REGIONS FUNDS, 485APOS, 1998-12-02

REGIONS FUNDS
485APOS, 1998-12-02

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1933 Act File No. 33-44737
1940 Act File No. 811-6511

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

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

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

Post-Effective Amendment No. 15 ................... X
-------- ----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 16 ................................... X
------- ----

REGIONS FUNDS
(formerly, First Priority Funds)

(Exact Name of Registrant as Specified in Charter)

5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)

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

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

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
__ on ____________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph
(a) (i). 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

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

Copies To:

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

PROSPECTUS
LOGO

REGIONS FUNDS
(FORMERLY, FIRST PRIORITY FUNDS)
TRUST SHARES
INVESTMENT SHARES

O REGIONS TREASURY MONEY MARKET FUND OREGIONS BALANCED FUND

O REGIONS LIMITED MATURITY GOVERNMENT FUND OREGIONS VALUE FUND

O REGIONS FIXED INCOME FUND OREGIONS GROWTH FUND

O REGIONS AGGRESSIVE GROWTH FUND

SHARES OF THE REGIONS FUNDS, LIKE SHARES OF ALL MUTUAL FUNDS, ARE NOT BANK
DEPOSITS, NOT FEDERALLY INSURED, AND NOT GUARANTEED. REGIONS FUNDS SHARES MAY
LOSE VALUE. As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

January 31, 1999

TABLE OF CONTENTS [TO BE INSERTED]

<PAGE>

INVESTMENT RISKS

Regions Bank Capital Management Group (Adviser) is the investment adviser to the
Regions Funds. The Regions Funds offer investment opportunities to a wide range
of investors, from investors with short-term goals and wish to take little
investment risk to those investors with long-term goals willing to bear the
risks of the stock market for potentially greater rewards.

GENERAL RISKS. In all types of investments, reward and risk go hand in hand. All
mutual funds, including the Regions Funds, take investment risks. These risks
may result in a decline in the value of your fund shares. For example, equity
funds must contend with the volatility and unpredictability of the U.S. stock
market. Income and bond funds invest in debt securities, the price of which can
be expected to decrease when interest rates increase. Funds that use options and
futures contracts to protect their investments or increase their income take a
risk that the prices of securities subject to the futures or options may not
correlate with the prices of the securities in the fund's portfolio.
Mortgage-backed and asset-backed securities are subject to prepayment risks,
which generally occurs when interest rates fall.

In addition, an investment in any of the Regions Funds is not a deposit of a
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Loss of money is a risk of investing
in any of the Regions Funds.

REGIONS FUNDS

TREASURY MONEY MARKET FUND

GOAL. To provide current income consistent with stability of principal and
liquidity.

STRATEGY. The Fund invests in U.S. Treasury obligations maturing in 397 days or
less. The Fund will comply with the requirements of Rule 2a-7 under the
Investment Company Act of 1940, which sets forth portfolio quality and
diversification restrictions for money market mutual funds. Although the
Treasury Money Market Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

LIMITED MATURITY GOVERNMENT FUND

GOAL. To achieve current income.

STRATEGY. The Fund invests primarily in securities that are guaranteed as to
payment of principal and interest by the U.S. government or U.S. government
agencies or instrumentalities. Under normal circumstances, at least 65% of the
Fund's total assets will be invested in such securities. The net asset value of
the Fund is expected to fluctuate with changes in interest rates and bond market
conditions. The Adviser will attempt to minimize principal fluctuation and
increase return through, among other things, diversification, careful credit
analysis and security selection, and adjustments of the Fund's average portfolio
maturity. The Fund intends to maintain an average dollar-weighted maturity
between one and one-half and three years, although the Fund may purchase
individual securities with longer maturities.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

FIXED INCOME FUND

GOAL. To achieve current income with a secondary goal of capital appreciation.

STRATEGY. The Fund invests only in high grade debt securities under normal
circumstances, at least 65% of the Fund's total assets will be invested in
fixed-rate bonds and debentures. The Fund also invests in U.S. government
securities. The Fund selects securities based upon fundamental macroeconomic,
credit and market analysis. Normally, the Fund's average maturity will be
between three and ten years.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

BALANCED FUND

GOAL. To provide total return through capital appreciation, dividends and
interest.

STRATEGY. The Fund invests primarily in common and preferred stock, convertible
securities, and fixed income securities. Under normal market conditions, the
Fund will maintain at least 25% of its assets in fixed-income senior securities
and at least 25% of its assets in common stocks. The remaining 50% may be
invested in these securities, as well as American Depositary Receipts (ADRs),
collateralized mortgage obligations (CMOs), U.S. government securities, or other
investments as determined by the Adviser based on the Adviser's assessment of
the economy and the markets. The Adviser may shift between types of investments
to attempt to maximize returns or reduce risk to the Fund.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

VALUE FUND

GOAL. To provide income and growth of capital.

STRATEGY. The Fund invests in income-producing equity securities such as common
and preferred stock, warrants, and securities (including debt securities)
convertible into common stocks. Generally, these stocks are issued by companies
with a market capitalization of $1 billion or more. The Fund's investment
approach is based on the conviction that over the long term the economy will
continue to expand and develop and that this economic growth will be reflected
in the growth of the revenues and earnings of major corporations.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

GROWTH FUND

GOAL. To provide growth of capital and income.

STRATEGY. The Fund invests in common stock of companies with market
capitalizations of at least $250 million. Most stocks in which the Fund invests
will be of companies with a market capitalization of $1 billion or more. The
Fund's investment approach is based on the conviction that over the long term
the economy will continue to expand and develop and that this economic growth
will be reflected in the growth of the revenues and earnings of major
corporations.

SEE APPENDIX FOR DESCRIPTION OF THE BAR CHART

AGGRESSIVE GROWTH FUND

GOAL. To provide long-term capital appreciation.

STRATEGY. The Fund invests primarily in equity securities of companies with
small to medium-sized market capitalizations of $5 billion or less. The Fund may
also invest in larger companies that, in the opinion of the Adviser, possess
attractive appreciation potential. Under normal market conditions, the Fund
intends to invest in equity securities of companies with prospects for
above-average growth in revenues and/or earnings.

<PAGE>

SUMMARY OF FUND EXPENSES -NUMBERS TO BE INSERTED

FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Regions Funds.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Treasury Money Maturity Fixed Income
Market Government Fund Balanced
Fund Fund Trust Fund
Trust Trust Investment Trust
Investment Investment Shares Investment
Shares Shares Shares
Shareholder Fees (fees
paid directly from your
investment)
Maximum Sales Charge None None None
Imposed on Purchases None None None None
(as a percentage of None
offering price)
Maximum Sales Charge None None None
Imposed on Reinvested None None None None
Dividends (as a None
percentage of offering
price)
Contingent Deferred 0.00% 0.00% 0.00%
Sales Charge (as a 0.00% 3.00% 3.00% 3.00%
percentage of original 0.00%
purchase price or
redemption proceeds, as
applicable)(1)
Redemption Fees (as a None None None
percentage of amount None None None None
redeemed, if applicable) None
Exchange Fee None None None
None None None None
None
Maximum Account Fee None None None
None None None None
None

Annual Operating
Expenses (maximum
expenses that could be
deducted from assets) *
Management Fee (before 0.50% 0.70% 0.75% 0.80%
waiver) (2)........
Distribution (12b-1) None None None None
Fee (3) 0.40% 0.25% 0.30% 0.30%
Other Expenses
Shareholder None None None None
Servicing Fee None 0.25% 0.25% 0.25%
.................
Total Operating

</TABLE>

Expenses (4). (BEFORE WAIVER)....
ALTHOUGH NOT CONTRACTUALLY OBLIGATED, THE ADVISER WAIVED AND DISTRIBUTOR
REIMBURSED CERTAIN AMOUNTS. THESE ARE SHOWN BELOW ALONG WITH THE NET EXPENSES
THE FUND ACTUALLY PAID FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998 Waiver of
Fund Expenses
TOTAL ACTUAL ANNUAL
FUND OPERATING EXPENSES
(AFTER WAIVERS)
None None
None None
None
Shareholder Fees (fees None None
paid directly from your None None
investment) None
Maximum Sales Charge 0.00% 3.00%
Imposed on Purchases 0.00% 3.00%
(as a percentage of 3.00%
offering price)
Maximum Sales Charge None None
Imposed on Reinvested None None
Dividends (as a None
percentage of offering
price)
Contingent Deferred None None
Sales Charge (as a None None
percentage of original None
purchase price or
redemption proceeds, as
applicable)(1)
Redemption Fees (as a None None
percentage of amount None None
redeemed, if applicable) None
Exchange Fee
Maximum Account Fee

Annual Operating 0.80% 0.80% 0.75%
Expenses (maximum
expenses that could be
deducted from assets) *
None None 0.30%
0.30% 0.30%
Management Fee (before waiver) (2).........
Distribution (12b-1) None None None
Fee(3) 0.25% 0.25%
Other Expenses
Shareholder
Servicing Fee

Total Operating
Expenses (4).. (BEFORE
WAIVER).....................
ALTHOUGH NOT CONTRACTUALLY OBLIGATED, THE ADVISER WAIVED AND DISTRIBUTOR
REIMBURSED CERTAIN AMOUNTS. THESE ARE SHOWN BELOW ALONG WITH THE NET EXPENSES
THE FUND ACTUALLY PAID FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998 Waiver of
Fund Expenses
TOTAL ACTUAL ANNUAL
FUND OPERATING EXPENSES
(AFTER WAIVERS)

(1) The contingent deferred sales charge is 3.00% in the first year declining to
1.00% in the third year and 0.00% thereafter for all Regions Funds, except the
Treasury Money Market Fund. (See "__________".) Shareholders who purchase
Investment Shares of the Treasury Money Market .Fund through exchange of
Investment Shares of another Regions Fund, may be charged a contingent deferred
sales charge by the Trust's distributor.

No contingent deferred sales charge will be imposed on: (a) the portion of
redemption proceeds attributable to increases in the value of the account due to
increases in the net asset value per Share, (b) Shares acquired through
reinvestment of dividends and capital gains, (c) Shares held more than three
years after the end of the calendar month of acquisition, (d) accounts following
the death or disability of a shareholder, (e) minimum required distributions to
a shareholder over the age of 70 1/2 from an IRA or other retirement plan, (f)
shares purchased prior to June 1, 1997, or (g) involuntary redemptions by the
Funds of shares in shareholder accounts that do not comply with the minimum
balance requirements.

