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
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Pre-Effective Amendment No. ....................
Post-Effective Amendment No. 14 ................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 15 ................................... X
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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,
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)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
X 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
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CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of REGIONS FUNDS (formerly,
First Priority Funds), which is comprised of seven portfolios: (1) Regions
Growth Fund (formerly, First Priority Growth Fund); (2) Regions Fixed Income
Fund (formerly, First Priority Fixed Income Fund); (3) Regions Limited Maturity
Government Fund (formerly, First Priority Limited Maturity Government Fund); (4)
Regions Treasury Money Market Fund (formerly, First Priority Treasury Money
Market Fund); (5) Regions Value Fund (formerly, First Priority Value Fund); (6)
Regions Balanced Fund (formerly, First Priority Balanced Fund) and (7) Regions
Aggressive Growth Fund, relates only to portfolio (7), and is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(RULE 404 (C) CROSS REFERENCE)
Item 1. COVER PAGE......................(1-7) Cover Page.
Item 2. SYNOPSIS........................(1-7) Summary of Fund Expenses.
Item 3. CONDENSED FINANCIAL
INFORMATION....................(1-6) Financial Highlights;
(1-7) Performance Information.
Item 4. GENERAL DESCRIPTION
OF REGISTRANT..................(1-6) Synopsis; (7) General
Information; (1-6) Objective of Each
Fund; (1-6) Portfolio Investments and
Strategies; (7) Investment Objective
and Policies.
Item 5. MANAGEMENT OF THE FUND..........(1-6)Regions Funds Information;
(1-6) Management of the Regions
Funds; (1-7) Distribution of
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Fund Shares; (1-7) Fund
Administration; (1-7) Brokerage
Transactions; (1-6) Expenses of the
Funds; (7) Expenses of the Fund.
Item 6. CAPITAL STOCK AND
OTHER SECURITIES................(1-7) Dividends and Capital Gains;
(1-7) Shareholder Information;
(1-7) Voting Rights; (1-7) Effect of
Banking Laws; (1-7) Tax Information;
(1-7) Federal Income Tax.
Item 7. PURCHASE OF SECURITIES
BEING OFFERED..................(1-7) Net
Asset Value; (1-6) Investing in the
Funds; (7) Investing in the Fund;
(1-7) Minimum Investment Required;
(1-7) What Shares Cost; (1-7)
Conversion to Federal Funds; (1-7)
Systematic Investment Plan; (1-7)
Confirmations and Account Statements.
Item 8. REDEMPTION OR REPURCHASE........(1-7) Exchange Privilege;
(1-7) Exchanging Securities for Fund
Shares; (1-7) Redeeming
Shares; (1-7) By Telephone;
(1-7) By Mail; (1-7) Systematic
Withdrawal Plan; (1-7) Accounts
with Low Balances.
Item 9. PENDING LEGAL PROCEEDINGS.......None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. COVER PAGE......................(1-7) Cover Page.
Item 11. TABLE OF CONTENTS (1-7) Table of Contents.
Item 12. GENERAL INFORMATION
AND HISTORY....................(1-6) General Information about
the Trust.
Item 13. INVESTMENT OBJECTIVES AND
POLICIES.......................(1-7) Investment Objective and
Policies of the Funds;
(1-7) Investment Limitations.
Item 14. MANAGEMENT OF THE FUND..........(1-7) Regions Funds Management.
Item 15. CONTROL PERSONS AND PRINCIPAL
HOLDERS OF SECURITIES..........(1-7) Fund Ownership; (1-7) Trustees'
Compensation; (1-7) Trustee Liability.
Item 16. INVESTMENT ADVISORY AND OTHER
SERVICES.......................(1-7) Investment Advisory Services;
(1-7) Other Services; (1-7) Fund
Administration; (1-7) Custodian;
(1-6) Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Accounting Services;
(1-7) Independent Auditors.
Item 17. BROKERAGE ALLOCATION (1-7) Brokerage Transactions.
Item 18. CAPITAL STOCK AND OTHER
SECURITIES Not Applicable.
Item 19. PURCHASE, REDEMPTION AND PRICING
OF SECURITIES BEING OFFERED....(1-7)
Purchasing Shares; (1-7) Determining
Net Asset Value; (1-7) Redeeming
Shares; (1-7) Exchange Privilege;
(1-7) Exchanging Securities for Fund
Shares.
Item 20. TAX STATUS (1-7) Tax Status.
Item 21. UNDERWRITERS....................(1-7) Distribution Plan and
Shareholder Services Agreement
(Investment Shares Only and Special
Growth Fund; (1-7) Massachusetts
Partnership Law.
Item 22. CALCULATION OF PERFORMANCE
DATA...........................(1-) Total Return;
(4) Effective Yield; (1-7) Yield;
(1-7) Performance Comparisons.
<PAGE>
Item 23. FINANCIAL STATEMENTS To be filed by amendment.
IN RED INK ON THE LEFT SIDE] INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS
DATED NOVEMBER 9, 1998
REGIONS FAMILY OF FUNDS
REGIONS AGGRESSIVE GROWTH FUND
Prospectus
Dated December _____, 1998
A Diversified Portfolio of the Regions Funds,
an Open-End, Management Investment Company
TABLE OF CONTENTS
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TO BE ADDED
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PROSPECTUS
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REGIONS AGGRESSIVE GROWTH FUND
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The shares of Regions Aggressive Growth Fund (the "Fund") offered by this
prospectus represent interests in a portfolio of Regions Funds (the "Trust")
(formerly, First Priority Funds), an open-end management investment company (a
mutual fund). The Fund's investment objective is to provide long-term capital
appreciation through investment primarily in equity securities of companies with
small to medium sized market capitalization ($5 billion or less).
The shares offered by this prospectus are not deposits or obligations of any
Regions Bank, are not endorsed or guaranteed by any Regions Bank, and are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency.
Investment in these shares involves investment risks, including the possible
loss of principal.
This Prospectus contains the information you should read and know before you
invest in the Fund. Keep this Prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December
_____, 1998, with the Securities and Exchange Commission ("SEC"). The
information contained in the SAI is incorporated by reference into this
Prospectus. You may request a copy of the SAI free of charge, obtain other
information or make inquiries about the Fund by writing to the Fund or by
calling 1-800-433-2829. To obtain other information or make inquiries about the
Fund, contact the Fund at the address listed in the back of this Prospectus. The
SAI, material incorporated by reference into this document, and other
information regarding the Fund, are maintained electronically with the SEC at
Internet web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated December ____, 1998
<PAGE>
SUMMARY OF FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............................ None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(1)................ 3.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee................................................... None
ANNUAL FUND OPERATING EXPENSES *
(As a percentage of projected average net assets)
Management Fee ................................................ 0.75%
12b-1 Fees (2)................................................. 0.00%
Other Expenses................................................. 0.37%
Total Fund Operating Expenses............................... 1.12%
(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. (See "What Shares Cost".)
Shareholders who purchase Shares of the Treasury Money Market Fund through
exchange 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 Fund of shares in shareholder accounts that do
not comply with the minimum balance requirements.
(2)The Regions Aggressive Growth Fund has no intention of paying or accruing
12b-1 fees during the fiscal year ending November 30, 1999. If this Fund was
paying or accruing 12b-1 fees, the Regions Aggressive Growth Fund would be
able to pay up to 0.30% of its daily net assets for 12b-1 fees.
* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending November 30, 1999. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "REGIONS FUNDS INFORMATION," AND "INVESTING IN THE FUND."
EXAMPLE ..............................1 YEAR 3 YEARS
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption
at the end of each time period..............$43 $47
You would pay the following expenses on the same investment
assuming no redemptions:....................$11 $36
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>
GENERAL INFORMATION
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Regions Funds 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." The Declaration
of Trust permits Regions Funds to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities. The shares
of beneficial interest in any one portfolio may be offered in separate classes.
Regions Funds currently consists of seven investment portfolios, each (with the
exception of Aggressive Growth Fund) offering two classes of shares. This
prospectus relates only to Aggressive Growth Fund.
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.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide long-term capital
appreciation. The Fund will attempt to achieve its objective through investment
primarily in equity securities of companies with small to medium sized market
capitalization ($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 at least
65% of its assets in equity securities of companies with prospects for
above-average growth in revenues and/or earnings. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Trustees without approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
RISK FACTORS. Investors should be aware of the following general considerations.
The market value of the equity securities will also fluctuate, and the
possibility exists that the value of common stocks could decline over short or
even extended periods of time. The market value of fixed-income securities, may
vary inversely in response to changes in prevailing interest rates. These risks,
as well as a discussion of the risks associated with investment in small
capitalization stocks, are discussed in the section entitled "Equity Investment
Considerations." The foreign securities in which the Fund may invest may be
subject to certain risks in addition to those inherent in domestic investments.
The Fund may make certain investments and employ certain investment techniques
that involve other risks, including entering into repurchase agreements, lending
portfolio securities and entering into futures contracts and related options as
hedges. These risks and those associated with investing in when-issued
securities, options and variable rate securities are described below under
"Acceptable Investments" and in the SAI.
ACCEPTABLE INVESTMENTS.
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.
COMMON STOCKS. The Fund invests in stocks in those sectors of the economy where
it is expected that growth in revenues and/or earnings will cause the stocks to
perform favorably. Research is done to identify those sectors that will exhibit
favorable earnings growth prospects. Future growth prospects take precedence
over current valuation levels in the stock selection process, with an emphasis
on individual stock selection rather than sector weightings. Stocks selected for
investment will tend to have relatively small market capitalizations and exhibit
financial ratios (including price-to-earnings, price-to-book values, return on
assets values, and growth in earnings) greater than those of the general U.S.
equity market, although their actual dividend yields may be below those of the
broader market. Dividend yield will not be used as a selection criteria for
stocks held in the Fund, and any income received from securities held by the
Fund will be incidental. As a general matter, the Adviser will look to invest in
companies that are likely to benefit from new or innovative products, services,
or processes that should enhance such companies' prospects for future growth in
earnings. As a result, the market prices of many of the securities purchased and
held by the Fund may fluctuate widely.
DEBT SECURITIES--RATINGS AND INVESTMENT CONSIDERATIONS. Unless noted otherwise,
the Fund will only invest in debt securities which are rated "A" or better, at
the time of purchase, by a nationally recognized statistical rating organization
("NRSRO") (i.e., Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
("S&P"), or Fitch IBCA, Inc. ("Fitch"), or which, if unrated, are deemed to be
of comparable quality by the Adviser. If a debt security's rating falls below
"A" after the Fund has purchased it, the Fund is not required to drop the debt
security from its portfolio, but will consider appropriate action. Debt
securities may include fixed rate or adjustable rate bonds, debentures, and
notes of U.S. or foreign corporations; and U.S. government securities. The
prices of fixed-income securities fluctuate inversely to the direction of
interest rates.
When the Adviser selects debt securities for the Fund, it will consider the
ratings of a NRSRO assigned to various debt securities. In making its investment
decisions, the Adviser will also consider many factors other than current yield,
including the preservation of capital, the potential for realizing capital
appreciation, maturity, and yield to maturity. The Adviser will adjust
investments in particular securities or in types of debt securities in response
to its appraisal of changing economic conditions and trends. The Fund may sell
one security and purchase another security of comparable quality and maturity to
take advantage of what the Adviser believes to be short-term differentials in
market values or yield disparities.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which the
Fund invests are either issued or guaranteed by the U.S. government, its
agencies or instrumentalities. These securities include, but are not limited to:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes
and bonds;
o notes, bonds, and discount notes issued or guaranteed by the U.S.
government agencies and instrumentalities, supported by the full faith and
credit of the United States;
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
o notes, bonds, and discount notes of other U.S. government instrumentalities
supported only by the credit of the instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government are backed by the full faith and credit of the U.S.
