FIRST PRIORITY FAMILY OF FUNDS
COMBINED ANNUAL REPORT
Dated November 30, 1996
Diversified Portfolios of the First Priority Funds, an Open-End,
Management Investment Company
[LOGO] FIRST PRIORITY FAMILY OF FUNDS
PRESIDENT'S MESSAGE
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Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for First Priority
Funds. This report covers activity in First Priority Treasury Money Market Fund
("Treasury Money Market Fund"), First Priority Limited Maturity Government Fund
("Limited Maturity Government Fund"), First Priority Fixed Income Fund ("Fixed
Income Fund"), First Priority Balanced Fund ("Balanced Fund"), First Priority
Value Fund ("Value Fund"), and First Priority Growth Fund ("Growth Fund") over
the 12-month period from December 1, 1995 through November 30, 1996.
The report begins with an investment review by the portfolio manager of each
fund with a fluctuating net asset value. This review describes economic and
market conditions and their impact on fund strategy. Following the investment
review are a complete list of fund holdings and the financial statements.
The past year continued to be an extremely favorable investment environment for
stocks, however this was not the case for bonds due to interest rate volatility,
as the following highlights show:
TREASURY MONEY MARKET FUND
This fund is a convenient, highly conservative way for shareholders to pursue
daily income on their ready cash, with daily access to their money. The fund's
portfolio of U.S. Treasury money market securities paid dividends of $0.05 per
share for Trust Shares and $0.04 per share for Investment Shares during the
12-month period. The fund's net assets grew by approximately 3% to reach $142.4
million.*
LIMITED MATURITY GOVERNMENT FUND
The fund's diversified portfolio of limited maturity U.S. Treasury notes, U.S.
government agency securities and investment-grade corporate bonds rewarded
shareholders with an income stream totaling $0.50 per share over the 12-month
period. Despite a volatile interest rate environment, the fund's share price
fluctuated minimally, from $10.04 on the first day of the period to $9.96 on the
last day. The fund produced a total return of 4.37%, based on net asset value,
or 0.76% adjusted for the fund's sales charge.** The fund's net assets stood at
$63.7 million at the end of the period.
FIXED INCOME FUND
Amid a volatile interest rate environment, the fund's portfolio of U.S.
government bonds and investment-grade corporate bonds produced an income stream
totaling $0.54 per share over the 12-month period, while its share price grew
modestly from $10.34 on the first day of the period to $10.36 on the last day.
This income and growth combined to produce a total return of 5.66%, based on net
asset value, or 0.60% adjusted for the fund's sales charge.** The fund ended the
period with $152.9 million in net assets.
* Although money market mutual funds seek to maintain a stable net asset value
of $1.00, there is no guarantee that they will do so. An investment in the
Fund is neither insured nor guaranteed by the U.S. government.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
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BALANCED FUND
The fund's balanced approach--investing in a combination of high-quality stocks
and investment-grade corporate bonds and government bonds--produced a strong
total return of 15.35%, based on net asset value for the period, or 9.88%
adjusted for the fund's sales charge.** Contributing to the total return was the
fund's 9% rise in share price from the first day to the last day of the period,
dividends totaling $0.42 per share, and capital gains totaling $0.21 per share.
Fund net assets reached $59.3 million.
VALUE FUND
Consistent with a continued strong stock market environment, the fund's
diversified portfolio of high-quality stocks selected for their dividend
potential delivered a solid total return of 21.72%, based on net asset value, or
15.94% adjusted for the fund's sales charge.** The fund's share price rose more
than 15% from the first day to the last day of the period. Shareholders received
dividends totaling $0.29 per share and capital gains totaling $0.35 per share.
Fund net assets rose significantly to reach $83.6 million.
GROWTH FUND
The fund's diversified portfolio of high-quality growth stocks delivered an
extremely strong total return of 28.22%, based on net asset value, or 22.16%
adjusted for the fund's sales charge.** Contributing to this total return was a
21% rise in share price from the first day to the last day of the period,
dividends totaling $0.15 per share, and capital gains amounting to $0.55 per
share. At the end of the period, fund net assets stood at $175.5 million.
Thank you for putting your money to work through one or more of the First
Priority Funds. As we begin 1997, we renew our commitment to bring you the
highest level of service possible as we keep you up-to-date on your investment
progress.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
January 15, 1997
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
LIMITED MATURITY GOVERNMENT FUND
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MANAGEMENT DISCUSSION AND ANALYSIS
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During the fiscal year ended November 30, 1996, Limited Maturity
Government Fund produced a total return of 4.37%, based on net asset
value*. The fund's return is measured against the Merrill Lynch 1-3 year
Government/Corporate Index ("Merrill Lynch Index")** which returned 5.88%.
We compare our performance to this index because the fund will normally
invest at least 65% of the value of its total assets in U.S. government
securities, which should closely track the U.S. government allocation in
the Merrill Lynch Index. The balance of the fund assets may be comprised of
corporate bonds, mortgage-backed securities, asset-backed securities, bank
instruments, repurchase agreements, and securities of other investment
companies. The fund's dollar-weighted average portfolio maturity will
normally fluctuate between 2-5 years.
During the year, the fund was under pressure from February 1996 to
June 1996 due to accelerating economic growth and fears of a resurgence in
inflation. The financial markets anticipated an increase in short-term
rates by the Federal Reserve Board (the "Fed") to restrict economic growth
and constrain perceived inflationary trends. In fact, short-term rates were
not increased by the Fed since inflation has not materialized.
For the period from June 1996 through November 1996 the fund recovered
in net asset value. Economic growth decreased with an absence of inflation.
Our strategy was to reduce maturities in September 1996 and to bring
portfolio duration in line with the duration of the Merrill Lynch Index. We
believe that, going forward, the threat of inflation should diminish,
providing opportunities for the fund to increase its performance.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Merrill Lynch 1-3 Year Government/Corporate Index is an unmanaged index
comprised of publicly placed, non-convertible coupon bearing domestic
debt with maturities between 1 and 2.99 years. Investments cannot be
made in an index.
LIMITED MATURITY GOVERNMENT FUND
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GROWTH OF $10,000 INVESTED IN LIMITED MATURITY GOVERNMENT FUND
The graph below illustrates the hypothetical investment of $10,000 in
Limited Maturity Government Fund (the "Fund") from December 12, 1993 (start of
performance) to November 30, 1996, compared to the Merrill Lynch 1-5 Year
Government/Corporate Index and the Merrill Lynch 1-3 Year Government/Corporate
Index.
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
1 Year..................................................... 0.76%
Start of Performance (12/12/93).......... ................ 3.62%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2% at the Fund's inception ($10,000 investment
minus $200 sales charge = $9,800). The Fund's performance assumes the
reinvestment of all dividends and distributions. The Merrill Lynch 1-5 Year
Government/Corporate Index and the Merrill Lynch 1-3 Year
Government/Corporate Index have been adjusted to reflect reinvestment of
dividends on securities in the indices. The current maximum sales charge is
3.50%.
** Total return quoted reflects the current 3.50% sales charge.
Note: The Merrill Lynch 1-5 year Government/Corporate Index and the Merrill
Lynch 1-3 Year Government/ Corporate Index are not adjusted to reflect
sales charges, expenses, or other fees that the SEC requires to be
reflected in the Fund's performance. These indices are unmanaged. The
Investment Adviser has elected to change the benchmark of the Fund from
the Merrill Lynch 1-5 Year Government/Corporate Index to the Merrill Lynch
1-3 Year Government/Corporate Index. The Merrill Lynch 1-3 Year
Government/Corporate Index excludes maturities exceeding three years and
is more representative of the securities typically held by the Fund. The
Investment Adviser believes that the Merrill Lynch 1-3 Year
Government/Corporate Index is more appropriate.
FIXED INCOME FUND
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MANAGEMENT DISCUSSION AND ANALYSIS
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During the fiscal year ended November 30, 1996, Fixed Income Fund
returned 5.66% based on net asset value.* This compares to the performance
of the Merrill Lynch 1-10 Year Government/Corporate Index of 5.77%.** We
compare our performance to this index because we typically use a high
proportion of U.S. Treasury and agency securities in our portfolios with
approximately 20% in high quality corporate bonds. We define ourselves as
intermediate fixed income managers, since we typically do not buy bonds
with a maturity in excess of 15 years, and maintain a weighted average life
of less than 10 years for the portfolio.
It is important to recognize that we have adopted conservative
accounting policies which call for the amortization of premiums.
Historically, in a declining interest rate environment, many securities
available to us for purchase have been priced above par value or at a
premium. We have chosen to amortize this premium which reduces current
yield for the fund. Investors who purchase a fund primarily based on
current yield should examine the quality and maturity of the securities
held and the accounting treatment for amortization of premium. The effect
of not amortizing premium is to increase the current yield by, in effect,
increasing current distributions to investors by returning a portion of
their investment or principal.
During the year, the fund suffered a setback in net asset value from
February 1996 to June 1996, due to accelerating economic growth rate which
resulted in fears of inflation. It was also widely expected, during this
time, that the Fed would respond by tightening monetary policy therefore
pushing short-term interest rates higher to help control inflation. The
reality, since mid year, has been that the Fed has not increased interest
rates because the threat of inflation has not materialized. The Fed has
maintained a stable fed funds target rate since January 31, 1996.
As the year progressed, the fund recovered in net asset value from
September 1996 through November 1996. The economy showed signs of slowing
from the rapid pace of the second quarter of 1996 and inflation has not
accelerated.
Our strategic positioning of the fund has been to extend maturities
from a defensive posture at mid-year. Going forward, we would anticipate
the threat of inflation to diminish further which could provide for further
improvement in performance of the fund.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Merrill Lynch 1-10 Year Government/Corporate Index is an unmanaged index
comprised of publicly placed, non-convertible, coupon-bearing domestic
debt with maturities between 1 and 9.99 years. Investments cannot be
made in an index.
FIXED INCOME FUND
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GROWTH OF $10,000 INVESTED IN FIXED INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in Fixed
Income Fund (the "Fund") from April 20, 1992 (start of performance) to November
30, 1996, compared to the Merrill Lynch 1-10 Year Treasury Index and the Merrill
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX B
AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
1 Year....................................................................... 0.60%
Start of Performance (4/20/92)............................................... 5.93%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2% at the Fund's inception ($10,000 investment
minus $200 sales charge = $9,800). The Fund's performance assumes the
reinvestment of all dividends and distributions. The Merrill Lynch 1-10 Year
Treasury Index and the Merrill Lynch 1-10 Year Government/Corporate Index
have been adjusted to reflect reinvestment of dividends on securities in the
indices. The current maximum sales charge is 4.75%.
** Total return quoted reflects the current 4.75% sales charge.
Note: The Merrill Lynch 1-10 Year Treasury Index and the Merrill Lynch 1-10 Year
Government/Corporate Index are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the
Fund's performance. These indices are unmanaged. The Investment Adviser
has elected to change the benchmark of the Fund from the Merrill Lynch
1-10 Year Treasury Index to the Merrill Lynch 1-10 Year
Government/Corporate Index. The Merrill Lynch 1-10 Year
Government/Corporate Index is more representative of the securities
typically held by the Fund and includes all public obligations of the U.S.
Treasury and government agencies. The Merrill Lynch 1-10 Year Treasury
Index excludes all agency issues. The Investment Adviser believes that the
Merrill Lynch 1-10 Year Government/Corporate Index is more appropriate.
BALANCED FUND
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MANAGEMENT DISCUSSION AND ANALYSIS
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During the fiscal year ended November 30, 1996, Balanced Fund produced
a total return of 15.35%, based on net asset value.* Equities outperformed
fixed income instruments by a wide margin with the Standard & Poor's 500
Composite Stock Index ("S&P 500")** posting a 27.9% return while the
Merrill Lynch 1-10 Year Government/Corporate Index returned 5.77%.
The equity market was heavily influenced by higher than expected
corporate profits and record mutual fund inflows throughout the year. Large
cap growth stocks led the way for most of the year, but as the year
progressed the leadership began to narrow to just a few sectors such as
Consumer Staples, Technology, Energy, and Banks.
While the higher than expected corporate profits were welcomed in the
equity markets, they were not as well received in the fixed income markets.
It was perceived that the increased economic activity would result in
higher future inflation levels than currently present and would eventually
lead to higher interest rates and possible Fed actions.
For 1997, we believe that corporate profits will continue to grow but
at a slower rate than the past few years and that inflation will remain
subdued. We will continue to focus on large cap growth stocks in the equity
portion of the fund and high quality intermediate-term securities in the
fixed income portion of the fund.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Standard & Poor's 500 Composite Stock Index is an unmanaged index
comprised of common stocks in industry, transportation, and financial
and public utility companies. Investments cannot be made in an index.
BALANCED FUND
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GROWTH OF $10,000 INVESTED IN BALANCED FUND
The graph below illustrates the hypothetical investment of $10,000 in
Balanced Fund (the "Fund") from December 19, 1994 (start of performance) to
November 30, 1996, compared to the S&P 500/Lehman Brothers Government/Corporate
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX C
AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
1 Year....................................................................... 9.88%
Start of Performance (12/19/94).............................................. 14.47%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2% at the Fund's inception ($10,000 investment
minus $200 sales charge = $9,800). The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500/Lehman Brothers
Government/Corporate Index has been adjusted to reflect reinvestment of
dividends on securities in the index. The current maximum sales charge is
4.75%.
** Total return quoted reflects the current 4.75% sales charge.
Note: The S&P 500/Lehman Government/Corporate Index is not adjusted to reflect
sales charges, expenses, or other fees that the SEC requires to be
reflected in the Fund's performance. This index is unmanaged.