(2) It is anticipated that the adviser will voluntarily waive a portion of the
management fee. The adviser may terminate this voluntary waiver at any time. The
management fee (after the voluntary waiver) is expected to be ____% for the
_____________ Fund for the fiscal year ending November 30, 1999.

(3) The Limited Maturity Government Fund, Fixed Income Fund, Balanced Fund,
Value Fund, Growth Fund and Aggressive Growth Fund have no intention of paying
or accruing 12b-1 fees during the fiscal year ending November 30, 1999.

(4) The actual Total Operating Expenses were % and %, for Treasury Money Market
Fund - Trust Shares and Treasury Money Market Fund - Investment Shares after the
voluntary reduction of the management fee.

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

The Example assumes that you invest $10,000 in the Funds for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes the your investment has a 5% return each year and that the
Funds' operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

Treasury Limited
Money Maturity Fixed Balanced
Market Government Income Fund
Fund Fund Fund
-----------------------------------------
1
Year...............................................
3
Years..............................................
5
Years..............................................
10
Years............................................
Aggressive
Growth
Value Growth Fund
Fund Fund
-------------------------------
1
Year................................................
3
Years..............................................
5
Years..............................................
10
Years............................................

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

<PAGE>

WHAT ARE THE MAIN RISKS OF INVESTING IN THE REGIONS FUNDS?

EQUITY SECURITIES RISKS. The FIXED INCOME FUND, BALANCED FUND, VALUE FUND,
GROWTH FUND, and AGGRESSIVE GROWTH FUND are subject to fluctuations in the stock
markets, which have periods of increasing and decreasing values. Stocks have
greater volatility than debt securities. While greater volatility increases
risk, it offers the potential for greater reward.

Equity risk is also related to the size of the company issuing stock. Companies
may be categorized as having a small, medium, or large capitalization (market
value). The potential risks are higher with small- and medium-capitalization
companies and generally lower with large-capitalization companies. Therefore,
you should expect that investments in the GROWTH FUND, the BALANCED FUND and,
particularly, AGGRESSIVE GROWTH FUND will be more volatile than broad stock
market indices such as the S&P 500 or funds that invest in large-capitalization
companies.

FIXED INCOME SECURITIES RISKS. Risks of fixed income securities will impact the
FIXED INCOME FUND and LIMITED MATURITY FUND, but might also affect the BALANCED
FUND, VALUE FUND and AGGRESSIVE GROWTH FUND.

Prices of fixed-rate debt securities generally move in the opposite direction of
interest rates. The interest payments on fixed-rate debt securities do not
change when interest rates change. Therefore, since the price of these
securities can be expected to decrease when interest rates increase, you can
expect that value of investments in a Fund may go down. Although the Adviser
attempts to anticipate interest rate movements, there is no guarantee that it
will be able to do so.

In addition, longer term debt securities will experience greater price
volatility than debt securities with shorter maturities. You can expect the net
asset values of a Fund to fluctuate accordingly.

The credit quality of a debt security is based upon the issuer's ability to
repay the security. If payments on a debt security are not paid when due, that
may cause the net asset value of a Fund holding the security to go down.

If interest rates decline, an issuer may repay a debt security held by a Fund
prior to its maturity. If this occurs, the Adviser may have to reinvest the
proceeds in debt securities paying lower interest rates. If this happens, a Fund
may have a lower yield.

MORTGAGE-BACKED SECURITIES RISKS. Mortgage-backed securities are subject to
risks of prepayment. This is more likely to occur when interest rates fall
because many borrowers refinance mortgages to take advantage of more favorable
rates. Prepayments on mortgage-backed securities are also affected by other
factors, such as the volume of home sales. A Fund's yield will be reduced if
cash from prepaid securities are reinvested in securities with lower interest
rates. The risk of prepayment may also decrease the value of mortgage-backed
securities, as will mortgage foreclosures or defaults on the underlying
obligations.

FUTURES AND OPTIONS RISKS. On behalf of a Fund, the Adviser may trade in options
or futures in order to hedge the Fund's portfolio against market shifts as well
as to increase returns. However, if the Adviser does not correctly anticipate
market movements or is unable to close a option or futures position due to
conditions in the market, the Fund could lose money.

CONCENTRATION RISKS. When the Fund emphasizes its investments in securities of
issuers in a particular industry, the Fund's performance is closely tied to
events in that industry. For example, the VALUE FUND is expected to be
overweighted in the utility, energy, transportation, basic industry and
financial sectors. The GROWTH FUND is expected to be weighted in the technology,
consumer services, consumer non-durables and consumer staples sectors. The
AGGRESSIVE GROWTH FUND will emphasize technology stocks.

YEAR 2000 READINESS. The "Year 2000" problem is the potential for computer
errors or failures because certain computer systems may be unable to interpret
dates after December 31, 1999. The Year 2000 problem may cause systems to
process information incorrectly and could disrupt businesses that rely on
computers, like the Fund. While it is impossible to determine in advance all of
the risks to the Fund, the Fund could experience interruptions in basic
financial and operational functions. Fund shareholders could experience errors
or disruptions in Fund share transactions or Fund communications.

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

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

However, this may be difficult with certain issuers. For example, funds dealing
with foreign service providers or investing in foreign securities, will have
difficulty determining the Year 2000 readiness of those entities. This is
especially true of entities or issuers in emerging markets.

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

PRINCIPAL STRATEGIES

TREASURY MONEY MARKET FUND

The Fund invests primarily in short-term obligations of the U.S. Treasury. The
Fund may also invest in short-term AAA-rated securities of other investment
companies, and engage in when-issued and delayed-delivery transactions.
Consistent with the Fund's AAA rating by Standard & Poor's, the Fund will
maintain an average maturity of 60 days or less.

The Fund's primary objective is the production of current income while
maintaining liquidity and stability of principal. To the extent that Fund income
is derived from investments in U.S. Treasury securities, interest earned from
the Fund may be exempt from state income taxation.

LIMITED MATURITY GOVERNMENT FUND

The Fund invests in high-grade debt securities and will, under normal market
conditions, have at least 65% of its total assets invested in fixed-rate bonds.
The Fund manager employs a "top down" strategy in selecting investment
securities. Key factors include economic trends, inflation expectations,
interest rate momentum, and yield spreads. The Fund generally will invest in
debt securities of the U.S. Treasury and government agencies, mortgage-backed
securities, and investment-grade corporate bonds. When investing in
non-governmental securities, the Fund manager will conduct a thorough credit
analysis of the issuer, and will compare current yield spreads to historical
norms.

The average maturity of the Fund's debt securities generally will be in the
range of 1.5 to 3 years. When interest rates are at higher levels and lower
rates are forecasted for the future, the Fund manager may choose to lengthen the
Fund's effective duration. Likewise, when rising interest rates are expected,
the duration of the Fund's bond portfolio may be shortened.

Consistent with the Fund's primary objective of producing current income, the
Fund will focus on investment-grade fixed-income securities with short- to
intermediate-term maturities.

FIXED INCOME FUND

The average maturity of the Fund's debt securities generally will be in the
range of 3 to 10 years. When interest rates are at higher levels and lower rates
are forecasted for the future, the Fund manager may choose to lengthen the
Fund's effective duration. Likewise, when rising interest rates are expected,
the duration of the Fund's bond portfolio may be shortened.

Consistent with the Fund's primary objective of producing current income, the
Fund will focus on investment-grade, intermediate-term, fixed-income securities.

BALANCED FUND

The Fund invests in both equity and fixed-income investments, and will maintain
a minimum of 25% of Fund assets in each asset class. The remaining 50% of Fund
assets may be allocated between stocks and bonds, at the discretion of the Fund
manager.

The Fund's equity allocation will focus on high-quality, large-capitalization
companies. Using a blend of growth and value styles, the Fund manager seeks to
identify companies which have clearly defined business strategies, produce
consistent revenue streams from an established customer base, enjoy significant
market share in their respective industries, produce healthy cashflows, achieve
consistent increases in sales, operating margins, and corporate earnings, and
have experienced management teams with consistent records of delivering
shareholder value. The Fund manager periodically reviews market prices in
relation to the stock's intrinsic value, and adjusts the Fund's holdings
accordingly.

The Fund's fixed income allocation focuses on intermediate-term debt securities,
with an emphasis on U.S. Treasury and governmental agency issues. Corporate bond
issues with a minimum credit rating of "A" (S & P/ Moody's) at the time of
purchase may also be included as yield spreads become attractive.

VALUE FUND

The Fund invests in common and preferred stocks according to a sector-weighting
strategy in which attractive market valuation levels are assigned priority over
prospects for future earnings growth. The Fund manager attempts to identify
those sectors of the economy which, given the current phase of the business
cycle, are likely to realize gains in share prices as market valuation factors
re-adjust over time. Selected sectors and companies will tend to possess
price-to-earnings (P/E) and price-to-book ratios below broad market averages,
while dividend yields generally will be higher than market averages. Common and
preferred stocks are expected to produce dividends, and will generally possess
market capitalizations of at least $250 million. Convertible securities of
smaller companies may also be included in the Fund's portfolio.

The Fund manager seeks to identify companies which have clearly defined business
strategies, produce consistent revenue streams from an established customer
base, enjoy significant market share in their respective industries, produce
healthy cashflows, achieve consistent increases in sales, operating margins, and
corporate earnings, and have experienced management teams with consistent
records of delivering shareholder value. The Fund manager periodically reviews
market prices in relation to the stock's intrinsic value, and adjusts the Fund's
holdings accordingly.

GROWTH FUND

The Fund invests in the common stocks of companies expecting to achieve
above-average growth in earnings. The Fund manager selects industry sectors
which expect favorable earnings growth, given the current phase of the business
cycle. Future growth prospects take precedence over current valuation levels in
the stock selection process. Selected companies are expected to exhibit large
market capitalizations and above-average price/earnings (P/E), price-to-book,
and return on assets ratios. Dividend yields may be lower than market averages,
owing to the growth emphasis of the Fund.

