111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
(A PORTFOLIO OF THE 111 CORCORAN FUNDS)
PROSPECTUS
The shares of 111 Corcoran North Carolina Municipal Securities Fund (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio in
the 111 Corcoran Funds (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide income which
is exempt from federal regular income tax and North Carolina state income tax.
In addition, the Fund intends to qualify as an investment substantially exempt
from the North Carolina intangible personal property tax. The Fund pursues this
objective by investing primarily in a portfolio of North Carolina municipal
securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF CENTRAL
CAROLINA BANK AND TRUST COMPANY OR ITS AFFILIATES, ARE NOT ENDORSED OR
GUARANTEED BY CENTRAL CAROLINA BANK AND TRUST COMPANY OR ITS AFFILIATES, 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 July 31,
1994 with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing or calling the Fund at 1-800-422-2080.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 4
Municipal Securities 4
Characteristics 4
Participation Interests 4
Variable Rate Municipal
Securities 5
Municipal Leases 5
Investing in Securities of Other
Investment Companies 5
Restricted and Illiquid Securities 5
When-Issued and Delayed Delivery
Transactions 5
Lending of Portfolio Securities 5
Put and Call Options 6
Financial Futures and Options
on Futures 6
Risks 7
Temporary Investments 7
North Carolina Municipal Bonds 8
Investment Risks 8
Non-Diversification 8
Investment Limitations 9
THE 111 CORCORAN FUNDS INFORMATION 9
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Management of the 111 Corcoran Funds 9
Board of Trustees 9
Investment Adviser 9
Advisory Fees 9
Adviser's Background 10
Distribution of Fund Shares 10
Administration of the Fund 11
Administrative Services 11
Custodian 11
Transfer Agent, Dividend Disbursing
Agent and Portfolio Recordkeeper 11
Legal Counsel 11
Independent Public Accountants 11
NET ASSET VALUE 11
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INVESTING IN THE FUND 11
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Share Purchases 11
Through Central Carolina Bank 12
Through Authorized
Broker/Dealers 12
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Quantity Discounts and
Accumulated Purchases 13
Letter of Intent 14
Reinvestment Privilege 14
Systematic Investment Program 14
Certificates and Confirmations 14
Dividends 14
Capital Gains 15
EXCHANGE PRIVILEGE 15
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Exchange by Telephone 15
Written Exchange 16
REDEEMING SHARES 16
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By Telephone 16
By Mail 16
Systematic Withdrawal Program 17
Accounts with Low Balances 17
Redemption in Kind 18
SHAREHOLDER INFORMATION 18
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Voting Rights 18
Massachusetts Partnership Law 18
EFFECT OF BANKING LAWS 19
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TAX INFORMATION 19
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Federal Income Tax 19
North Carolina Taxes 20
Other State and Local Taxes 21
PERFORMANCE INFORMATION 21
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FINANCIAL STATEMENTS 22
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 36
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ADDRESSES Inside Back Cover
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................................... 4.50%
Maximum Sales Load 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)................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee.............................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of estimated average net assets)
Management Fee (after waiver)(1).......................................... 0.00%
12b-1 Fees................................................................ None
Total Other Expenses...................................................... 0.50%
Total Fund Operating Expenses (2).................................... 0.50%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver and/or reimbursement by the investment adviser. The investment
adviser, at its sole discretion, can terminate this voluntary waiver and/or
reimbursement at any time. The maximum management fee is 0.75%.
(2) The Total Fund Operating Expenses are estimated to be 1.25% absent the
anticipated voluntary waiver and/or reimbursement by the Fund's adviser. The
Total Fund Operating Expenses were 0.69% for the fiscal year ended May 31, 1994,
and were 1.44% absent the voluntary waiver and/or reimbursement for the fiscal
year ended May 31, 1994.