+ The S&P 500/Lehman Brothers Government/Corporate Index (the "Index") is a
weighted index that combines components of the S&P 500 and the Lehman
Brothers Government/Corporate Index. Figures shown for the Index assume a
constant weighting of 50% S&P 500 and 50% Lehman Brothers
Government/Corporate Index throughout the period. Although the Fund's
allocation between equity and debt instruments will vary, the Fund's
allocation on November 30, 1996, as indicated in the Fund's financial
statements, was 50.0% in equities, 45.7% in debt instruments and the
remainder in short-term liquid investments.
VALUE FUND
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MANAGEMENT DISCUSSION AND ANALYSIS
---------------------------------------------------------------------------
During the fiscal year ended November 30, 1996, Value Fund had a total
return of 21.72%, based on net asset value*. The S&P/Barra Value Index**
had a return of 27.47% for the same period. This index represents the lower
half of a price-to-book ranking of the S&P 500. The members of the S&P 500
are ranked from highest to lowest by price-to-book ratio. The top one-half
of this ranking (by market capitalization) becomes the S&P/Barra Growth
Index and the lower one-half becomes the S&P/Barra Value Index. The
S&P/Barra Value Index currently contains approximately 360 stocks.
As discussed last year, the fund has reduced its holdings of
convertible securities. At the beginning of the fiscal year, the fund held
31% of its assets in convertibles; it now holds approximately 2% of its
assets in convertibles. Convertible securities have returned approximately
10% during the fiscal year (using the Merrill Lynch All-Convertible
Index*** as a benchmark), but this performance has lagged that of the stock
market. We will still consider using convertibles in situations where the
particular security is attractive enough to justify it. The Aetna
Convertible Preferred stock that we currently hold offers much of the
potential for appreciation that the common stock offers, but tends to pay a
much higher dividend. These characteristics lead us to hold the convertible
and not the common stock.
The fund's holdings benefited from a very strong stock market during
this period. The S&P 500 returned 27.89%, including reinvested dividends,
during this period. Corporate earnings continued to grow this year, albeit
at a slower pace than in 1995. There was also a lot of money coming into
the stock market through mutual funds, and these two factors have driven
the stock market to several record highs. Financial stocks continued to do
well, and the fund benefited from its holdings of bank and insurance
stocks. Energy stocks have also done well as oil and natural gas prices
have moved up. The fund has several holdings in the oil and natural gas
industries, and these have done well.
We plan to remain fully invested in the stock market. Although stocks
have had two excellent years in a row, we do not expect the market to
experience any kind of meaningful decline over the next twelve months. We
foresee steady interest rates and corporate earnings growth and these
factors, combined with a continued inflow of cash from mutual funds, should
hold the stock market steady. We hope to hold the fund's dividend at a
higher-than-average level by holding stocks which pay dividends that are
above the market's level.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** S&P/Barra Value Index is an unmanaged sub-index of the S&P 500
representing 50% of the S&P 500 market capitalization and is comprised
of those companies with lower price-to-book ratios. Investments cannot
be made in an index.
*** Merrill Lynch All-Convertible Index is an unmanaged index comprised of
all non-mandatory domestic corporate convertible securities with at
least an original par of $50 million or a $50 million market value.
Securities which drop below a market value of $40 million are excluded.
All securities are converted into common stock only. Investments cannot
be made in an index.
VALUE FUND
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GROWTH OF $10,000 INVESTED IN VALUE FUND
The graph below illustrates the hypothetical investment of $10,000 in Value
Fund (the "Fund") from December 19, 1994 (start of performance) to November 30,
1996, compared to the S&P/Barra Value Index.
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX D
AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
1 Year....................................................................... 15.94%
Start of Performance (12/19/94).............................................. 20.51%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2% at the Fund's inception ($10,000 investment
minus $200 sales charge = $9,800). The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P/Barra Value Index
has been adjusted to reflect reinvestment of dividends on securities in the
index. The current maximum sales charge is 4.75%.
** Total return quoted reflects the current 4.75% sales charge.
Note: The S&P/Barra Value Index is not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the
Fund's performance. This index is unmanaged.
GROWTH FUND
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MANAGEMENT DISCUSSION AND ANALYSIS
---------------------------------------------------------------------------
1996 was a good year both on an absolute and on a relative basis for
investors in Growth Fund. During the fiscal year ended November 30, 1996,
the fund returned 28.22%, based on net asset value,* just trailing the
S&P/Barra Growth Index** return of 28.3% and outperforming the S&P 500
return of 27.89%.
The economic environment was generally favorable for the equity
market. The economy cycled through a slow growth period in December 1995
and into February of 1996. In March, economic growth rekindled and remained
strong through June with a second quarter Gross Domestic Product growth
rate of 4.2%. Interest rates moved up sharply between March and June in
anticipation of rising inflationary pressures from the increased rate of
economic growth. That rise in rates contributed to a slowdown of economic
growth in the third quarter with Gross Domestic Product growing only 2.0%.
The stock market also reacted to the prospect of rising inflation by
correcting almost 10% between late May and the latter part of July. With
the economy continuing to exhibit slow growth and inflation continuing to
remain benign, interest rates have moved lower in the last two months after
stabilizing in the third quarter, and the stock market has recovered to
reach new all time highs.
Other than a brief period of outperformance from March to May by small
capitalization and cyclical stocks, the large capitalization growth stocks
have led the market throughout the year. Market leadership narrowed as the
year progressed with banks, consumer staples, technology and energy stocks
being the best performing groups calendar year to date.
Looking ahead to 1997, the current "best of all worlds" environment
for equities--moderate economic growth, low inflation, stable to declining
interest rates, and rising earnings--appears to be sustainable at least
into the first half of the year. If the economy can remain on a moderate
growth path enabling corporate profits to rise, the stock market should be
able to have a third year of positive returns albeit at a rate of growth
closer to long-term historical averages than the outstanding returns of the
past two years.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** S&P/Barra Growth Index is an unmanaged sub-index of the S&P 500
representing 50% of the S&P 500 market capitalization and is comprised
of those companies with higher price-to-book ratios. Investments cannot
be made in an index.
GROWTH FUND
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GROWTH OF $10,000 INVESTED IN GROWTH FUND
The graph below illustrates the hypothetical investment of $10,000 in
Growth Fund (the "Fund") from April 20, 1992 (start of performance) to November
30, 1996, compared to the S&P 500.
GRAPHIC REPRESENTATION OMITTED SEE APPENDIX E
AVERAGE ANNUAL TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
1 Year....................................................................... 22.16%
Start of Performance (4/20/92)............................................... 11.86%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 2% at the Fund's inception ($10,000 investment
minus $200 sales charge = $9,800). The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500 has been
adjusted to reflect reinvestment of dividends on securities in the index. The
current maximum sales charge is 4.75%.
** Total return quoted reflects the current 4.75% sales charge.
Note: The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
FIRST PRIORITY FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
DISTRIBUTIONS
FROM NET DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS REALIZED IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET GAIN ON OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT INVESTMENT
NOVEMBER 30, OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TREASURY MONEY MARKET FUND--TRUST SHARES
1992(a) 1.00 0.02 -- 0.02 (0.02) -- --
1993 1.00 0.03 -- 0.03 (0.03) -- --
1994 1.00 0.04 -- 0.04 (0.04) -- --
1995 1.00 0.05 -- 0.05 (0.05) -- --
1996 1.00 0.05 -- 0.05 (0.05) -- --
TREASURY MONEY MARKET FUND--INVESTMENT SHARES
1992(a) 1.00 0.01 -- 0.01 (0.01) -- --
1993 1.00 0.02 -- 0.02 (0.02) -- --
1994 1.00 0.03 -- 0.03 (0.03) -- --
1995 1.00 0.04 -- 0.04 (0.04) -- --
1996 1.00 0.04 -- 0.04 (0.04) -- --
LIMITED MATURITY GOVERNMENT FUND
1994(b) 10.00 0.42 (0.40) 0.02 (0.42) -- --
1995 9.60 0.51 0.44 0.95 (0.51) -- --
1996 10.04 0.50 (0.08) 0.42 (0.50) -- --
FIXED INCOME FUND--TRUST SHARES
1992(c) 9.90 0.38 0.37 0.75 (0.38) -- --
1993 10.27 0.51 0.50 1.01 (0.51) (0.10) --
1994 10.67 0.54 (1.01) (0.47) (0.53) (0.20) (0.01)(g)
1995(d) 9.46 0.09 0.11 0.20 (0.09) -- --
FIXED INCOME FUND--INVESTMENT SHARES
1992(c) 9.90 0.37 0.37 0.74 (0.37) -- --
1993 10.27 0.48 0.50 0.98 (0.48) (0.10) --
1994 10.67 0.51 (1.01) (0.50) (0.50) (0.20) (0.01)(g)
1995 9.46 0.52 0.90 1.42 (0.54) -- --
1996 10.34 0.54 0.02 0.56 (0.54) -- --
</TABLE>
(a) Reflects operations for the period from April 14, 1992 (date of initial
public investment) to November 30, 1992.
(b) Reflects operations for the period from December 12, 1993 (date of initial
public investment) to November 30, 1994.
(c) Reflects operations for the period from April 20, 1992 (date of initial
public investment) to November 30, 1992.
(d) Reflects operations for the two month period ended January 31, 1995. Prior
to February 1, 1995 the Fund offered two classes of shares: Investment
Shares and Trust Shares. On February 1, 1995, all outstanding Trust Shares
were converted to Investment Shares and the Fund no longer offers Trust
Shares.
(e) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(f) Computed on an annualized basis.
(g) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(h) 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)
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------
NET ASSET NET EXPENSE NET ASSETS, AVERAGE
TOTAL VALUE, END TOTAL INVESTMENT WAIVER/ END OF PERIOD COMMISSION
DISTRIBUTIONS OF PERIOD RETURN(E) EXPENSES INCOME REIMBURSEMENT(H) (000 OMITTED) RATE PAID
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.02) 1.00 2.06% 0.29%(f) 3.20%(f) 0.53%(f) $ 86,616 --
(0.03) 1.00 2.75% 0.38% 2.72% 0.46% $ 88,510 --
(0.04) 1.00 3.59% 0.32% 3.49% 0.50% $ 91,008 --
(0.05) 1.00 5.48% 0.33% 5.35% 0.50% $ 109,368 --
(0.05) 1.00 4.83% 0.52% 4.71% 0.29% $ 101,786 --
(0.01) 1.00 1.83% 0.74%(f) 2.58%(f) 0.53%(f) $ 23,578 --
(0.02) 1.00 2.34% 0.78% 2.33% 0.46% $ 23,795 --
(0.03) 1.00 3.18% 0.72% 3.09% 0.50% $ 16,571 --
(0.04) 1.00 5.06% 0.73% 4.98% 0.50% $ 28,930 --
(0.04) 1.00 4.41% 0.92% 4.31% 0.29% $ 40,619 --
(0.42) 9.60 0.19% 0.38%(f) 4.45%(f) 0.70%(f) $ 48,526 --
(0.51) 10.04 10.12% 0.61% 5.26% 0.49% $ 63,078 --
(0.50) 9.96 4.37% 1.01% 5.09% 0.08% $ 63,732 --
(0.38) 10.27 7.66% 0.77%(f) 6.02%(f) 0.29%(f) $ 96,354 --
(0.61) 10.67 10.14% 0.84% 4.80% 0.25% $ 169,881 --
(0.74) 9.46 (4.55%) 0.79% 5.44% 0.25% $ 153,289 --
(0.09) 9.57 2.11% 0.82%(f) 5.79%(f) 0.25%(f) -- --
(0.37) 10.27 7.48% 1.07%(f) 5.33%(f) 0.29%(f) $ 5,457 --
(0.58) 10.67 9.81% 1.14% 4.40% 0.25% $ 12,519 --
(0.71) 9.46 (4.83%) 1.09% 5.14% 0.25% $ 9,645 --
(0.54) 10.34 15.37% 1.02% 5.25% -- $ 160,286 --
(0.54) 10.36 5.66% 1.02% 5.38% -- $ 152,940 --
<CAPTION>
TOTAL PORTFOLIO
DISTRIBUTIONS TURNOVER
- -------------
<S> <C>
(0.02) --
(0.03) --
(0.04) --
(0.05) --
(0.05) --
(0.01) --
(0.02) --
(0.03) --
(0.04) --
(0.04) --
(0.42) 3%
(0.51) 26%
(0.50) 48%
(0.38) 44%
(0.61) 83%
(0.74) 24%
(0.09) --
(0.37) 44%
(0.58) 83%
(0.71) 24%
(0.54) 45%
(0.54) 52%
</TABLE>
FIRST PRIORITY FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
DISTRIBUTIONS
FROM NET DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS REALIZED IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET GAIN ON OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT INVESTMENT INVESTMENT INVESTMENT
NOVEMBER 30, OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
1995(c) 10.00 0.44 1.38 1.82 (0.36) -- --
1996 11.46 0.41 1.27 1.68 (0.42) (0.21) --
VALUE FUND
1995(c) 10.00 0.40 1.98 2.38 (0.34) -- --
1996 12.04 0.27 2.22 2.49 (0.29) (0.35) --
GROWTH FUND--TRUST SHARES
1992(a) 9.86 0.14 0.77 0.91 (0.11) -- --
1993 10.66 0.18 (0.03) 0.15 (0.18) (0.12) --
1994 10.51 0.25 (0.10) 0.15 (0.23) (0.07) --
1995(b) 10.36 0.08 0.02 0.10 (0.08) (0.33) --
GROWTH FUND--INVESTMENT SHARES
1992(a) 9.86 0.10 0.79 0.89 (0.09) -- --
1993 10.66 0.16 (0.04) 0.12 (0.15) (0.12) --
1994 10.51 0.21 (0.09) 0.12 (0.20) (0.07) --
1995 10.36 0.18 2.10 2.28 (0.21) (0.33) --
1996 12.10 0.12 3.12 3.24 (0.15) (0.55) --
</TABLE>
(a) Reflects operations for the period from April 20, 1992 (date of initial
public investment) to November 30, 1992.