In addition to seeking companies with above-average potential for growth, the
Fund manager will seek to identify companies which have clearly defined business
strategies, produce consistent revenue streams from an established customer
base, enjoy significant market share in their respective industries, produce
healthy cashflows, achieve consistent increases in sales, operating margins, and
corporate earnings, and have experienced management teams with consistent
records of delivering shareholder value. The Fund manager periodically reviews
market prices in relation to the stock's target price, and adjusts the Fund's
holdings accordingly.

AGGRESSIVE GROWTH FUND

The Fund invests primarily in equities of small- to medium-sized companies whose
market capitalization ranges from $300 million to $5 billion. The Fund may, as
market conditions warrant, invest a portion of is assets in large-capitalization
companies exhibiting above-average potential. The Fund manager seeks to identify
companies with superior prospects for growth in revenues and earnings. Given
recent market trends and expectations, the Fund may invest a substantial portion
of its assets in the equities of technology and technology-related companies.
These sectors have achieved substantial market growth in recent years, but
exhibit greater volatility in earnings, dividends, and share prices than major
market indices such as the S & P 500.

PORTFOLIO TURNOVER
Although the Funds do not intend to invest for the purpose of seeking short-term
profits, securities will be sold without regard to the length of time they have
been held when the Funds' Adviser believes it is appropriate to do so in light
of a Fund's investment goal. A higher portfolio turnover rate involves greater
transaction expenses which must be borne directly by a Fund (and thus,
indirectly by its shareholders), and impact Fund performance. In addition, a
high rate of portfolio turnover may result in the realization of larger amounts
of capital gains which, when distributed to that Fund's shareholders, are
taxable to them.

TEMPORARY INVESTMENTS
To minimize potential losses and maintain liquidity to meet shareholder
redemptions during adverse market conditions, the Funds may temporarily depart
from its principal investment strategy by investing up to 100% of Fund assets in
cash or short-term, high quality money market instruments (e.g., commercial
paper, repurchase agreements, etc.). This may cause a Fund to temporarily forego
greater investment returns for the safety of principal.

SECURITIES DESCRIPTIONS

EQUITY SECURITIES are the fundamental unit of ownership in a company. They
represent a share of the issuer's earnings and assets, after the issuer pays its
liabilities. Generally, issuers have discretion as to the payment of any
dividends or distributions. As a result, investors cannot predict the income
they will receive from equity securities. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the BALANCED FUND,
VALUE FUND, GROWTH FUND, and AGGRESSIVE GROWTH FUND invest.

COMMON STOCKS are the most prevalent type of equity security. Common
stockholders are entitled to the net value of the issuer's earnings and
assets after the issuer pays its creditors and any preferred stockholders. As
a result, changes in an issuer's earnings directly influence the value of its
common stock.

FIXED INCOME SECURITIES pay interest, dividends or distributions at a specified
rate. The rate may be fixed or adjusted periodically. Generally, investors in
fixed income securities are creditors of the issuer. The issuer must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. Securities with higher credit risks generally have
higher yields. A security's yield will increase or decrease depending upon
whether it costs less (a discount) or more (a premium) than the principal
amount. Under normal market conditions, securities with longer maturities will
also have higher yields. If the issuer is entitled to redeem the security before
its scheduled maturity, the price and yield on the security may change based
upon the probability of an early redemption.

The following describes the types of fixed income securities in which the Funds
invest.

TREASURY SECURITIES are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risk.

AGENCY SECURITIES are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority. Some government
entities are supported by the full, faith and credit of the United States.
Other government entities receive support through federal subsidies, loans or
other benefits. A few government entities have no explicit financial support,
but are regarded as having implied support because the federal government
sponsors their activities. Investors regard agency securities as having low
credit risk, but not as low as Treasury securities.

The Funds treat mortgage-backed securities guaranteed by a government
sponsored entity as if issued or guaranteed by a federal agency. Although
such a guarantee protects against credit risk, it does not reduce the market
and prepayment risks.

CORPORATE DEBT SECURITIES are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most common types of
corporate debt security. The credit risks of corporate debt securities vary
widely among issuers.

MORTGAGE-BACKED SECURITIES represent interests in pools of mortgages. The
underlying mortgages normally have similar interest rates, maturities and
other terms. Mortgages may have fixed or adjustable interest rates. Interests
in pools of adjustable rate mortgages are known as ARMs.

Mortgage-backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage-backed securities is a
"pass-through certificate." Holders of pass-through certificates receive a
pro rata share of the payments from the underlying mortgages. Holders also
receive a pro rata share of any prepayments, so they assume all the
prepayment risk of the underlying mortgages.

Collateralized mortgage obligations (CMOs) are complicated instruments that
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage-backed securities. This
creates different prepayment and market risks for each CMO class.

In addition, CMOs may allocate interest payments to one class (IOs) and
principal payments to another class (POs). POs increase in value when
prepayment rates increase. In contrast, IOs decrease in value when
prepayments increase, because the underlying mortgages generate less interest
payments. However, IOs prices tend to increase when interest rates rise (and
prepayments fall), making IOs a useful hedge against market risk.

DEMAND MASTER NOTES. Demand master notes are short-term borrowing arrangements
between a corporation or government agency and an investor. These notes are
payable (in full or in part) on demand by either party, usually with one to
seven days notice. They generally pay a floating or variable interest rate, and
the principal amount may be periodically increased or decreased at the
investor's option.

HOW TO BUY SHARES

WHAT DO SHARES COST?

You can buy shares of a Fund at net asset value (NAV), without a sales charge,
on any day the New York Stock Exchange (NYSE) is open for business. When the
Fund receives your transaction request in proper form, it is processed at the
next determined public offering price. NAV is determined for the Funds (other
than TREASURY MONEY MARKET FUND) at the end of regular trading (normally 4:00
p.m. Eastern Time) each day the NYSE is open. The NAV for the TREASURY MONEY
MARKET FUND is determined twice daily at 12:00 Noon (Eastern Time) and 4:00 p.m.
(Eastern Time).

To open an account with the Regions Funds, your first investment must be at
least $25,000 for Trust Shares and $1,000 for Investment Shares. If you are an
officer, director, employee or retired employee of Regions Bank, or would like
to open an IRA account, the minimum initial investment is $500 for Investment
Shares. However, you can add to your existing Regions Funds account directly or
through the Funds' Systematic Investment Program for as little at $100. In
special circumstances, these minimums may be waived or lowered at the Funds'
discretion. Keep in mind that investment professionals may charge you fees for
their services in connection with your share transaction.

SALES CHARGE WHEN YOU REDEEM AGGRESSIVE GROWTH FUND AND INVESTMENT SHARES ONLY
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC). A CDSC applies to the Aggressive
Growth Fund and the Funds that offer Investment Shares, with the exception of
the TREASURY MONEY MARKET FUND,

------------------------------------------------------------
SHARES HELD UP TO: CDSC
------------------------------------------------------------
------------------------------------------------------------
1 year 3.00%
------------------------------------------------------------
------------------------------------------------------------
2 years 2.00%
------------------------------------------------------------
------------------------------------------------------------
3 years 1.00%
------------------------------------------------------------
------------------------------------------------------------
4 years 0.00%
------------------------------------------------------------
YOU WILL NOT BE CHARGED A CDSC WHEN REDEEMING SHARES:
oif you are an officer, director, employee or retired employee of Regions
Bank, or its affiliates, and your spouse and dependent
children;
oif you are a Regions Management Account customer; or
oif you are a trust customer redeeming through the Trust departments of
Regions Bank, or its affiliates. The Trust departments may charge fees
for services provided.

IN ADDITION, YOU WILL NOT BE CHARGED A CDSC:
oon the portion of redemption proceeds attributable to increases in the
value of your account due to increases in the NAV; oon shares acquired
through reinvestment of dividends and capital gains; oon shares held more
than 3 years after the end of the calendar month of acquisition; oif your
redemption is a required distribution and you are over the age of 70 1/2
from an individual retirement account or other
retirement plan;
oupon the death or disability of the shareholder(s) of the account;
oon shares purchased prior to June 1, 1997; or
owhen the Fund redeems your Shares and closes your account for failing to
meet the minimum balance requirement.

If your redemption qualifies the Distributor must be notified at the time
of redemption to eliminate the CDSC.

TO KEEP THE SALES CHARGE AS LOW AS POSSIBLE, THE FUNDS WILL SELL YOUR
SHARES IN THE FOLLOWING ORDER: oShares that are not subject to a CDSC;
oShares held the longest; and othen, the CDSC is based on the NAV at the
time you purchased or redeemed those Shares, whichever is lower.

DEALER CONCESSIONS: For Aggressive Growth Fund shares and Investment Shares
redeemed, with the exception of the TREASURY MONEY MARKET FUND, a dealer may
receive up to 100% of the CDSC. The dealer may be advanced a portion of the CDSC
at the time of purchase or upon payment arrangements made between the dealer and
the Distributor. Such payments may be in the form of cash or promotional
incentives.

DISTRIBUTION OF FUND SHARES

Federated Securities Corp., a subsidiary of Federated Investors, Inc., is the
principal distributor for shares of the Funds and a number of other investment
companies. The Distributor may offer certain items of nominal value from time to
time to any shareholder or investor in connection with the sale of Fund shares.
The Distributor may select brokers, dealers and administrators (including
depository or other institutions such as commercial banks and savings
associations) to provide distribution and/or administrative services for which
they will receive fees from the distributor based upon shares owned by their
clients or customers. These services include general marketing services
distributing prospectuses and other information, providing account assistance,
and communicating or facilitating purchases and redemptions of the Funds'
shares.