Treasury. Others for which no assurances can be given that the U.S. government
will provide financial support to the agencies or instrumentalities, since it is
not obligated to do so, are supported by:
o the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
o the credit of the agency or instrumentality issuing the obligation.
BANK INSTRUMENTS. The bank instruments in which the Fund may invest include, but
are not limited to: time and savings deposits (including certificates of
deposit) in commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund, both of which
are administered by the Federal Deposit Insurance Corporation ("FDIC"),
including certificates of deposit and other time deposits issued by foreign
branches of FDIC insured banks, and banker's acceptances.
EQUITY INVESTMENT CONSIDERATIONS. The Fund, as with other mutual funds that
invest in equity securities, is subject to market risks. Since equity markets
tend to be cyclical, the possibility exists that common stocks could decline
over short or even extended periods of time. There are some additional risk
factors associated with investments in the Fund because the Fund may invest in
small-to-medium capitalization stocks. In particular, although their potential
for growth may be greater, stocks in the small-to-medium capitalization sector
of the United States equity market tend to be slightly more volatile in price
than larger capitalization stocks, such as those included in the Standard &
Poor's 500 Composite Stock Index ("S&P 500"). This is because, among other
things, small-to-medium-sized companies have less certain growth prospects than
larger companies, have a lower degree of liquidity in the equity market, and
tend to have a greater sensitivity to changing market conditions. Further, in
addition to exhibiting slightly higher volatility, the stocks of
small-to-medium-sized companies may, to some degree, fluctuate independently of
the stocks of larger companies. That is, the stocks of small-to-medium-sized
companies may decline in price as the price of large company stocks rises or
vice versa. Therefore, investors should expect that the Fund will be slightly
more volatile than, and may fluctuate independently of, broad stock market
indices such as the S&P 500. The Fund's investments may emphasize equity
securities issued by small-to-medium-sized companies. The Fund's strategy,
however, does not preclude investment in large, seasoned companies, which in the
judgment of the Adviser possess superior potential returns similar to companies
with formative growth profiles.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of ADRs. The Fund may also invest in debt
securities of foreign issuers. Securities of a foreign issuer may present
greater risks in the form of nationalization, confiscation, domestic
marketability, or other national or international restrictions. As a matter of
practice, the Fund will not invest in the securities of a foreign issuer if any
such risk appears to the Adviser to be substantial.
CONVERTIBLE SECURITIES. The convertible securities which the Fund may purchase
are securities which may be exchanged or converted into a predetermined number
of the issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds, or debentures or warrants or some
combination of the features of several of these securities. The Fund will
generally purchase only those convertible securities that were part of an issue
that had a market value of $50,000,000 at the time of issue. Convertible
securities are not held to a specific quality standard as other debt securities
purchased by the Fund except as mentioned below, but the Adviser will assess the
quality of the convertible security before purchase. Most convertible securities
pay income at a fixed rate in the form of interest or dividends. Some
convertible securities pay income at a rate which changes over time and some
convertibles do not pay current income. (See "Zero Coupon Convertible
Securities" below.)
The investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment purposes.
Convertible bonds and convertible preferred stocks are fixed-income securities
that generally retain the investment characteristics of fixed-income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Convertible securities are senior to equity
securities and, therefore, have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher yields
than common stocks, but lower than nonconvertible securities of similar quality.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in which, in
the Adviser's opinion, the investment characteristics of the underlying common
stock will assist the Fund in achieving its investment objective. Otherwise, the
Fund will hold or trade the convertible securities. In selecting convertible
securities for the Fund, the Adviser evaluates the investment characteristics of
the convertible security as a fixed-income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security, the
Adviser considers numerous factors, including the economic and market outlook,
the value of the security relative to other investment alternatives, trends in
the determinants of the issuer's profits, and an assessment of the quality of
the security.
ZERO COUPON CONVERTIBLE SECURITIES. Zero coupon convertible securities are
securities which are issued at a discount to their face amount and do not
entitle the holder to any periodic payments of interest prior to maturity.
Rather, income earned on zero coupon convertible securities accretes at a stated
yield until the security reaches its face amount at maturity. Zero coupon
convertible securities are convertible into the issuer's common stock. In
addition, zero coupon convertible securities usually have put features that
provide the holder with the opportunity to sell the bonds back to the issuer at
a stated price before maturity. Generally, the prices of zero coupon convertible
securities may be more sensitive to market interest rate fluctuations than
conventional convertible securities.
Federal income tax law requires the holders of a zero coupon convertible
security to recognize income from the security prior to the receipt of cash
payments. To maintain its qualification as a regulated investment company and
avoid liability for federal income taxes, the Fund will be required to
distribute income accrued from zero coupon convertible securities which it owns,
and may have to sell portfolio securities (perhaps at disadvantageous times) in
order to generate cash to satisfy these distribution requirements.
PUT AND CALL OPTIONS. The Fund may write (i.e., sell) covered call and put
options on all or any portion of their portfolios to generate income. By writing
a call option, the Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, the Fund becomes obligated during the term of the
option to purchase the securities underlying the option at the exercise price if
the option is exercised. The Fund may also write straddles (combinations of
covered puts and calls on the same underlying security).
The Fund may only write "covered" options. This means that, so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option or have the right to obtain such securities
without payment of further consideration (or have segregated cash in the amount
of any additional consideration). The Fund will be considered "covered" with
respect to a put option it writes if, so long as it is obligated as the writer
of the put option, it deposits and maintains with its custodian in a segregated
account liquid assets having a value equal to or greater than the exercise price
of the option. The principal reason for writing call or put options is to
obtain, through a receipt of premiums, a greater current return that would be
realized on the underlying securities alone. The Fund receives a premium from
writing a call or put option which it retains whether or not the option is
exercised. By writing a call option, the Fund might lose the potential for gain
on the underlying security while the option is open, and by writing a put
option, the Fund might become obligated to purchase the underlying security for
more than its current market price upon exercise.
The Fund may purchase call and put options for the purpose of offsetting
previously written call and put options of the same series. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Put options may also be purchased to protect against price movements
in particular securities in the Fund's portfolio. A put option gives the Fund,
in return for a premium, the right to sell the underlying security to the writer
(seller) at a specified price during the term of the option.
The Fund will purchase options only to the extent permitted by the policies of
state securities authorities in states where shares of the Fund are qualified
for offer and sale. The Fund will write put options only on securities which the
Fund wishes to have in its portfolio and where the Fund has determined, as an
investment consideration, that it is willing to pay the exercise price of the
option. The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers of
the options when options on the portfolio securities held by the Fund are not
traded on an exchange. The Fund purchases and writes options only with
investment dealers and other financial institutions (such as commercial banks or
savings associations) deemed creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.
The Fund may purchase put options and write call options using market index
options such as the S&P 500 for the purpose of hedging to attempt to protect the
value of the Fund or to generate income.
FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell futures contracts
to hedge all or a portion of its portfolio against changes in stock prices,
interest rates, and market conditions. The Fund will not engage in futures
transactions for speculative purposes. Financial futures contracts call for the
delivery of particular debt instruments at a certain time in the future. The
seller of the contract agrees to make delivery of the type of instrument called
for in the contract, and the buyer agrees to take delivery of the instrument at
the specified future time.
Stock index futures contracts are based on indices that reflect the market value
of common stock of the firms included in the indices. An index futures contract
is an agreement by which two parties agree to take or make delivery of an amount
of cash equal to the difference between the value of the index at the close of
the last trading day of the contract and the price at which the index contract
was originally written.
The Fund may also write call options and purchase put options on futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value. When the Fund writes a call option on a futures contract, it
is undertaking the obligation of selling a futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS. When the Fund uses futures and options on futures as hedging devices,
there is a risk that the prices of the securities subject to the futures
contracts may not correlate perfectly with the prices of the securities in the
Fund's portfolio. This may cause the futures contract and any related options to
react differently than the portfolio securities to market changes. In addition,
the Adviser could be incorrect in its expectations about the direction or extent
of market factors such as stock price movements. In these events, the Fund may
lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options depends on this secondary market.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
been applied to certain contracts (including, futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives". The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will only
use derivative contracts for the purpose disclosed in the applicable sections
above. To the extent that the Fund invests in securities that could be
characterized as derivatives, such as futures, it will only do so in a manner
consistent with its investment objectives, policies and limitations.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. In when-issued and delayed delivery transactions, the Fund relies
on the seller to complete the transaction. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices.
The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate income, the Fund may lend
portfolio securities on a short-term or long-term basis limited to one-third of
the value of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. This policy cannot be changed without the approval of
holders of a majority of the Fund's shares. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the Adviser
has determined are creditworthy under guidelines established by the Board of
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned at all
times. There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers and other recognized
financial institutions sell U.S. government securities or other securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
TEMPORARY INVESTMENTS. The Fund may, for temporary defensive purposes, in such
proportions as in the judgment of the Adviser prevailing market conditions
warrant, invest in cash and cash items, including:
o short-term money market instruments;
o securities issued and/or guaranteed as to payment of principal and interest
by the U.S. government, its agencies or instrumentalities; and
o repurchase agreements.
BORROWING MONEY. The Fund will not borrow money directly or through reverse
repurchase agreements (arrangements in which the Fund sells a portfolio
instrument for a percentage of its cash value with an agreement to buy it back
on a set date) or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets. The Fund will
not borrow through the use of reverse repurchase agreements. The Fund cannot
pledge securities except to secure permitted borrowings. In this regard, the
Fund is limited to pledging up to 10% of the value of its total assets to secure
such borrowings. These policies cannot be changed without the approval of
holders of a majority of the Fund's shares.
DIVERSIFICATION. The Fund will not, with respect to 75% of the value of its
total assets, invest more than 5% in securities of any one issuer other than
cash, cash items, or securities issued or guaranteed by the government of the
United States, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities. In addition, the Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer. These policies
cannot be changed without the approval of holders of a majority of the Fund's
shares.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restriction on resale under federal securities law. Under criteria
established by the Trustees, certain restricted securities are deemed to be
liquid. To the extent that restricted securities are not determined to be
liquid, the Fund will limit their purchase together with other illiquid
securities, non-negotiable time deposits, repurchase agreements providing for
settlement in more than seven days after notice, and over-the-counter options to
15% of its net assets.
REGIONS FUNDS INFORMATION
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MANAGEMENT OF THE REGIONS FUNDS
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
business affairs of the Trust and for exercising all of the powers of the Trust
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by the Capital Management Group, a
unit of the Trust Division of Regions Bank, as the Fund's Adviser, subject to
direction by the Trustees. The Adviser continually conducts investment research
and supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal to
0.80% of the Fund's average daily net assets. The fees for the Fund, while
higher than the advisory fees paid by other mutual funds in general, are
comparable to fees paid by many mutual funds with similar investment objectives
and policies. The Adviser may voluntarily choose to waive a portion of its fee
or reimburse other expenses of the Fund. The Adviser can terminate such waivers
or reimbursement policy at any time at its sole discretion.
ADVISER'S BACKGROUND. The Adviser is a wholly-owned subsidiary of Regions
Financial Corp., a bank holding company organized during 1971 under the laws of
the State of Delaware, and is a member of the Regions Bank organization.
Operating out of more than 700 offices, Regions Bank, and its affiliates,
provide a wide range of banking and fiduciary services. As of August 31, 1998,
Regions Financial Corp. was one of the 100 largest bank holding companies in the
United States with total assets of approximately $35 billion.
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. Also, Thomson BankWatch has given Regions Financial Corporation its
highest rating of "A", a distinction earned by less than 1% of U.S. financial
institutions. In addition, Veribanc, Inc. has designated Regions Bank as a Blue
Ribbon Bank. The Blue Ribbon rating symbol symbolizes excellence in asset
quality, capital strength, liquidity, and profitability, as well as other key
financial thresholds. No Blue Ribbon Bank has ever failed. Regions Financial
Corp.'s common stock is currently included among those in the Dow Jones Equity
Market Index as well as Standard & Poor's Midcap Index.