(b) Reflects operations for the two month period ended January 31, 1995. Prior
to February 1, 1995 the Fund offered two classes of shares: Investment
Shares and Trust Shares. On February 1, 1995, all outstanding Trust Shares
were converted to Investment Shares and the Fund no longer offers Trust
Shares.
(c) Reflects operations for the period from December 19, 1994 (date of initial
public investment) to November 30, 1995.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(e) Computed on an annualized basis.
(f) 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)
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------
NET ASSET NET EXPENSE NET ASSETS, AVERAGE
TOTAL VALUE, END TOTAL INVESTMENT WAIVER/ END OF PERIOD COMMISSION
DISTRIBUTIONS OF PERIOD RETURN(D) EXPENSES INCOME REIMBURSEMENT(F) (000 OMITTED) RATE PAID
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.36) 11.46 18.50% 0.61%(e) 4.34%(e) 0.56%(e) $ 51,197 --
(0.63) 12.51 15.35% 1.13% 3.60% 0.09% $ 59,321 0.0701
(0.34) 12.04 24.14% 0.69%(e) 3.93%(e) 0.55%(e) $ 45,424 --
(0.64) 13.89 21.72% 1.11% 2.29% 0.06% $ 83,572 0.0532
(0.11) 10.66 9.28% 0.76%(e) 2.28%(e) 0.35%(e) $ 102,822 --
(0.30) 10.51 1.43% 0.84% 1.85% 0.30% $ 154,185 --
(0.30) 10.36 1.42% 0.79% 2.32% 0.30% $ 143,876 --
(0.41) 10.05 1.00% 0.83%(e) 2.76%(e) 0.30%(e) -- --
(0.09) 10.66 9.14% 1.07%(e) 1.85%(e) 0.35%(e) $ 3,132 --
(0.27) 10.51 1.13% 1.14% 1.59% 0.30% $ 7,004 --
(0.27) 10.36 1.11% 1.09% 2.02% 0.30% $ 6,131 --
(0.54) 12.10 23.01% 1.03% 1.61% 0.05% $ 154,297 --
(0.70) 14.64 28.22% 1.05% 0.98% 0.01% $ 175,521 0.0713
<CAPTION>
TOTAL PORTFOLIO
DISTRIBUTIONS TURNOVER
- -------------
<S> <C>
(0.36) 49%
(0.63) 41%
(0.34) 76%
(0.64) 58%
(0.11) 30%
(0.30) 74%
(0.30) 66%
(0.41) --
(0.09) 30%
(0.27) 74%
(0.27) 66%
(0.54) 110%
(0.70) 56%
</TABLE>
TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
UNITED STATES TREASURY OBLIGATIONS--83.5%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS
---------------------------------------------------------------
$116,000,000 12/5/1996-4/3/1997 $114,973,236
--------------------------------------------------------------- ------------
U.S.TREASURY NOTES
---------------------------------------------------------------
4,000,000 4.75% 2/15/1997 3,992,423
--------------------------------------------------------------- ------------
TOTAL UNITED STATES TREASURY OBLIGATIONS (AT AMORTIZED COST) 118,965,659
--------------------------------------------------------------- ------------
MUTUAL FUNDS SHARES--7.7%
- -----------------------------------------------------------------------------------
4,511,493 Dreyfus Treasury Prime Cash Management 4,511,493
---------------------------------------------------------------
3,752,591 Goldman Sachs I.L.A. Treasury Portfolio 3,752,591
---------------------------------------------------------------
2,643,168 Franklin U.S. Treasury Money Market Portfolio 2,643,168
--------------------------------------------------------------- ------------
TOTAL MUTUAL FUNDS SHARES (AT NET ASSET VALUE) 10,907,252
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST AND VALUE)(A) $129,872,911
--------------------------------------------------------------- ------------
</TABLE>
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($142,405,047) at November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
LIMITED MATURITY GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--4.8%
- ------------------------------------------------------------------------------------
BANKING--0.8%
-----------------------------------------------------------------
$ 500,000 Barnett Banks, Inc., 6.25%, 7/28/1998 $ 503,250
----------------------------------------------------------------- -----------
BEVERAGES--1.6%
-----------------------------------------------------------------
500,000 PepsiCo, Inc., 6.80%, 5/15/2000 511,210
-----------------------------------------------------------------
500,000 PepsiCo, Inc., 7.48%, 4/27/2002 509,720
----------------------------------------------------------------- -----------
Total 1,020,930
----------------------------------------------------------------- -----------
FINANCE--AUTOMOTIVE--0.8%
-----------------------------------------------------------------
500,000 Ford Motor Credit Corporation, 5.625%, 1/15/1999 496,910
----------------------------------------------------------------- -----------
FINANCE--COMMERCIAL--0.8%
-----------------------------------------------------------------
500,000 American Express Credit Corporation, 6.75%, 6/1/2001 511,125
----------------------------------------------------------------- -----------
RETAIL--0.8%
-----------------------------------------------------------------
500,000 J.C. Penney, Inc., 6.375%, 9/15/2000 503,720
----------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $2,996,535) 3,035,935
----------------------------------------------------------------- -----------
U.S. GOVERNMENT AGENCIES--15.7%
- ------------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK--0.8%
-----------------------------------------------------------------
500,000 6.96%, 6/6/2000 503,815
----------------------------------------------------------------- -----------
FEDERAL HOME LOAN BANK--3.1%
-----------------------------------------------------------------
500,000 5.75%, 2/6/2001 494,320
-----------------------------------------------------------------
500,000 6.375%, 6/22/2000 503,145
-----------------------------------------------------------------
500,000 6.375%, 12/4/2002 497,745
-----------------------------------------------------------------
500,000 6.54%, 7/10/2000 502,395
----------------------------------------------------------------- -----------
Total 1,997,605
----------------------------------------------------------------- -----------
</TABLE>
LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--CONTINUED
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--4.7%
-----------------------------------------------------------------
$ 1,000,000 5.70%, 2/2/1999 $ 997,200
-----------------------------------------------------------------
1,000,000 6.27%, 1/27/2004 980,000
-----------------------------------------------------------------
1,000,000 8.28%, 3/15/2005 1,028,470
----------------------------------------------------------------- -----------
Total 3,005,670
----------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--5.5%
-----------------------------------------------------------------
500,000 5.12%, 1/22/1999 493,395
-----------------------------------------------------------------
1,000,000 6.28%, 2/3/2004 980,220
-----------------------------------------------------------------
500,000 6.40%, 1/13/2004 492,665
-----------------------------------------------------------------
500,000 6.80%, 9/30/2002 499,835
-----------------------------------------------------------------
500,000 7.30%, 4/17/2000 510,010
-----------------------------------------------------------------
500,000 8.32%, 3/2/2005 514,150
----------------------------------------------------------------- -----------
Total 3,490,275
----------------------------------------------------------------- -----------
STUDENT LOAN MARKETING ASSOCIATION--1.6%
-----------------------------------------------------------------
500,000 7.00%, 6/21/2000 500,575
-----------------------------------------------------------------
500,000 7.67%, 3/8/2000 502,850
----------------------------------------------------------------- -----------
Total 1,003,425
----------------------------------------------------------------- -----------
TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $9,991,484) 10,000,790
----------------------------------------------------------------- -----------
U.S. TREASURY NOTES--71.7%
- ------------------------------------------------------------------------------------
1,000,000 5.00%, 1/31/1999 987,950
-----------------------------------------------------------------
1,000,000 5.00%, 2/15/1999 987,520
-----------------------------------------------------------------
500,000 5.125%, 2/28/1998 497,850
-----------------------------------------------------------------
1,000,000 5.125%, 11/30/1998 991,550
-----------------------------------------------------------------
1,500,000 5.125%, 12/31/1998 1,486,740
-----------------------------------------------------------------
1,500,000 5.25%, 1/31/2001 1,474,485
-----------------------------------------------------------------
500,000 5.375%, 11/30/1997 499,830
-----------------------------------------------------------------
2,000,000 5.375%, 5/31/1998 1,996,160
-----------------------------------------------------------------
2,000,000 5.50%, 11/15/1998 1,996,980
-----------------------------------------------------------------
</TABLE>
LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
- ------------------------------------------------------------------------------------
$ 2,000,000 5.50%, 2/28/1999 $ 1,995,200
-----------------------------------------------------------------
500,000 5.50%, 4/15/2000 496,775
-----------------------------------------------------------------
500,000 5.50%, 12/31/2000 494,965
-----------------------------------------------------------------
500,000 5.625%, 6/30/1997 501,115
-----------------------------------------------------------------
500,000 5.625%, 10/31/1997 501,020
-----------------------------------------------------------------
500,000 5.625%, 11/30/2000 497,360
-----------------------------------------------------------------
1,500,000 5.625%, 2/28/2001 1,490,895
-----------------------------------------------------------------
500,000 5.75%, 9/30/1997 501,570
-----------------------------------------------------------------
500,000 5.75%, 10/31/2000 499,650
-----------------------------------------------------------------
500,000 5.875%, 7/31/1997 501,850
-----------------------------------------------------------------
2,000,000 5.875%, 8/15/1998 2,010,280
-----------------------------------------------------------------
2,000,000 5.875%, 10/31/1998 2,010,300
-----------------------------------------------------------------
2,000,000 5.875%, 3/31/1999 2,011,140
-----------------------------------------------------------------
1,000,000 5.875%, 6/30/2000 1,004,130
-----------------------------------------------------------------
500,000 6.00%, 8/31/1997 502,170
-----------------------------------------------------------------
2,000,000 6.00%, 5/31/1998 2,013,880
-----------------------------------------------------------------
2,000,000 6.00%, 9/30/1998 2,015,160
-----------------------------------------------------------------
2,000,000 6.00%, 8/15/1999 2,017,140
-----------------------------------------------------------------
500,000 6.125%, 3/31/1998 504,095
-----------------------------------------------------------------
2,000,000 6.125%, 8/31/1998 2,018,700
-----------------------------------------------------------------
1,500,000 6.125%, 7/31/2000 1,518,285
-----------------------------------------------------------------
500,000 6.125%, 9/30/2000 506,075
-----------------------------------------------------------------
500,000 6.25%, 5/31/2000 507,935
-----------------------------------------------------------------
500,000 6.25%, 8/31/2000 508,125
-----------------------------------------------------------------
2,000,000 6.375%, 5/15/1999 2,033,100
-----------------------------------------------------------------
1,000,000 6.50%, 8/15/1997 1,007,980
-----------------------------------------------------------------
500,000 6.75%, 4/30/2000 515,440
-----------------------------------------------------------------
1,000,000 6.875%, 3/31/2000 1,034,450
-----------------------------------------------------------------
</TABLE>
LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. TREASURY NOTES--CONTINUED
- ------------------------------------------------------------------------------------
$ 500,000 7.25%, 2/15/1998 $ 510,105
-----------------------------------------------------------------
2,000,000 7.375%, 11/15/1997 2,035,580
-----------------------------------------------------------------
500,000 7.50%, 12/31/1996 501,035
-----------------------------------------------------------------
500,000 7.50%, 1/31/1997 501,935
----------------------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $45,382,219) 45,686,505
----------------------------------------------------------------- -----------
(A)REPURCHASE AGREEMENT--5.7%
- ------------------------------------------------------------------------------------
3,630,089 HSBC Securities, Inc., 5.58%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 3,630,089
----------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $62,000,327)(B) $62,353,319
----------------------------------------------------------------- -----------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $62,000,327. The
net unrealized appreciation of investments on a federal tax basis amounts to
$352,992 which is comprised of $480,006 appreciation and $127,014
depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($63,731,519) at November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--10.9%
- -----------------------------------------------------------------------------------
CONSUMER CYCLICAL--0.6%
----------------------------------------------------------------
RETAIL--SPECIALTY
----------------------------------------------------------------
$ 880,000 Limited, Inc., 9.125%, 2/1/2001 $ 957,519
---------------------------------------------------------------- ------------
CONSUMER STAPLES--0.6%
----------------------------------------------------------------
TOBACCO
----------------------------------------------------------------
880,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 959,473
---------------------------------------------------------------- ------------
ELECTRICAL EQUIPMENT--1.1%
----------------------------------------------------------------
1,750,000 General Electric Capital Corp., 5.50%, 11/1/2001 1,700,528
---------------------------------------------------------------- ------------
ELECTRICAL POWER--1.2%
----------------------------------------------------------------
880,000 Orange & Rockland Utilities, Inc., 9.375%, 3/15/2000 959,094
----------------------------------------------------------------
880,000 Virginia Electric & Power, 8.875%, 6/1/1999 937,710
---------------------------------------------------------------- ------------
Total Electrical Power 1,896,804
---------------------------------------------------------------- ------------
FINANCIAL--6.7%
----------------------------------------------------------------
FINANCE--AUTOMOTIVE
----------------------------------------------------------------
1,000,000 General Motors Acceptance Corp., 7.75%, 1/15/1999 1,035,020
----------------------------------------------------------------
2,000,000 General Motors Acceptance Corp., 8.00%, 10/1/1999 2,098,100
---------------------------------------------------------------- ------------
Total 3,133,120
---------------------------------------------------------------- ------------
FINANCIAL--COMMERCIAL
----------------------------------------------------------------
1,000,000 Associates Corp. of North America, 6.875%, 8/1/2003 1,025,840
----------------------------------------------------------------
4,000,000 Xerox Credit Corp., 7.40%, 11/21/2011 3,955,000
---------------------------------------------------------------- ------------
Total 4,980,840
---------------------------------------------------------------- ------------
SECURITIES
----------------------------------------------------------------
2,000,000 Lehman Brothers Holdings, Inc., 7.25%, 10/15/2003 2,052,600
---------------------------------------------------------------- ------------
Total Financial 10,166,560
---------------------------------------------------------------- ------------
</TABLE>
FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
TRANSPORTATION--0.7%
----------------------------------------------------------------
$ 880,000 Ford Motor Co., 8.875%, 4/1/2006 $ 1,009,219
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $16,226,716) 16,690,103
---------------------------------------------------------------- ------------
U.S. GOVERNMENT AGENCIES--66.9%
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK--5.5%
----------------------------------------------------------------
1,750,000 6.75%, 10/24/2003 1,756,020
----------------------------------------------------------------
5,850,000 5.75% Floating Rate Note*, 11/5/2003 5,683,567
----------------------------------------------------------------
1,000,000 6.50%, 4/14/2004 1,003,670
---------------------------------------------------------------- ------------
Total 8,443,257
---------------------------------------------------------------- ------------
FEDERAL HOME LOAN MORTGAGE CORP.--27.4%
----------------------------------------------------------------
500,000 7.50%, 6/20/2001 505,530
----------------------------------------------------------------
2,410,000 6.11%, 1/17/2003 2,380,935
----------------------------------------------------------------
2,000,000 6.70%, 9/3/2003 1,998,620
----------------------------------------------------------------
2,000,000 6.375%, 12/23/2003 1,978,860
----------------------------------------------------------------
2,280,000 7.03%, 11/17/2005 2,291,446
----------------------------------------------------------------
2,000,000 6.625%, 11/28/2005 1,987,960
----------------------------------------------------------------
1,000,000 7.01%, 3/15/2006 1,002,040
----------------------------------------------------------------
2,000,000 7.53%, 8/7/2006 2,082,720
----------------------------------------------------------------
2,040,833 PC, 1386C, 6.48%, Floating Rate Note*, 10/15/2007 2,071,160
----------------------------------------------------------------
314,132 PC, 1414F, 6.53%, Floating Rate Note*, 11/15/2007 317,295
----------------------------------------------------------------
1,075,000 7.55%, 11/27/2007 1,089,964
----------------------------------------------------------------