RULE 12B-1 PLAN (AGGRESSIVE GROWTH FUND AND INVESTMENT SHARES ONLY). The Regions
Funds has adopted a Rule 12b-1 Plan on behalf of the AGGRESSIVE GROWTH FUND and
Investment Shares of the Funds. The 12b-1 fee paid by the AGGRESSIVE GROWTH FUND
and Investment Shares of the other Fund's is as follows:

- -----------------------------------------------------------
FUND 12B-1 FEE PAID AS A
PERCENTAGE INVESTMENT SHARES
ASSETS
- -----------------------------------------------------------
- -----------------------------------------------------------
LIMITED MATURITY 0.25%
GOVERNMENT FUND
- ----------------------------
- -----------------------------------------------------------
FIXED INCOME FUND
- ----------------------------
- ----------------------------
BALANCED FUND
- ----------------------------
- ----------------------------
VALUE FUND 0.30%
- ----------------------------
- ----------------------------
GROWTH FUND
- ----------------------------
- ----------------------------
AGGRESSIVE GROWTH FUND
- ----------------------------
- -----------------------------------------------------------
TREASURY MONEY MARKET FUND 0.40%
- -----------------------------------------------------------

The Distributor and financial intermediaries are paid a 12b-1 fee for the sale,
distribution and customer servicing of the AGGRESSIVE GROWTH FUND and Investment
Shares of the Funds. Because these shares pay marketing fees on an ongoing
basis, your investment cost may be higher over time than shares with different
sales charges and marketing fees.

<PAGE>

HOW DO I PURCHASE SHARES?

Trust customers may purchase shares of any Fund by contacting their local Trust
Administrator or by telephoning Regions Bank at 1-800-433-2829.

You may purchase the AGGRESSIVE GROWTH FUND and Investment Shares by contacting
your local Regions Investment Company, Inc. (RICI) office or telephone RICI at
1-800-456-3244. Texas residents must purchase shares through Federated
Securities Corp. at 1-800-356-2805.

You may purchase shares through a broker-dealer, investment professional, or
financial institution (Authorized Dealers). Some Authorized Dealers may charge a
transaction fee for this service. If you purchase shares of a Fund through a
program of services offered or administered by a Authorized Dealer or other
service provider, you should read the program materials, including information
relating to fees, in conjunction with the Funds' prospectus. Certain features of
a Fund may not be available or may be modified in connection with the program of
services provided.

Your purchase order must be received by the Fund by 11:00 a.m. (Central Time)
for the TREASURY MONEY MARKET FUND or 3:00 p.m. (Central Time) for all other
Funds to get that day's NAV. Payment for the purchase of TREASURY MONEY MARKET
FUND shares is normally required the same business day. For settlement of an
order for the other Funds, payment must be received within three business days
of receipt of the order. Each Fund reserves the right to reject any purchase
request. It is the responsibility of the Trust Administrator, RICI, any
Authorized Dealer or other service provider that has entered into an agreement
with the Funds, its distributor, or administrative or shareholder services
agent, to promptly submit purchase orders to the Funds. Orders placed through
one of these entities are considered received when the Funds are notified of the
purchase or redemption order. However, you are not the owner of Fund shares (and
therefore will not receive dividends) until payment for the shares is received.

HOW TO EXCHANGE SHARES

EXCHANGE PRIVILEGE
You may exchange Shares of a Fund into Shares of the same class of another Fund
at NAV by calling or writing to Regions Bank or RICI, as appropriate. AGGRESSIVE
GROWTH FUND shareholders may exchange their shares for Shares of any of the
other Regions Funds. Shareholders of AGGRESSIVE GROWTH FUND should contact their
Trust Administrator or RICI representative, as appropriate. Texas residents must
telephone Federated Securities Corp. at 1-800-356-2805 to exchange shares. To do
this, you must: w meet any minimum initial investment requirements; and w
receive a prospectus for the Fund into which you wish to exchange.

Signatures must be guaranteed if you request an exchange into another
Fund with a different shareholder registration.

Investment Shares of any Fund may be exchanged-for Investment Shares of
another Fund without the imposition of a contingent deferred sales charge.
However, if the shareholder redeems the exchange-for shares within three years
of the original purchase of exchanged shares, a contingent deferred sales charge
will be imposed.

The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or Adviser may determine from the amount,
frequency and pattern of exchanges that a shareholder is engaged in excessive
trading which is detrimental to the Fund and other shareholders. If this occurs,
the Fund may terminate the availability of exchanges to that shareholder and may
bar that shareholder from purchasing other Funds.

Shareholders contemplating exchanges into the Regions Funds should
consult their tax advisers since the tax advantages of each Fund may vary. An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction.

BY TELEPHONE: Telephone exchange instructions must be received before
3:00 p.m. (Central Time) for Shares to be exchanged that day. Orders for
exchange received after 3:00 p.m. (Central Time) on any business day will be
executed at the close of the next business day.

Your telephone instructions may be recorded. If a Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Funds will notify you if it changes
telephone transaction privileges.

<PAGE>

HOW DO I REDEEM SHARES?

You may redeem your Fund shares by several methods. You should note that
redemptions will be made only on days when the Fund computes its NAV. When your
redemption request is received in proper form, it is processed at the next
determined NAV.

To redeem Trust Shares, trust customers of Regions Bank should telephone their
Trust Administrator. Investment Shares may be redeemed by telephoning their
local RICI office. Shareholders of AGGRESSIVE GROWTH FUND should contact their
Trust Administrator or RICI representative, as appropriate. Shareholders who
purchased shares through an Authorized Dealer should contact their Authorized
Dealer for specific instructions on how to redeem by telephone.

To redeem Shares by mail, written requests must be received in proper form and
can be made through the trust Department, RICI or any Authorized Dealer. The
redemption request should include the shareholder's name, Fund name and class of
shares, account number and the share or dollar amount to be redeemed. It is the
responsibility of the service provider to promptly submit redemption requests to
the Fund. Shareholders are encouraged to telephone the Trust Department, or RICI
for assistance in redeeming by mail.

Redemption requests for the Funds must be received by 11:00 a.m. (Central Time)
for the TREASURY MONEY MARKET FUND or 3:00 p.m. (Central Time) for all other
Funds in order for shares to be redeemed at that day's NAV. Redemption proceeds
will normally be mailed, or wired to the shareholder's account at Regions Bank
within five business days, but in no event more than seven days, after the
request is made.

WILL I BE CHARGED A FEE FOR REDEMPTIONS?

Trust Shares of any of the Funds and Investment Shares of the TREASURY MONEY
MARKET FUND are not subject to a redemption fee. Depending on when you redeem
your AGGRESSIVE GROWTH FUND and Investment Shares of the other Funds, you may be
charged a fee by the Fund for redeeming your shares . See "How to Buy Shares" -
"Sales Charge When You Redeem AGGRESSIVE GROWTH FUND and INVESTMENT SHARES
ONLY." You may also be charged a transaction fee if you redeem Fund shares
through an Authorized Dealer or service provider (other than RICI or the Regions
Banks). Consult your Authorized Dealer or service provider for more information,
including applicable fees.

ADDITIONAL CONDITIONS FOR REDEMPTIONS

SIGNATURE GUARANTEES

In the following instances, you must have a signature guarantee on written
redemption requests:

- when you want a redemption to be sent to an address other than the one you
have on record with the Fund; - when you want the redemption payable to
someone other than the shareholder of record; or - when your redemption is to
be sent to an address of record that was changed within the last 90 days.

Your signature can be guaranteed by any federally insured financial institution
(such as a bank or credit union) or a broker/dealer that is a domestic stock
exchange member, BUT NOT BY A NOTARY PUBLIC.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. However, payment may be delayed up to seven
days:
w to allow your purchase payment to clear;
w during periods of market volatility; or
w when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except
for systematic program transactions). The TREASURY MONEY MARKET FUND sends you
monthly confirmations to report all transactions including dividends paid during
the month. In addition, you will receive periodic statements reporting all
account activity, including systematic program transactions, dividends and
capital gains paid.

You may request photocopies of historical confirmations from prior years. The
Funds may charge a fee for this service.

DIVIDENDS AND CAPITAL GAINS
- -----------------------------------------------------------
FUND DIVIDENDS DECLARED AND PAID
- -----------------------------------------------------------
- -----------------------------------------------------------
BALANCED FUND
- ----------------------------
- ----------------------------
VALUE FUND
- ----------------------------
- ----------------------------
GROWTH FUND QUARTERLY
- ----------------------------
- ----------------------------
AGGRESSIVE GROWTH FUND
- ----------------------------
- -----------------------------------------------------------
TREASURY MONEY MARKET FUND
- ----------------------------
- ----------------------------
FIXED INCOME FUND MONTHLY
- ----------------------------
- ----------------------------
LIMITED MATURITY
GOVERNMENT FUND
- -----------------------------------------------------------

Dividends are declared and paid to shareholders invested in a Fund on the record
date.

In addition, each Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares, unless you elect cash payments.

If you purchase shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in shares. Therefore, you should consider the tax
implications of purchasing shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund may
redeem shares in your account and pay you the proceeds if your account balance
falls below the required minimum initial investment amount. Before shares are
redeemed to close an account, you will be notified in writing and allowed 30
days to purchase additional shares to meet the minimum.

TAX INFORMATION

FEDERAL INCOME TAX

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

Fund distributions are expected to be primarily dividends for the TREASURY MONEY
MARKET FUND and LIMITED MATURITY GOVERNMENT FUND and both dividends and capital
gains for all other Funds. Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

REGIONS FUNDS INFORMATION

MANAGEMENT OF THE REGIONS FUNDS
The Board of Trustees governs the Trust. The Board selects and oversees the
Adviser, Capital Management Group. The Adviser manages each Fund's assets,
including buying and selling portfolio securities. The Adviser's address is 417
North 20th Street, Birmingham, Alabama, 35203.

ADVISER'S BACKGROUND
Capital Management Group is a wholly owned subsidiary of Regions Financial
Corp., a bank holding company organized under the laws of the State of Delaware,
and is a member of the Regions Bank organization. Regions Financial Corp. is one
of only nine banking companies in the nation to be named to Keefe, Bruyette &
Woods, Inc.'s 1996 Bank Honor Roll, which recognizes companies that continually
report annual increases in their earnings per share. As of December 31, 1998,
the Adviser was one of the 100 largest bank holding companies in the United
States and had approximately $___ billion in assets under management.

