, or $0.14 per share. Total assets
for the First Priority Balanced Fund amounted to more than $46 million at the
end of the period. The fund paid shareholders more than $522,000 in
distributions, or $0.12 per share.
Thank you for putting your confidence in First Priority Equity Income Fund and
First Priority Balanced Fund. We'll continue to keep you informed on your
investment, and will remain committed to delivering the highest level of
personal service.
Sincerely,
Edward C. Gonzales
President
June 15, 1995
FIRST PRIORITY EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--21.2%
- --------------------------------------------------------------------------------------
BASIC INDUSTRY--1.7%
-------------------------------------------------------------------
$ 325,000 Lafarge Corp., 7.00%, 7/1/2013 $ 336,375
-------------------------------------------------------------------
300,000 Unifi, Inc., 6.00%, 3/15/2002 303,099
------------------------------------------------------------------- -----------
Total 639,474
------------------------------------------------------------------- -----------
CAPITAL GOODS--3.3%
-------------------------------------------------------------------
ELECTRICAL
-------------------------------------------------------------------
500,000 AES Corp., 6.50%, 3/15/2002 468,210
------------------------------------------------------------------- -----------
INDUSTRIAL
-------------------------------------------------------------------
400,000 Cooper Industries, Inc., 7.05%, 1/1/2015 405,000
------------------------------------------------------------------- -----------
TECHNOLOGY
-------------------------------------------------------------------
300,000 Thermo Electron Corp., 5.00%, 4/15/2001 381,750
------------------------------------------------------------------- -----------
Total Capital Goods 1,254,960
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL--4.0%
-------------------------------------------------------------------
AUTOMOTIVE
-------------------------------------------------------------------
700,000 Pep Boys-Manny, Moe & Jack, 4.00%, 9/1/1999 669,704
------------------------------------------------------------------- -----------
RETAIL-SPECIALTY
-------------------------------------------------------------------
300,000 J. Baker, Inc., 7.00%, 6/1/2002 297,750
-------------------------------------------------------------------
400,000 Proffitt's, Inc., 4.75%, 11/1/2003 331,000
-------------------------------------------------------------------
300,000 Sports & Recreation, Inc., 4.25%, 11/1/2000 227,250
------------------------------------------------------------------- -----------
Total 856,000
------------------------------------------------------------------- -----------
Total Consumer Cyclical 1,525,704
------------------------------------------------------------------- -----------
CONSUMER SERVICES-RESTAURANTS--3.3%
-------------------------------------------------------------------
2,000,000 Boston Markets, Inc., 0/8.00% YTM, Conv. LYONS, 6/1/2015 427,500
-------------------------------------------------------------------
400,000 Olsten Corp., 4.875%, 5/15/2003 413,500
-------------------------------------------------------------------
300,000 Wendy's International, Inc., 7.00%, 4/1/2006 430,170
------------------------------------------------------------------- -----------
Total 1,271,170
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------
CONSUMER STAPLE-HEALTH CARE--2.4%
-------------------------------------------------------------------
$ 400,000 Fisher Scientific International, Inc., Step-up, 0/4.75%, 3/1/2003 $ 426,412
-------------------------------------------------------------------
1,000,000 Rite Aid Corp., 0/6.75% YTM, 7/24/2006 480,000
------------------------------------------------------------------- -----------
Total 906,412
------------------------------------------------------------------- -----------
CREDIT CYCLICAL--1.2%
-------------------------------------------------------------------
500,000 Masco Corp., 5.25%, 2/15/2012 447,500
------------------------------------------------------------------- -----------
ENERGY-OIL--1.2%
-------------------------------------------------------------------
500,000 Pennzoil Co., 4.75%, 10/1/2003 480,000
------------------------------------------------------------------- -----------
FINANCIAL--2.8%
-------------------------------------------------------------------
BANK
-------------------------------------------------------------------
600,000 Leucadia National Corp., 5.25%, 2/1/2003 573,000
------------------------------------------------------------------- -----------
INSURANCE
-------------------------------------------------------------------
500,000 Horace Mann Educators, Step-up , 0/6.50%, 12/1/1999 491,250
------------------------------------------------------------------- -----------
Total Financial 1,064,250
------------------------------------------------------------------- -----------
TRANSPORTATION--1.3%
-------------------------------------------------------------------
500,000 AMR Corp., 6.125%, 11/1/2024 484,710
------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $7,827,964) 8,074,180
------------------------------------------------------------------- -----------
COMMON STOCKS--50.6%
- --------------------------------------------------------------------------------------
BASIC INDUSTRIES--4.9%
-------------------------------------------------------------------
CHEMICALS/PAPER
-------------------------------------------------------------------
3,000 Union Camp Corp. 155,625
-------------------------------------------------------------------
5,000 Weyerhaeuser Co. 219,375
-------------------------------------------------------------------
9,000 Dow Chemical Co. 660,375
-------------------------------------------------------------------
5,000 PPG Industries, Inc. 208,125
------------------------------------------------------------------- -----------
Total 1,243,500
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
METALS & MINING
-------------------------------------------------------------------
8,000 Barrick Gold Corp. $ 202,000
-------------------------------------------------------------------
7,000 Cyprus Amax Minerals Co. 185,500
-------------------------------------------------------------------
10,000 Freeport McMoran Copper & Gold, Inc. 250,000
------------------------------------------------------------------- -----------
Total 637,500
------------------------------------------------------------------- -----------
Total Basic Industries 1,881,000
------------------------------------------------------------------- -----------
CAPITAL GOODS--12.3%
-------------------------------------------------------------------
ELECTRICAL
-------------------------------------------------------------------
14,000 General Electric Co. 812,000
------------------------------------------------------------------- -----------
MACHINE
-------------------------------------------------------------------
5,000 Ingersoll-Rand Co. 186,250