2,512,918 PC, 1475O, 7.00%, 2/15/2008 2,497,439
----------------------------------------------------------------
6,189,728 PC, 1544L, 5.97%, Floating Rate Note*, 7/15/2008 5,994,937
----------------------------------------------------------------
4,400,000 PC, 1604FC, 5.89%, Floating Rate Note*, 11/15/2008 4,236,452
----------------------------------------------------------------
5,000,000 PC, 1712C, 6.00%, 3/15/2009 4,713,950
----------------------------------------------------------------
2,708,244 PC, 31K, 6.50%, 10/25/2014 2,601,323
----------------------------------------------------------------
4,250,000 PC, 1403M, 6.50%, 12/15/2021 4,114,893
---------------------------------------------------------------- ------------
Total 41,865,524
---------------------------------------------------------------- ------------
</TABLE>
FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--CONTINUED
- -----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--29.8%
----------------------------------------------------------------
$ 2,200,000 REMIC, 1993-G6/J, 7.00%, 12/25/1999 $ 2,235,222
----------------------------------------------------------------
4,400,000 STRIPS, PO, 0/7.56%, 12/20/2001 4,393,048
----------------------------------------------------------------
1,750,000 STRIPS, PO, 0/7.89%, 3/9/2002 1,726,270
----------------------------------------------------------------
3,500,000 6.49%, 3/19/2003 Series MTN 3,492,545
----------------------------------------------------------------
1,250,000 REMIC, 1992-G34/EC, 8.25%, 7/25/2005 1,327,813
----------------------------------------------------------------
1,900,000 7.125%, 11/7/2005 Series MTN 1,905,168
----------------------------------------------------------------
2,000,000 7.25%, 9/26/2005 Series MTN 2,010,200
----------------------------------------------------------------
4,500,000 7.34%, 9/29/2005 Series MTN 4,533,435
----------------------------------------------------------------
3,000,000 7.11%, 3/20/2006 Series MTN 3,052,170
----------------------------------------------------------------
2,820,000 7.02%, 4/10/2006 Series MTN 2,856,491
----------------------------------------------------------------
3,000,000 7.54%, 11/2/2006 Series MTN 3,059,130
----------------------------------------------------------------
1,250,000 REMIC 1992-209/F, 6.74% Floating Rate Note*, 11/25/2007 1,278,213
----------------------------------------------------------------
3,716,165 REMIC, 1993-G32/J, 6.75%, 5/25/2009 3,676,334
----------------------------------------------------------------
3,541,125 REMIC, 1994-10/KC, 6.50%, 10/25/2010 3,430,960
----------------------------------------------------------------
1,000,000 REMIC, 1992-137/DA, 7.75%, 1/25/2017 1,018,510
----------------------------------------------------------------
5,601,615 REMIC, 1993-202/PH, 6.50%, 2/25/2022 5,577,080
---------------------------------------------------------------- ------------
Total 45,572,589
---------------------------------------------------------------- ------------
TENNESSEE VALLEY AUTHORITY--4.2%
----------------------------------------------------------------
2,000,000 7.875%, 9/15/2001 2,031,520
----------------------------------------------------------------
4,400,000 6.125%, 7/15/2003 4,342,800
---------------------------------------------------------------- ------------
Total 6,374,320
---------------------------------------------------------------- ------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $102,561,378) 102,255,690
---------------------------------------------------------------- ------------
</TABLE>
FIXED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--20.4%
- -----------------------------------------------------------------------------------
U.S. TREASURY NOTES
----------------------------------------------------------------
$ 6,000,000 7.50%, 11/15/2001 $ 6,425,100
----------------------------------------------------------------
7,000,000 7.50%, 5/15/2002 7,537,110
----------------------------------------------------------------
17,250,000 STRIPS, IO, 2/15/2006 9,841,470
----------------------------------------------------------------
7,000,000 7.00%, 7/15/2006 7,464,450
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $30,055,814) 31,268,130
---------------------------------------------------------------- ------------
(a)REPURCHASE AGREEMENT--1.3%
- -----------------------------------------------------------------------------------
2,005,011 HSBC Securities, Inc., 5.58%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 2,005,011
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $150,848,919)(b) $152,218,934
---------------------------------------------------------------- ------------
</TABLE>
* Current rate shown.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $150,848,919.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,370,015 which is comprised of $2,582,784 appreciation and
$1,212,769 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($152,940,365) at November 30, 1996.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
IO -- Interest Only
PC -- Participation Certificate
PO -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
STRIPS -- Separate Trading of Registered Interest & Principal of Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BALANCED FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--50.0%
- ------------------------------------------------------------------------------------
BASIC INDUSTRIES--3.0%
------------------------------------------------------------------
CHEMICALS/PAPER
------------------------------------------------------------------
6,000 Air Products & Chemicals, Inc. $ 417,000
------------------------------------------------------------------
5,500 Dow Chemical Co. 460,625
------------------------------------------------------------------
3,000 Du Pont (E.I.) de Nemours & Co. 282,750
------------------------------------------------------------------
6,500 Kimberly-Clark Corp. 635,375
------------------------------------------------------------------ -----------
Total Basic Industries 1,795,750
------------------------------------------------------------------ -----------
CAPITAL GOODS--11.2%
------------------------------------------------------------------
ELECTRICAL
------------------------------------------------------------------
14,000 General Electric Co. 1,456,000
------------------------------------------------------------------ -----------
TECHNOLOGY
------------------------------------------------------------------
16,000 (c) BMC Software, Inc. 696,000
------------------------------------------------------------------
4,000 Boeing Co. 397,500
------------------------------------------------------------------
4,500 Eastman Kodak Co. 364,500
------------------------------------------------------------------
6,000 Hewlett-Packard Co. 323,250
------------------------------------------------------------------
5,200 Intel Corp. 659,750
------------------------------------------------------------------
6,199 Lucent Technologies, Inc. 317,699
------------------------------------------------------------------
8,000 (c) Microsoft Corp. 1,255,000
------------------------------------------------------------------
5,900 Motorola, Inc. 326,712
------------------------------------------------------------------
11,250 (c) Oracle Corp. 551,250
------------------------------------------------------------------
3,100 TRW, Inc. 301,863
------------------------------------------------------------------ -----------
Total 5,193,524
------------------------------------------------------------------ -----------
Total Capital Goods 6,649,524
------------------------------------------------------------------ -----------
CONSUMER CYCLICAL--3.5%
------------------------------------------------------------------
AUTOMOTIVE
------------------------------------------------------------------
7,500 Pep Boys-Manny Moe & Jack 274,688
------------------------------------------------------------------ -----------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER CYCLICAL--CONTINUED
------------------------------------------------------------------
MERCHANDISE/APPAREL
------------------------------------------------------------------
10,000 Home Depot, Inc. $ 521,250
------------------------------------------------------------------
9,000 Toys "R" Us, Inc. 310,500
------------------------------------------------------------------
6,000 VF Corp. 407,250
------------------------------------------------------------------
22,000 Wal-Mart Stores, Inc. 561,000
------------------------------------------------------------------ -----------
Total 1,800,000
------------------------------------------------------------------ -----------
Total Consumer Cyclical 2,074,688
------------------------------------------------------------------ -----------
CONSUMER SERVICES--2.6%
------------------------------------------------------------------
ENTERTAINMENT
------------------------------------------------------------------
8,000 Walt Disney Co. 590,000
------------------------------------------------------------------ -----------
HOSPITAL MANAGEMENT
------------------------------------------------------------------
11,250 Columbia/HCA Healthcare Corp. 450,000
------------------------------------------------------------------ -----------
RETAIL--RESTAURANTS
------------------------------------------------------------------
6,000 Cracker Barrel Old Country Store 143,250
------------------------------------------------------------------
8,000 McDonald's Corp. 374,000
------------------------------------------------------------------ -----------
Total 517,250
------------------------------------------------------------------ -----------
Total Consumer Services 1,557,250
------------------------------------------------------------------ -----------
CONSUMER STAPLE--12.0%
------------------------------------------------------------------
FOOD & BEVERAGE
------------------------------------------------------------------
8,500 General Mills, Inc. 539,750
------------------------------------------------------------------
20,000 PepsiCo, Inc. 597,500
------------------------------------------------------------------
12,000 Sara Lee Corp. 471,000
------------------------------------------------------------------ -----------
Total 1,608,250
------------------------------------------------------------------ -----------
HEALTH CARE/DRUG
------------------------------------------------------------------
7,800 American Home Products Corp. 501,150
------------------------------------------------------------------
14,000 Merck & Co., Inc. 1,162,000
------------------------------------------------------------------
10,000 Pfizer, Inc. 896,250
------------------------------------------------------------------
4,000 Schering-Plough Corp. 285,000
------------------------------------------------------------------ -----------
Total 2,844,400
------------------------------------------------------------------ -----------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER STAPLE--CONTINUED
------------------------------------------------------------------
HOSPITAL SUPPLIES
------------------------------------------------------------------
7,000 Johnson & Johnson $ 371,875
------------------------------------------------------------------ -----------
HOUSEHOLD PRODUCTS
------------------------------------------------------------------
5,500 Colgate-Palmolive Co. 509,437
------------------------------------------------------------------
4,000 Procter & Gamble Co. 435,000
------------------------------------------------------------------ -----------
Total 944,437
------------------------------------------------------------------ -----------
TOBACCO
------------------------------------------------------------------
10,000 Philip Morris Cos., Inc. 1,031,250
------------------------------------------------------------------
10,000 UST, Inc. 326,250
------------------------------------------------------------------ -----------
Total 1,357,500
------------------------------------------------------------------ -----------
Total Consumer Staple 7,126,462
------------------------------------------------------------------ -----------
ENERGY--5.6%
------------------------------------------------------------------
OIL SERVICES
------------------------------------------------------------------
8,000 Amoco Corp. 621,000
------------------------------------------------------------------
10,000 Chevron Corp. 670,000
------------------------------------------------------------------
4,700 Exxon Corp. 444,738
------------------------------------------------------------------
8,000 Halliburton Co. 482,000
------------------------------------------------------------------
3,200 Schlumberger Ltd. 332,800
------------------------------------------------------------------
8,000 Texaco, Inc. 793,000
------------------------------------------------------------------ -----------
Total Energy 3,343,538
------------------------------------------------------------------ -----------
FINANCIAL--7.8%
------------------------------------------------------------------
BANKING
------------------------------------------------------------------
11,000 American Express Co. 574,750
------------------------------------------------------------------
7,000 BankAmerica Corp. 721,000
------------------------------------------------------------------
7,000 Citicorp 764,750
------------------------------------------------------------------
13,000 Federal National Mortgage Association 536,250
------------------------------------------------------------------
4,000 NationsBank Corp. 414,500
------------------------------------------------------------------
2,000 Wells Fargo & Co. 569,250
------------------------------------------------------------------ -----------
Total 3,580,500
------------------------------------------------------------------ -----------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
FINANCIAL--CONTINUED
-----------------------------------------------------------------
INSURANCE
-----------------------------------------------------------------
6,000 American International Group, Inc. $ 690,000
-----------------------------------------------------------------
2,000 General RE Corp. 337,500
----------------------------------------------------------------- ------------
Total 1,027,500
----------------------------------------------------------------- ------------
Total Financial 4,608,000
----------------------------------------------------------------- ------------
TRANSPORTATION--0.4%
-----------------------------------------------------------------
2,531 AMR Corp. 230,954
----------------------------------------------------------------- ------------
UTILITIES--3.9%
-----------------------------------------------------------------
COMMUNICATION
-----------------------------------------------------------------
8,000 AT&T Corp. 314,000
-----------------------------------------------------------------
6,000 Ameritech Corp. 353,250
----------------------------------------------------------------- ------------
Total 667,250
----------------------------------------------------------------- ------------
UTILITIES/ELECTRICAL
-----------------------------------------------------------------
10,000 Central & SouthWest Corp. 267,500
-----------------------------------------------------------------
5,000 Duke Power Co. 231,875
-----------------------------------------------------------------
10,000 Florida Progress Corp. 323,750
-----------------------------------------------------------------
9,000 SBC Communications, Inc. 473,625
-----------------------------------------------------------------
15,000 Southern Co. 333,750
----------------------------------------------------------------- ------------
Total 1,630,500
----------------------------------------------------------------- ------------
Total Utilities 2,297,750
----------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $21,480,165) 29,683,916
----------------------------------------------------------------- ------------
CORPORATE BONDS--7.5%
- -----------------------------------------------------------------------------------
CONSUMER CYCLICAL--1.3%
-----------------------------------------------------------------
AUTOMOTIVE
-----------------------------------------------------------------
$ 120,000 Ford Motor Co., Delaware, 8.875%, 4/1/2006 137,621
----------------------------------------------------------------- ------------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER CYCLICAL--CONTINUED
-----------------------------------------------------------------
RETAIL SPECIALTY
-----------------------------------------------------------------
$ 120,000 Limited, Inc., 9.125%, 2/1/2001 $ 130,571
-----------------------------------------------------------------
500,000 J.C. Penney Co., Inc., 6.375%, 9/15/2000 503,720
----------------------------------------------------------------- ------------
Total 634,291
----------------------------------------------------------------- ------------
Total Consumer Cyclical 771,912
----------------------------------------------------------------- ------------
CONSUMER STAPLE--0.2%
-----------------------------------------------------------------
TOBACCO
-----------------------------------------------------------------
120,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 130,837
----------------------------------------------------------------- ------------
ELECTRICAL POWER--0.5%
-----------------------------------------------------------------
120,000 Orange & Rockland Utilities, Inc., 9.375%, 3/15/2000 130,786
-----------------------------------------------------------------
120,000 Virginia Electric Power, 8.875%, 6/1/1999 127,870
----------------------------------------------------------------- ------------
Total Electrical Power 258,656
----------------------------------------------------------------- ------------
FINANCIAL--5.5%