PORTFOLIO MANAGERS
- -------------------------------------------------------------------
PORTFOLIO FUNDS MANAGED BIOGRAPHY
MANAGER
- -----------------------------------------------------------------------------
J. KENNETH Regions Funds Senior Vice President and Director. Manager of
ALDERMAN, CFA the Capital Management Group; responsible for
the comprehensive investment policy of the
group and the Regions Family of Mutual Funds.
Experience: 15 years investment experience,
including ten years of investment experience
with the Trust Division of Regions Bank; two
years commercial bank experience. Education:
B.S., Accounting, Auburn University, 1973 ;
M.B.A., Florida State University, 1976;
Certified Public Accountant, 1975; National
Graduate Trust School, 1985; Chartered
Financial Analyst, 1989. Affiliations: Member,
Institute of Chartered Financial Analysts,
Association for Investment Management and
Research, and American Institute of Certified
Public Accountants.
MARY LYNN Fixed Income Fund Vice President, Chief Investment Strategist BRONNER,
CFA Balanced Fund and Senior Fixed Income Portfolio Manager.
(co-manager) Responsible for the day-to-day management of
Regions Fixed Income Fund (July, 1997) and
co-manager of the Regions Balanced Fund. Ms.
Bronner served as portfolio manager for
Regions Limited Maturity Government Fund from
January, 1997 until taking over the Fixed
Income Fund in July, 1997. She also serves as
a member of the Capital Management Group as
portfolio manager and Fixed Income Strategist.
Experience: 19 years investment experience,
specifically seven years as Portfolio Manager
for Regions Financial Corporation under its
predecessor, First Alabama Bank; seven years
as a Registered Investment Advisor with The
Bronner Group. Education: B.S., Finance,
University of Tennessee, 1977; M.B.A., Auburn
University at Montgomery, 1980; Jurisdoctor
Law, Jones Law Institute, 1984; and Chartered
Financial Analyst, 1982. Affiliations: Member,
Alabama State Bar, Institute of Chartered
Financial Analysts, and Association for
Investment Management and Research.
JOHN M. HAIGLER Limited Maturity Vice President and Portfolio Manager.
Government Fund Responsible for the day-to-day management of
Regions Limited Maturity Government Fund
(July, 1997). Mr. Haigler previously served as
portfolio manager of Regions Treasury Money
Market Fund (April, 1992-December, 1993) and
as portfolio manager of Regions Limited
Maturity Government Fund (December,
1993-Janaury, 1997). He is responsible for
management of the Trust Division's short-term
income funds and for commercial paper and
certificates of deposit investments. Mr.
Haigler also serves as an active member of the
Capital Management Group and as portfolio
manager and analyst. Experience: 20 years
investment experience, 27 years with Regions
Bank. Education: B.A., Huntington College,
1963. Affiliations: Member, Alabama Society of
Financial Analysts and Association of
Investment Management and Research.
JOHN E. Growth Fund Vice President and Senior Equity Portfolio
STEINER, CFA Balanced Fund Manager. Responsible for day-to-day management
of the Regions Growth Fund and co-manager of
the Regions Balanced Fund. Served as portfolio
manager of the Regions Treasury Money Market
Fund from December, 1993 until taking over the
Balanced Fund on June 1, 1996. He actively
manages employee benefit and personal trust
accounts as well as contributes to the
formulation of equity and fixed income
strategies. Experience: 12 years investment
experience, specifically Employee Benefits,
Personal Trust, and Endowments; 13 years with
Regions Bank. Education: B.S., Industrial
Management, Auburn University, 1981; Chartered
Financial Analyst, 1996. Affiliations: Member,
Chartered Financial Analyst, and the
Association for Investment Management and
Research.
JAMES L. Value Fund Vice President and Senior Equity Analyst.
SAVAGE, CFA Responsible for the day-to-day management of
the Regions Value Fund (January, 1996). Also
serves as an active member of the Capital
Management Group as portfolio manager and
analyst. Experience: eight years investment
analysis and portfolio management. Joined
Regions Bank (November, 1995) to bring further
expertise to investment team. Previously had
been a trust portfolio manager for a large
regional bank in the Southeast which utilized
a value style of equity management. Education:
B.S., Finance, Auburn University, 1987; M.S.,
Finance, Georgia State University, 1991;
Chartered Financial Analyst, 1995.
Affiliations: Member, Chartered Financial
Analysts, Member & Board of Directors, Alabama
Society of Financial Analysts, Association of
Investment Management and Research.
CHARLES A. Aggressive Growth Vice President and Portfolio Manager. Served
MURRAY, CFA Fund as Portfolio Manager and Analyst in the
Capital Management Group managing equity
portfolios and balanced accounts since 1974.
Joined Regions Bank in June, 1972. Served as a
Portfolio Manager for small/mid-cap common
trust funds, a convertible income fund and a
fixed income fund from 1978 through 1992.
Education: B.S., University of Alabama, 1970;
Chartered Financial Analyst, 1993.
Affiliations: Member, Alabama Society of
Financial Analysts, Association for Investment
Management and Research.
TERRY K. ALBANO Treasury Money Portfolio Manager. Responsible for the
Market Fund day-to-day management of the Regions Treasury
Money Market Fund (July, 1996). Also serves as
an active member of the Capital Management
Group as portfolio manager and analyst.
Experience: nine years investment analysis and
portfolio management including serving as
director of cash management for a
publicly-held food service company. Education:
B.S. Finance, University of South Alabama,
1989. Affiliations: Member, Alabama Society of
Financial Analysts, Association for Investment
Management and Research.

</TABLE>

ADVISORY FEES
The Adviser is entitled to receive an annual investment advisory fee equal to a
percentage of each Fund's average daily net assets as follows:

FUND ADVISORY FEE
TREASURY MONEY MARKET FUND............ 0.50%
LIMITED MATURITY GOVERNMENT FUND...... 0.70%
FIXED INCOME FUND..................... 0.75%
GROWTH FUND........................... 0.80%
VALUE FUND............................ 0.80%
BALANCED FUND......................... 0.80%
AGGRESSIVE GROWTH FUND................ 0.75%

The Adviser has the discretion to voluntarily waive a portion of its fee.
However, any waivers by the Adviser are voluntary and may be terminated at any
time in its sole discretion.

FINANCIAL HIGHLIGHTS -- TO BE INSERTED]

<PAGE>

REGIONS FUNDS

A Statement of Additional Information (SAI) dated January 31, 1999 is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is available in the Funds' annual report to shareholders. The
annual report discusses market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain the SAI, the annual report and other information without charge write to
or call Regions Funds at 1-800-433-2829.

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

Regions Funds
417 North 20th Street
P.O. Box 10247
Birmingham, Alabama 35203
1- 800-433-2829

Federated Securities Corp.
Distributor

G00___-01 (1/99)

SEC File No. 811-6511

CUSIP
75913Q886 75913Q878
75913Q860 75913Q852
75913Q704 75913Q803
75913Q100 75913Q209
75913Q506 75913Q605
75913Q308 75913Q407
75913Q845

REGIONS FUNDS

(FORMERLY, FIRST PRIORITY FUNDS)

TRUST SHARES

INVESTMENT SHARES

STATEMENT OF ADDITIONAL INFORMATION

January 31, 1999

O REGIONS TREASURY MONEY MARKET FUND OREGIONS BALANCED FUND
O REGIONS LIMITED MATURITY GOVERNMENT FUND OREGIONS VALUE FUND
O REGIONS FIXED INCOME FUND OREGIONS GROWTH FUND
O REGIONS AGGRESSIVE GROWTH FUND

This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectus for the Regions Funds, dated
January 31, 1999. This SAI incorporates by reference the Funds' Annual
Report. You may obtain the prospectus or Annual Report, without charge by
calling the Trust at 1-800-433-2829.

5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010

CUSIP
75913Q886 75913Q878
75913Q860 75913Q852
75913Q704 75913Q803
75913Q100 75913Q209
75913Q506 75913Q605
75913Q308 75913Q407
75913Q845

G0_____(1/99)

FEDERATED SECURITIES CORP.
Distributor

A subsidiary of FEDERATED INVESTORS, INC.

<PAGE>

TABLE OF CONTENTS

HOW ARE THE FUNDS ORGANIZED

SECURITIES IN WHICH THE FUNDS INVEST

SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS

INVESTMENT LIMITATIONS

DETERMINING MARKET VALUE OF SECURITIES

WHO DO SHARES COST

HOW IS THE FUND SOLD

HOW TO BUY SHARES

ACCOUNT AND SHARE INFORMATION

BANKING LAWS

WHAT ARE THE TAX CONSEQUENCES

WHO MANAGES THE FUNDS

HOW DOES THE FUND MEASURE PERFORMANCE

PERFORMANCE COMPARISONS

ECONOMIC AND MARKET INFORMATION

FINANCIAL STATEMENTS

APPENDIX

ADDRESSES

<PAGE>

HOW ARE THE FUNDS ORGANIZED
The Regions Funds (Trust) was established as a Massachusetts business trust
under a Declaration of Trust dated October 15, 1991. Effective May 15, 1998, the
Trust changed its name from "First Priority Funds" to "Regions Funds." As of the
date of this Statement, the Trust consists of seven separate portfolios of
securities (Funds) which are as follows: Regions Treasury Money Market Fund
(Treasury Money Market Fund); Regions Limited Maturity Government Fund (Limited
Maturity Government Fund); Regions Fixed Income Fund (Fixed Income Fund);
Regions Balanced Fund (Balanced Fund); Regions Value Fund, (Value Fund,
formerly, Regions Equity Income Fund); Regions Growth Fund, (Growth Fund,
formerly, Regions Equity Fund); and Regions Aggressive Growth Fund (Aggressive
Growth Fund). Shares of the Funds, except the Aggressive Growth Fund, are
offered in two classes of shares, Trust Shares and Investment Shares
(individually and collectively referred to as "Shares" as the context may
require). This SAI relates to both classes of the above-mentioned Shares of the
Funds. The Funds (other than Treasury Money Market Fund and Aggressive Growth
Fund) did not offer the Trust Shares class until January 1998.