------------------------------------------------------------------- -----------
TECHNOLOGY
-------------------------------------------------------------------
10,000 AMP, Inc. 426,250
-------------------------------------------------------------------
25,000 EG&G, Inc. 453,125
-------------------------------------------------------------------
4,000 Hewlett-Packard Co. 264,500
-------------------------------------------------------------------
1,500 International Business Machines Corp. 139,875
-------------------------------------------------------------------
12,000 Minnesota Mining & Manufacturing Co. 718,500
-------------------------------------------------------------------
8,000 Motorola, Inc. 479,000
-------------------------------------------------------------------
4,000 Pitney-Bowes, Inc. 148,000
-------------------------------------------------------------------
6,000 Raytheon Co. 465,000
-------------------------------------------------------------------
6,000 Thomas & Betts Corp. 404,250
------------------------------------------------------------------- -----------
Total 3,498,500
------------------------------------------------------------------- -----------
INDUSTRIAL
-------------------------------------------------------------------
7,000 WMX Technologies, Inc. 190,750
------------------------------------------------------------------- -----------
Total Capital Goods 4,687,500
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL--2.4%
-------------------------------------------------------------------
RETAIL-SPECIALTY
-------------------------------------------------------------------
13,000 J.C. Penney, Inc. 612,625
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
OTHER
-------------------------------------------------------------------
6,000 PACCAR, Inc. $ 288,750
------------------------------------------------------------------- -----------
Total Consumer Cyclical 901,375
------------------------------------------------------------------- -----------
CONSUMER SERVICES--4.0%
-------------------------------------------------------------------
PUBLISHING
-------------------------------------------------------------------
7,000 Dun & Bradstreet Corp. 371,000
-------------------------------------------------------------------
12,000 Eastman Kodak Co. 724,500
------------------------------------------------------------------- -----------
Total 1,095,500
------------------------------------------------------------------- -----------
RESTAURANTS
-------------------------------------------------------------------
7,000 Cracker Barrel Old Country Store 170,625
-------------------------------------------------------------------
12,000 Luby's Cafeterias, Inc. 244,500
------------------------------------------------------------------- -----------
Total 415,125
------------------------------------------------------------------- -----------
Total Consumer Services 1,510,625
------------------------------------------------------------------- -----------
CONSUMER STAPLE--12.6%
-------------------------------------------------------------------
FOOD & BEVERAGE
-------------------------------------------------------------------
4,000 Anheuser Busch Company, Inc. 236,500
-------------------------------------------------------------------
8,000 H. J. Heinz Co. 362,000
-------------------------------------------------------------------
11,000 Sara Lee Corp. 306,625
------------------------------------------------------------------- -----------
Total 905,125
------------------------------------------------------------------- -----------
HEALTH CARE
-------------------------------------------------------------------
6,000 American Home Products Corp. 441,750
-------------------------------------------------------------------
13,000 Baxter International, Inc. 453,375
-------------------------------------------------------------------
12,000 Bristol Myers Squibb Co. 796,500
-------------------------------------------------------------------
14,000 Bard C.R., Inc. 413,000
-------------------------------------------------------------------
4,000 Johnson & Johnson 265,000
-------------------------------------------------------------------
10,000 UpJohn Co. 363,750
------------------------------------------------------------------- -----------
Total 2,733,375
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
MISCELLANEOUS
-------------------------------------------------------------------
5,000 Bausch & Lomb, Inc. $ 203,125
-------------------------------------------------------------------
10,000 Tambrands, Inc. 428,750
------------------------------------------------------------------- -----------
Total 631,875
------------------------------------------------------------------- -----------
TOBACCO
-------------------------------------------------------------------
18,000 UST, Inc. 537,750
------------------------------------------------------------------- -----------
Total Consumer Staple 4,808,125
------------------------------------------------------------------- -----------
ENERGY-OIL--4.8%
-------------------------------------------------------------------
3,500 Amoco Corp. 239,312
-------------------------------------------------------------------
5,000 Chevron Corp. 245,625
-------------------------------------------------------------------
6,000 Exxon Corp. 428,250
-------------------------------------------------------------------
3,000 Mobil Corp. 301,125
-------------------------------------------------------------------
9,000 Texaco, Inc. 616,500
------------------------------------------------------------------- -----------
Total 1,830,812
------------------------------------------------------------------- -----------
FINANCIAL--6.2%
-------------------------------------------------------------------
BANKING
-------------------------------------------------------------------
10,000 Banc One Corp. 347,500
-------------------------------------------------------------------
2,500 Federal National Mortgage Association 232,500
-------------------------------------------------------------------
5,100 J. P. Morgan & Company 361,462
-------------------------------------------------------------------
10,000 NBD Bancorp, Inc. 328,750
------------------------------------------------------------------- -----------
Total 1,270,212
------------------------------------------------------------------- -----------
INSURANCE
-------------------------------------------------------------------
7,000 Geico Corp. 385,000
-------------------------------------------------------------------
5,000 Marsh & McLennan Cos. 398,125
-------------------------------------------------------------------
8,000 Torchmark, Inc. 319,000
------------------------------------------------------------------- -----------
Total 1,102,125
------------------------------------------------------------------- -----------
Total Financial 2,372,337
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
UTILITIES-COMMUNICATIONS--3.4%
-------------------------------------------------------------------
15,000 AT&T Corp. $ 761,250