As fiduciary, Regions Bank managed over $7 billion in discretionary assets as of
August 31, 1998. It manages six common trust funds and collective investment
funds having a market value in excess of $480 million as of August 31, 1998.
Regions Bank has been Adviser to each of the Regions Funds since their
inception. The Regions Funds had a market value of approximately $1.2 billion as
of August 31, 1998.
As part of their regular banking operations, Regions Bank and its affiliates may
grant loans to public companies. Thus, it may be possible, from time to time,
for the Fund to hold or acquire the securities of issuers which are also lending
clients of Regions Bank or its affiliates. The lending relationship will not be
a factor in the selection of securities.
Charles Allen Murray, CFA. Birthdate: September 27,1948
Vice President and Portfolio Manager
Served 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.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the distributor for shares of the Fund. It is
a Pennsylvania corporation organized on November 14, 1969, and is the
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors, Inc.
DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with
Investment Company Act Rule 12b-1 (the "Distribution Plan"), the Fund may pay to
the distributor an amount computed at an annual rate of 0.30% of the average
daily net asset value of the Fund to finance any activity which is principally
intended to result in the sale of shares subject to the Distribution Plan.
The Fund is presently not accruing or paying any distribution expenses pursuant
to the Distribution Plan.
Federated Securities Corp. may from time to time and for such periods as it
deems appropriate, voluntarily reduce its compensation under the Distribution
Plan to the extent the expenses attributable to the Fund exceed such lower
expense limitation as the distributor may, by notice to the Trust, voluntarily
declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales and/or administrative support services as agents for their clients or
customers who beneficially own shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding a Fund; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund may reasonably request.
Financial institutions will receive fees from the distributor based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.
The Distribution Plan is a compensation-type plan. As such, the Fund make no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying, or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the services.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, Inc., provides the Fund with
certain administrative personnel and services (including certain legal and
accounting services) necessary to operate the Fund. Federated Administrative
Services provides these at an annual rate as follows:
...... MAXIMUM AVERAGE AGGREGATE DAILY ADMINISTRATIVE FEE
NET ASSETS OF THE TRUST
.150%. ............on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075%............. on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. Federated Administrative Services may voluntarily waive a
portion of its FEE.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Adviser will generally use those
who are recognized dealers in specific portfolio instruments, except when a
better price and execution of the order can be obtained elsewhere. In selecting
among firms believed to meet these criteria, the Adviser may give consideration
to those firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND
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Holders of shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.
NET ASSET VALUE
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The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
The net asset value of the Fund is determined as of the close of trading
(normally 4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient changes in
the value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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MINIMUM INVESTMENT REQUIRED. The minimum initial investment in the Fund by an
investor is $1,000. Subsequent investments in the Fund may be in any amounts.
The Fund may waive the initial minimum investment from time to time. For further
information, please call Regions Funds at 1-800-433-2829.
Investors may open an IRA account for shares of the Fund with a minimum initial
investment of $500. Officers, directors, employees, and retired employees of
Regions Bank, or its affiliates, and their spouses and their dependent children
may purchase shares of the Fund with a minimum initial investment of $500,
unless they choose to participate in the systematic investment plan, in which
case the minimum initial investment is $100.
WHAT SHARES COST. Shares of the Fund are sold without an initial sales charge,
but are subject to a contingent deferred sales charge of up to 3.00% if redeemed
within three full years following the purchase date. Shares of the Fund provide
an investor the benefit of putting all of the investor's dollars to work from
the time the investment is made.
Shares redeemed within three years of their purchase will be subject to a
contingent deferred sales charge. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
shares at the time of purchase or the net asset value of the redeemed shares at
the time of redemption according to the following schedule:
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
First 3.00%
Second 2.00%
Third 1.00%
Fourth 0.00%
Redemptions will be processed in a manner intended to maximize the amount
of redemption which will not be subject to a contingent deferred sales charge.
In computing the amount of the applicable contingent deferred sales charge,
redemptions are deemed to have occurred in the following order: (1) shares
acquired through the reinvestment of dividends and long-term capital gains; (2)
shares held for more than three full years from the date of purchase; and (3)
shares held for fewer than three years on a first-in, first-out basis.
No contingent deferred sales charge will be imposed on the redemption of shares
by officers, directors, employees and retired employees of Regions Bank, or its
affiliates, and their spouses and dependent children and by Regions Management
Account customers. Additionally, no contingent deferred sales charge will be
imposed upon trust customers redeeming through the Trust departments of Regions
Bank, or its affiliates. The Trust departments, however, may charge fees for
services provided, which may be related to the ownership of Fund shares. This
prospectus should, therefore, be read together with any agreement between the
Trust customer and the Trust department with regard to services provided and
fees charged for these services.
In addition, no contingent deferred sales charge will be imposed on (i) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per share, (ii) shares acquired
through reinvestment of dividends and capital gains, (iii) shares held for more
than three years after the end of the calendar month of acquisition, (iv)
accounts following the death or disability of any shareholder in the account,
(v) minimum required distributions to a shareholder over the age of 70 1/2 from
an IRA or other retirement plan, (vi) shares purchased prior to June 1, 1997, or
(vii) involuntary redemptions by the Fund of shares in shareholder accounts that
do not comply with the minimum balance requirements.
DEALER CONCESSIONS. For the redemption of shares of the Fund a dealer may
receive up to 100% of the contingent deferred sales charge. A portion of this
charge may be advanced to the dealer at the time of purchase. Any portion of the
contingent deferred sales charge which is not paid to a dealer will be retained
by the distributor. However, from time to time, and at the sole discretion of
the distributor, all or part of that portion may be paid to a dealer. If
accepted by the dealer, such additional payments will be predicated upon the
amount of Fund shares sold. Such payments may take the form of cash or
promotional incentives, such as payment of certain expenses of qualified
employees and their spouses to attend informational meetings about the Fund or
other special events at recreational facilities, or items of material value. In
some instances, these incentives will be made available only to dealers whose
employees have sold or may sell significant amounts of shares of the Fund.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or their
affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, education, and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor will be reimbursed
by the Adviser or its affiliates and are in addition to any payments made under
the Fund's Distribution Plan.
SHARE PURCHASES. Fund shares are sold on days on which both the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Trust
customers may purchase shares through the Trust Departments of Regions Bank and
its affiliates. Other customers may purchase shares through Regions Investment
Company, Inc. ("RICI"). Texas residents must purchase shares through Federated
Securities Corp. at 1-800-356-2805. In connection with the sale of Fund shares,
the distributor may from time to time offer certain items of nominal value to
any shareholder or investor. The Fund reserves the right to reject any purchase
request.
Trust customers may place an order to purchase shares by contacting their local
Trust Administrator or by calling Regions Bank at 1-800-433-2829. Other
customers may purchase shares by contacting their local RICI office or telephone
RICI at 1-800-456-3244.
Payment may be made by either check or federal funds or by debiting a customer's
account at Regions Bank or its affiliates. Purchase orders must be received by
3:00 p.m. (Central time) in order to be credited on the same day. For settlement
of an order, payment must be received within three business days of receipt of
the order.
CONVERSION TO FEDERAL FUNDS. It is the Fund's policy to be as fully invested as
possible so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Federated Shareholder Services Company
acts as the shareholder's agent in depositing checks and converting them to
federal funds.
SYSTEMATIC INVESTMENT PLAN. Holders of shares of the Fund may arrange for
systematic monthly investments in their accounts in amounts of $100 or more.
Officers, directors, employees, and retired employees of Regions Bank, or its
affiliates, and their spouses and their dependent children, may arrange for
systematic monthly investments in their accounts in amounts of $25 or more. Once
proper authorization is given, a shareholder's bank account will be debited to
purchase shares in the Fund.
EXCHANGING SECURITIES FOR FUND SHARES. Investors may exchange certain securities
or a combination of certain securities and cash for shares of the Fund. The Fund
reserves the right to determine the acceptability of securities to be exchanged.
On the day securities are accepted by the Fund, they are valued in the same
manner as the Fund values its assets. Investors wishing to exchange securities
should first contact Regions Bank. The market value of any securities exchanged
in an initial investment, plus any cash, must be at least $1,000,000.
CONFIRMATIONS AND ACCOUNT STATEMENTS. Shareholders will receive detailed
confirmations of transactions (except for systematic program transactions). In
addition, shareholders will receive periodic statements reporting all account
activity, including dividends paid. The Fund will not issue share certificates.
DIVIDENDS AND CAPITAL GAINS. Dividends are declared and paid quarterly.
Dividends are declared just prior to determining net asset value. Capital gains
realized by the Fund, if any, will be distributed at least once every twelve
months. Dividends and capital gains will be reinvested in additional shares of
the Fund on payment dates at the ex-dividend date net asset value unless cash
payments are requested by shareholders by writing to the Fund or Regions Bank,
as appropriate.
<PAGE>
EXCHANGE PRIVILEGE
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A shareholder may exchange shares of the Fund for Investment Shares of any other
Fund in the Regions Funds by calling or by writing to Regions Bank, or RICI, as
appropriate. Texas residents must telephone Federated Securities Corp. at
1-800-356-2805 to exchange shares. In addition, shareholders of the Trust may
have the ability to exchange shares of certain funds distributed by Federated
Securities Corp. For further information, contact Regions Bank. Shares purchased
by check are not eligible for exchange until the purchase check has cleared,
which could take up to seven calendar days. The exchange feature applies to
shares of the Fund as of the effective offering date of the Fund's shares.
Telephone exchange instructions may be recorded.
Orders to exchange shares of the Fund for Investment Shares of any of the other
Regions Funds will be executed by redeeming the shares owned at net asset value
and purchasing shares of any of the other Regions Funds at the offering price
determined after the proceeds from such redemption become available. Orders for
exchanges received by the Fund prior to 3:00 p.m. (Central time) on any day the
Fund is open for business will be executed as of the close of business that day.
Orders for exchanges received after 3:00 p.m. (Central time) on any business day
will be executed at the close of the next business day.
Shares of the Fund may be exchanged for Investment Shares of another Fund in the
Regions Funds without the imposition of a contingent deferred sales charge.
However, if the shareholder redeems the exchanged-for shares within three years
of the original purchase of exchanged shares, a contingent deferred sales charge
will be imposed. For purposes of computing the contingent deferred sales charge,
the length of time the shareholder has owned shares will be measured from the
date of original purchase and will not be affected by the exchange.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore,
the Trust, in addition to its right to reject any exchange, reserves the right
to terminate the exchange privilege of any shareholder who makes more than five
exchanges of shares of the Fund in a year or three in a calendar quarter.
An exchange order must comply with the requirements for a redemption and
purchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
each fund being acquired. An exchange constitutes a sale for federal income tax
purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING SHARES
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The Fund redeems shares at net asset value, less any applicable deferred sales
charge, next determined after the Fund receives the redemption request.
Redemption requests cannot be executed on days on which the New York Stock
Exchange is closed or on federal holidays when wire transfers are restricted.
Requests for redemption can be made in person, by telephone, or by mail through
RICI.
BY TELEPHONE. Trust customers may redeem shares of the Fund by contacting their
Trust Administrator. Other shareholders may redeem shares by telephoning their
local RICI office. For calls received by Regions Bank before 3:00 p.m. (Central
time), proceeds will normally be wired within five business days to the
shareholder's account at Regions Bank or a check will be sent to the address of
record. Those shares will not be entitled to the dividend declared on the day
the redemption request was received. In no event will proceeds be wired more
than seven days after a proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Regions Bank. Telephone redemption instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as a written request to Federated Shareholder
Services Company or Regions Bank, should be considered.