-----------------------------------------------------------------
SECURITIES
-----------------------------------------------------------------
1,000,000 Lehman Brothers Holdings, Inc., 7.25%, 10/15/2003 1,026,300
----------------------------------------------------------------- ------------
FINANCE--COMMERCIAL
-----------------------------------------------------------------
500,000 Associates Corp. of North America, 6.875%, 8/1/2003 512,920
-----------------------------------------------------------------
1,000,000 Xerox Credit Corp., 7.40%, 11/21/2011 988,750
----------------------------------------------------------------- ------------
Total 1,501,670
----------------------------------------------------------------- ------------
FINANCE--EQUIPMENT
-----------------------------------------------------------------
250,000 General Electric Capital Corp., 5.50%, 11/1/2001 242,932
----------------------------------------------------------------- ------------
INSURANCE
-----------------------------------------------------------------
500,000 Merrill Lynch & Co., Inc., 6.00%, 1/15/2001 496,310
----------------------------------------------------------------- ------------
Total Financial 3,267,212
----------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $4,322,439) 4,428,617
----------------------------------------------------------------- ------------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--20.3%
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK
-----------------------------------------------------------------
$ 250,000 6.75%, 10/24/2003 $ 250,860
-----------------------------------------------------------------
1,000,000 6.50% Floating Rate Note*, 4/14/2004 1,003,670
----------------------------------------------------------------- ------------
Total 1,254,530
----------------------------------------------------------------- ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
-----------------------------------------------------------------
500,000 6.57%, 9/18/2000 503,355
-----------------------------------------------------------------
1,000,000 6.67%, 12/14/2005 990,090
-----------------------------------------------------------------
150,000 7.55%, 11/27/2007 152,088
-----------------------------------------------------------------
600,000 PC, 1604FC, 5.53%, Floating Rate Note*, 11/15/2008 577,698
-----------------------------------------------------------------
750,000 PC, 1403M, 6.50%, 12/15/2021 726,157
----------------------------------------------------------------- ------------
Total 2,949,388
----------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
-----------------------------------------------------------------
800,000 REMIC, 1993-G06/J, 7.00%, 12/25/1999 812,808
-----------------------------------------------------------------
600,000 STRIPS, PO, 0/7.56%, 12/20/2001 599,052
-----------------------------------------------------------------
250,000 STRIPS, PO, 0/7.89%, 3/9/2002 246,610
-----------------------------------------------------------------
500,000 6.49%, 3/19/2003 498,935
-----------------------------------------------------------------
1,000,000 REMIC, 1992-G34/EC, 8.25%, 7/25/2005 1,062,250
-----------------------------------------------------------------
500,000 7.05%, 10/20/2005 500,195
-----------------------------------------------------------------
510,000 7.54%, 11/2/2006 520,052
-----------------------------------------------------------------
500,000 REMIC, 1993-G32 CL-J, 6.75%, 5/25/2009 494,641
-----------------------------------------------------------------
500,000 REMIC, 1994-10/KC, 6.50%, 10/25/2010 484,445
-----------------------------------------------------------------
1,000,000 REMIC, 1992-137/DA, 7.75%, 1/25/2017 1,018,510
-----------------------------------------------------------------
1,000,000 REMIC, 1993-202/PH, 6.50%, 2/25/2022 995,620
----------------------------------------------------------------- ------------
Total 7,233,118
----------------------------------------------------------------- ------------
TENNESSEE VALLEY AUTHORITY
-----------------------------------------------------------------
600,000 6.125%, 7/15/2003 592,200
----------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $11,371,904) 12,029,236
----------------------------------------------------------------- ------------
</TABLE>
BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--17.9%
- -----------------------------------------------------------------------------------
U.S. TREASURY NOTES
-----------------------------------------------------------------
$1,000,000 5.875%, 8/15/1998 $ 1,005,140
-----------------------------------------------------------------
1,000,000 5.50%, 4/15/2000 993,550
-----------------------------------------------------------------
500,000 6.25%, 8/31/2000 508,125
-----------------------------------------------------------------
1,000,000 5.625%, 2/28/2001 993,930
-----------------------------------------------------------------
1,000,000 7.50%, 11/15/2001 1,070,850
-----------------------------------------------------------------
1,000,000 7.50%, 5/15/2002 1,076,730
-----------------------------------------------------------------
1,000,000 6.25%, 2/15/2003 1,017,670
-----------------------------------------------------------------
1,000,000 6.50%, 5/15/2005 1,030,800
-----------------------------------------------------------------
2,800,000 STRIPS, IO, 2/15/2006 1,597,456
-----------------------------------------------------------------
1,250,000 7.00%, 7/15/2006 1,332,937
----------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $10,137,883) 10,627,188
----------------------------------------------------------------- ------------
(a)REPURCHASE AGREEMENT--3.3%
- -----------------------------------------------------------------------------------
1,977,649 HSBC Securities, Inc., 5.58%, dated 11/29/1996, due 12/2/1996 (AT
AMORTIZED COST) 1,977,649
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $49,290,040)(b) $ 58,746,606
----------------------------------------------------------------- ------------
</TABLE>
* Current rate shown.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $49,290,808. The
net unrealized appreciation of investments on a federal tax basis amounts to
$9,455,798 which is comprised of $9,729,581 appreciation and $273,783
depreciation at November 30, 1996.
(c) Non-income producing.
Note: The categories of investments are shown as a percentage of net assets
($59,320,797) at November 30, 1996.
BALANCED FUND
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
IO -- Interest Only
PC -- Participation Certificate
PO -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
STRIPS -- Separate Trading of Registered Interest & Principal of Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VALUE FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--94.4%
- ------------------------------------------------------------------------------------
BANKING--15.4%
------------------------------------------------------------------
40,000 Banc One Corp. $ 1,905,000
------------------------------------------------------------------
17,000 Bank America Corp. 1,751,000
------------------------------------------------------------------
20,000 Bankers Trust New York Corp. 1,740,000
------------------------------------------------------------------
19,000 Chase Manhattan Corp. 1,795,500
------------------------------------------------------------------
20,000 Citicorp 2,185,000
------------------------------------------------------------------
15,000 J.P. Morgan & Co., Inc. 1,415,625
------------------------------------------------------------------
20,000 NationsBank Corp. 2,072,500
------------------------------------------------------------------ -----------
Total Banking 12,864,625
------------------------------------------------------------------ -----------
BASIC INDUSTRY--7.3%
------------------------------------------------------------------
CHEMICALS
------------------------------------------------------------------
10,000 Dow Chemical Co. 837,500
------------------------------------------------------------------
10,000 Du Pont (E.I.) de Nemours & Co. 942,500
------------------------------------------------------------------
25,000 Nalco Chemical Co. 953,125
------------------------------------------------------------------
25,000 PPG Industries, Inc. 1,531,250
------------------------------------------------------------------ -----------
Total 4,264,375
------------------------------------------------------------------ -----------
ALUMINUM
------------------------------------------------------------------
15,000 Aluminum Co. of America 954,375
------------------------------------------------------------------ -----------
PAPER
------------------------------------------------------------------
20,000 Weyerhaeuser Co. 920,000
------------------------------------------------------------------ -----------
Total Basic Industry 6,138,750
------------------------------------------------------------------ -----------
CAPITAL GOODS--3.7%
------------------------------------------------------------------
ELECTRICAL EQUIPMENT/MACHINERY
------------------------------------------------------------------
16,000 General Electric Co. 1,664,000
------------------------------------------------------------------
30,000 Ingersoll-Rand Co. 1,395,000
------------------------------------------------------------------ -----------
Total Capital Goods 3,059,000
------------------------------------------------------------------ -----------
</TABLE>
VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER CYCLICAL--9.2%
------------------------------------------------------------------
AUTOS/LODGING/OTHER
------------------------------------------------------------------
40,000 Corning, Inc. $ 1,620,000
------------------------------------------------------------------
45,000 Echlin, Inc. 1,513,125
------------------------------------------------------------------
40,000 Ford Motor Co. 1,310,000
------------------------------------------------------------------ -----------
Total 4,443,125
------------------------------------------------------------------ -----------
MERCHANDISING/MASS MERCHANDISING
------------------------------------------------------------------
35,000 Dayton-Hudson Corp. 1,360,625
------------------------------------------------------------------ -----------
RETAIL-SPECIALTY/MERCHANDISING
------------------------------------------------------------------
20,000 Nordstrom, Inc. 870,000
------------------------------------------------------------------
30,000 Toys "R" Us, Inc. 1,035,000
------------------------------------------------------------------ -----------
Total 1,905,000
------------------------------------------------------------------ -----------
Total Consumer Cyclical 7,708,750
------------------------------------------------------------------ -----------
CONSUMER SERVICES--1.9%
------------------------------------------------------------------
PUBLISHING
------------------------------------------------------------------
35,000 McGraw-Hill Cos., Inc. 1,592,500
------------------------------------------------------------------ -----------
CONSUMER STAPLES--4.4%
------------------------------------------------------------------
HEALTH CARE/DRUG
------------------------------------------------------------------
7,000 Bristol-Myers Squibb Co. 796,250
------------------------------------------------------------------
15,000 Pharmacia & Upjohn, Inc. 579,375
------------------------------------------------------------------ -----------
Total 1,375,625
------------------------------------------------------------------ -----------
TOBACCO/COSMETICS
------------------------------------------------------------------
30,000 Tambrands, Inc. 1,282,500
------------------------------------------------------------------
30,000 UST, Inc. 978,750
------------------------------------------------------------------ -----------
Total 2,261,250
------------------------------------------------------------------ -----------
Total Consumer Staples 3,636,875
------------------------------------------------------------------ -----------
</TABLE>
VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
ENERGY--19.6%
------------------------------------------------------------------
OIL SERVICES
------------------------------------------------------------------
25,000 Amoco Corp. $ 1,940,625
------------------------------------------------------------------
40,000 Burlington Resources, Inc. 2,120,000
------------------------------------------------------------------
22,000 Chevron Corp. 1,474,000
------------------------------------------------------------------
40,000 Exxon Corp. 3,785,000
------------------------------------------------------------------
11,000 Mobil Corp. 1,331,000
------------------------------------------------------------------
17,000 Royal Dutch Petroleum Co., ADR 2,887,875
------------------------------------------------------------------
10,000 Schlumberger Ltd. 1,040,000
------------------------------------------------------------------
18,000 Texaco, Inc. 1,784,250
------------------------------------------------------------------ -----------
Total Energy 16,362,750
------------------------------------------------------------------ -----------
INSURANCE/MISCELLANEOUS--11.2%
------------------------------------------------------------------
17,000 American International Group, Inc. 1,955,000
------------------------------------------------------------------
35,000 Chubb Corp. 1,898,750
------------------------------------------------------------------
45,000 Federal National Mortgage Association 1,856,250
------------------------------------------------------------------
11,000 General RE Corp. 1,856,250
------------------------------------------------------------------
16,000 Marsh & McLennan Cos., Inc. 1,814,000
------------------------------------------------------------------ -----------
Total Insurance/Miscellaneous 9,380,250
------------------------------------------------------------------ -----------
TECHNOLOGY--10.7%
------------------------------------------------------------------
25,000 AMP, Inc. 956,250
------------------------------------------------------------------
10,000 Boeing Co. 993,750
------------------------------------------------------------------
28,000 Hewlett-Packard Co. 1,508,500
------------------------------------------------------------------
15,000 Intel Corp. 1,903,125
------------------------------------------------------------------
6,000 International Business Machines Corp. 956,250
------------------------------------------------------------------
23,000 Motorola, Inc. 1,273,625
------------------------------------------------------------------
14,000 TRW, Inc. 1,363,250
------------------------------------------------------------------ -----------
Total Technology 8,954,750
------------------------------------------------------------------ -----------
TRANSPORTATION--1.2%
------------------------------------------------------------------
40,000 USFreightways Corp. 1,037,500
------------------------------------------------------------------ -----------
</TABLE>
VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
UTILITIES--9.8%
------------------------------------------------------------------
COMMUNICATIONS
------------------------------------------------------------------
10,000 AT&T Corp. $ 392,500
------------------------------------------------------------------
25,000 Bell Atlantic Corp. 1,571,875
------------------------------------------------------------------
45,000 BellSouth Corp. 1,816,875
------------------------------------------------------------------ -----------
Total 3,781,250
------------------------------------------------------------------ -----------
ELECTRICAL
------------------------------------------------------------------
55,000 SCANA Corp. 1,498,750
------------------------------------------------------------------
70,000 Southern Co. 1,557,500
------------------------------------------------------------------
55,000 TECO Energy, Inc. 1,340,625
------------------------------------------------------------------ -----------
Total 4,396,875
------------------------------------------------------------------ -----------
Total Utilities 8,178,125
------------------------------------------------------------------ -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $66,275,659) 78,913,875
------------------------------------------------------------------ -----------
PREFERRED STOCKS--1.8%
- ------------------------------------------------------------------------------------
ENERGY--0.9%
------------------------------------------------------------------
OIL SERVICES
------------------------------------------------------------------
10,000 Ashland, Inc., $3.13 Cum Conv. Pfd. 745,000
------------------------------------------------------------------ -----------
INSURANCE/MISCELLANEOUS--0.9%
------------------------------------------------------------------
10,000 Aetna Services Inc., $4.76 Conv. Pfd. 742,500
------------------------------------------------------------------ -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,255,575) 1,487,500
------------------------------------------------------------------ -----------
</TABLE>
VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
(a)REPURCHASE AGREEMENT--3.8%
- ------------------------------------------------------------------------------------
$3,118,435 HSBC Securities, Inc., 5.58%, dated 11/29/1996, due 12/2/1996 (AT
AMORTIZED COST) $ 3,118,435
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $70,649,669)(b) $83,519,810
------------------------------------------------------------------ -----------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $70,649,669. The
net unrealized appreciation of investments on a federal tax basis amounts to
$12,870,141 which is comprised of $13,254,801 appreciation and $384,660
depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($83,571,970) at November 30, 1996.