-------------------------------------------------------------------
6,000 Bellsouth Corp. 368,250
-------------------------------------------------------------------
6,000 Questar Corp. 180,000
------------------------------------------------------------------- -----------
Total 1,309,500
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $17,653,037) 19,301,274
------------------------------------------------------------------- -----------
PREFERRED STOCKS--19.0%
- --------------------------------------------------------------------------------------
BASIC INDUSTRIES--2.0%
-------------------------------------------------------------------
CHEMICAL/PAPER
-------------------------------------------------------------------
13,000 Atlantic Richfield Co., 9.00% Exch Notes 9/15/97 326,625
------------------------------------------------------------------- -----------
METALS & MINING
-------------------------------------------------------------------
3,000 Battle Mountain Gold Co., $3.25 Cum Cv. Pfd. 166,500
-------------------------------------------------------------------
5,000 WHX Corp., Series B, $3.75 Cum Cv. Pfd. 211,875
------------------------------------------------------------------- -----------
Total 378,375
------------------------------------------------------------------- -----------
Total Basic Industries 705,000
------------------------------------------------------------------- -----------
CAPITAL GOODS--3.5%
-------------------------------------------------------------------
INDUSTRIAL
-------------------------------------------------------------------
5,000 Corning, Delaware, LP, 6.00% Cum Cv. Pfd. 248,750
------------------------------------------------------------------- -----------
TECHNOLOGY
-------------------------------------------------------------------
8,000 General Motors Corp., Series C, $3.25 Cum Cv. Pfd. 496,000
-------------------------------------------------------------------
6,000 National Semiconductor, $3.25 Cum Cv. Pfd. 534,750
------------------------------------------------------------------- -----------
Total 1,030,750
------------------------------------------------------------------- -----------
Total Capital Goods 1,279,500
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL--2.8%
-------------------------------------------------------------------
AUTOMOTIVE
-------------------------------------------------------------------
6,000 Ford Motor Co., Series A, $4.20 Cum Cv. Pfd. 573,000
------------------------------------------------------------------- -----------
OTHER
-------------------------------------------------------------------
5,000 Federal-Mogul Corp., Series D, $3.875 Cum Cv. Pfd. 268,910
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
PREFERRED STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
RETAIL-SPECIALTY
-------------------------------------------------------------------
5,000 TJX Companies, Inc., Series C, $3.125 Cum Cv. Pfd. $ 199,375
------------------------------------------------------------------- -----------
Total Consumer Cyclical 1,041,285
-------------------------------------------------------------------
CONSUMER SERVICES-HOSPITAL MANAGEMENT--1.8%
-------------------------------------------------------------------
6,000 Beverly Enterprises, Inc., $2.75 Cum Cv. Pfd. 294,750
-------------------------------------------------------------------
17,000 FHP International Corp., Series A, Cum Cv. Pfd. 389,938
------------------------------------------------------------------- -----------
Total 684,688
------------------------------------------------------------------- -----------
CONSUMER STAPLE-FOOD & BEVERAGE--1.0%
-------------------------------------------------------------------
10,000 ConAgra, Inc., Series E, $1.6875 Cum Cv. Pfd. 342,500
------------------------------------------------------------------- -----------
CREDIT CYCLICALS-BUILDING MATERIALS--0.8%
-------------------------------------------------------------------
10,000 Merry Land & Investments, Inc., Series C, $2.15 Cum Cv. Pfd. 261,250
------------------------------------------------------------------- -----------
ENERGY-OIL--1.0%
-------------------------------------------------------------------
6,000 Ashland, Inc., $3.125 Cum Cv. Pfd. 354,000
------------------------------------------------------------------- -----------
FINANCIAL--6.1%
-------------------------------------------------------------------
BANKING
-------------------------------------------------------------------
10,000 H. F. Ahmanson & Co., Inc., Series D, 6.00%, Cum Cv. Pfd. 508,750
-------------------------------------------------------------------
6,000 Republic New York Corp., $3.375 Cum Cv. Pfd. 331,500
-------------------------------------------------------------------
15,000 Rochester Community Savings Bank, Cum Cv. Pfd. 498,750
-------------------------------------------------------------------
12,000 Union Planters Corp., Cum Cv. Pfd. 408,000
------------------------------------------------------------------- -----------
Total 1,747,000
------------------------------------------------------------------- -----------
FINANCE
-------------------------------------------------------------------
6,300 American General Corp., Delaware, LLC, Series A, $3.00 Cum Cv. Pfd. 322,875
-------------------------------------------------------------------
5,000 St. Paul Capital, LLC, 6.00%, 5/31/2025 Cum Cv. Pfd.* 260,000
------------------------------------------------------------------- -----------
Total 582,875
------------------------------------------------------------------- -----------
INSURANCE
-------------------------------------------------------------------
6,000 Conseco, Inc., Series D, 6.50% Cum Cv. Pfd. 257,250
------------------------------------------------------------------- -----------
Total Financial 2,587,125
------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $6,876,957) 7,255,348
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
MUTUAL FUND SHARES--2.0%
- --------------------------------------------------------------------------------------
294,015 Franklin Funds Institutional Portfolio $ 294,015
-------------------------------------------------------------------
481,913 Goldman Sachs I.L.A. Treasury Portfolio 481,913
------------------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 775,928
------------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--8.9%
- --------------------------------------------------------------------------------------
$3,383,945 Lehman Brothers, Inc., 6.05%, dated 5/31/1995, due 6/1/1995
(AT AMORTIZED COST) 3,383,945
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $36,517,831) $38,790,675+
------------------------------------------------------------------- -----------
</TABLE>
* Non-income producing security.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $36,517,831. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,272,844, which is comprised of $2,503,410 appreciation and $230,566
depreciation at May 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($38,132,482) at May 31, 1995.