If, at any time, the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders would be promptly notified.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. A shareholder may redeem shares by sending a written request to RICI.
The written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested. Shareholders should
call RICI for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption payable other
than to the shareholder of record must have signatures on written redemption
requests guaranteed by:
o a trust company or commercial bank whose deposits are insured by BIF, which
is administered by the FDIC;
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings association whose deposits are insured by the SAIF,
which is administered by the FDIC; or
o any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and the transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within five
business days, but in no event more than seven days, after receipt of a proper
written redemption request, provided that the transfer agent has received
payment for shares from the shareholder.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, accounts having
a value of at least $10,000 may arrange for regular monthly or quarterly fixed
withdrawal payments. Each payment must be at least $100. Excessive withdrawals
may deplete or decrease the value of an account. For this reason, payments under
this Systematic Withdrawal Plan should not be considered as yield or income on
the shareholder's investment in the Fund. A contingent deferred sales charge may
be imposed on shares of the Fund.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below the applicable required
minimum value. This requirement does not apply, however, if the balance falls
below the applicable minimum because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
VOTING RIGHTS. Each share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders of the Fund for vote. All
shares of each portfolio in the Trust and of all classes, if applicable, have
equal voting rights, except that, in matters affecting only a particular fund or
class, only shareholders of that fund or class are entitled to vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or a Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by Trustees or by shareholders at a special meeting. A
special meeting of shareholders shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
EFFECT OF BANKING LAWS
- ---------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing, controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling, or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such an
investment company or from purchasing shares of such a company as agent for and
upon the order of their customer.
Some entities providing services to the Trust are subject to such banking laws
and regulations. They believe, based on the advice of counsel, that they may
perform those services for the Fund contemplated by any agreement entered into
with the Trust without violating those laws or regulations. Changes in either
federal or state statutes and regulations relating to the permissible activities
of banks and their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent these entities from continuing to perform all or a
part of the above services. If this happens, the Trustees would consider
alternative means of continuing available services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
TAX INFORMATION
- ----------------------------------------------------------------------------
FEDERAL INCOME TAX. The Fund will pay no federal income tax because the Fund
expects to meet requirements of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Fund will not be combined for tax purposes with those realized by any of the
other Regions Funds.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by the
maximum offering price per share of the Fund on the last day of the period. This
number is then annualized using semi-annual compounding. The yield does not
necessarily reflect income actually earned by the Fund and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
performance of the Fund to certain indices.
The performance information described above reflects the effect of the maximum
contingent deferred sales charge which, if excluded, would increase the total
return and yield.
PERFORMANCE INFORMATION FOR PREDECESSOR COLLECTIVE TRUST FUND
The Fund is the successor to the portfolio of a collective trust fund managed by
the Adviser. It is anticipated that, at the Fund's commencement of operations
(expected to take place on or about December 4, 1998), the assets from the
collective trust fund will be transferred to the Fund in exchange for Fund
shares. The Adviser has represented that the Fund's investment objective,
policies and limitations are in all material respects equivalent to those of the
collective trust fund.
The Fund's average annual compounded total returns for the one-, three-, five-
and since inception periods ended September 30, 1998, reflecting the contingent
deferred sales charge (See the section entitled "What Shares Cost" in this
prospectus) were -7.21%, 14.30%, 11.58% and 11.06%, respectively. The Fund's
average annual compounded total returns for the one-, three-, five- and since
inception periods ended September 30, 1998, without reflecting the contingent
deferred sales charge were -4.33%, 14.69%, 11.58% and 11.06%, respectively. The
quoted performance data includes the performance of the collective trust fund
for periods before the Fund's registration statement became effective. The past
performance data shown above is not necessarily indicative of the Fund's future
performance. The collective trust fund was not registered under the Investment
Company Act of 1940 ("1940 Act") and therefore was not subject to certain
investment restrictions that are imposed by the 1940 Act. If the collective
trust fund had been registered under the 1940 Act, the performance may have been
adversely affected.
<PAGE>
ADDRESSES
- ---------------------------------------------------------------------------
Regions Growth Fund5800 Corporate DrivePittsburgh, Pennsylvania 15237-7010
Distributor
Federated Securities Corp.
Federated Investors Tower1001 Liberty Avenue
Pennsylvania Pittsburgh, 15222-3779
Investment Adviser
Regions Bank
Capital Management Group
P.O. Box 10247
Birmingham, Alabama 35202
Transfer Agent, Dividend Disbursing Agent and Portfolio Accounting Services
Federated Shareholder Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
Regions Bank
417 North 20th Street
Birmingham, Alabama 35203
Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
Product Code(12/98)
[IN RED INK ON THE LEFT SIDE] INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 9, 1998
REGIONS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the following seven
portfolios (the "Funds"), of Regions Funds (the "Trust")(formerly, First
Priority Funds). Each Fund offers two classes of shares, Investment Shares and
Trust Shares, except Regions Aggressive Growth Fund which does not offer classes
of shares.
Regions Treasury Money Market Fund
Regions Limited Maturity Government Fund
Regions Fixed Income Fund
Regions Balanced Fund
Regions Value Fund
Regions Growth Fund
Regions Aggressive Growth Fund
This Statement of Additional Information should be read with the Prospectus of
Regions Funds dated December ____, 1998, ("Prospectus"). This Statement is not a
prospectus itself. To request a copy of the prospectus free of charge, write the
Trust or call 1-800-433-2829.
REGIONS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated December ____, 1998
[GRAPHIC OMITTED]
Federated Securities Corp., Distributor
Cusip 335931606 Cusip 335931887
Cusip 335931507 Cusip 335931879
Cusip 335931705 Cusip 335931861
Cusip 335931309 Cusip 335931853
Cusip 335931101 Cusip 335931846
Cusip 335931804 Cusip 335931838
Cusip __________
007580 (12/98)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------
I
GENERAL INFORMATION ABOUT THE TRUST 1
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS 1
Warrants 1
Collateralized Mortgage Obligations ("CMOs") 1
Resets of Interest 2
Caps and Floors 2
Investment Considerations - Mortgage-Backed 2
and Asset-Backed Securities
Repurchase Agreements 2
Money Market Instruments 3
When-Issued and Delayed Delivery Transactions 3
Futures and Options Transactions 3
Lending of Portfolio Securities 4
Restricted Securities 5
Reverse Repurchase Agreements 5
Portfolio Turnover 5
Investment Limitations 6
REGIONS FUNDS MANAGEMENT 9
Fund Ownership 13
Trustees Compensation 14
Trustee Liability 14
INVESTMENT ADVISORY SERVICES 15
Adviser to the Funds 15
Advisory Fees 15
OTHER SERVICES 15
Fund Administration 15
Custodian 15
Transfer Agent, Dividend Disbursing Agent, 16
and Portfolio Accounting Services
Independent Auditors 16
BROKERAGE TRANSACTIONS 16
PURCHASING SHARES 16
Distribution and Shareholder Servicing Plans 16
EXCHANGING SECURITIES FOR FUND SHARES 17
DETERMINING NET ASSET VALUE 17
Determining Market Value of Securities18
Use of the Amortized Cost Method 18
(Treasury Money Market Fund only)
EXCHANGE PRIVILEGE 19
Requirements for Exchanging Shares 19
Making an Exchange 19
REDEEMING SHARES 19
Redemption in Kind 19
MASSACHUSETTS PARTNERSHIP LAW 20
TAX STATUS 20
The Funds' Tax Status 20
Shareholders' Tax Status 20
TOTAL RETURN 21
YIELD 21
EFFECTIVE YIELD 22
PERFORMANCE COMPARISONS 22
Treasury Money Market Fund 23
Limited Maturity Government Fund 23
Fixed Income Fund 24
Balanced Fund 24
Value Fund 25
Growth Fund 25
Economic and Market Information 26
FINANCIAL STATEMENTS 26
APPENDIX 27
<PAGE>
GENERAL INFORMATION ABOUT THE TRUST
The 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 (the
"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"); Regions
Growth Fund, ("Growth Fund"); and Regions Aggressive Growth Fund ("Aggressive
Growth Fund"). Shares of the Funds are offered in two classes of shares, Trust
Shares and Investment Shares, (individually and collectively referred to as
"Shares" as the context may require), except for Aggressive Growth Fund which
does not offer classes of shares This Combined Statement of Additional
Information 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.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS
The Prospectus discusses the objective of each Fund and the policies they employ
to achieve those objectives. The following discussion supplements the
description of the Funds' investment policies in the Prospectus. The Funds'
respective investment objectives cannot be changed without approval of
shareholders. The investment policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
WARRANTS
Balanced Fund, Value Fund, Growth Fund and Aggressive Growth Fund may invest in
warrants. Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common stock
at issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However, most
warrants have expiration dates after which they are worthless. In addition, if
the market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. The percentage increase
or decrease in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
Limited Maturity Government Fund, Fixed Income Fund, and Balanced Fund may
invest in CMOs. The following example illustrates how mortgage cash flows are
prioritized in the case of CMOs--most of the CMOs in which several of the Funds
invest use the same basic structure:
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four tranches of securities: the
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date and the final tranche (Z bonds) typically receives any
excess income from the underlying investments after payments are made to the
other tranches and receives no principal or interest payments until the shorter
maturity tranches have been retired, but then receives all remaining principal
and interest payments.
(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.
(3) The tranches of securities are retired sequentially. All principal payments
are directed first to the shortest-maturity tranche (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest-maturity tranche (or B bonds). This process continues until
all of the tranches have been paid off.
Because the cash flow is distributed sequentially instead of pro rata, as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. One or more of the
tranches often bear interest at an adjustable rate. The interest portion of
these payments is distributed by the Funds as income, and the principal portion
is reinvested.
<PAGE>
RESETS OF INTEREST
The interest rates paid on the mortgage securities in which several of the Funds
invest may be readjusted at intervals of one year or less to an increment over
some predetermined interest rate index. There are two main categories of
indices: those based on U.S. Treasury securities and those derived from a
calculated measure, such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year and five-year
constant maturity Treasury Note rates, the three-month Treasury Bill rate, the
180-day Treasury Bill rate, rates on longer-term Treasury securities, the
National Median Cost of Funds, the one-month or three-month London Interbank
Offered Rate (LIBOR), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury Note rate,
closely mirror changes in market interest rate levels. Others tend to lag behind
changes in market rate levels and tend to be somewhat less volatile.
CAPS AND FLOORS
The underlying mortgages which collateralize the adjustable rate mortgage
securities ("ARMS") and CMOs in which several of the Funds invest will
frequently have caps and floors which limit the maximum amount by which the loan
rate to the residential borrower may change up or down: (1) per reset or
adjustment interval, and (2) the life of the loan. Some residential mortgage
loans restrict periodic adjustments by limiting changes in the borrower's
monthly principal and interest payments rather than limiting interest rate
changes. These payment caps may result in negative amortization.
The value of mortgage securities in which a Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable caps or
floors on the underlying residential mortgage loans. Additionally, even though
the interest rates on the underlying residential mortgages are adjustable,
amortization and prepayments may occur, thereby causing the effective maturities
of the mortgage securities in which a Fund invests to be shorter than the
maturities stated in the underlying mortgages.
INVESTMENT CONSIDERATIONS - MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Unlike conventional bonds, mortgage-backed and other asset-backed securities may
pay back principal over the life of the security rather than at maturity, and a
holder of these securities may receive unscheduled principal payments
representing prepayments on the underlying mortgages or other assets. As a
consequence, these securities may be a less effective means of "locking in"
long-term interest rates than other similar investments (e.g., investments with
comparable maturities).
While these securities generally entail less risk of a decline during periods of
rapidly rising rates, they may also have less potential for capital appreciation
than other similar investments, because as interest rates decline, the
likelihood increases that the underlying obligations will be prepaid.