SECURITIES IN WHICH THE FUNDS INVEST
Following is a table that indicates which types of securities are a:
P = PRINCIPAL investment of a Fund; (shaded in chart) A = ACCEPTABLE (but
not principal) investment of a Fund; or N = NOT AN ACCEPTABLE investment of
a Fund.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
SECURITIES TREASURY LIMITED FIXED BALANCEDVALUE GROWTH AGGRESSIVE
MONEY MATURITY INCOME FUND FUND FUND GROWTH
MARKET GOVERNMENTFUND FUND
FUND FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
AMERICAN DEPOSITARY RECEIPTS N N N A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES N A A A N N N
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
BANK INSTRUMENTS N A A A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
BORROWING1 A A A A A A A
- ------------------------------------------------------------------------------------------
COMMERCIAL PAPER N A A A A A A
- --------------------------------------------------- ------------------------
- ------------------------------------------------------------------------------------------
COMMON STOCK2 N N N P P P P
- --------------------------------------------------- -----------------
- ------------------------------------------------------------------------------------------
CONVERTIBLE SECURITIES3 N N N A A A A
- ------------------------------------------------------------------------------------------
- ---------------------------------------------------------- ------------------------
DERIVATIVE CONTRACTS AND N A A A A A A
SECURITIES
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CORPORATE FIXED RATE DEBT N A P P N N N
OBLIGATIONS4
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CORPORATE FLOATING RATE DEBT N A A P N N N
OBLIGATIONS4
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FOREIGN SECURITIES N A A A A A A
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FUTURES AND OPTIONS N A A A A A A
TRANSACTIONS
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ILLIQUID AND RESTRICTED N A A A A A A
SECURITIES5
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LENDING OF PORTFOLIO N A A A A A A
SECURITIES
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MORTGAGE-BACKED SECURITIES N A A A N N N
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MUNICIPAL DEBT OBLIGATIONS N A A A N N N
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OTHER MONEY MARKET INSTRUMENTS N A A A A A A
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PREFERRED STOCKS N N N A A A A
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REPURCHASE AGREEMENTS N A A A A A A
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SECURITIES OF OTHER A A A A A A A
INVESTMENT COMPANIES
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STRIPPED BONDS N A A A N N N
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U.S. GOVERNMENT SECURITIES P P P P A A A
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WARRANTS N N N A A A A
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WHEN-ISSUED AND DELAYED A A A A A A A
DELIVERY TRANSACTIONS
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ZERO COUPON CONVERTIBLE N N N A A A A
SECURITIES
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</TABLE>

1. The TREASURY MONEY MARKET FUND, FIXED INCOME FUND AND GROWTH FUND may pledge
10% (15% for LIMITED MATURITY GOVERNMENT FUND)of their respective total
assets as collateral for such borrowings.
2. The BALANCED FUND will invest in common stocks of companies with market
capitalizations of $1 billion or less (small-cap stocks), the GROWTH FUND
will invest in common stocks of companies with market capitalizations of at
least $250 million and the AGGRESSIVE GROWTH FUND will invest will invest in
common stocks of companies with market capitalizations of at least $5 billion
or less.
3. The BALANCED FUND and VALUE FUND may invest up to 25% of their respective
total assets in below investment grade convertible securities (rated BB and
below by a nationally recognized statistical rating organization (NRSRO)). An
NRSRO is Moody's, S&P and Fitch
4. The Corporate Debt Obligations that the Funds invest will be rated in one of
the three highest rating categories by an NRSRO. 5. ALL FUNDS, except the
TREASURY MONEY MARKET FUND, may invest up to 15% of their respective assets in
illiquid securities except that the GROWTH
FUND are limited to 10%. The TREASURY MONEY MARKET FUND cannot invest in
illiquid and restricted securities.
SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund invests.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock. PREFERRED STOCKS Preferred stocks
have the right to receive specified dividends or distributions before the
issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The
Fund [MAY ALSO/WILL] treat such redeemable preferred stock as a fixed income
security.
INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial
real estate market. WARRANTS Warrants give the Fund the option to buy the
issuer's equity securities at a specified price (the exercise price) at a
specified future date (the expiration date). The Fund may buy the designated
securities by paying the exercise price before the expiration date. Warrants
may become worthless if the price of the stock does not rise above the
exercise price by the expiration date. This increases the market risks of
warrants as compared to the underlying security. Rights are the same as
warrants, except companies typically issue rights to existing stockholders.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which the Fund
invests.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risks. AGENCY SECURITIES Agency securities are issued or guaranteed by
a federal agency or other government sponsored entity acting under federal
authority (a GSE). The United States supports some GSEs with its full, faith
and credit. Other GSEs receive support through federal subsidies, loans or
other benefits. A few GSEs have no explicit financial support, but are
regarded as having implied support because the federal government sponsors
their activities. Agency securities are generally regarded as having low
credit risks, but not as low as treasury securities. The Fund treats mortgage
backed securities guaranteed by GSEs as agency securities. Although a GSE
guarantee protects against credit risks, it does not reduce the market and
prepayment risks of these mortgage backed securities. CORPORATE DEBT
SECURITIES Corporate debt securities are fixed income securities issued by
businesses. Notes, bonds, debentures and commercial paper are the most
prevalent types of corporate debt securities. The Fund may also purchase
interests in bank loans to companies. The credit risks of corporate debt
securities vary widely amount issuers. The credit risk of an issuer's debt
security may also vary based on its priority for repayment. For example,
higher ranking (senior) debt securities have a higher priority than lower
ranking (subordinated) securities. This means that the issuer might not make
payments on subordinated securities while continuing to make payments on
senior securities. In addition, in the event of bankruptcy, holders of senior
securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds or bank loans to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the
market and credit risks as compared to other debt securities of the same
issuer. DEMAND INSTRUMENTS Demand instruments are corporate debt
securities that the issuer must repay upon demand. Other demand
instruments require a third party, such as a dealer or bank, to repurchase
the security for its face value upon demand. The Fund treats demand
instruments as short-term securities, even though their stated maturity
may extend beyond one year.
MUNICIPAL SECURITIES
Municipal securities are issued by states, counties, cities and other
political subdivisions and authorities. Although many municipal securities
are exempt from federal income tax, the Fund may invest in taxable municipal
securities. MORTGAGE BACKED SECURITIES Mortgage backed securities represent
interests in pools of mortgages. The mortgages that comprise a pool normally
have similar interest rates, maturities and other terms. Mortgages may have
fixed or adjustable interest rates. Interests in pools of adjustable rate
mortgages are know as ARMs. Mortgage backed securities come in a variety of
forms. Many have extremely complicated terms. The simplest form of mortgage
backed securities are pass-through certificates. An issuer of pass-through
certificates gathers monthly payments from an underlying pool of mortgages.
Then, the issuer deducts its fees and expenses and passes the balance of the
payments onto the certificate holders once a month. Holders of pass-through
certificates receive a pro rata share of all payments and pre-payments from
the underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and market risks
for each CMO class. For example, in a sequential pay CMO, one class of
CMOs receives all principal payments and prepayments. The next class of
CMOs receives all principal payments after the first class is paid off.
This process repeats for each sequential class of CMO. As a result,
each class of sequential pay CMOs reduces the prepayment risks of
subsequent classes. More sophisticated CMOs include planned
amortization classes (PACs) and targeted amortization classes (TACs).
PACs and TACs are issued with companion classes. PACs and TACs receive
principal payments and prepayments at a specified rate. The companion
classes receive principal payments and prepayments in excess of the
specified rate. In addition, PACs will receive the companion classes'
share of principal payments, if necessary, to cover a shortfall in the
prepayment rate. This helps PACs and TACs to control prepayment risks
by increasing the risks to their companion classes. CMOs may allocate
interest payments to one class (Interest Only or IOs) and principal
payments to another class (Principal Only or POs). POs increase in
value when prepayment rates increase. In contrast, IOs decrease in
value when prepayments increase, because the underlying mortgages
generate less interest payments. However, IOs tend to increase in value
when interest rates rise (and prepayments decrease), making IOs a
useful hedge against market risks. Another variant allocates interest
payments between two classes of CMOs. One class (Floaters) receives a
share of interest payments based upon a market index such as LIBOR. The
other class (Inverse Floaters) receives any remaining interest payments
from the underlying mortgages. Floater classes receive more interest
(and Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and market risks from the
Floater to the Inverse Floater class, reducing the price volatility of
the Floater class and increasing the price volatility of the Inverse
Floater class. CMOs must allocate all payments received from the
underlying mortgages to some class. To capture any unallocated
payments, CMOs generally have an accrual (Z) class. Z classes do not
receive any payments from the underlying mortgages until all other CMO
classes have been paid off. Once this happens, holders of Z class CMOs
receive all payments and prepayments. Similarly, REMICs have residual
interests that receive any mortgage payments not allocated to another
REMIC class. The degree of increased or decreased prepayment risks
depends upon the structure of the CMOs. [Z CLASSES,] IOs, POs, and
Inverse Floaters are among the most volatile investment grade fixed
income securities currently traded in the United States. However, the
actual returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can
predict and will vary among pools.
ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed
income assets (including other fixed income securities) may be used to create
an asset backed security. Asset backed securities may take the form of
commercial paper, notes, or pass through certificates. Asset backed
securities may also resemble some types of CMOs, such as Floaters, Inverse
Floaters, IOs and POs. Historically, borrowers are more likely to refinance
their mortgage than any other type of consumer or commercial debt. In
addition, some asset backed securities use prepayment to buy additional
assets, rather than paying off the securities. Therefore, while asset backed
securities may have some prepayment risks, they generally do not present the
same degree of risk as mortgage backed securities. ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred
to as a coupon payment). Investors buy zero coupon securities at a price
below the amount payable at maturity. The difference between the purchase
price and the amount paid at maturity represents interest on the zero coupon
security. An investor must wait until maturity to receive interest and
principal, which increases the market and credit risks of a zero coupon
security. There are many forms of zero coupon securities. Some are issued at
a discount and are referred to as zero coupon or capital appreciation bonds.
Others are created from interest bearing bonds by separating the right to
receive the bond's coupon payments from the right to receive the bond's
principal due at maturity, a process known as coupon stripping. Treasury
STRIPs, IOs and POs are the most common forms of stripped zero coupon
securities. In addition, some securities give the issuer the option to
deliver additional securities in place of cash interest payments, thereby
increasing the amount payable at maturity. These are referred to as
pay-in-kind or PIK securities. BANK INSTRUMENTS Bank instruments are
unsecured interest bearing deposits with banks. Bank instruments include bank
accounts, time deposits, certificates of deposit and banker's acceptances.
Yankee instruments are denominated in U.S. dollars and issued by U.S.
branches of foreign banks. Eurodollar instruments are denominated in U.S.
dollars and issued by non-U.S. branches of U.S. or foreign banks. CREDIT
ENHANCEMENT Credit enhancement consists of an arrangement in which a company
agrees to pay amounts due on a fixed income security after the issuer
defaults. In some cases the company providing credit enhancement makes all
payments directly to the security holders and receives reimbursement from the
issuer. Normally, the credit enhancer has greater financial resources and
liquidity than the issuer. For this reason, the Adviser may evaluate the
credit risk of a fixed income security based solely upon its credit
enhancement. Common types of credit enhancement include guarantees, letters
of credit, bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. Following a default, these assets may be sold and the
proceeds paid to security's holders. Either form of credit enhancement
reduces credit risks by providing another source of payment for a fixed
income security.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities. Convertible securities have lower yields
than comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the
underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit the Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment. The Fund treats convertible securities as both fixed income
and equity securities for purposes of its investment policies and limitations,
because of their unique characteristics. FOREIGN SECURITIES Foreign securities
are securities of issuers based outside the United States. The Fund considers an
issuer to be based outside the United States if:
it is organized under the laws of, or has a principal office located in,
another country; the principal trading market for its securities is in
another country; or
it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject currency risks and risks of foreign investing. Trading in
certain foreign markets is also subject to liquidity risks.
DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in
overseas markets. ADRs are also traded in U.S. dollars, eliminating the need
for foreign exchange transactions. The foreign securities underlying European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside the
United States. Depositary Receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks
of foreign investing.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract. The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract. The Fund may trade in the following types
of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures CONTRACTS are considered to be commodity contracts. Futures contracts
traded OTC are frequently referred to as forward contracts. OPTIONS Options
are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the
seller (writer) of the option. A put option gives the holder the right to
sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option. The Fund may:
Buy call options on [INSERT PER INSTRUCTIONS] in anticipation of an increase
in the value of the underlying asset. Buy put options on [INSERT PER
INSTRUCTIONS] in anticipation of a decrease in the value of the underlying
asset. Write call options on [INSERT PER INSTRUCTIONS] to generate income
from premiums, and in anticipation of a decrease or only limited increase in
the value of the underlying asset. If a call written by the Fund is
exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the premium
received. Write put options on [INSERT PER INSTRUCTIONS](to generate income
from premiums, and in anticipation of an increase or only limited decrease in
the value of the underlying asset). In writing puts, there is a risk that the
Fund may be required to take delivery of the underlying asset when its
current market price is lower than the exercise price. When the Fund writes
options on futures contracts, it will be subject to margin requirements
similar to those applied to futures contracts. Buy or write options to close
out existing options positions.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the
interest rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser. The Fund's
custodian or subcustodian will take possession of the securities subject to
repurchase agreements. The Adviser or subcustodian will monitor the value of
the underlying security each day to ensure that the value of the security
always equals or exceeds the repurchase price. Repurchase agreements are
subject to credit risks. REVERSE REPURCHASE AGREEMENTS Reverse repurchase
agreements are repurchase agreements in which the Fund is the seller (rather
than the buyer) of the securities, and agrees to repurchase them at an agreed
upon time and price. A reverse repurchase agreement may be viewed as a type
of borrowing by the Fund. Reverse repurchase agreements are subject to credit
risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
WHEN ISSUED TRANSACTIONS When issued transactions are arrangements in which
the Fund buys securities for a set price, with payment and delivery of the
securities scheduled for a future time. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund. The Fund records the transaction when it agrees to buy
the securities and reflects their value in determining the price of its
shares. Settlement dates may be a month or more after entering into these
transactions SO THAT the market values of the securities bought may vary from
the purchase prices. Therefore, when issued transactions create market risks
for the Fund. When issued transactions also involve credit risks in the event
of a counterparty default. Some Funds may have leverage risks.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other when issued transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to accept
any security that meets specified terms. For example, in a TBA mortgage
backed transaction, the Fund and the seller would agree upon the issuer,
interest rate and terms of the underlying mortgages. However, the seller
would not identify the specific underlying mortgages until it issues the
security. TBA mortgage backed securities increase market risks because the
underlying mortgages may be less favorable than anticipated by the Fund.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if
the market value of the loaned securities increases. Also, the borrower must
pay the Fund the equivalent of any dividends or interest received on the
loaned securities. The Fund will reinvest cash collateral in securities that
qualify as an acceptable investment for the Fund. However, the Fund must pay
interest to the borrower for the use of cash collateral. Loans are subject to
termination at the option of the Fund or the borrower. The Fund will not have
the right to vote on securities while they are on loan, but it will terminate
a loan in anticipation of any important vote. The Fund may pay administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash collateral to a securities lending agent
or broker. Securities lending activities are subject to market risks and
credit risks. Some Funds may have leverage risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions. INVESTMENT LIMITATIONS FUNDAMENTAL LIMITATIONS The following
investment limitations are fundamental and cannot be changed without shareholder
approval. SELLING SHORT AND BUYING ON MARGIN