The following abbreviations are used throughout this portfolio:
<TABLE>
<S> <C>
LYONS -- Liquid Yield Options Notes
YTM -- Yield to Maturity
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY BALANCED FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--6.0%
- --------------------------------------------------------------------------------------
CAPITAL GOODS-TECHNOLOGY--0.3%
-------------------------------------------------------------------
$ 120,000 United Technologies Corp., 9.625%, 5/15/1999 $ 123,482
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL--0.9%
-------------------------------------------------------------------
AUTOMOTIVE
-------------------------------------------------------------------
120,000 Ford Motor Co., Delaware, 8.875%, 4/1/2006 136,644
------------------------------------------------------------------- -----------
RETAIL-SPECIALTY
-------------------------------------------------------------------
120,000 Limited, Inc., 9.125%, 2/1/2001 132,999
-------------------------------------------------------------------
200,000 Sports & Recreation, Inc., 4.25%, 11/1/2000 151,500
------------------------------------------------------------------- -----------
Total 284,499
------------------------------------------------------------------- -----------
Total Consumer Cyclical 421,143
------------------------------------------------------------------- -----------
CONSUMER STAPLE--0.3%
-------------------------------------------------------------------
TOBACCO
-------------------------------------------------------------------
120,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 132,080
------------------------------------------------------------------- -----------
FINANCIAL--3.9%
-------------------------------------------------------------------
FINANCE-AUTOMOTIVE
-------------------------------------------------------------------
325,000 Ford Motor Credit Corporation, 6.35%, 2/11/1998 324,643
------------------------------------------------------------------- -----------
FINANCE-EQUIPMENT
-------------------------------------------------------------------
250,000 General Electric Capital Corp., 5.50%, 11/1/2001 235,775
------------------------------------------------------------------- -----------
INSURANCE
-------------------------------------------------------------------
240,000 U.S. Life Corp., 6.75%, 1/15/1998 241,195
------------------------------------------------------------------- -----------
LEASING
-------------------------------------------------------------------
500,000 International Lease Finance Corp., 4.75%, 7/15/1996 492,095
------------------------------------------------------------------- -----------
SECURITIES
-------------------------------------------------------------------
500,000 Goldman, Sachs & Co., 7.80%, 7/15/2002 515,245
------------------------------------------------------------------- -----------
Total Financial 1,808,953
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------
UTILITIES--0.6%
-------------------------------------------------------------------
$ 120,000 Orange & Rockland Utilities, 9.375%, 3/15/2000 $ 132,697
-------------------------------------------------------------------
120,000 Virginia Electric & Power, 8.875%, 6/1/1999 129,703
------------------------------------------------------------------- -----------
Total 262,400
------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $2,645,959) 2,748,058
------------------------------------------------------------------- -----------
COMMON STOCKS--43.4%
- --------------------------------------------------------------------------------------
BASIC INDUSTRIES--5.3%
-------------------------------------------------------------------
AIR TRANSPORTATION
-------------------------------------------------------------------
10,000 Atlantic Southeast Airlines, Inc. 241,250
-------------------------------------------------------------------
18,000 Pittston Services Group 434,250
------------------------------------------------------------------- -----------
Total 675,500
------------------------------------------------------------------- -----------
CHEMICALS/PAPER
-------------------------------------------------------------------
6,000 Dow Chemical Co. 440,250
-------------------------------------------------------------------
8,000 International Paper Co. 629,000
-------------------------------------------------------------------
6,000 Union Camp Corp. 311,250
------------------------------------------------------------------- -----------
Total 1,380,500
------------------------------------------------------------------- -----------
METALS & MINING
-------------------------------------------------------------------
16,000 Barrick Gold Corp. 404,000
------------------------------------------------------------------- -----------
Total Basic Industries 2,460,000
------------------------------------------------------------------- -----------
CAPITAL GOODS--13.0%
-------------------------------------------------------------------
ELECTRICAL
-------------------------------------------------------------------
14,000 General Electric Co. 812,000
------------------------------------------------------------------- -----------
PHOTOGRAPHY
-------------------------------------------------------------------
6,000 Eastman Kodak Co. 362,250
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
TECHNOLOGY
-------------------------------------------------------------------
16,000 AMP, Inc. $ 682,000
-------------------------------------------------------------------
6,000 BMC Software, Inc. 385,500
-------------------------------------------------------------------
4,000 Boeing Co. 235,500
-------------------------------------------------------------------
20,000 GATX Corp. 847,500
-------------------------------------------------------------------
8,000 International Business Machines Corp. 746,000
-------------------------------------------------------------------
20,000 Measurex Corp. 525,000