Furthermore, if these securities are purchased at a premium, mortgage
foreclosures and unscheduled principal payments may result in some loss of a
holder's principal investment to the extent of the premium paid. Conversely, if
these securities are purchased at a discount, both a scheduled payment of
principal and unscheduled prepayment of principal would increase current and
total returns and would accelerate the recognition of income, which would be
taxed as ordinary income when distributed to shareholders.
REPURCHASE AGREEMENTS
The Funds require the custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from a Fund,
the Fund could receive less than the repurchase price on any sale of such
securities. In the event that a defaulting seller files for bankruptcy or
becomes insolvent, disposition of securities by a Fund might be delayed pending
court action. The Funds believe that under the regular procedures normally in
effect for custody of the Funds' portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of a Fund and
allow retention or disposition of such securities. The Funds will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Funds' Adviser to
be creditworthy pursuant to guidelines established by the Trustees.
<PAGE>
MONEY MARKET INSTRUMENTS
Value Fund, Growth Fund and Aggressive Growth Fund may invest in the following
money market instruments:
o instruments of domestic and foreign banks and savings associations if
they have capital, surplus and undivided profits of over $100,000,000 or
if the principal amount of the instrument is insured in full by the Bank
Insurance Fund or the Savings Association Insurance Fund, both of which
are administered by the Federal Deposit Insurance Corporation; and
o prime commercial paper (rated "A-1" by Standard & Poor's, "Prime-1" by
Moody's Investors Service, or "F-1" by Fitch IBCA, Inc.)
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Funds. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of a Fund sufficient to
make payment for the securities to be purchased are segregated on the Funds'
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Funds do not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of their respective
assets.
FUTURES AND OPTIONS TRANSACTIONS
The Funds that may engage in futures and options transactions will maintain
their positions in securities, options rights, and segregated cash subject to
puts and calls until the options are exercised, closed, or have expired. An
option position on futures contracts may be closed out over-the-counter or on a
nationally recognized exchange which provides a secondary market for options of
the same series.
A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that initial margin in futures transactions
does not involve the borrowing of funds by a Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good-faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day a Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as "marking
to market." Variation margin does not represent a borrowing or loan by a
Fund but is instead settlement between a Fund and the broker of the amount
one would owe the other if the futures contract expired. In computing its
daily net asset value, the Funds will mark to market their open futures
positions.
The Funds are also required to deposit and maintain margin when it writes
call options on futures contracts.
PUT OPTIONS ON FUTURES CONTRACTS
The Funds may purchase listed put options on futures contracts. Unlike
entering directly into a futures contract, which requires the purchaser to
buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, a Fund will
normally close out its option by selling an identical option. If the hedge
is successful, the proceeds received by a Fund upon the sales of the
second option will be large enough to offset both the premium paid by a
Fund for the original option plus the decrease in value of the hedged
securities.
<PAGE>
Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If a Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
CALL OPTIONS ON FUTURES CONTRACTS
In addition to purchasing put options on futures, the Funds may write
listed and over-the-counter call options on futures contracts to hedge its
portfolio. When a Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the life of
the option if the option is exercised. As stock prices fall or market
interest rates rise, causing the prices of futures to go down, a Fund's
obligation under a call option on a future (to sell a futures contract)
costs less to fulfill, causing the value of a Fund's call option position
to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
a Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of a Fund's portfolio securities.
Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less
than the premium received by a Fund for the initial option. The net
premium income of a Fund will then substantially offset the decrease in
value of the hedged securities.
The Funds will not maintain open positions in futures contracts they have
sold or call options they have written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of a Fund's securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, a Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
STOCK INDEX OPTIONS
Balanced Fund and Value Fund may purchase put options on stock indices
listed on national securities exchanges or traded in the over-the-counter
market. A stock index fluctuates with changes in the market value of the
stocks included in the index.
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in a Fund's portfolio correlate with price
movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the
price of a particular stock, whether a Fund will realize a gain or loss
from the purchase of the option on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements
in the price of a particular stock. Accordingly, successful use by a Fund
of options on stock indices will be subject to the ability of the Funds'
Adviser to predict correctly movements in the directions of the stock
market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the prices of individual
stocks.
LENDING OF PORTFOLIO SECURITIES
As a fundamental policy the Funds (with the exception of Treasury Money Market
Fund) may lend portfolio securities. The collateral received when a Fund lends
portfolio securities must be valued daily and, should the market value of the
loaned securities increase, the borrower must furnish additional collateral to a
Fund. During the time portfolio securities are on loan, the borrower pays a Fund
any dividends or interest paid on such securities. Loans are subject to
termination at the option of a Fund or the borrower. The Funds may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Funds would not have the right
to vote securities on loan, but would terminate the loan and regain the right to
vote if that were considered important with respect to the investment.
<PAGE>
RESTRICTED SECURITIES
The Funds (with the exception of Treasury Money Market Fund) may invest in
commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper is
restricted as to disposition under federal securities law and is generally sold
to institutional investors, such as the Funds, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Funds through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Funds believe that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Funds' investment adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Funds intend to not subject such
paper to the limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission (the "SEC")
staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe-harbor for
certain secondary market transactions involving registration for resales of
otherwise restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Funds believe that the staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Trustees. The Trustees may consider the following criteria in determining
the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
REVERSE REPURCHASE AGREEMENTS
Balanced Fund and Value Fund may also enter into reverse repurchase agreements
pursuant to a fundamental policy. These transactions are similar to borrowing
cash. In a reverse repurchase agreement, a Fund transfers possession of a
portfolio instrument to another person, such as a financial institution, broker,
or dealer, in return for a percentage of the instrument's market value in cash,
and agrees that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest at an
agreed upon rate. The use of reverse repurchase agreements may enable a Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that a Fund will be able to avoid selling portfolio instruments
at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund in a
dollar amount sufficient to make payment for the obligations to be purchased are
segregated at the trade date. These securities are marked to market daily and
are maintained until the transaction is settled.
PORTFOLIO TURNOVER
For the fiscal years ended November 30, 1997 and 1996, the portfolio turnover
rates were 40% and 48%, respectively, for Limited Maturity Government Fund; 37%
and 52%, respectively, for the Fixed Income Fund; 40% and 56%, respectively, for
the Growth Fund; 31% and 58%, respectively, for the Value Fund; and 34% and 41%,
respectively, for the Balanced Fund.
<PAGE>
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by a Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered as a
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 assets, 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 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).
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.)
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.
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.
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).
<PAGE>
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.
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.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN RESTRICTED AND ILLIQUID 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.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of affiliated money market funds as
an efficient means of managing the Fund's uninvested cash.
<PAGE>
PURCHASING SECURITIES TO EXERCISE CONTROL
The Funds will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN PUT 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 the investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Funds have no present intent to borrow money, pledge securities or, (1) with
respect to Balanced Fund and Value Fund, invest in reverse repurchase
agreements; (2) with respect to Limited Maturity Government Fund, invest in
credit card receivables; and (3) with respect to Fixed Income Fund, Growth Fund
and Aggressive Growth Fund, invest in restricted or illiquid securities, all in
excess of 5% of the value of each Fund's respective net assets in the coming
fiscal year. In addition, Treasury Money Market Fund has no present intention to
invest in closed-end investment companies in the coming fiscal year.
For purposes of their policies and limitations, the Funds consider instruments
issued by a U.S. branch of a domestic bank or savings association having
capital, surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
The Funds do not consider the issuance of separate classes of shares or entering
into futures contracts to constitute an issue of "senior securities" within the
meaning of the investment limitations set forth above.
The Funds will, as relevant, (1) limit the aggregate value of the assets
underlying covered call options or put options written by a Fund to not more
than 25% of its net assets; (2) will limit the premiums paid for options
purchased by a Fund to 20% of its net assets; and (3) will limit the margin
deposits on futures contracts entered into by a Fund to 5% of its net assets.
These restrictions may be revised without shareholder notification.
<PAGE>
REGIONS FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Regions Funds, and principal occupations.
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 Company.
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.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Director or Trustee of the Funds; President, Investment Properties
Corporation; Senior Vice-President, John R. Wood and Associates, Inc., Realtors;
Partner or Trustee in private real estate ventures in Southwest Florida;
formerly, President, Naples Property Management, Inc. and Northgate Village
Development Corporation.
Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Director or Trustee of the Funds; formerly, Partner, Andersen Worldwide SC.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; Director and Member of the Executive
Committee, Michael Baker, Inc.; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc.; Director, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund; Chairman, Pittsburgh
Civic Light Opera.
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director, The Emerging
Germany Fund, Inc.; formerly, President, Boston Stock Exchange, Inc.; Regional
Administrator, United States Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; formerly, Member, National Board of Trustees, Leukemia Society of
America.
Edward L. Flaherty, Jr., Esq. @
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney, Of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Treasurer and Trustee
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation; Director, VISA USA and VISA International; Chairman
and Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; President and Trustee, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; Director or Trustee of some of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee and
Trustee of the Company. of the Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board between meetings
of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Obligations Trust II; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Virtus Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; WesMark Funds; WCT Funds; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's 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 August 24, 1998: HUBCO, c/o Regions Financial Corp.,
Birmingham, Alabama owned approximately 204,261,212 Trust Shares (85.36%) of the
Treasury Money Market Fund; approximately 5,937,068 Trust Shares (100%) and
223,562 Investment Shares (7.19%) of Limited Maturity Government Fund;
approximately 19,135,314 Trust Shares (100%) and 644,604 Investment Shares
(32.35%) of Fixed Income Fund; approximately 687,823 Trust Shares (100%) of the
Balanced Fund; approximately 9,288,368 Trust Shares (100%) and 739,194
Investment Shares (29.45%) of Value Fund; and approximately 12,830,548 Trust
Shares (100%) and 660,999 Investment Shares (10.62%) of Growth Fund.
IFTC, as custodian for Regions Financial Corporation Profit Sharing Plan, Kansas
City, Missouri, owned approximately 28,313,635 Trust Shares (11.83%) of Treasury
Money Market Fund; approximately 2,628,462 Investment Shares (84.58%) of Limited
Maturity Government Fund; approximately 584,590 Investment Shares (29.34%) of
Fixed Income Fund; approximately 5,468,602 Investment Shares (78.94%) of
Balanced Fund; approximately 1,118,844 Investment Shares (44.58%) of Value Fund;
and approximately 3,649,881 Investment Shares (58.63%) of Growth Fund.
<PAGE>
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $1,596
Trustee
John T. Conroy, Jr. $1,755
Trustee
William J. Copeland $1,755
Trustee
James E. Dowd $1,755
Trustee
Lawrence D. Ellis, M.D. $1,596
Trustee
Edward L. Flaherty, Jr. $1,755
Trustee
Edward C. Gonzales $0
President, Treasurer and Trustee
Peter E. Madden $1,596
Trustee
John E. Murray, Jr., $1,596
Trustee
Wesley W. Posvar $1,596
Trustee
Marjorie P. Smuts $1,596
Trustee
*Information is furnished for the fiscal year ended November 30, 1997.
#The aggregate compensation is provided for the Trust which is comprised of 7
portfolios.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
<PAGE>
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUNDS
The Funds' investment adviser is the Capital Management Group, a unit of the
Trust Division of Regions Bank (the "Adviser"), which is a wholly-owned
subsidiary of Regions Financial Corp. Because of internal controls maintained by
Regions Bank to restrict the flow of non-public information, Fund investments
are typically made without any knowledge of Regions Bank or its affiliates'
lending relationships with an issuer.