The Funds will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. A deposit or payment by a Fund
of initial or variation margin in connection with futures contracts, forward
contracts or related options transactions is not considered the purchase of a
security on margin. ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Funds will not issue senior securities except that a Fund may borrow money
directly (or with respect to the BALANCED FUND and VALUE FUND, through reverse
repurchase agreements) in amounts up to one-third of the value of their
respective total including the amounts borrowed (except to the extent that FIXED
INCOME FUND, GROWTH FUND and AGGRESSIVE GROWTH FUND may enter into futures
contracts). The Funds will not borrow money except as a temporary,
extraordinary, or emergency measure or to facilitate management of the portfolio
by enabling a Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Funds will not
purchase any securities while borrowings in excess of 5% of their respective
total assets are outstanding. PLEDGING ASSETS

The Funds will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. However, the TREASURY MONEY MARKET FUND, LIMITED MATURITY
GOVERNMENT FUND, FIXED INCOME FUND, GROWTH FUND and AGGRESSIVE GROWTH FUND may
pledge assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 10% (15% with respect to the LIMITED MATURITY GOVERNMENT
FUND) of the value of total assets at the time of the pledge. (For purposes of
this limitation, the following are not deemed to be pledges: margin deposits for
the purchase and sale of financial future contracts and related options and the
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis). LENDING CASH
OR SECURITIES

The Funds will not lend any of their assets, except, that each Fund, other than
TREASURY MONEY MARKET FUND, will lend portfolio securities (limited with respect
to LIMITED MATURITY GOVERNMENT FUND, FIXED INCOME FUND, GROWTH FUND and
AGGRESSIVE GROWTH FUND to one-third of the value of its respective total
assets). This shall not prevent a Fund from purchasing or holding U.S.
government obligations, money market instruments, variable rate demand notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by each Fund's investment objective, policies, and
limitations or the Trust's Declaration of Trust.

The TREASURY MONEY MARKET FUND will not lend any of its assets, except that
it may purchase or hold U.S. Treasury obligations permitted by its investment
objective, policies and limitations, or Declaration of Trust.

INVESTING IN COMMODITIES

The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts (except to the extent that a Fund may engage in
transactions involving futures contracts or options on futures contracts and
related options with respect to financial instruments, securities, or securities
indices). INVESTING IN REAL ESTATE

The Funds will not purchase or sell real estate, including limited partnership
interests, although the Funds (except for TREASURY MONEY MARKET FUND) may invest
in the securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or interests in
real estate. DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of each Fund's total
assets, the Funds will not purchase securities issued by any one issuer (other
than cash, cash items or securities issued or guaranteed by the government of
the United States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if, as a result, more than 5% of the value of
its total assets would be invested in the securities of that issuer. In
addition, each Fund will not acquire more than 10% of the outstanding voting
securities of that issuer. (For purposes of this limitation, the BALANCED FUND,
VALUE FUND, GROWTH FUND and AGGRESSIVE GROWTH FUND consider common stock and all
preferred stock of an issuer each as a single class, regardless of priorities,
series, designations, or other differences.) CONCENTRATION OF INVESTMENTS

A Fund will not invest 25% or more of its total assets in securities of issuers
having their principal business activities in the same industry (other than
securities issued by the U.S. government, its agencies or instrumentalities).

Due to the limited focus of its investment objective, this limitation has no
applicability to TREASURY MONEY MARKET FUND.
UNDERWRITING

The Funds will not underwrite any issue of securities, except as a Fund may
be deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities which the Funds may purchase pursuant to its
investment objective, policies, and limitations.

NON-FUNDAMENTAL LIMITATIONS

The following investment limitations are non-fundamental and, therefore,
may be changed by the Trustees without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes effective.

INVESTING IN ILLIQUID AND RESTRICTED SECURITIES

A Fund will not invest more than 15% (10% with respect to TREASURY MONEY MARKET
FUND) of its respective net assets in illiquid securities, including certain
restricted securities not determined to be liquid under criteria established by
the Trustees, repurchase agreements providing for settlement in more than seven
days after notice, non-negotiable fixed time deposits with maturities over seven
days, and over-the-counter options. PURCHASING SECURITIES TO EXERCISE CONTROL

The Funds will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Funds may invest in the securities of affiliated money market funds as an
efficient means of managing a Fund's uninvested cash.
INVESTING IN OPTIONS

A Fund will not purchase put options on securities unless the securities are
held in the Fund's portfolio and not more than 5% of the value of the Fund's
respective total assets would be invested in premiums on put option positions.
WRITING COVERED CALL OPTIONS

A Fund will not write call options on securities unless the securities are held
in the Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in the amount of any
further payment. ARBITRAGE TRANSACTIONS