-------------------------------------------------------------------
8,000 Microsoft Corp. 677,500
-------------------------------------------------------------------
12,000 Minnesota Mining & Manufacturing Co. 718,500
------------------------------------------------------------------- -----------
Total 4,817,500
------------------------------------------------------------------- -----------
Total Capital Goods 5,991,750
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL--3.1%
-------------------------------------------------------------------
APPAREL
-------------------------------------------------------------------
7,000 AnnTaylor Stores Corp. 146,125
-------------------------------------------------------------------
12,000 Liz Claiborne 213,000
-------------------------------------------------------------------
32,000 Stride Rite Corp. 360,000
------------------------------------------------------------------- -----------
Total 719,125
------------------------------------------------------------------- -----------
AUTOMOTIVE
-------------------------------------------------------------------
6,000 General Motors Corp. 288,000
------------------------------------------------------------------- -----------
RETAIL-SPECIALTY
-------------------------------------------------------------------
12,000 Family Dollar Stores, Inc. 142,500
-------------------------------------------------------------------
26,000 Sports & Recreation, Inc. 299,000
------------------------------------------------------------------- -----------
Total 441,500
------------------------------------------------------------------- -----------
Total Consumer Cyclical 1,448,625
------------------------------------------------------------------- -----------
CONSUMER SERVICES--3.3%
-------------------------------------------------------------------
BROADCASTING/ENTERTAINMENT
-------------------------------------------------------------------
5,000 Capital Cities ABC, Inc. 482,500
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
COMMON STOCKS--CONTINUED
<C> <C> <S> <C>
- --------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT
-------------------------------------------------------------------
8,000 Bard C.R., Inc. $ 236,000
------------------------------------------------------------------- -----------
RETAIL-RESTAURANTS
-------------------------------------------------------------------
26,000 International Dairy Queen, Class A 500,500
-------------------------------------------------------------------
8,000 McDonald's Corp. 303,000
------------------------------------------------------------------- -----------
Total 803,500
------------------------------------------------------------------- -----------
Total Consumer Services 1,522,000
------------------------------------------------------------------- -----------
CONSUMER STAPLE--12.1%
-------------------------------------------------------------------
FOOD & BEVERAGE
-------------------------------------------------------------------
10,000 PepsiCo, Inc. 490,000
------------------------------------------------------------------- -----------
HEALTH CARE
-------------------------------------------------------------------
10,000 Bristol Myers Squibb Co. 663,750
-------------------------------------------------------------------
20,000 Merck & Co., Inc. 942,500
-------------------------------------------------------------------
12,000 Pfizer Corp. 1,057,500
-------------------------------------------------------------------
4,000 Schering-Plough Corp. 315,000
------------------------------------------------------------------- -----------
Total 2,978,750
------------------------------------------------------------------- -----------
HOUSEHOLD PRODUCTS
-------------------------------------------------------------------
5,000 Colgate-Palmolive Co. 385,000
------------------------------------------------------------------- -----------
TOBACCO
-------------------------------------------------------------------
15,000 Philip Morris Cos., Inc. 1,093,125
-------------------------------------------------------------------
20,000 UST, Inc. 597,500
------------------------------------------------------------------- -----------
Total 1,690,625
------------------------------------------------------------------- -----------
Total Consumer Staple 5,544,375
------------------------------------------------------------------- -----------
ENERGY-OIL--1.3%
-------------------------------------------------------------------
12,000 Chevron Corp. 589,500
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
FINANCIAL--5.3%
-------------------------------------------------------------------
BANKING
-------------------------------------------------------------------
8,000 Keycorp $ 245,000
-------------------------------------------------------------------
4,000 Wells Fargo & Co. 736,000
------------------------------------------------------------------- -----------
Total 981,000
------------------------------------------------------------------- -----------
INSURANCE
-------------------------------------------------------------------
4,000 American International Group, Inc. 455,000
-------------------------------------------------------------------
24,000 Liberty Corp. 621,000
-------------------------------------------------------------------
10,000 Torchmark, Inc. 398,750
------------------------------------------------------------------- -----------
Total 1,474,750
------------------------------------------------------------------- -----------
Total Financial 2,455,750
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $18,286,763) 20,012,000
------------------------------------------------------------------- -----------
PREFERRED STOCKS--3.4%
- --------------------------------------------------------------------------------------
BASIC INDUSTRIES-METALS & MINING--0.5%
-------------------------------------------------------------------
12,000 Freeport McMoran Copper & Gold 235,500
------------------------------------------------------------------- -----------