The Adviser shall not be liable to the Trust, the Funds or any shareholder of
the Funds for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee from each Fund as described in the Prospectus. For the fiscal years ended
November 30, 1997, 1996 and 1995, the Adviser earned fees from Treasury Money
Market Fund of $923,323, $735,258 and $644,330, respectively, of which $461,662,
$427,681 and $644,330, were waived. For the fiscal years ended November 30,
1997, 1996 and 1995, the Adviser earned fees from Limited Maturity Government
Fund of $554,567, $448,104 and $406,281, respectively, of which $0, $48,135 and
$282,157, were waived. For the fiscal years ended November 30, 1997, 1996 and
1995, the Adviser earned fees from Fixed Income Fund of $1,272,862, $1,135,766
and $1,167,748, respectively, of which $0, $0 and $63,017, were waived. For the
fiscal years ended November 30, 1997, 1996 and for the period from December 19,
1994 (date of initial public investment) to November 30, 1995, the Adviser
earned fees from Balanced Fund of $576,963, $436,997 and $349,457, respectively,
of which $0, $48,034 and $242,832, were waived. For the fiscal years ended
November 30, 1997, 1996 and for the period from December 19, 1994 (date of
initial public investment) to November 30, 1995, the Adviser earned fees from
Value Fund of $875,092, $528,160 and $261,156, respectively, of which $0,
$42,523 and $180,915 were waived. For the fiscal years ended November 30, 1997,
1996 and 1995, the Adviser earned fees from Growth Fund of $1,925,571,
$1,242,921 and $1,151,393, respectively, of which $0, $12,959 and $129,440, were
waived.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services ("FAS"), a subsidiary of Federated Investors,
Inc., provides administrative personnel and services to the Funds for a fee as
described in the Prospectus. For the fiscal years ended November 30, 1997, 1996
and 1995, FAS earned fees from Treasury Money Market Fund of $218,861, $190,715
and $171,752, respectively. For the fiscal years ended November 30, 1997, 1996
and 1995, FAS earned fees from Limited Maturity Government Fund of $94,304,
$83,044 and $77,297, respectively. For the fiscal years ended November 30, 1997,
1996 and 1995, FAS earned fees from Fixed Income Fund of $201,589, $196,480 and
$207,570, respectively. During the fiscal years ended November 30, 1997, 1996,
and for the period from December 19, 1994 (date of initial public investment) to
November 30, 1995, FAS earned fees from Balanced Fund of $85,552, $70,893 and
$58,065, respectively and from Value Fund of $129,340, $85,580 and $50,126,
respectively. For the fiscal years ended November 30, 1997, 1996 and 1995, FAS
earned fees from Growth Fund of $285,419, $201,629 and $191,841, respectively.
CUSTODIAN
Regions Bank, Birmingham, Alabama, is custodian for the securities and cash of
the Funds. Under the custodian agreement, Regions Bank holds the each Fund's
portfolio securities and keeps all necessary records and documents relating to
its duties. Regions Bank's fees for custody services are based upon the market
value of Fund securities held in custody plus certain securities transaction
charges.
<PAGE>
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES
Federated Shareholder Services Company, Pittsburgh, Pennsylvania, a subsidiary
of Federated Services Company, is transfer agent and dividend disbursing agent
for the Funds. It also provides certain accounting and recordkeeping services
with respect to the Funds' portfolio investments.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Funds or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the Adviser or its
affiliates in advising the Funds and other accounts. To the extent that receipt
of these services may supplant services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses. The Adviser
and its affiliates exercise reasonable business judgment in selecting brokers
who offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. For the fiscal years ended November 30, 1997, 1996, and for the period
from December 19, 1994 (date of initial public investment) to November 30, 1995,
Balanced Fund paid total brokerage commissions of $45,727, $38,576 and $57,569,
respectively and Value Fund paid total brokerage commissions of $178,390,
$135,984 and $65,627, respectively. For the fiscal years ended November 30,
1997, 1996, and 1995, the Growth Fund paid total brokerage commissions of
$382,723, $269,887 and $442,047, respectively.
Although investment decisions for a Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type a Fund may
make may also be made by those other accounts. When a Fund and one or more other
accounts managed by the Adviser are prepared to invest in, or desire to dispose
of, the same security, available investments or opportunities for sales will be
allocated in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained or disposed of by a Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
PURCHASING SHARES
Shares of the Funds are sold at their net asset value and redeemed at net asset
value less any applicable contingent deferred sales charge on days on which the
New York Stock Exchange is open for business. The procedure for purchasing
shares of the Fund is explained in the Prospectus under "Investing in the
Funds." As used in the Prospectus, the term "dependent children" means all
children under the age of 19 and full-time students under the age of 23.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
(INVESTMENT SHARES ONLY AND AGGRESSIVE GROWTH FUND)
With respect to the Investment Shares of the Funds, and shares of Aggressive
Growth Fund, the Trust has adopted a Distribution Plan pursuant to Rule 12b-1
(the "Distribution Plan") which was promulgated by the SEC under the Investment
Company Act of 1940. In addition, the Funds have entered into a Shareholder
Services Agreement with Federated Shareholder Services on behalf of Investment
Shares of the Funds and shares of Aggressive Growth Fund. The Distribution Plan
provides for the payment of fees to Federated Securities Corp. to finance any
activity which is principally intended to result in the sale of Investment
Shares and shares of Aggressive Growth Fund. Such activities may include the
advertising and marketing of Fund shares; preparing, printing and distributing
prospectuses and sales literature to prospective shareholders, brokers or
administrators; and implementing and operating the Distribution Plan. Pursuant
to the Distribution Plan, the distributor may pay fees to brokers for
distribution and administrative services and to administrators for
administrative services as to Fund shares. Pursuant to the Shareholder Services
Agreement,
<PAGE>
Federated Shareholder Services Company may pay financial institutions to provide
services to holders of Investment Shares and shares of Aggressive Growth Fund.
The services provided under both arrangements are made by a representative who
has knowledge of the shareholder's particular circumstances and goals, and
include, but are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory, computer,
and other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses.
The Trustees expect that the adoption of the Distribution Plan will result in
the sale of a sufficient number of Fund shares so as to allow the Funds to
achieve economic viability. It is also anticipated that an increase in the size
of a Fund will facilitate more efficient portfolio management and assist the
Funds in seeking to achieve their respective investment objectives.
Other benefits which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholders assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal years ended November 30, 1997 and 1996, brokers and
administrators received fees in the amount of $187,392 and $163,095,
respectively, with respect to Investment Shares of Treasury Money Market Fund.
EXCHANGING SECURITIES FOR FUND SHARES
With respect to Limited Maturity Government Fund, Value Fund, and Balanced Fund,
any securities to be exchanged must meet the investment objective and policies
of the Fund, must have a readily ascertainable market value, must be liquid, and
must not be subject to restrictions on resale. An investor should forward the
securities in negotiable form with an authorized letter of transmittal to
Regions Bank. The Fund will notify the investor of its acceptances and valuation
of the securities within five business days of their receipt by Federated
Shareholder Services Company. Securities will be acquired for investment and not
for resale.
The basis of the exchange will depend upon the net asset value of Fund shares on
the day the securities are valued. One share of a Fund will be issued for each
equivalent amount of securities accepted.
Any interest earned on the securities prior to exchange will be considered in
valuing the securities. All interest, dividends, subscriptions, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
Treasury Money Market Fund attempts to stabilize the value of a share at $1.00.
Net asset value generally changes each day with respect to the other Funds. The
days on which the net asset value is calculated by the Funds are described in
the Prospectus.
<PAGE>
DETERMINING MARKET VALUE OF SECURITIES
With the exception of Treasury Money Market Fund, market or fair values of each
Fund's portfolio securities are determined as follows:
o for equity securities, according to the last sale price on a national
securities exchange, if applicable;
o in the absence of recorded sales for listed equity securities, according
to the mean between the last closing bid and asked prices;
o for unlisted equity securities, latest bid prices;
o for bonds and other fixed income securities, 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, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
A Fund will value futures contracts and options at their market values
established by the exchanges at the close of options trading on such exchanges
unless the Trustees determine in good faith that another method of valuing
option positions is necessary.
Over-the-counter put options will be valued at the mean between the bid and the
asked prices. Covered call options will be valued at the last sale price on the
national exchange on which such option is traded. Unlisted call options will be
valued at the latest bid price as provided by brokers.
USE OF THE AMORTIZED COST METHOD (TREASURY MONEY MARKET FUND ONLY)
With respect to Treasury Money Market Fund, the Trustees have decided that the
best method for determining the value of portfolio instruments is amortized
cost. Under this method, portfolio instruments are valued at the acquisition
cost as adjusted for amortization of premium or accumulation of discount rather
than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the SEC under the Investment Company Act of 1940. Under that
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 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 one year, 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.
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 0.50%
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.
<PAGE>
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments that,
in the opinion of the Trustees, present minimal credit risk and that, if
rated, meet minimum rating standards set forth in the Rule. If the
instruments are not rated, the Trustees must determine that they are of
comparable quality. Shares of investment companies purchased by the Fund
will meet these same criteria and will have investment policies consistent
with Rule 2a-7. 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 thirteen
months can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon
as possible.
Treasury Money Market Fund may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations. This policy may,
from time to time, result in high portfolio turnover. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset value
is affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
Treasury Money Market Fund, computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above, may tend to be
higher than a similar computation made by using a method of valuation based upon
market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares of
Treasury Money Market Fund computed the same way may tend to be lower than a
similar computation made by using a method of calculation based up market prices
and estimates.
EXCHANGE PRIVILEGE
REQUIREMENTS FOR EXCHANGING SHARES
Shareholders using the exchange privilege must exchange shares having a net
asset value of at least the minimum initial investment requirements of each Fund
as set forth in the Prospectus. Before the exchange, the shareholder must
receive a copy of the Prospectus.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in the same class of Shares of the other fund.
Further information on the exchange privilege and the Prospectus may be obtained
by calling Regions Bank.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions may
require a signature guarantee.
REDEEMING SHARES
The Funds redeem shares at the next computed net asset value after receiving the
redemption request. Redemption procedures are explained in the respective
prospectus under "Redeeming Shares." Shareholder redemptions for Investment
Shares of the Funds and shares of Aggressive Growth Fund may be subject to a
contingent deferred sales charge.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the respective Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
<PAGE>
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
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 from its assets.
TAX STATUS
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, each Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to a Fund if the Fund were a regular corporation and to the extent
designated by the Fund as so qualifying. These dividends and any short-term
capital gains are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund shares.
With respect to Treasury Money Market Fund, capital gains experienced by
the Fund could result in an increase in dividends. Capital losses could
result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them once
every twelve months.
<PAGE>
TOTAL RETURN
The average annual total return for each class of shares of the Funds is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the maximum offering price per Share at the end of the
period. The number of Shares owned at the end of the period is based on the
number of shares purchased at the beginning of the period with $1,000 adjusted
over the period by any additional Shares, assuming the quarterly or monthly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the net asset value of
Investment Shares and shares of Aggressive Growth Fund redeemed.
The average annual total returns for Investment Shares and Trust Shares of
Treasury Money Market Fund for the one-year period ended November 30, 1997 were
4.39% and 4.81%, respectively. During the period from April 14, 1992 (date of
initial public investment) to November 30, 1997, the average total returns were
3.76% and 4.17%, respectively.
The average annual total returns for Investment Shares of Limited Maturity
Government Fund for the one-year period ended November 30, 1997 and the period
from December 12, 1993 (date of initial public investment) to November 30, 1997
were 1.66% and 4.86%, respectively.
The average annual total returns for Investment Shares of Fixed Income Fund for
the one-year period ended November 30, 1997 and the period from April 20, 1992
(date of initial public investment) to November 30, 1997 were 2.84% and 6.86%,
respectively.
The average annual total returns for Investment Shares of Balanced Fund for the
one-year period ended November 30, 1997 and the period from December 19, 1994
(date of initial public investment) to November 30, 1997 were 13.14% and 16.73%,
respectively.
The average annual total returns for Investment Shares of Value Fund for the
one-year period ended November 30, 1997 and the period from December 19, 1994
(date of initial public investment) to November 30, 1997 were 20.85% and 23.48%,
respectively.