The following acronym is used throughout this portfolio:
ADR -- American Depository Receipt
(See Notes which are an integral part of the Financial Statements)
GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--96.6%
- -----------------------------------------------------------------------------------
BASIC INDUSTRIES--5.2%
-----------------------------------------------------------------
CHEMICALS/METALS/STEEL/GOLD
-----------------------------------------------------------------
30,000 Avery Dennison Corp. $ 2,118,750
-----------------------------------------------------------------
50,000 Barrick Gold Corp. 1,500,000
-----------------------------------------------------------------
40,000 Monsanto Co. 1,590,000
----------------------------------------------------------------- ------------
Total 5,208,750
----------------------------------------------------------------- ------------
PAPER
-----------------------------------------------------------------
40,000 Kimberly-Clark Corp. 3,910,000
----------------------------------------------------------------- ------------
Total Basic Industries 9,118,750
----------------------------------------------------------------- ------------
CAPITAL GOODS--5.1%
-----------------------------------------------------------------
EQUIPMENT-MACHINERY
-----------------------------------------------------------------
70,000 General Electric Co. 7,280,000
----------------------------------------------------------------- ------------
INDUSTRY
-----------------------------------------------------------------
40,000 Parker-Hannifin Corp. 1,625,000
----------------------------------------------------------------- ------------
Total Capital Goods 8,905,000
----------------------------------------------------------------- ------------
CONSUMER CYCLICAL--6.1%
-----------------------------------------------------------------
AUTO/LODGING/OTHER
-----------------------------------------------------------------
60,000 Corning, Inc. 2,430,000
-----------------------------------------------------------------
40,000 Pep Boys-Manny Moe & Jack 1,465,000
----------------------------------------------------------------- ------------
Total 3,895,000
----------------------------------------------------------------- ------------
MERCHANDISE/MASS MERCHANDISING
-----------------------------------------------------------------
100,000 Wal-Mart Stores, Inc. 2,550,000
----------------------------------------------------------------- ------------
MERCHANDISE/SPECIALTY
-----------------------------------------------------------------
50,000 Home Depot, Inc. 2,606,250
----------------------------------------------------------------- ------------
</TABLE>
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
TEXTILE/APPAREL & PRODUCTS
-----------------------------------------------------------------
40,000 Liz Claiborne, Inc. $ 1,695,000
----------------------------------------------------------------- ------------
Total Consumer Cyclical 10,746,250
----------------------------------------------------------------- ------------
CONSUMER NON-CYCLICAL--11.0%
-----------------------------------------------------------------
TOBACCO/COSMETICS/HOUSEHOLD
-----------------------------------------------------------------
40,000 Colgate-Palmolive Co. 3,705,000
-----------------------------------------------------------------
50,000 Gillette Co. 3,687,500
-----------------------------------------------------------------
56,000 Newell Co. 1,736,000
-----------------------------------------------------------------
55,000 Philip Morris Cos., Inc. 5,671,875
-----------------------------------------------------------------
42,000 Procter & Gamble Co. 4,567,500
----------------------------------------------------------------- ------------
Total Consumer Non-Cyclical 19,367,875
----------------------------------------------------------------- ------------
CONSUMER SERVICES--9.7%
-----------------------------------------------------------------
BROADCASTING
-----------------------------------------------------------------
35,000 (a) Viacom, Inc., Class B 1,321,250
----------------------------------------------------------------- ------------
ENTERTAINMENT
-----------------------------------------------------------------
60,000 Walt Disney Co. 4,425,000
----------------------------------------------------------------- ------------
HOSPITAL MANAGEMENT
-----------------------------------------------------------------
90,000 Columbia/HCA Healthcare Corp. 3,600,000
----------------------------------------------------------------- ------------
MANUFACTURING-HOUSING
-----------------------------------------------------------------
40,000 Fleetwood Enterprises, Inc. 1,220,000
----------------------------------------------------------------- ------------
PUBLISHING
-----------------------------------------------------------------
25,000 McGraw-Hill Cos., Inc. 1,137,500
-----------------------------------------------------------------
46,000 Time Warner, Inc. 1,874,500
----------------------------------------------------------------- ------------
Total 3,012,000
----------------------------------------------------------------- ------------
RETAIL-RESTAURANTS
-----------------------------------------------------------------
68,500 Cracker Barrel Old Country Store 1,635,437
-----------------------------------------------------------------
40,000 McDonald's Corp. 1,870,000
----------------------------------------------------------------- ------------
Total 3,505,437
----------------------------------------------------------------- ------------
Total Consumer Services 17,083,687
----------------------------------------------------------------- ------------
</TABLE>
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER STAPLE--22.1%
-----------------------------------------------------------------
BEVERAGE
-----------------------------------------------------------------
88,000 Coca-Cola Co. $ 4,499,000
-----------------------------------------------------------------
100,000 PepsiCo, Inc. 2,987,500
----------------------------------------------------------------- ------------
Total 7,486,500
----------------------------------------------------------------- ------------
HEALTHCARE/DRUG
-----------------------------------------------------------------
68,000 American Home Products Corp. 4,369,000
-----------------------------------------------------------------
56,000 (a) Amgen, Inc. 3,409,000
-----------------------------------------------------------------
80,000 Merck & Co., Inc. 6,640,000
-----------------------------------------------------------------
80,000 Pfizer, Inc. 7,170,000
-----------------------------------------------------------------
60,000 Schering Plough Corp. 4,275,000
----------------------------------------------------------------- ------------
Total 25,863,000
----------------------------------------------------------------- ------------
HOSPITAL SUPPLIES
-----------------------------------------------------------------
20,000 Abbott Laboratories 1,115,000
-----------------------------------------------------------------
80,000 Johnson & Johnson 4,250,000
----------------------------------------------------------------- ------------
Total 5,365,000
----------------------------------------------------------------- ------------
Total Consumer Staple 38,714,500
----------------------------------------------------------------- ------------
ENERGY--3.9%
-----------------------------------------------------------------
OIL SERVICES
-----------------------------------------------------------------
14,500 Atlantic Richfield Co. 2,017,313
-----------------------------------------------------------------
27,000 Schlumberger Ltd. 2,808,000
-----------------------------------------------------------------
20,600 Texaco, Inc. 2,041,975
----------------------------------------------------------------- ------------
Total Energy 6,867,288
----------------------------------------------------------------- ------------
INSURANCE/MISCELLANEOUS--2.9%
-----------------------------------------------------------------
28,000 American International Group, Inc. 3,220,000
-----------------------------------------------------------------
47,000 Federal National Mortgage Association 1,938,750
----------------------------------------------------------------- ------------
Total Insurance/Miscellaneous 5,158,750
----------------------------------------------------------------- ------------
</TABLE>
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
BANKING--2.2%
-----------------------------------------------------------------
20,000 NationsBank Corp. $ 2,072,500
-----------------------------------------------------------------
6,000 Wells Fargo & Co. 1,707,750
----------------------------------------------------------------- ------------
Total Banking 3,780,250
----------------------------------------------------------------- ------------
TECHNOLOGY--24.7%
-----------------------------------------------------------------
45,000 Airtouch Communications, Inc. 1,153,125
-----------------------------------------------------------------
35,000 Automatic Data Processing, Inc. 1,500,625
-----------------------------------------------------------------
58,000 (a) BMC Software, Inc. 2,523,000
-----------------------------------------------------------------
50,000 (a) 3Com Corp. 3,756,250
-----------------------------------------------------------------
66,000 (a) Cisco Systems, Inc. 4,479,750
-----------------------------------------------------------------
20,000 Eastman Kodak Co. 1,620,000
-----------------------------------------------------------------
70,000 Hewlett-Packard Co. 3,771,250
-----------------------------------------------------------------
50,000 Intel Corp. 6,343,750
-----------------------------------------------------------------
50,000 Lucent Technologies, Inc. 2,562,500
-----------------------------------------------------------------
35,000 (a) Microsoft Corp. 5,490,625
-----------------------------------------------------------------
21,000 Minnesota Mining & Manufacturing Co. 1,758,750
-----------------------------------------------------------------
46,000 Motorola, Inc. 2,547,250
-----------------------------------------------------------------
120,000 (a) Oracle Corp. 5,880,000
----------------------------------------------------------------- ------------
Total Technology 43,386,875
----------------------------------------------------------------- ------------
TRANSPORTATION--0.5%
-----------------------------------------------------------------
40,000 Atlantic Southeast Airlines, Inc. 910,000
----------------------------------------------------------------- ------------
</TABLE>
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--3.2%
-----------------------------------------------------------------
COMMUNICATIONS
-----------------------------------------------------------------
50,000 AT&T Corp. $ 1,962,500
-----------------------------------------------------------------
25,000 Ameritech Corp. 1,471,875
----------------------------------------------------------------- ------------
Total 3,434,375
----------------------------------------------------------------- ------------
ELECTRICAL
-----------------------------------------------------------------
80,000 Central & SouthWest Corp. 2,140,000
----------------------------------------------------------------- ------------
Total Utilities 5,574,375
----------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $121,586,470) 169,613,600
----------------------------------------------------------------- ------------
(b)REPURCHASE AGREEMENT--3.2%
- -----------------------------------------------------------------------------------
$5,589,126 HSBC Securities, Inc., 5.58%, dated 11/29/1996, due 12/2/1996 5,589,126
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $127,175,596)(c) $175,202,726
----------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $127,175,596.
The net unrealized appreciation of investments on a federal tax basis
amounts to $48,027,130 which is comprised of $49,226,153 appreciation and
$1,199,023 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($175,520,983) at November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY LIMITED
MONEY MATURITY FIXED
MARKET GOVERNMENT INCOME
FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value $129,872,911 $58,723,230 $150,213,923
Investments in repurchase agreements, at amortized cost -- 3,630,089 2,005,011
Cash -- -- --
Income receivable 501,042 982,078 1,342,405
Receivable for investments sold 12,000,000 500,000 --
Receivable for shares sold 364,084 55,204 65,173
Deferred expenses 1,888 10,698 1,747
- --------------------------------------------------------------------------------------------------------------
Total assets 142,739,925 63,901,299 153,628,259
- --------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased -- -- --
Payable for shares redeemed -- 5,898 18,467
Income distribution payable 296,173 135,489 635,406
Accrued expenses 38,705 28,393 34,021
- --------------------------------------------------------------------------------------------------------------
Total liabilities 334,878 169,780 687,894
- --------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $142,405,047 $63,658,146 $155,130,300
Net unrealized appreciation of investments -- 352,992 1,370,015
Accumulated net realized gain (loss) on investments -- (298,565) (3,609,421)
Undistributed net investment income -- 18,946 49,471
- --------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $142,405,047 $63,731,519 $152,940,365
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, and Redemption Proceeds Per Share:
(net assets / shares outstanding)
Trust Shares $1.00 -- --
Investment Shares $1.00 $9.96 $10.36
- --------------------------------------------------------------------------------------------------------------
Offering Price Per Share: (a)
Investment Shares -- $10.32 (b) $10.88(c)
- --------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Trust Shares 101,786,449 -- --
Investment Shares 40,618,598 6,400,017 14,763,120
- --------------------------------------------------------------------------------------------------------------
TOTAL SHARES OUTSTANDING 142,405,047 6,400,017 14,763,120
- --------------------------------------------------------------------------------------------------------------
Investments, at identified cost $129,872,911 $62,000,327 $150,848,919
- --------------------------------------------------------------------------------------------------------------
Investments, at tax cost $129,872,911 $62,000,327 $150,848,919
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) See 'What Shares Cost' in the Prospectus.