CAPITAL GOODS-TECHNOLOGY--0.9%
-------------------------------------------------------------------
9,000 WHX Corp. Conv. Pfd A 399,375
------------------------------------------------------------------- -----------
CONSUMER CYCLICAL-AUTOMOTIVE--1.2%
-------------------------------------------------------------------
6,000 Ford Motor Co. 573,000
------------------------------------------------------------------- -----------
CONSUMER SERVICES-HOSPITAL MANAGEMENT--0.8%
-------------------------------------------------------------------
7,000 Beverly Enterprises, Inc. 343,875
------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,588,085) 1,551,750
------------------------------------------------------------------- -----------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--19.8%
- --------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK--2.2%
-------------------------------------------------------------------
$1,000,000 6.50%, 6/7/2004 $ 998,500
------------------------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORP.--4.9%
-------------------------------------------------------------------
360,000 4.75%, 2/2/1999 345,877
-------------------------------------------------------------------
500,000 8.00%, 3/16/2000 501,890
-------------------------------------------------------------------
150,000 7.55%, 11/27/2007 151,505
-------------------------------------------------------------------
600,000 PC, 1604FC, 6.38%, 11/15/2008 554,976
-------------------------------------------------------------------
750,000 PC, 1403M, 6.50%, 12/15/2021 703,740
------------------------------------------------------------------- -----------
Total 2,257,988
------------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--11.5%
-------------------------------------------------------------------
800,000 REMIC, 1993-G06/J, 7.00%, 12/25/1999 812,472
-------------------------------------------------------------------
600,000 STRIP, 0/7.56%, 12/20/2001 541,560
-------------------------------------------------------------------
250,000 STRIP, 0/7.89%, 3/9/2002 223,685
-------------------------------------------------------------------
250,000 REMIC, 1992-G40/K, 7.00%, 6/25/2002 252,860
-------------------------------------------------------------------
500,000 5.82%, 11/4/2003 470,515
-------------------------------------------------------------------
1,000,000 REMIC, 1992-G35/EC, 8.25%, 7/25/2005 1,054,720
-------------------------------------------------------------------
500,000 REMIC, 1993-G32/J, 6.75%, 5/25/2009 485,620
-------------------------------------------------------------------
500,000 REMIC, 1994-10/KC, 6.50%, 10/25/2010 474,720
-------------------------------------------------------------------
1,000,000 REMIC, 1993-202/PH, 6.50%, 2/25/2022 969,900
------------------------------------------------------------------- -----------
Total 5,286,052
------------------------------------------------------------------- -----------
TENNESSEE VALLEY AUTHORITY--1.2%
-------------------------------------------------------------------
600,000 6.125%, 7/15/2003 578,664
------------------------------------------------------------------- -----------
TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $8,441,542) 9,121,204
------------------------------------------------------------------- -----------
U.S. TREASURY OBLIGATIONS--18.4%
- --------------------------------------------------------------------------------------
U.S. TREASURY NOTES
-------------------------------------------------------------------
1,000,000 STRIP, 11/15/1996 920,040
-------------------------------------------------------------------
750,000 5.125%, 3/31/1998 734,280
-------------------------------------------------------------------
500,000 6.375%, 7/15/1999 506,160
-------------------------------------------------------------------
</TABLE>
FIRST PRIORITY BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- --------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
-------------------------------------------------------------------
$1,000,000 5.50%, 4/15/2000 $ 977,900
-------------------------------------------------------------------
1,000,000 7.50%, 11/15/2001 1,070,950
-------------------------------------------------------------------
1,000,000 7.50%, 5/15/2002 1,074,850
-------------------------------------------------------------------
1,000,000 6.25%, 2/15/2003 999,390
-------------------------------------------------------------------
1,000,000 5.75%, 8/15/2003 965,860
-------------------------------------------------------------------
2,500,000 STRIP, 2/15/2006 1,254,950
------------------------------------------------------------------- -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $7,821,082) 8,504,380
------------------------------------------------------------------- -----------
MUTUAL FUND SHARES--0.4%
- --------------------------------------------------------------------------------------
100,000 Franklin U.S. Treasury Money Market Portfolio 100,000
-------------------------------------------------------------------
96,990 Goldman Sachs I.L.A. Treasury Portfolio 96,990
------------------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 196,990
------------------------------------------------------------------- -----------
*REPURCHASE AGREEMENT--6.3%
- --------------------------------------------------------------------------------------
2,911,691 HSBC Securities, Inc., 6.05%, dated 5/31/1995, due 6/1/1995
(AT AMORTIZED COST) 2,911,691
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $41,892,112) $45,046,073+
------------------------------------------------------------------- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at May 31, 1995.
+ The cost of investments for federal tax purposes amounts to $41,892,112. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,153,961, which is comprised of $3,659,349 appreciation and $505,388
depreciation at May 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($46,148,600) at May 31, 1995.