The Funds will not enter into transactions for the purpose of engaging in
arbitrage.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. For purposes of its policies and limitations, the Fund considers
instruments (such as certificates of deposit and demand and time deposits)
issued by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be cash items. REGULATORY COMPLIANCE. The TREASURY MONEY MARKET
FUND may follow non-fundamental operational policies that are more restrictive
than its fundamental investment limitations, as set forth in the prospectus and
this statement of additional information, in order to comply with applicable
laws and regulations. In particular, the TREASURY MONEY MARKET FUND will comply
with the various requirements of Rule 2a-7 under the Act, which regulates money
market mutual funds. For example, Rule 2a-7 generally prohibits the investment
of more than 5% of the TREASURY MONEY MARKET FUND'S total assets in the
securities of any one issuer, although the TREASURY MONEY MARKET FUND'S
fundamental investment limitation only requires such 5% diversification with
respect to 75% of its assets. The TREASURY MONEY MARKET FUND will also determine
the effective maturity of its investments, as well as its ability to consider a
security as having received the requisite short-term ratings by NRSROs,
according to Rule 2a-7. The TREASURY MONEY MARKET FUND may change these
operational policies to reflect changes in the laws and regulations without
shareholder approval. PORTFOLIO TURNOVER. For the fiscal years ended November
30, 1998 and 1997, the portfolio turnover rates were ___% and 40%, respectively,
for LIMITED MATURITY GOVERNMENT FUND; ___% and 37%, respectively, for the FIXED
INCOME FUND; ___% and 40%, respectively, for the GROWTH FUND; ___% and 31%,
respectively, for the VALUE FUND; and ___% and 34%, respectively, for the
BALANCED FUND. DETERMINING MARKET VALUE OF SECURITIES USE OF THE AMORTIZED COST
METHOD (TREASURY MONEY MARKET FUND ONLY)

The Trustees have decided that the best method for determining the value of
portfolio instruments for the TREASURY MONEY MARKET FUND is amortized cost.
Under this method, portfolio instruments are valued at the acquisition cost as
adjusted for amortization of premium or accumulation of discount rather than at
current market value. The TREASURY MONEY MARKET FUND's use of the amortized cost
method of valuing portfolio instruments depends on its compliance with the
provisions of Rule 2a-7 (the Rule) promulgated by the Securities and Exchange
Commission under the Act. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. Under the Rule,
the TREASURY MONEY MARKET FUND is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule, a
demand feature entitles the Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days' notice
or (2) at specified intervals not exceeding 397 days on no more than 30 days'
notice. A standby commitment entitles the Fund to achieve same-day settlement
and to receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise. The TREASURY MONEY
MARKET FUND acquires instruments subject to demand features and standby
commitments to enhance the instrument's liquidity. The Fund treats demand
features and standby commitments as part of the underlying instruments, because
the Fund does not acquire them for speculative purposes and cannot transfer them
separately from the underlying instruments. Therefore, although the Fund defines
demand features and standby commitments as puts, the Fund does not consider them
to be corporate investments for purposes of its investment policies. MONITORING
PROCEDURES. The Trustees' procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to minimize
any material dilution or other unfair results arising from differences between
the two methods of determining net asset value. INVESTMENT RESTRICTIONS. The
Rule requires that the TREASURY MONEY MARKET FUND limit its investments to
instruments that, in the opinion of the Trustees, present minimal credit risks
and have received the requisite rating from one or more NRSROs. If the
instruments are not rated, the Trustees must determine that they are of
comparable quality. The Rule also requires the Fund to maintain a
dollar-weighted average portfolio maturity (not more than 90 days) appropriate
to the objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instrument with a remaining maturity of more than 397 days can be
purchased by the Fund. Should the disposition of a portfolio security result in
a dollar-weighted average portfolio maturity of more than 90 days, the TREASURY
MONEY MARKET FUND will invest its available cash to reduce the average maturity
to 90 days or less as soon as possible. Shares of investment companies purchased
by the Fund will meet these same criteria and will have investment policies
consistent with Rule 2a-7. Under the amortized cost method of valuation, neither
the amount of daily income nor the net asset value is affected by any unrealized
appreciation or depreciation of the portfolio. In periods of declining interest
rates, the indicated daily yield on shares of the TREASURY MONEY MARKET FUND,
computed based upon amortized cost valuation, may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates. In periods of rising interest rates, the indicated daily yield on
shares of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices and
estimates. MARKET VALUES (ALL OTHER FUNDS) Market values of portfolio securities
are determined as follows:

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

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

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

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

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

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors.

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

WHAT DO SHARES COST?
The TREASURY MONEY MARKET FUND attempts to stabilize the net asset value (NAV)
of Shares at $1.00 by valuing its portfolio securities using the amortized cost
method. Shares of the other Funds are sold at their NAV and redeemed at NAV less
any applicable contingent deferred sales charge (applies to Investment Shares
only) on days on which the New York Stock Exchange is open for business. The NAV
for each class of Shares may differ due to the variance in daily net income
realized by each class. Such variance will reflect only accrued net income to
which the shareholders of a particular class are entitled. HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Funds, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (AGGRESSIVE GROWTH FUND AND INVESTMENT SHARES ONLY)

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

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

The Funds (except the AGGRESSIVE GROWTH FUND) may pay Federated Shareholder
Services, a subsidiary of Federated Investors, Inc., for providing shareholder
services and maintaining shareholder accounts. Federated Shareholder Services
may select others, including Regions Bank and RICI, to perform these services
for their customers and may pay them fees.

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

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

<PAGE>

HOW TO BUY SHARES
EXCHANGING SECURITIES FOR FUND SHARES
You may contact the Distributor to request a purchase of Shares in an exchange
for securities you own. The Fund reserves the right to determine whether to
accept your securities and the minimum market value to accept. The Fund will
value your securities in the same manner as it values its assets. This exchange
is treated as a sale of your securities for federal tax purposes. EXCHANGE
PRIVILEGE Before the exchange, the shareholder must receive a copy of the
Prospectus. Please refer to the "How to Exchange Shares" section in the
Prospectus. REDEMPTION IN KIND

Although the Funds intend to pay share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities. Because the Trust has elected
to be governed by Rule 18f-1 under the Investment Company Act or 1940, the Funds
are obligated to pay share redemptions to any one shareholder in cash only up to
the lesser of $250,000 or 1% of a Fund's net assets represented by such share
class during any 90-day period. Any share redemption payment greater than this
amount will also be in cash unless the Funds' Trustees determine that payment
should be in kind. In such a case, a Fund will pay all or a portion of the
remainder of the redemption in portfolio securities, valued in the same way as
the Fund determines its net asset value. The portfolio securities will be
selected in a manner that the Funds' Trustees deems fair and equitable and, to
the extent available, such securities will be readily marketable. Redemption in
kind is not as liquid as a cash redemption. If redemption is made in kind,
shareholders receiving their portfolio securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur transaction costs. MASSACHUSETTS PARTNERSHIP LAW Under certain
circumstances, shareholders may be held personally liable under Massachusetts
law for acts or obligations of the Trust. To protect shareholders, the Trust has
filed legal documents with Massachusetts that expressly disclaim the liability
of shareholders for such acts or obligations of the Trust. These documents
require notice of this disclaimer to be given in each agreement, obligation, or
instrument the Trust or its Trustees enter into or sign. In the unlikely event a
shareholder is held personally liable for the Trust's obligations, the Trust is
required to use its property to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust. Therefore, financial loss
resulting from liability as a shareholder will occur only if the Trust cannot
meet its obligations to indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE INFORMATION VOTING RIGHTS Each Share of a Fund gives the
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. All classes of each Fund in a Trust have equal voting
rights, except that in matters affecting only a particular Fund or class, only
Shares of that Fund or class are entitled to vote. Trustees may be removed by
the Trustees or by shareholders at a special meeting. A special meeting of
shareholders will be called by the Trustees upon the written request of
shareholders who own at least 10% of each Trust's outstanding shares of all
series entitled to vote. As of January __, 1999, Officers and Trustees own less
than 1% of the Funds' outstanding shares.

The following list indicates the beneficial ownership of shareholders who are
the beneficial owners of more than 5% of the outstanding shares of the following
portfolios as of January __, 1999: HUBCO, c/o Regions Financial Corp.,
Birmingham, Alabama owned approximately ________ Trust Shares (____%) of the
Treasury Money Market Fund; approximately ________ Trust Shares (____%) and
______ Investment Shares (_____%) of Limited Maturity Government Fund;
approximately _______ Trust Shares (____%) and______ Investment Shares (_____%)
of Fixed Income Fund; approximately _____ Trust Shares (____%) of the Balanced
Fund; approximately ________ Trust Shares (____%) and ______ Investment Shares
(_____%) of Value Fund; and approximately ______ Trust Shares (____%) and
_______ Investment Shares (_____%) of Growth Fund.

IFTC, as custodian for Regions Financial Corporation Profit Sharing Plan, Kansas
City, Missouri, owned approximately________ Trust Shares (____%) of Treasury
Money Market Fund; approximately _______ Investment Shares (_____%) of Limited
Maturity Government Fund; approximately ______ Investment Shares (______%) of
Fixed Income Fund; approximately _______ Investment Shares (_____%) of Balanced
Fund; approximately _______ Investment Shares (____%) of Value Fund; and
approximately ________ Investment Shares (______%) of Growth Fund.

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

WHAT ARE THE TAX CONSEQUENCES?
FEDERAL INCOME TAX

The Funds will pay no federal income tax because each Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code (Code) applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. Each Fund will be treated as a single, separate entity for
federal income tax purposes so that income earned and capital gains and losses
realized by the Trust's other portfolios will be separate from those realized by
each Fund. Each Fund is entitled to a loss carry-forward, which may reduce the
taxable income or gain that each Fund would realize, and to which the
shareholder would be subject, in the future. The dividends received deduction
for corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to the Funds if the Funds were a regular corporation, and to the
extent designated by the Funds as so qualifying. Otherwise, these dividends and
any short-term capital gains are taxable as ordinary income. No portion of any
income dividends paid by the other Funds is eligible for the dividends received
deduction available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income. CAPITAL GAINS

Capital gains, when experienced by the Funds, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. When a Fund
realizes net long-term capital gains, it will distribute them at least once
every 12 months.
WHO MANAGES THE FUNDS?
OFFICERS AND TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years, total compensation received as a
Trustee from the Trust for its most recent fiscal year and total compensation
received from the Federated Fund Complex for the most recent calendar year. The
Trust is comprised of seven funds and the Federated Fund Complex is comprised of
56 investment companies in the Fund Complex. As of January __, 1999, the Funds'
Board and Officers as a group owned [approximately # (___%)] [less than 1%] of
the Fund's outstanding Shares.

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

John F. Donahue#*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924

Chairman and Trustee

Chief Executive Officer and Director or Trustee of the Funds; Chairman and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.Mr. Donahue is the father of J.
Christopher Donahue, Executive Vice President of the Trust.

Compensation from the Trust $0

Compensation from Fund Complex $0

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.

Compensation from the Trust $_____