*EXPENSES IN THIS TABLE ARE ESTIMATED BASED ON EXPENSES EXPECTED TO BE INCURRED
DURING THE FISCAL YEAR ENDING MAY 31, 1995. 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 " THE 111 CORCORAN FUNDS INFORMATION."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption at
the end of each time period............................. $50 $60 $72 $105
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 36.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------
1994 1993*
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<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.36 $10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.47 0.37
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Net realized and unrealized gain (loss) on investments (0.18) 0.36
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Total from investment operations 0.29 0.73
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.47) (0.37)
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Distributions to shareholders from net realized gain on investment
transactions (0.01) --
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Total distributions (0.48) (0.37)
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NET ASSET VALUE, END OF PERIOD $10.17 $10.36
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TOTAL RETURN** 2.68% 7.37%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.69% 0.70%(b)
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Net investment income 4.42% 4.51%(b)
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Expense waiver/reimbursement(a) 0.75% 0.99%(b)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $45,864 $28,152
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Portfolio turnover rate 24% 17%
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</TABLE>
* Reflects operations for the period from July 22, 1992 (date of initial public
investment) to May 31, 1993.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
annual report dated May 31, 1994, which can be obtained free of charge.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The 111 Corcoran Funds was established as a Massachusetts business trust under a
Declaration of Trust dated December 11, 1991. The Declaration of Trust permits
the 111 Corcoran Funds to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. This prospectus
relates only to the 111 Corcoran Funds' North Carolina municipal securities
portfolio, known as 111 Corcoran North Carolina Municipal Securities Fund (the
"Fund"). The Fund is for trust clients of Central Carolina Bank and its
affiliates and individual investors who desire a convenient means of
accumulating an interest in a professionally managed, non-diversified portfolio
investing primarily in North Carolina municipal securities. Central Carolina
Bank is the investment adviser to the Fund. A minimum initial investment of
$1,000 is required. Subsequent investments must be in amounts of at least $100.
The Fund is not likely to be a suitable investment for retirement plans since it
intends to invest primarily in North Carolina municipal securities which are
tax-exempt.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide income which is exempt from
federal regular income tax and North Carolina state income tax. In addition, the
Fund intends to qualify as an investment substantially exempt from the North
Carolina intangible personal property tax ("intangibles tax"). (Federal regular
income tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.) Interest income of the
Fund that is exempt from federal regular income tax and North Carolina state
income tax described above retains its tax-exempt status when distributed to the
Fund's shareholders. However, income distributed by the Fund may not necessarily
be exempt from state or municipal taxes in states other than North Carolina.
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. The investment objective cannot be changed without approval of
shareholders. Unless indicated otherwise, the investment policies may be changed
by the Board of Trustees (the "Trustees") without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of municipal securities
exempt from North Carolina state income taxes, intangibles tax and/or federal
regular income tax. The average maturity of the Fund is 5 to 15 years. As a
matter of fundamental investment policy which may not be changed without
shareholder approval, the Fund will invest its assets so that, under normal
circumstances, at least 80% of its annual interest income is exempt from federal
regular income tax or that at least 80% of its net assets are invested in
obligations, the interest income from which is exempt from federal regular
income tax. In addition, the
Fund will invest its assets so that, under normal circumstances, at least 65% of
the value of its total assets will be invested in North Carolina municipal
securities which are exempt from federal regular income tax, North Carolina
state income tax and intangibles tax.
ACCEPTABLE INVESTMENTS
MUNICIPAL SECURITIES. The North Carolina municipal securities in which the Fund
invests are obligations, including industrial development bonds, issued on
behalf of the state of North Carolina and its political subdivisions.
In addition, the Fund may invest in obligations issued by or on behalf of any
state, territory or possession of the United States, including the District of
Columbia, or any political subdivision or agency of any of these; and
participation interests, as described below, in any of the above obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Fund and/or the investment adviser to the Fund,
exempt from the personal income tax imposed by the state of North Carolina
and/or federal regular income tax. It is likely that shareholders who are
subject to alternative minimum tax will be required to include interest from a
portion of the municipal securities owned by the Fund in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations. To the extent the Fund invests in North Carolina municipal
securities which are direct obligations of the state of North Carolina or its
political subdivisions or direct obligations of the U.S. government, interest in
the Fund will also be exempt from the intangibles tax.