The following abbreviations are used throughout this portfolio:
<TABLE>
<S> <C>
PC -- Participation Certificate
REMIC -- Real Estate Mortgage Investment Conduit
STRIP -- Separate Trading of Registered Interest & Principal of Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED
FUND FUND
------------- -----------
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Investments in securities, at amortized cost and value $38,790,675 $45,046,073
- -----------------------------------------------------------------
Cash 2,001 --
- -----------------------------------------------------------------
Receivable for investments sold 279,321 1,038,285
- -----------------------------------------------------------------
Income receivable 209,700 276,000
- -----------------------------------------------------------------
Receivable for shares sold 26,662 16,353
- ----------------------------------------------------------------- ------------- -----------
Total assets 39,308,359 46,376,711
- ----------------------------------------------------------------- ------------- -----------
LIABILITIES:
- -----------------------------------------------------------------
Payable for investments purchased 1,132,490 202,330
- -----------------------------------------------------------------
Payable for shares redeemed 20,547 --
- -----------------------------------------------------------------
Accrued expenses 22,840 25,781
- ----------------------------------------------------------------- ------------- -----------
Total liabilities 1,175,877 228,111
- ----------------------------------------------------------------- ------------- -----------
NET ASSETS CONSISTS OF:
- -----------------------------------------------------------------
Paid in capital $35,343,631 $42,466,348
- -----------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 2,272,844 3,153,961
- -----------------------------------------------------------------
Accumulated net realized gain (loss) on investments 369,270 164,420
- -----------------------------------------------------------------
Undistributed net investment income 146,737 363,871
- ----------------------------------------------------------------- ------------- -----------
TOTAL NET ASSETS $38,132,482 $46,148,600
- ----------------------------------------------------------------- ------------- -----------
NET ASSET VALUE, and Redemption Proceeds
Per Share: (Net assets/shares outstanding) $11.06 $10.88
- ----------------------------------------------------------------- ------------- -----------
Offering Price Per Share:+ $11.29* $11.10*
- ----------------------------------------------------------------- ------------- -----------
SHARES OUTSTANDING: 3,448,241 4,242,821
- ----------------------------------------------------------------- ------------- -----------
Investments, at identified and tax cost $36,517,831 $41,892,112
- ----------------------------------------------------------------- ------------- -----------
</TABLE>
+ See "What Shares Cost" in the prospectus.
* Computation of offering price: 100/98 of net asset value.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED MAY 31, 1995* (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED
FUND FUND
------------- ----------
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Dividends $ 329,840 $ 227,999
- ------------------------------------------------------------------
Interest 277,899 784,190
- ------------------------------------------------------------------ ------------ ----------
Total income 607,739 1,012,189
- ------------------------------------------------------------------ ------------ ----------
EXPENSES:
- ------------------------------------------------------------------
Investment advisory fee 95,128 153,680
- ------------------------------------------------------------------
Administrative personnel and services fee 22,863 25,916
- ------------------------------------------------------------------
Custodian fees 2,987 4,826
- ------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 7,525 8,146
- ------------------------------------------------------------------
Legal fees 2,418 2,418
- ------------------------------------------------------------------
Portfolio accounting fees 25,012 27,129
- ------------------------------------------------------------------
Printing and postage 3,223 3,224
- ------------------------------------------------------------------
Insurance premiums 2,874 3,270
- ------------------------------------------------------------------
Miscellaneous 4,915 5,302
- ------------------------------------------------------------------ ------------ ----------
Total expenses 166,945 233,911
- ------------------------------------------------------------------ ------------ ----------
Deduct--Waiver of investment advisory fee 66,770 108,235
- ------------------------------------------------------------------ ------------ ----------
Net expenses 100,175 125,676
- ------------------------------------------------------------------ ------------ ----------
Net investment income 507,564 886,513
- ------------------------------------------------------------------ ------------ ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
- ------------------------------------------------------------------
Net realized gain on investments 369,270 164,420
- ------------------------------------------------------------------
Net change in unrealized appreciation of investments 2,272,844 3,153,961
- ------------------------------------------------------------------ ------------ ----------
Net realized and unrealized gain on investments 2,642,114 3,318,381
- ------------------------------------------------------------------ ------------ ----------
Change in net assets resulting from operations $ 3,149,678 $4,204,894
- ------------------------------------------------------------------ ------------ ----------
</TABLE>
* For the period from December 19, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD ENDED MAY 31, 1995* (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED
FUND FUND
------------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 507,564 $ 886,513
- -----------------------------------------------------------------
Net realized gain on investments 369,270 164,420
- -----------------------------------------------------------------
Net change in unrealized appreciation of investments 2,272,844 3,153,961
- ----------------------------------------------------------------- ------------- -----------
Change in net assets resulting from operations 3,149,678 4,204,894
- ----------------------------------------------------------------- ------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (360,827) (522,642)
- ----------------------------------------------------------------- ------------- -----------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 36,155,187 45,576,985
- -----------------------------------------------------------------
Cost of shares redeemed (811,556) (3,110,637)
- ----------------------------------------------------------------- ------------- -----------
Change in net assets resulting from share transactions 35,343,631 42,466,348
- ----------------------------------------------------------------- ------------- -----------
Change in net assets 38,132,482 46,148,600
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period -- --
- ----------------------------------------------------------------- ------------- -----------
End of period (including undistributed net investment income of