(b) Computation of offering price: 100/96.5 of net asset value.
(c) Computation of offering price: 100/95.25 of net asset value.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
FUND VALUE FUND GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value $56,768,957 $80,401,375 $ 169,613,600
Investments in repurchase agreements, at amortized cost 1,977,649 3,118,435 5,589,126
Cash -- 444 --
Income receivable 339,206 229,879 214,715
Receivable for investments sold -- 681,547 --
Receivable for shares sold 443,779 33,127 316,793
Deferred expenses 10,022 8,465 1,752
- ---------------------------------------------------------------------------------------------------------------
Total assets 59,539,613 84,473,272 175,735,986
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 186,500 863,515 --
Payable for shares redeemed -- 383 174,877
Income distribution payable -- -- --
Accrued expenses 32,316 37,404 40,126
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 218,816 901,302 215,003
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in capital $48,066,403 $66,555,314 $ 118,236,386
Net unrealized appreciation of investments 9,456,566 12,870,141 48,027,130
Accumulated net realized gain (loss) on investments 1,474,347 3,888,730 9,157,307
Undistributed net investment income 323,481 257,785 100,160
- ---------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $59,320,797 $83,571,970 $ 175,520,983
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, and Redemption Proceeds Per Share:
(net assets / shares outstanding)
Trust Shares -- -- --
Investment Shares $12.51 $13.89 $14.64
- ---------------------------------------------------------------------------------------------------------------
Offering Price Per Share: (a)
Investment Shares $13.13(b) $14.58(b) $15.37(b)
- ---------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Trust Shares -- -- --
Investment Shares 4,740,378 6,018,115 11,992,551
- ---------------------------------------------------------------------------------------------------------------
TOTAL SHARES OUTSTANDING 4,740,378 6,018,115 11,992,551
- ---------------------------------------------------------------------------------------------------------------
Investments, at identified cost $49,290,040 $70,649,669 $ 127,175,596
- ---------------------------------------------------------------------------------------------------------------
Investments, at tax cost $49,290,808 $70,649,669 $ 127,175,596
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) See 'What Shares Cost' in the Prospectus.
(b) Computation of offering price: 100/95.25 of net asset value.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY LIMITED
MONEY MATURITY FIXED
MARKET GOVERNMENT INCOME
FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $7,690,335 $3,899,774 $9,732,358
Dividends -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total income 7,690,335 3,899,774 9,732,358
- -----------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 735,258 448,104 1,135,766
Administrative personnel and services fee 190,715 83,044 196,480
Custodian fees 31,910 15,303 32,787
Transfer and dividend disbursing agent fees and expenses 96,611 23,380 43,037
Directors'/Trustees' fees 1,504 1,398 3,286
Auditing fees 15,000 16,046 15,500
Legal fees 3,956 1,500 2,016
Portfolio accounting fees 53,853 61,799 58,831
Distribution services fee 163,095 -- --
Share registration costs 27,011 23,983 20,343
Printing and postage 11,793 10,998 8,569
Insurance premiums 6,500 5,000 5,318
Miscellaneous 17,521 3,986 23,063
- -----------------------------------------------------------------------------------------------------------------
Total expenses 1,354,727 694,541 1,544,996
Waiver of investment advisory fee (427,681) (48,135) --
- -----------------------------------------------------------------------------------------------------------------
Net expenses 927,046 646,406 1,544,996
- -----------------------------------------------------------------------------------------------------------------
Net investment income 6,763,289 3,253,368 8,187,362
- -----------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments -- (166,590) (15,303)
Change in unrealized appreciation (depreciation) of investments -- (433,168) 197,811
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments -- (599,758) 182,508
- -----------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $6,763,289 $2,653,610 $8,369,870
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
FUND VALUE FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 2,007,628 $ 341,287 $ 320,266
Dividends 576,066 1,900,125 2,839,057
- ------------------------------------------------------------------------------------------------------------------
Total income 2,583,694 2,241,412 3,159,323
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 436,997 528,160 1,242,921
Administrative personnel and services fee 70,893 85,580 201,629
Custodian fees 13,425 15,667 33,589
Transfer and dividend disbursing agent fees and expenses 31,791 28,438 43,202
Directors'/Trustees' fees 1,998 1,998 1,651
Auditing fees 16,002 16,002 18,276
Legal fees 3,010 1,501 1,027
Portfolio accounting fees 55,841 59,351 56,031
Distribution services fee -- -- --
Share registration costs 14,311 18,337 11,148
Printing and postage 9,600 9,010 8,865
Insurance premiums 4,502 4,502 4,582
Miscellaneous 8,691 4,578 20,573
- ------------------------------------------------------------------------------------------------------------------
Total expenses 667,061 773,124 1,643,494
Waiver of investment advisory fee (48,034) (42,523) (12,959)
- ------------------------------------------------------------------------------------------------------------------
Net expenses 619,027 730,601 1,630,535
- ------------------------------------------------------------------------------------------------------------------
Net investment income 1,964,667 1,510,811 1,528,788
- ------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments 1,477,490 3,889,499 9,169,321
Change in unrealized appreciation (depreciation) of
investments 4,504,813 8,077,338 28,913,778
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 5,982,303 11,966,837 38,083,099
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 7,946,970 $13,477,648 $ 39,611,887
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED MATURITY GOVERNMENT
TREASURY MONEY MARKET FUND FUND FIXED INCOME FUND
------------------------------ ---------------------------- -----------------------------
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1996 1995 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS--
Net investment income $ 6,763,289 $ 6,800,164 $ 3,253,368 $ 3,054,367 $ 8,187,362 $ 8,305,409
Net realized gain (loss) on
investments -- -- (166,590) (69,260) (15,303) (2,505,522)
Net realized loss on written
options -- -- -- -- -- --
Net change in unrealized
appreciation(depreciation)
of investments -- -- (433,168) 2,687,975 197,811 16,376,572
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 6,763,289 6,800,164 2,653,610 5,673,082 8,369,870 22,176,459
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Distributions from net
investment income:
Trust Shares (5,005,887) (5,503,465) -- -- -- (1,365,718)
Investment Shares (1,757,402) (1,296,699) (3,234,422) (3,054,367) (8,137,891) (7,052,406)
Distributions from net
realized gain on investment
transactions:
Trust Shares -- -- -- -- -- --
Investment Shares -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
distributions to
shareholders (6,763,289) (6,800,164) (3,234,422) (3,054,367) (8,137,891) (8,418,124)
- -----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of shares 493,986,271 417,980,476 13,504,225 23,448,679 65,721,129 37,892,010
Net asset value of shares
issued to shareholders in
payment of dividends
declared 2,249,107 1,247,132 1,034,092 21,355 453,104 413,172
Cost of shares redeemed (492,127,904) (388,508,575) (13,303,825) (11,536,971) (73,751,878) (54,711,747)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from share
transactions 4,107,474 30,719,033 1,234,492 11,933,063 (7,577,645) (16,406,565)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets 4,107,474 30,719,033 653,680 14,551,778 (7,345,666) (2,648,230)
NET ASSETS:
Beginning of period 138,297,573 107,578,540 63,077,839 48,526,061 160,286,031 162,934,261
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $ 142,405,047 $ 138,297,573 $ 63,731,519 $ 63,077,839 $ 152,940,365 $160,286,031
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income included in net
assets at end of period -- -- 18,946 -- $ 49,471 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) as computed
for federal tax purposes -- -- $ (166,590) $ (69,260) $ (15,303) $ (2,618,115)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND VALUE FUND GROWTH FUND
-------------------------- -------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995(A) 1996 1995(A) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,964,667 1,897,919 $ 1,510,811 $ 1,284,315 $ 1,528,788 $ 2,563,024
Net realized gain (loss) on
investments 1,477,490 931,781 3,889,499 1,327,013 9,169,321 7,215,306
Net realized loss on written options -- -- -- -- -- (236,735)
Net change in unrealized
appreciation(depreciation) of
investments 4,504,813 4,951,753 8,077,338 4,792,803 28,913,778 20,298,337
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 7,946,970 7,781,453 13,477,648 7,404,131 39,611,887 29,839,932
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment
income:
Trust Shares -- -- -- -- -- (899,259)
Investment Shares (1,977,098) (1,562,007) (1,483,398) (1,053,943) (1,880,165) (1,859,046)
Distributions from net realized gain
on investment transactions:
Trust shares -- -- -- -- -- (3,996,308)
Investment Shares (934,924) -- (1,327,782) -- (6,989,405) (195,892)
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from distributions to
shareholders (2,912,022) (1,562,007) (2,811,180) (1,053,943) (8,869,570) (6,950,505)
- ------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sale of shares 11,045,572 51,155,036 33,369,808 42,607,764 27,092,197 25,926,206
Net asset value of shares issued to
shareholders in payment of
dividends declared 950,011 348 47,317 968 490,841 306,176
Cost of shares redeemed (8,906,342) (6,178,222) (5,935,299) (3,535,244) (37,101,805) (44,831,583)
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from share transactions 3,089,241 44,977,162 27,481,826 39,073,488 (9,518,767) (18,599,201)
- ------------------------------------------------------------------------------------------------------------------
Change in net assets 8,124,189 51,196,608 38,148,294 45,423,676 21,223,550 4,290,226
NET ASSETS:
Beginning of period 51,196,608 -- 45,423,676 -- 154,297,433 150,007,207
- ------------------------------------------------------------------------------------------------------------------
End of period $59,320,797 $51,196,608 $83,571,970 $45,423,676 $175,520,983 $154,297,433
- ------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
included in net assets at end of
period $ 323,481 $ 335,912 $ 257,785 $ 230,372 $ 100,160 $ 451,537
- ------------------------------------------------------------------------------------------------------------------
Net gain (loss) as computed for
federal tax purposes $ 1,475,251 $ 934,788 $ 3,888,676 $ 1,327,835 $ 9,157,822 $ 6,990,071
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from December 19, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios (individually referred to as the
"Fund", or collectively as the "Funds") at November 30, 1996, which are
presented herein:
<TABLE>
<S> <C>
PORTFOLIO NAME INVESTMENT APPROACH
- --------------------------------------------------------------------------------------------------
First Priority Treasury Money Market Fund To provide current income consistent with
("Treasury Money Market Fund") stability of principal and liquidity by
investing primarily in a diversified portfolio
limited to short-term U.S. treasury
obligations.
- --------------------------------------------------------------------------------------------------
First Priority Limited Maturity Government To achieve current income by investing in a
Fund diversified portfolio consisting primarily of
("Limited Maturity Government Fund") securities which are guaranteed as to payment
of principal and interest by the U.S.
government, its agencies or instrumentalities.
- --------------------------------------------------------------------------------------------------
First Priority Fixed Income Fund To achieve current income with a secondary
("Fixed Income Fund") objective of capital appreciation by investing
in a broad range of high grade debt
securities.
- --------------------------------------------------------------------------------------------------
First Priority Balanced Fund To provide total return through capital
("Balanced Fund") appreciation, dividends, and interest by
investing primarily in a diversified portfolio
of common stocks, preferred stocks,
fixed-income senior securities, and
convertible securities.
- --------------------------------------------------------------------------------------------------
First Priority Value Fund To provide income and growth of capital by
("Value Fund") investing primarily in a diversified portfolio
of income-producing equity securities,
including convertible securities.
- --------------------------------------------------------------------------------------------------
First Priority Growth Fund To provide growth of capital and income by
("Growth Fund") investing principally in a diversified
portfolio of common stocks of companies with
market capitalization of at least $250
million.
- --------------------------------------------------------------------------------------------------
</TABLE>
Treasury Money Market Fund offers both Trust and Investment classes of shares.
Investment Shares are identical in all respects to Trust Shares, except the
Investment Shares are sold pursuant to a
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
distribution plan adopted in accordance with the Act's Rule 12b-1. The assets of
each Fund of the Trust are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. Limited Maturity Government Fund, Fixed
Income Fund, Balanced Fund, Value Fund, and Growth Fund offer only one class of
shares.
On February 1, 1996, First Priority Equity Fund and First Priority Equity Income
Fund changed their names to First Priority Growth Fund and First Priority Value
Fund, respectively.
(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, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Listed equity securities are valued at the last sale price reported on a
national securities exchange. The Treasury Money Market Fund's use of the
amortized cost method to value portfolio securities is in accordance with
Rule 2a-7 under the Act. For fluctuating net asset value Funds within the
Trust, short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities purchased with
remaining maturities of sixty days or less may be valued at amortized cost,
which approximates fair market value. Investments in other open-end
regulated investment companies are valued at net asset value. The Funds'
restricted securities are valued at the price provided by an independent
pricing service, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement transactions. Additionally, procedures have been
established by the Funds to monitor, 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, including accrued interest.
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 reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Funds
could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
Revenue Code, as amended (the "Code"). Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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 income. Accordingly, no
provisions for federal tax are necessary.
At November 30, 1996, the Limited Maturity Government Fund and Fixed Income
Fund, for federal tax purposes, had capital loss carryforwards, of $298,565
and $3,608,509, respectively, which will reduce the Funds' taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Funds of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforwards of the Limited Maturity Government Fund and the Fixed Income
Fund will expire in 2002 ($62,715), ($975,091), respectively and 2003
($69,260), ($2,618,115), respectively, and 2004 ($166,590), ($15,303),
respectively.
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.
DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of their shares in their first fiscal year, excluding the
initial expense of registering their shares, have been deferred and are
being amortized using the straight-line method over a period of up to five
years from each Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Funds or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Trustees. The Funds will not incur any
registration costs upon such resales. The Funds did not hold restricted
securities at November 30, 1996.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in fund shares were as follows:
For the year ended November 30, 1996:
<TABLE>
<CAPTION>
TREASURY MONEY MARKET FUND LIMITED MATURITY
GOVERNMENT FUND
---------------------------- -------------------------
INVESTMENT INVESTMENT
TRUST SHARES SHARES SHARES DOLLARS
- ---------------------------------------------------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 225,453,608 268,532,663 1,356,256 $13,504,225
- ----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 556,588 1,692,519 104,949 1,034,092
- ----------------------------------------------------
Shares redeemed (233,591,379) (258,536,525) (1,340,753) (13,303,825)
- ---------------------------------------------------- ----------- ----------- --------- ----------
Net change resulting from Trust/Investment Shares
transactions (7,581,183) 11,688,657 120,452 $ 1,234,492
- ---------------------------------------------------- ----------- ----------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
FIXED INCOME FUND BALANCED FUND
-------------------------- -------------------------
INVESTMENT INVESTMENT
SHARES DOLLARS SHARES DOLLARS
- ----------------------------------------------------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Shares sold 6,523,751 $ 65,721,129 960,324 $11,045,572
- -----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 44,514 453,104 82,169 950,011
- -----------------------------------------------------
Shares redeemed (7,311,945) (73,751,878) (771,226) (8,906,342)
- ----------------------------------------------------- --------- ----------- --------- ----------
Net change resulting from Investment Shares
transactions (743,680) $ (7,577,645) 271,267 $ 3,089,241
- ----------------------------------------------------- --------- ----------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
VALUE FUND GROWTH FUND
------------------------- --------------------------
INVESTMENT INVESTMENT
SHARES DOLLARS SHARES DOLLARS
- ----------------------------------------------------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,724,418 $33,369,808 2,178,975 $ 27,092,197
- -----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 3,797 47,317 40,723 490,841
- -----------------------------------------------------
Shares redeemed (483,316) (5,935,299) (2,980,103) (37,101,805)
- ----------------------------------------------------- --------- ---------- --------- -----------
Net change resulting from Investment Shares
transactions 2,244,899 $27,481,826 (760,405) $ (9,518,767)
- ----------------------------------------------------- --------- ---------- --------- -----------
</TABLE>
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
For the year ended November 30, 1995:
<TABLE>
<CAPTION>
TREASURY
MONEY MARKET LIMITED MATURITY
FUND GOVERNMENT FUND FIXED INCOME FUND BALANCED FUND(A)
------------- ------------------------- --------------------------- ------------------------
TRUST SHARES SHARES SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- ---------------------- ------------- ---------- ----------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 208,253,666 -- -- 232,816 $ 2,202,182 -- --
- ---------------------
Trust Shares exchanged
for Investment
Shares -- -- -- (13,709,037) (144,699,450) -- --
- ---------------------
Shares issued to
shareholders in
payment of
distributions declared 5,585 -- -- -- -- -- --
- ---------------------
Shares redeemed (189,899,208) -- -- (2,725,220) (25,831,235)
- --------------------- ------------ --------- ---------- ---------- ----------- -------- ----------
Net change resulting
from Trust Shares
transactions 18,360,043 -- -- (16,201,441) (168,328,503) -- --
- --------------------- ------------ --------- ---------- ---------- ----------- -------- ----------
INVESTMENT SHARES
- ---------------------
Shares sold 209,726,810 2,394,876 $23,448,679 3,603,637 $ 35,689,828 5,045,851 $51,155,036
- ---------------------
Trust Shares exchanged
for Investment Shares -- -- -- 13,709,037 144,699,450 -- --
- ---------------------
Shares issued to
shareholders in
payment of
distributions declared 1,241,547 2,167 21,355 41,512 413,172 31 348
- ---------------------
Shares redeemed (198,609,367) (1,173,524) (11,536,971) (2,873,052) (28,880,512) (576,771) (6,178,222)
- --------------------- ------------ --------- ---------- ---------- ----------- -------- ----------
Net change resulting
from Investment
Shares transactions 12,358,990 1,223,519 11,933,063 14,481,134 151,921,938 4,469,111 44,977,162
- --------------------- ------------ --------- ---------- ---------- ----------- -------- ----------
Total net change
resulting from
Fund share
transactions 30,719,033 1,223,519 $11,933,063 (1,720,307) $(16,406,565) 4,469,111 $44,977,162
- --------------------- ------------ --------- ---------- ---------- ----------- -------- ----------
</TABLE>
(a) For the period from December 19, 1994 (date of initial public investment) to
November 30, 1995.
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FUND(A) GROWTH FUND
------------------------ ----------------------------
TRUST SHARES SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------------------------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold -- -- 559,276 $ 5,624,181
- --------------------------------------------------------------
Trust Shares exchanged for Investment Shares -- -- (12,292,374) (123,538,364)
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared -- -- -- --
- --------------------------------------------------------------
Shares redeemed -- -- (2,153,028) (22,271,579)
- -------------------------------------------------------------- -------- ---------- ---------- ------------
Net change resulting from Trust Shares transactions -- -- (13,886,126) (140,185,762)
- -------------------------------------------------------------- -------- ---------- ---------- ------------
INVESTMENT SHARES
- --------------------------------------------------------------
Shares sold 4,087,317 $42,607,764 1,858,603 20,302,025
- --------------------------------------------------------------
Trust Shares exchanged for Investment Shares -- -- 12,292,374 123,538,364
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 83 968 29,980 306,176
- --------------------------------------------------------------
Shares redeemed (314,184) (3,535,244) (2,020,017) (22,560,004)
- -------------------------------------------------------------- -------- ---------- ---------- ------------
Net change resulting from Investment Shares transactions 3,773,216 39,073,488 12,160,940 121,586,561
- -------------------------------------------------------------- -------- ---------- ---------- ------------
Total net change resulting from Fund share transactions 3,773,216 $39,073,488 (1,725,186) $ (18,599,201)
- -------------------------------------------------------------- -------- ---------- ---------- ------------
</TABLE>
(a) For the period from December 19, 1994 (date of initial public investment) to
November 30, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Regions Bank, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee based
upon a percentage of each Fund's average daily net assets (see below). The
Adviser may voluntarily choose to waive any portion of its fee and/or reimburse
certain operating expenses of the Funds. The Adviser can modify or terminate
this voluntary waiver and/or reimbursement at any time at its sole discretion.
Additionally, the adviser may offset the investment advisory fee by reimbursing
individual shareholder accounts. Some accounts have special fee arrangements
that provide specifically for the retention of the investment advisory fee, and
in such cases, the fee will not be reimbursed.
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- ----------------------------------------------------------------------------- -------------
<S> <C>
Treasury Money Market Fund 0.50%
- -----------------------------------------------------------------------------
Limited Maturity Government Fund 0.70%
- -----------------------------------------------------------------------------
Fixed Income Fund 0.75%
- -----------------------------------------------------------------------------
Balanced Fund 0.80%
- -----------------------------------------------------------------------------
Value Fund 0.80%
- -----------------------------------------------------------------------------
Growth Fund 0.80%
- -----------------------------------------------------------------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Trust for the period.
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Funds will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Funds' Investment Shares to finance
activities intended to result in the sale of the Funds' Investment Shares. The
Plan provides that the Funds may incur distribution expenses according to the
following schedule, annually, to compensate FSC.
<TABLE>
<CAPTION>
% OF AVERAGE
DAILY NET ASSETS
FUND NAME OF EACH FUND
- ------------------------------------------------ -----------------
<S> <C>
Treasury Money Market Fund--Investment Shares 0.40%
- ------------------------------------------------
Limited Maturity Government Fund 0.25%
- ------------------------------------------------
Fixed Income Fund 0.30%
- ------------------------------------------------
Balanced Fund 0.30%
- ------------------------------------------------
Value Fund 0.30%
- ------------------------------------------------
Growth Fund 0.30%
- ------------------------------------------------
</TABLE>
For the year ended November 30, 1996 Limited Maturity Government Fund, Fixed
Income Fund, Balanced Fund, Value Fund, and Growth Fund did not incur a
distribution services fee.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC"), serves as transfer and dividend disbursing agent for the Funds. The
fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Regions Bank is the Funds' custodian. The fee is based on the
level of each Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following the
FIRST PRIORITY FUNDS
- --------------------------------------------------------------------------------
Funds' effective dates. For the year ended November 30, 1996, the Funds paid
FAS, pursuant to this agreement, as follows:
<TABLE>
<CAPTION>
INITIAL ORGANIZATIONAL
ORGANIZATIONAL EXPENSES
FUND EXPENSES REIMBURSED
- --------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Treasury Money Market Fund $50,822 $16,658
- ---------------------------------------------------------
Limited Maturity Government Fund $26,082 $ 5,216
- ---------------------------------------------------------
Fixed Income Fund $50,007 $16,391
- ---------------------------------------------------------
Balanced Fund $24,457 $ 4,000
- ---------------------------------------------------------
Value Fund $18,322 $ 4,000
- ---------------------------------------------------------
Growth Fund $49,934 $16,367
- ---------------------------------------------------------
</TABLE>
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended November 30, 1996, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Limited Maturity Government Fund $27,926,663 $29,241,894
- ------------------------------------------------------------------
Fixed Income Fund $76,516,287 $85,198,141
- ------------------------------------------------------------------
Balanced Fund $24,433,588 $21,545,848
- ------------------------------------------------------------------
Value Fund $69,399,137 $36,162,968
- ------------------------------------------------------------------
Growth Fund $84,343,488 $84,099,166
- ------------------------------------------------------------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and the Shareholders of
FIRST PRIORITY FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of First Priority Funds (comprising the following
portfolios: Treasury Money Market Fund, Limited Maturity Government Fund, Fixed
Income Fund, Balanced Fund, Value Fund and Growth Fund) as of November 30, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for the years ended November 30, 1996 and 1995, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
November 30, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of First Priority Funds
as of November 30, 1996, the results of their operations, the changes in their
net assets and their financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 10, 1997
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. Charles L. Davis, Jr.
Wesley W. Posvar Vice President and Assistant Treasurer
Marjorie P. Smuts Jay S. Neuman
Assistant Secretary
</TABLE>
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 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.
[LOGO] FIRST PRIORITY FAMILY OF FUNDS
Federated Securities Corp. is the distributor of the fund
Cusip 335931887
Cusip 335931101
Cusip 335931804
Cusip 335931309
Cusip 335931705
Cusip 335931606
Cusip 335931507
007575 (1/97)
APPENDIX FOR FIRST PRIORITY FUNDS
A. The graphic presentation here displayed consists of a line graph
titled `Growth of $10,000 Invested in Limited Maturity Government Fund
(the `Fund''). The corresponding components of the line graph are listed
underneath. The Fund is represented by a solid line. The Merrill Lynch 1-5
Year Government/Corporate Index is represented by a dotted line. The
Merrill Lynch 1-3 Year Government/Corporate Index is represented by a
broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund, the Merrill
Lynch 1-5 Year Government/Corporate Index and Merrill Lynch 1-3 Year
Government/Corporate Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the Fund's
start of performance, 12/12/93 through 11/30/96. The right margin reflects
the ending value of the hypothetical investment in the Fund as compared to
the Merrill Lynch 1-5 Year Government/Corporate Index and Merrill Lynch 1-3
Year Government/Corporate Index; the ending values are $11,284, $11,783 and
$11,788, respectively.
B. The graphic presentation here displayed consists of a line graph
titled `Growth of $10,000 Invested in Fixed Income Fund (the ``Fund'').
The corresponding components of the line graph are listed underneath. The
Fund is represented by a solid line. The Merrill Lynch 1-10 Year Treasury
Index is represented by a dotted line. The Merrill Lynch 1-10 Year
Government/Corporate Index is represented by a broken line. The line graph
is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund, the Merrill Lynch 1-10 Year
Treasury Index and Merrill Lynch 1-10 Year Government/Corporate Index.
The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 4/30/92 through
11/30/96. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Merrill Lynch 1-10 Year Treasury
Index and Merrill Lynch 1-10 Year Government/Corporate Index; the ending
values are $13,419, $14,499 and $14,179, respectively.
C. The graphic presentation here displayed consists of a line graph
titled `Growth of $10,000 Invested in Balanced Fund (the ``Fund''). The
corresponding components of the line graph are listed underneath. The Fund
is represented by a solid line. The S&P 500/Lehman Brothers
Government/Corporate Index is represented by a dotted line. The line graph
is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and the S&P 500/Lehman Brothers
Government/Corporate Index. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the Fund's
start of performance, 12/19/94 through 11/30/96. The right margin reflects
the ending value of the hypothetical investment in the Fund as compared to
the S&P 500/Lehman Brothers Government/Corporate Index; the ending values
are $13,396 and $14,819, respectively.
D. The graphic presentation here displayed consists of a line graph
titled `Growth of $10,000 Invested in Value Fund (the ``Fund''). The
corresponding components of the line graph are listed underneath. The Fund
is represented by a solid line. The S&P/Barra Value Index is represented by
a dotted line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund and the
S&P/Barra Value Index. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Fund's start of
performance, 12/19/94 through 11/30/96. The right margin reflects the
ending value of the hypothetical investment in the Fund as compared to the
S&P/Barra Value Index; the ending values are $14,808 and $16,730,
respectively.
E. The graphic presentation here displayed consists of a line graph
titled `Growth of $10,000 Invested in Growth Fund (the ``Fund''). The
corresponding components of the line graph are listed underneath. The Fund
is represented by a solid line. The S&P 500 is represented by a dotted
line. The line graph is a visual representation of a comparison of change
in value of a hypothetical $10,000 purchase in the Fund and the S&P 500.
The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of performance, 4/20/92 through
11/30/96. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 500; the ending values are
$17,248 and $20,613, respectively.