CHARACTERISTICS. The municipal securities which the Fund buys are subject to the
following quality standards:
- rated "A" or above by either Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Corporation ("Standard & Poor's"). A description of
the rating categories is contained in the Appendix to the Statement of
Additional Information;
- insured by a municipal bond insurance company which is rated "AAA" by
Standard & Poor's or "Aaa" by Moody's;
- guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
- fully collateralized by an escrow of U.S. government securities; or
- unrated if determined to be of comparable quality to one of the foregoing
rating categories by the Fund's adviser.
If a security loses its rating or has its rating reduced after the Fund has
purchased it, the Fund is not required to sell or otherwise dispose of the
security, but may consider doing so. If ratings made by Moody's or Standard &
Poor's change because of changes in those organizations or in their ratings
systems, the Fund will attempt to obtain comparable ratings as substitute
standards in accordance with the investment policies of the Fund.
PARTICIPATION INTERESTS. The Fund may purchase participation interests in
municipal securities from financial institutions such as commercial banks,
savings and loan associations, and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal and state tax. The
financial institutions from which the Fund purchases participation interests
frequently provide or secure irrevocable letters of credit or guarantees to
assure that the participation interests are of high quality. The Trustees will
determine that participation interests meet the prescribed quality standards for
the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the North Carolina municipal
securities which the Fund purchases may have variable interest rates. Variable
interest rates are ordinarily based on a published interest rate, interest rate
index, or a similar standard, such as the 91-day U.S. Treasury bill rate. Many
variable rate municipal securities are subject to payment of principal on demand
by the Fund, usually in not more than seven days. All variable rate municipal
securities will meet the quality standards for the Fund. The Fund's investment
adviser has been instructed by the Trustees to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including participation
interests held by the Fund, on the basis of published financial information and
reports of the nationally recognized statistical rating organizations and other
analytical services.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, or a conditional sales contract.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will invest
in other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. It should
be noted that investment companies incur certain expenses such as management
fees and, therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expense.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. Restricted securities are any securities in
which the Fund may otherwise invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities laws. Certain restricted securities which the Trustees deem to be
liquid will be excluded from this limitation. The Fund will limit investments in
illiquid securities, including certain restricted securities or municipal leases
not determined by the Trustees to be liquid, 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase municipal
securities on a when-issued or delayed delivery basis. In when-issued and
delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term basis up to one-third of the
value of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the 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.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the Fund.
The Fund will write call options on securities either held in its portfolio or
for which it has the right to obtain without payment of further consideration or
for which it has segregated cash in the amount of any additional consideration.
In the case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.
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
since 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 and loan
associations) deemed creditworthy by the Fund's 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.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government 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.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the 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 also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a
futures contract, the Fund is entitled (but not obligated) to purchase a futures
contract at a fixed price at any time 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 contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
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 Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest rate 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 investment adviser will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market on an exchange 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 positions depends on
this secondary market.
TEMPORARY INVESTMENTS. The Fund normally invests its assets so that at least 80%
of its annual interest income is exempt from federal regular income tax or that
at least 80% of its net assets are invested in obligations, the interest income
from which is exempt from federal regular income tax. In addition, the Fund will
invest its assets so that, under normal circumstances, at least 65% of the value
of its total assets will be invested in North Carolina municipal securities
which are exempt from federal regular income tax, North Carolina state income
tax and intangibles tax. However, from time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in short-term tax-exempt or taxable temporary investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; shares of other investment companies; and
repurchase agreements (arrangements in which the organization selling the Fund a
bond or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of comparable quality to the acceptable investments of the Fund.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
However, it is anticipated that certain temporary investments will generate
income which is subject to North Carolina state income tax and subject the
shareholders of the Fund to the intangibles tax to the extent of such
investments.