$146,737 and $363,871, respectively) $38,132,482 $46,148,600
- ----------------------------------------------------------------- ------------- -----------
</TABLE>
* For the period from December 19, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PERIOD ENDED MAY 31, 1995(A) (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED
FUND FUND
------------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $10.00
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income 0.18 0.21
- ---------------------------------------------------------------------
Net realized and unrealized gain on investments 1.02 0.79
- --------------------------------------------------------------------- --------- -------
Total from investment operations 1.20 1.00
- --------------------------------------------------------------------- --------- -------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Distributions from net investment income (0.14) (0.12)
- --------------------------------------------------------------------- --------- -------
NET ASSET VALUE, END OF PERIOD $ 11.06 $10.88
- --------------------------------------------------------------------- --------- -------
TOTAL RETURN (B) 12.10% 10.11%
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses 0.84%(c) 0.65%(c)
- ---------------------------------------------------------------------
Net investment income 4.27%(c) 4.61%(c)
- ---------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.56%(c) 0.56%(c)
- ---------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted) $38,132 $46,149
- ---------------------------------------------------------------------
Portfolio turnover 43% 20%
- ---------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from December 19, 1994 (date of initial
public investment) to May 31, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
First Priority Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of six diversified portfolios. The following
portfolios comprise the Trust:
<TABLE>
<S> <C>
First Priority Treasury Money Market Fund
First Priority Limited Maturity Government Fund
First Priority Fixed Income Fund
First Priority Equity Fund
First Priority Equity Income Fund ("Equity Income Fund")
First Priority Balanced Fund ("Balanced Fund")
</TABLE>
The financial statements included herein are only those of Equity Income Fund
and Balanced Fund (individually referred to as the "Fund", or collectively
referred to as the "Funds"). The financial statements of the other portfolios
are presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Corporate bonds and other fixed-income and
asset backed securities are valued at the last sale price reported on
national securities exchanges on that day, if available. Otherwise,
corporate bonds and other fixed-income and asset backed securities are
valued at the prices provided by an independent pricing service. Listed
equity securities are valued at the last sale price reported on national
securities exchanges. Unlisted and short-term securities (and private
placement securities) are generally valued at the prices provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be valued at amortized cost, which
approximates fair market value. Investments in other regulated investment
companies are valued at net asset value.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require a custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor,
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards established or reviewed by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Funds
could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their taxable income.
Accordingly, no provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
PERIOD ENDED MAY 31, 1995*:
<TABLE>
<CAPTION>
EQUITY INCOME BALANCED
FUND FUND
- --------------------------------------------------------------------- ------------- ---------
<S> <C> <C>
Shares sold 3,525,258 4,543,971
- ---------------------------------------------------------------------
Shares redeemed (77,017) (301,150)
- --------------------------------------------------------------------- ------------ ---------
Net change resulting from share transactions 3,448,241 4,242,821
- --------------------------------------------------------------------- ------------ ---------
</TABLE>
* For the period from December 19, 1994 (date of initial public investment) to
May 31, 1995.
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--First Alabama Bank, the Trust's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.80 of 1% of each Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES, PORTFOLIO ACCOUNTING AND CUSTODIAN
FEES--Federated Services Company ("FServ") serves as transfer and dividend
disbursing agent for the Funds for which it receives a fee. This fee is based on
the size, type, and number of accounts and transactions made by shareholders.
FServ also maintains the Funds' accounting records for which it receives a fee.
This fee is based on the level of each Fund's average net assets for the period,
plus out-of-pocket expenses.
First Alabama Bank is the Funds custodian for which it receives a fee. The fee
is based on the level of each Fund's average net assets for the period.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Funds will be
borne initially by FAS. The Funds have agreed to reimburse FAS for the
organizational expenses during the five year period following December 6, 1994
(date the Funds became effective). For the period ended
May 31, 1995, the Funds paid FAS as follows:
<TABLE>
<CAPTION>
ESTIMATED
INITIAL ORGANIZATIONAL
ORGANIZATIONAL EXPENSES
FUND EXPENSES REIMBURSED
- ----------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Equity Income Fund $ 30,000 $1,002
- ----------------------------------------------------------------- ----------- ----------
Balanced Fund $ 30,000 $1,002
- ----------------------------------------------------------------- ----------- ----------
</TABLE>
INTERFUND TRANSACTIONS--During the period ended May 31, 1995, the Equity Income
Fund and the Balanced Fund engaged in purchase transactions with funds that have
a common investment adviser, common Directors/Trustees, and/or common Officers.
These transactions were made at current market value pursuant to Rule 17a-7
under the Act amounting to $18,306,150 and $32,612,520, respectively.
GENERAL--Certain of the Officers and Trustees of the Funds are Officers and
Directors or Trustees of the above companies.
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1995, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Equity Income Fund $ 42,468,148 $ 10,504,729
- ----------------------------------------------------------------- ------------- -------------
Balanced Fund $ 45,910,711 $ 7,428,503
- ----------------------------------------------------------------- ------------- -------------
</TABLE>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue
John F. Donahue
Chairman
Thomas G. Bigley
Edward C. Gonzales
John T. Conroy, Jr.
President and Treasurer
William J. Copeland
J. Christopher Donahue
James E. Dowd
Vice President
Lawrence D. Ellis, M.D.
Richard B. Fisher
Vice President
Edward L. Flaherty, Jr.
John W. McGonigle
Edward C. Gonzales
Vice President and Secretary
Peter E. Madden
Ronald M. Petnuch
Gregor F. Meyer
Vice President and Asst. Treasurer
John E. Murray, Jr.
David M. Taylor
Assistant Treasurer
Wesley W. Posvar
Jay S. Neuman
Marjorie P. Smuts
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objectives and policies, management fees, expenses and other information.
335931804
335931887
G01186-02 (6/95)