The average annual total returns for Investment Shares of Growth Fund for the
one-year period ended November 30, 1997 and the period from April 20, 1992 (date
of initial public investment) to November 30, 1997 were 19.19% and 14.65%,
respectively.
The Funds (other than Treasury Money Market Fund and Aggressive Growth Fund) did
not offer the Trust Shares class until January 1998.
YIELD
The yield for each class of shares of the Funds (other than shares of Treasury
Money Market Fund) is determined by dividing the net investment income per share
(as defined by the SEC) earned by any class of shares over a thirty-day period
by the maximum offering price per share on the last day of the period. This
number is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of shares of the Fund, the performance will be reduced for shareholders paying
those fees.
The yield for the 30-day period ended November 30, 1997 for Investment
Shares was: 4.89% for Limited Maturity Government Fund; 5.79% for Fixed Income
Fund; 2.70% for Balanced Fund; 1.41% for Value Fund; and 0.35% for Growth Fund.
The Funds (other than Treasury Money Market Fund and Aggressive Growth Fund) did
not offer the Trust Shares class until January 1998.
<PAGE>
Treasury Money Market Fund calculates yield for Investment Shares , shares of
Aggressive Growth Fund and Trust Shares daily, based upon the seven days ending
on the day of the calculation, called the "base period." This yield is computed
by the following:
o determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share, and all dividends declared on the original and any purchased
shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, the performance will be reduced for those shareholders paying
those fees.
The yields for Investment Shares and Trust Shares of Treasury Money Market
Fund for the seven-day period ended November 30, 1997 were 4.28% and 4.68%,
respectively.
EFFECTIVE YIELD
Treasury Money Market Fund's effective yield for both classes of shares is
computed by compounding the unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
The effective yield for Investment Shares and Trust Shares of Treasury Money
Market Fund for the seven-day period ended November 30, 1997 were 4.38% and
4.79%, respectively.
PERFORMANCE COMPARISONS
The performance of each class of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in a Fund's or class of share's expenses; and
o various other factors, including the relative amount of Fund cash flow.
With respect to Funds other than Treasury Money Market Fund, either class of
Shares' performance fluctuates on a daily basis largely because net earnings and
the maximum offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
<PAGE>
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Funds use in advertising may include:
LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, a Fund will quote its Lipper ranking in the appropriate category
in advertising and sales literature.
MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUA FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
TREASURY MONEY MARKET FUND:
o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S.
Treasury, maturing in 30 days.
o LEHMAN BROTHERS TREASURY BOND INDEX comprised entirely of U.S. Treasury
obligations. Flower bonds and foreign issues are excluded.
o IBC/DONOHUE'S MONEY FUND REPORT publishes annualized yields of hundreds
of money market funds on a weekly basis and through its Money Market
Insight publication reports monthly reinvestment of dividends over a
specified period of time.
LIMITED MATURITY GOVERNMENT FUND:
o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an unmanaged index tracking
short-term U.S. government securities with maturities between 1
and 2.99 years. The index is produced by Merrill Lynch, Pierce, Fenner
& Smith, Inc.
o MERRILL LYNCH CORPORATE AND GOVERNMENT INDEX includes issues which must
be in the form of publicly placed, nonconvertible, coupon-bearing
domestic debt with maturities between 1 and 4.99 years. Par amounts
outstanding must be no less than $10 million at the start and at the
close of the performance measurement period. Corporate instruments must
be rated by S&P or by Moody's as investment grade issues (i.e., BBB/Baa
or better).
o MERRILL LYNCH 1-10 YEAR GOVERNMENT INDEX is an unmanaged index comprised
of U.S. government securities with maturities between 1 and 10 years.
Index returns are calculated as total returns for periods of one, six
and twelve months, as well as year-to-date. The index is produced by
Merrill Lynch, Pierce, Fenner & Smith, Inc.
o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX is an unmanaged index
comprised of all publicly issued, non-convertible domestic debt of the
U.S. government. Only notes and bonds with minimum outstanding principal
of $1 million and minimum maturity of one year and maximum maturity of
ten years are included.
o MERRILL LYNCH 2-YEAR TREASURY CURVE INDEX is comprised of the most
recently issued 2-year U.S. Treasury notes. Index returns are calculated
as total returns for periods of one, three, six, and twelve months as
well as year-to-date.
o 2-YEAR TREASURY NOTE-Source: Wall Street Journal, Bloomberg Financial
Markets, and Telerate.
Investors may use such a reporting service or indices in addition to the
Fund's prospectus to obtain a more complete view of the Fund's
performance before investing.
<PAGE>
FIXED INCOME FUND:
O LEHMAN BROTHERS GOVERNMENT/CORPORATE TOTAL INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, non-convertible domestic bonds of maturity
of nine years. It calculates total return for one month, three month,
twelve month, and ten year periods, and year-to-date.
o MERRILL LYNCH GOVERNMENT/CORPORATE INDEX is comprised of approximately
4,800 issues which include publicly placed, nonconvertible
coupon-bearing domestic debt carrying a term to maturity of at least one
year, with par amounts outstanding at no less than $10 million at the
start and close of the performance measurement period, and which must be
rated by S&P or Moody's as investment grade issues (i.e., BBB/Baa or
better).
o MERRILL LYNCH 1-10 YEAR GOVERNMENT INDEX is an unmanaged index comprised
of U.S. Government securities with maturities between 1 and 10 years.
Index returns are calculated as total returns for periods of one, three,
six and twelve months as well as year-to-date. The index is produced by
Merrill Lynch, Pierce, Fenner & Smith, Inc.
o LEHMAN BROTHERS GOVERNMENT (LT) INDEX, for example, is an index composed
of bonds issued by the U.S. government or its agencies which have at
least $1 million outstanding in principal and which have maturities of
ten years or longer. Index figures are total return figures calculated
monthly.
BALANCED FUND:
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's Index assumes reinvestments
of all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE TOTAL INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, nonconvertible domestic bonds of companies
in industry, public utilities, and finance. Tracked by Lehman Brothers,
the index has an average maturity of nine years. It calculates total
return for one-month, three-month, twelve-month, and ten-year periods,
and year-to-date.
o S&P 500/LEHMAN BROTHERS GOVERNMENT/CORPORATE (WEIGHTED INDEX) AND THE
S&P 500/LEHMAN GOVERNMENT (WEIGHTED INDEX) combine the components of a
stock-oriented index and a bond-oriented index to obtain results which
can be compared to the performance of a managed fund. The indices' total
returns will be assigned various weights depending upon the Fund's
current asset allocation.
o MERRILL LYNCH 1-10 YEAR GOVERNMENT INDEX is an unmanaged index comprised
of U.S. government securities with maturities between 1 and 10 years.
Index returns are calculated as total returns for periods of one, six
and twelve months, as well as year-to-date. The index is produced by
Merrill Lynch, Pierce, Fenner & Smith, Inc.
<PAGE>
VALUE FUND:
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's Index assumes reinvestments
of all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
o S&P/BARRA VALUE INDEX is a sub-index of the S&P 500 composite index of
common stocks. The index represents approximately fifty percent of the
S&P 500 market capitalization and is comprised of those companies with
lower price-to-book ratios. The index is maintained by Standard & Poor's
in conjunction with Barra, an investment technology firm.
GROWTH FUND:
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, compares total returns of funds
whose portfolios are invested primarily in common stocks. In addition,
the Standard & Poor's index assumes reinvestment of all dividends paid
by stocks listed on the index. Taxes due on any of these distributions
are not included, nor are brokerage or other fees calculated in the
Standard & Poor's figures.
O S&P/BARRA GROWTH INDEX is a sub-index of the S&P 500 composite index of
common stocks. The index represents approximately fifty percent of the
S&P 500 market capitalization and is comprised of those companies with
higher price-to-book ratio (one distinction associated with "growth
stocks"). The index is maintained by Standard and Poor's in conjunction
with BARRA, an investment technology firm.
AGGRESSIVE GROWTH FUND:
TO BE ADDED
Investors may also consult the fund evaluation consulting universes
listed below. Consulting universes may be composed of pension, profit
shares, commingled, endowment/foundation, and mutual funds.
o FIDUCIARY CONSULTING GRID UNIVERSE, for example, is composed of over
1,000 funds, representing 350 different investment managers, divided
into subcategories based on asset mix. The funds are ranked quarterly
based on performance and risk characteristics.
o SEI data base for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on
investor groups and asset mix. The funds are ranked every three, six,
and twelve months.
o MERCER MEIDINGLER, INC. complies a universe of approximately 600
equity funds, representing about 500 investment managers, and
updates their rankings each calendar quarter as well as on a one,
three, and five year basis.
o CALLAN ASSOCIATES, INC. maintains a detailed database of approximately
1900 equity mutual funds, representing about 500 investment managers,
and divides them into style groups based on asset mix and fund
objectives. The funds are ranked quarterly based in performance and risk
characteristics.
Advertisements and other sales literature for a Fund may quote total returns
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in either class of
shares based on quarterly reinvestment of dividends over a specified period of
time. Advertisements for Investment Shares and shares of Aggressive Growth Fund
may quote performance information which does not reflect the effect of the
contingent deferred sales charge. Advertising and other promotional literature
may include charts, graphs and other illustrations using the Funds' returns, or
returns in general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic investment. In
addition, the Funds can compare their performance, or performance for the types
of securities in which they invest, to a variety of other investments, such as
bank savings accounts, certificates of deposit, and Treasury bills.
<PAGE>
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
FINANCIAL STATEMENTS The financial statements for the fiscal year ended November
30, 1997, are incorporated herein by reference to the Annual Report of the Trust
dated November 30, 1997 (File No. 811-6511) . A copy of the Trust's Annual
Report may be obtained without charge by contacting the Trust.
<PAGE>
APPENDIX
STANDARD AND POOR'S CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-):--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Not rated by Moody's.
FITCH IBCA, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. The issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
<PAGE>
MOODY'S INVESTORS SERVICES, INC., COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (for related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1 repayment
capacity will normally be evidenced by the following characteristics:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated PRIME-2 (for related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
FITCH IBCA, INC., SHORT-TERM RATINGS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned to this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2--(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not as great
as the F-1+ and F-1 categories.
PART C. OTHER INFORMATION.
Item 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements: To be filed by amendment.
(b) Exhibits:
(1) (i) Conformed copy of Declaration of Trust of the
Registrant, including conformed copy of
Amendment No. 1;(7)
(ii) Conformed copy of Amendment No. 2 to Declaration
of Trust (4);
(iii) Conformed Copy of Amendment No. 3 through 5 to
the Declaration of Trust; (12)
(iv) Form of Amendment No. 6 to the Declaration of
Trust; (12)
(2) Copy of By-Laws of the Registrant (1);
(i) Copy of Amendment Nos. 1 through 4 to the
By-Laws of the Registrant; (13)
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (4);
(5) (i) Conformed copy of Investment Advisory Contract
of the Registrant, through and including
conformed copies of Exhibits A, B, C, and D;(7)
(ii) Conformed Copy of Exhibits E and F to the
Investment Advisory Contract of the Registrant to
add First Priority Equity Income Fund and First
Priority Balanced Fund, respectively, to the
Investment Advisory Contract; (11)
(6) (i) Conformed copy of Distributor's Contract of the
Registrant, including conformed copies of Exhibits A,
B, and C;(7) (ii) Conformed Copy of Exhibit D to the
Distributor's Contract to add First Priority Equity
Income Fund and First Priority
Balanced Fund, respectively, to the Distributor's
Contract; (11) (iii) Conformed copy of Exhibits E and F
to the Distributor's Contract; (13)
(7) Not applicable;
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed December 23, 1991. (File Nos. 33-44737 and
811-6511)
(4) Response is incorporated by reference to Post-Effective Amendment No. 5 on
Form N-1A filed January 24, 1994. (File Nos. 33-44737 and 811-6511).