NORTH CAROLINA MUNICIPAL BONDS
North Carolina municipal bonds are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, schools, streets, and
water and sewer works. They are also issued to repay outstanding obligations, to
raise funds for general operating expenses, and to make loans to other public
institutions and facilities. North Carolina municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby increases
local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds; the industry which is the beneficiary of such bonds
is generally the only source of payment for the bonds. The prices of fixed
income securities fluctuate inversely to the direction of interest rates.
INVESTMENT RISKS
Yields on North Carolina municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating of the
issue. Further, any adverse economic conditions or developments affecting the
state of North Carolina or its municipalities could impact the Fund's portfolio.
The Fund's concentration in securities issued by the state of North Carolina and
its political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. North Carolina's
dependence on agriculture, manufacturing and tourism leaves it vulnerable to
both the business cycle and long-term national economic trends. The ability of
the Fund to achieve its investment objective also depends on the continuing
ability of the issuers of North Carolina municipal securities and participation
interests, or the guarantors of either, to meet their obligations for the
payment of interest and principal when due. Investing in North Carolina
municipal securities which meet the Fund's quality standards may not be possible
if the state of North Carolina or its municipalities do not maintain their
current credit ratings. In addition, the issuance, tax exemption and liquidity
of North Carolina municipal securities may be adversely affected by judicial,
legislative or executive action, including, but not limited to, rulings of state
and federal courts, amendments to the state and federal constitutions, changes
in statutory law, and changes in administrative regulations, as well as voter
initiatives.
NON-DIVERSIFICATION
The Fund is a non-diversified portfolio of an investment company. As such, there
is no limit on the percentage of assets which can be invested in any single
issuer. An investment in the Fund, therefore, will entail greater risk than
would exist in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market
value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would be the case
if the portfolio were diversified among more issuers. The Fund may purchase an
issue of municipal securities in its entirety.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, the
aggregate value of all investments in any one issuer (except U.S. government
obligations, cash, and cash items) which exceed 5% of the Fund's total assets
shall not exceed 50% of the value of its total assets.
In addition, not more than 25% of its total assets will be invested in the
securities of any one issuer, except government securities or securities of
regulated investment companies.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge up to 10% of the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations become effective.
The Fund will not:
- invest more than 5% of its total assets in industrial development bonds
where the payment of principal and interest is the responsibility of
companies (or guarantors, where applicable) with less than three years of
continuous operations, including the operation of any predecessor.
THE 111 CORCORAN FUNDS INFORMATION
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MANAGEMENT OF THE 111 CORCORAN FUNDS
BOARD OF TRUSTEES. The 111 Corcoran Funds are managed by a Board of Trustees.
The Board of Trustees is responsible for managing the business affairs of the
111 Corcoran Funds and for exercising all of the powers of the 111 Corcoran
Funds except those reserved for the shareholders. An 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 111
Corcoran Funds, investment decisions for the Fund are made by Central Carolina
Bank and Trust Company (the "Bank"), the Fund's investment 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 Fund.
ADVISORY FEES. The Fund's adviser is entitled to receive an annual
investment advisory fee equal to .75 of 1% of the Fund's average daily net
assets. The fee paid by the Fund, while higher than the advisory fee paid
by other mutual funds in general, is comparable to fees paid by many mutual
funds with similar objectives and policies. The investment advisory
contract allows the voluntary waiver, in whole or in part, of the
investment advisory fee or the reimbursement of expenses by the adviser
from time to time. The adviser can terminate any voluntary waiver of its
fee or reimbursement of expenses at any time at its sole discretion.
Investment decisions for the Fund will be made independently from those of
any fiduciary or other accounts that may be managed by the Bank or its
affiliates. If, however, such accounts, the Fund, or the Bank for its own
account are simultaneously engaged in transactions involving the same
securities, the transactions may be combined and allocated to each account.