(7) Response is incorporated by reference to Post-Effective Amendment No.7 on
Form N-1A filed October 7, 1994 (File Nos. 33-44737 and 811-6511).
(11) Response is incorporated by reference to Post-Effective Amendment No. 11 on
Form N-1A filed January 22, 1997 (File Nos. 33-44737 and 811-6511).
(12) Response is incorporated by reference to Post-Effective Amendment No. 12 on
Form N-1A filed January 20, 1998 (File Nos. 33-44737 and 811-6511).
(13) Response is incorporated by reference to Post-Effective Amendment No. 13 on
Form N-1A filed September 18, 1998 (File Nos. 33-44737 and 811-6511).
<PAGE>
(8) Conformed copy of Custodian Contract of the Registrant
between First Priority Funds and Regions Bank (4); (9) (i)
Conformed copy of Fund Accounting and Shareholder
Recordkeeping Agreement (5);
(ii) Form of Shareholder Services Plan of the
Registrant; (7)
(iii) Conformed copy of Shareholder Services Agreement
with conformed copy of Exhibit A attached thereto; (13)
(iv) Conformed copy of Administrative Services
Agreement;(10)
(a) Amendment No. 1 to Administrative Services
Agreement; (13)
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (11)
(11) Conformed Copy of Independent Auditors Consent;(12)
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding; (5)
(14) Not applicable;
(15) (i) Conformed copy of Distribution Plan of the
Registrant, through and including conformed copies of
Exhibits A and B;(7) (ii) Conformed Copy of Exhibit C
to the Distribution Plan of the Registrant; (11)
(iii) Copy of Rule 12b-1 Agreement through and including
Exhibit A (1); (iv) Copy of Amendment No. 1 to Exhibit
A of the Rule 12b-1 Agreement; (12)
(16) (i) Copy of Schedules for Computation of Fund
Performance Data for First Priority Growth Fund,
First Priority Value Fund, First Priority
Balanced Fund, First Priority Treasury Money
Market Fund, and First Priority Fixed Income
Fund; (11)
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed December 23, 1991. (File Nos. 33-44737 and
811-6511)
(4) Response is incorporated by reference to Post-Effective Amendment No. 5 on
Form N-1A filed January 24, 1994. (File Nos. 33-44737 and 811-6511).
(5) Response is incorporated by reference to Post-Effective Amendment No. 6 on
Form N-1A filed June 29, 1994 (File Nos. 33-44737 and 811-6511).
(7) Response is incorporated by reference to Post-Effective Amendment No.7 on
Form N-1A filed October 7, 1994 (File Nos. 33-44737 and 811-6511).
(10) Response is incorporated by reference to Post-Effective Amendment No. 10 on
Form N-1A filed January 26, 1996 (File Nos. 33-44737 and 811-6511).
(11) Response is incorporated by reference to Post-Effective Amendment No. 10 on
Form N-1A filed January 22, 1997 (File Nos. 33-44737 and 811-6511).
(12) Response is incorporated by reference to Post-Effective Amendment No. 12 on
Form N-1A filed January 20, 1998 (File Nos. 33-44737 and 811-6511).
(13) Response is incorporated by reference to Post-Effective Amendment No. 13 on
Form N-1A filed September 18, 1998 (File Nos. 33-44737 and 811-6511).
(ii) Copy of Schedule for Computation of Fund
Performance Data for First Priority Limited Maturity
Government Fund (5); (17) Copy of Financial Data Schedules;
(12) (18) (i) Conformed Copy of Multiple Class Plan; (9)
(ii) Conformed copy of Exhibits A & B to
Multiple Class Plan; (13)
(19) Conformed copy of Power of Attorney; +
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
None
Item 26. NUMBER OF HOLDERS OF SECURITIES: Number of Record Holders
TITLE OF CLASS AS OF AUGUST 24, 1998___
Shares of Beneficial Interest
(no par value)
Regions Growth Fund
Trust Shares 5
Investment Shares 2,611
Regions Fixed Income Fund
Trust Shares 5
Investment Shares 330
Regions Limited Maturity Government Fund
Trust Shares 6
Investment Shares 69
Regions Treasury Money Market Fund
Trust Shares 11
Investment Shares 2,126
Regions Value Fund
Trust Shares 5
Investment Shares 1,050
Regions Balanced Fund
Trust Shares 6
Investment Shares 846
Regions Aggressive Growth Fund Not yet effective
Item 27. INDEMNIFICATION: (1)
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed December 23, 1991. (File Nos. 33-44737 and
811-6511)
(9) Response is incorporated by reference to Post-Effective Amendment No. 9 on
Form N-1A filed June 29, 1995 (File Nos. 33-44737 and 811-6511).
(11) Response is incorporated by reference to Post-Effective Amendment No. 10 on
Form N-1A filed January 22, 1997 (File Nos. 33-44737 and 811-6511).
(12) Response is incorporated by reference to Post-Effective Amendment No. 12 on
Form N-1A filed January 20, 1998 (File Nos. 33-44737 and 811-6511).
(13) Response is incorporated by reference to Post-Effective Amendment No. 13 on
Form N-1A filed September 18, 1998 (File Nos. 33-44737 and 811-6511).
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
(a) The Adviser is a wholly-owned subsidiary of Regions
Financial Corp., a bank holding company organized during 1971
under the laws of the State of Delaware, and is a member of the
Regions Bank organization. Operating out of more than 700
offices, Regions provides wide range of banking and fiduciary
services to its customers. As of August 31, 1998, Regions
Financial Corp. was one of the 100 largest bank holding
companies in the United States with total assets of
approximately $35 billion. Regions is one of only nine banking
companies in the nation to be named to Keefe, Bruyette & Woods,
Inc.'s 1995 Bank Honor Roll, which recognizes companies that
continually report annual increases in their earnings per
share. Also, Thomson BankWatch has given Regions Financial
Corporation its highest rating of "A", a distinction earned by
less than 1% of U.S. financial institutions. In addition,
Veribanc, Inc. has designated Regions' flagship bank, First
Alabama Bank, as a Blue Ribbon Bank. The Blue Ribbon rating
symbol symbolizes excellence in asset quality, capital
strength, liquidity, and profitability, as well as other key
financial thresholds.
As fiduciary, Regions Bank managed over $7 billion in
discretionary assets as of August 31, 1998. It manages ten
common trust funds and collective investment funds having a
market value in excess of $480 million as of August 31, 1998.
Regions Bank has been adviser to First Priority Funds since
inception with a market value of approximately $1.2 billion as
of August 31, 1998.
Other Substantial
Position with Business, Profession,
NAME THE ADVISER VOCATION OR EMPLOYMENT
J. Stanley Mackin Chairman of the Board
Richard D. Horsley Vice Chairman of the
Board and Executive
Financial Officer
Sam P. Faucett President/Western Region
President/Florida Region
Joe M. Hinds, Jr. President/Northern Region
President/Tennessee Region
Wilbur B. Hufham President/Southeastern
Region
William E. Jordan President/Central Region
Carl E. Jones, Jr. Chief Executive Officer
William E. Askew Executive Vice President/
Retail Banking
Delmar F. Epton Executive Vice President/
Operations Group
Robert P. Houston Executive Vice President
and Comptroller
<PAGE>
E.C. Stone Executive Vice President
Corporate Banking
Richard E. Wambsganss Executive Vice President/
Trust Group
Will G. Fisher Senior Vice President/
International Banking
Douglas W. Graham Senior Vice President/
Personnel
J. Kenneth Alderman Senior Trust Investment
Officer
Jackie D. Oliver Senior Vice President/
Revolving Credit
Edward A. Solomon Senior Vice President/
Operations
Loring C. Muir Senior Vice President/
Compliance
Samuel E. Upchurch, Jr. General Counsel
E. Eldridge, Jr. Corporate Auditor
Sheila S. Blair Director Executive Director,
Greater Birmingham
Foundation
James B. Boone, Jr. Director Chairman of the Board
Boone Newspapers, Inc.
Albert P. Brewer Director Professor of Law &
Government
Samford University
James S.M. French Director Chairman and President
Dunn Investment Company
Richard D. Horsley Director Vice Chairman of the
Board and Executive
Financial Officer
Regions Financial Corp.
Catesby AP C. Jones Director Proprietor
Mabry Securities Company
Olin B. King Director Chairman of the Board and
Chief Executive Officer
SCI Systems, Inc.
William R. Boles Director Attorney,
Boles, Boles,& Ryan
H. Manning McPhillips, Jr. Director Chairman and Chief
Executive Officer
McPhillips Manufacturing
Company, Inc.
J. Stanley Mackin Director Chairman of the Board and
Chief Executive Officer
Regions Financial Corp.
Henry E. Simpson Director Attorney
Lange, Simpson, Robinson
& Somerville
Robert E. Steiner, III Director Attorney
Steiner, Crum & Baker
Lee J. Styslinger, Jr. Director Chairman
ALTEC Industries, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
Automated Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIGGS Funds; SouthTrust Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President,
Federated Investors Tower President, Federated, Treasurer and
Pittsburgh, PA 15222-3779 Securities Corp. Trustee
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ronald Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Regions Funds 5800 Corporate Drive
("Registrant") Pittsburgh, PA 15237-7010
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend 1001 Liberty Avenue
Disbursing Agent) Pittsburgh, PA 15222-3779
Federated Administrative Services Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Regions Bank
Mutual Funds Group P.O. Box 10247
("Advisor and Custodian") Birmingham, Alabama 35202
<PAGE>
Item 31. MANAGEMENT SERVICES: Not applicable.
Item 32. UNDERTAKINGS:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, REGIONS FUNDS, has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, all in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 9th day of November 1998.
REGIONS FUNDS
(formerly, First Priority Funds)
BY: /s/ Gail Cagney
Gail Cagney, Assistant Secretary
Attorney in Fact for John F. Donahue
November 9, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Gail Cagney
GAIL CAGNEY____ Attorney In Fact November 9, 1998
---------------
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer and Trustee
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
EXHIBIT 19 UNDER FORM N-1A
EXHIBIT 24 UNDER ITEM 601/REG. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of REGIONS FUNDS and each of them, their
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/S/ JOHN F. DONAHUE Chairman and Trustee November 4, 1998
John F. Donahue (Chief Executive Officer)
/S/ E. C. GONZALES President, Treasurer and November 4, 1998
Edward C. Gonzales Trustee(Principal
Financial and
Accounting Officer)
/S/ THOMAS G. BIGLEY Trustee November 4, 1998
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Thomas G. Bigley
/S/NICHOLAS P. CONSTANTAKISTrustee November 4, 1998
Nicholas P. Constantakis
/S/ JOHN T. CONROY, JR. Trustee November 4, 1998
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John T. Conroy, Jr.
/S/ WILLIAM J. COPELAND Trustee November 4, 1998
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William J. Coopeland
/S/ JAMES E. DOWD Trustee November 4, 1998
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James E. Dowd
/S/ LAWRENCE D. ELLIS, M.D.Trustee November 4, 1998
Lawrence D. Ellis, M.D.
/S/ EDWARD L. FLAHERTY, JR.Trustee November 4, 1998
Edward L. Flaherty, Jr.
/S/ PETER E. MADDEN Trustee November 4, 1998
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Peter E. Madden
/S/ JOHN E. MURRAY, JR. Trustee November 4, 1998
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John E. Murray, Jr.
/S/ WESLEY W. POSVAR Trustee November 4, 1998
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Wesley W. Posvar
/S/ MARJORIE P. SMUTS Trustee November 4, 1998
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Marjorie P. Smuts
Sworn to and subscribed before me this 4th day of November, 1998.
_/S/ CHERI GOOD
Notary Public