This system may adversely affect the price the Fund pays or receives, or
the size of the position it obtains. The Bank may engage, for its own
account or for other accounts managed by the Bank, in other transactions
involving North Carolina municipal securities which may have adverse
effects on the market for securities in the Fund's portfolio.
ADVISER'S BACKGROUND. The Bank was founded in 1903 as Durham Bank and Trust
Company. The Bank was created from Durham Bank and Trust Company on
September 30, 1961. The Bank is the lead bank within CCB Financial
Corporation, which is a multibank holding company that includes a
commercial bank subsidiary with offices also in North Carolina. CCB
Financial Corp. was incorporated in North Carolina in November 1982. The
principal executive offices of the Bank are located at 111 Corcoran Street,
Durham, North Carolina 27702. The activities of the Bank encompass a full
range of commercial banking services, including trust services.
The Bank has managed commingled funds since 1953. As of June 30, 1994, the
Trust Division managed assets in excess of $1.3 billion. The Trust Division
manages 2 commingled funds with assets of approximately $52.5 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992.
As part of their regular banking operations, CCB may make loans to cities,
counties and other public enterprises. 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 CCB. The lending relationship will not be a
factor in the selection of securities.
James S. Agnew has been the Fund's portfolio manager since the Fund's
inception in July 1992. Mr. Agnew joined the Bank in 1969 and has, for more
than the past five years, been Vice President and Senior Trust Officer of
the Bank, responsible for managing approximately $250 million in fixed
income assets. Mr. Agnew received a B.A. and M.S. in Industrial Management
from Georgia Institute of Technology and an L.L.B. from Woodrow Wilson Law
College.
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 principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- ---------------------
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO RECORDKEEPER. Federated
Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
is transfer agent for the shares of the Fund, and dividend disbursing agent for
the fund. Federated Services Company also provides certain accounting and
recordkeeping services with respect to the portfolio investments of the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
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.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through Central Carolina Bank or
through brokers or dealers which have a sales agreement with the distributor. 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.
THROUGH CENTRAL CAROLINA BANK. An investor may call Central Carolina Bank to
place an order to purchase shares of the Fund. (Call toll-free 1-800-422-2080.)
Texas residents must purchase shares through Federated Securities Corp. at
1-800-618-3573. Orders through Central Carolina Bank are considered received
when the Fund is notified of the purchase order. Purchase orders must be
received by Central Carolina Bank before 3:00 p.m. (Eastern time) and must be
transmitted by Central Carolina Bank to the Fund before 4:00 p.m. (Eastern time)
in order for shares to be purchased at that day's price. Payment is normally
required in five business days. It is the responsibility of Central Carolina
Bank to transmit orders promptly to the Fund.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of the Fund. Shares will be
purchased at the public offering price next determined after the Fund receives
the purchase request. Purchase requests through registered broker/dealers must
be received by the broker/dealer and transmitted by the broker/dealer to Central
Carolina Bank before 3:00 p.m. (Eastern time) and then transmitted by Central
Carolina Bank to the Fund by 4:00 p.m. (Eastern time) in order for shares to be
purchased at that day's public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $100. These minimums may be waived
for purchases by the Trust Division of Central Carolina Bank for its fiduciary
or custodial accounts. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge, as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF NET
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million but less than $2 million 0.25% 0.25%
$2 million or more 0.00% 0.00%
</TABLE>
The net asset value is determined at or after the close of 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; and (iii)
the following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
PURCHASES AT NET ASSET VALUE
Shares of the Fund may be purchased at net asset value, without a sales charge,
by the Trust Division of Central Carolina Bank for accounts in which the Trust
Division holds or manages assets, by trust companies, trust departments of other
financial institutions, and by banks and savings and loans for their own
accounts. Trustees, emeritus trustees, employees and retired employees of the
Trust, CCB Financial Corp., Central Carolina Bank, or Federated Securities Corp.
or their affiliates, or any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund, and their spouses and
children under 21, may also buy shares at net asset value, without a sales
charge.
SALES CHARGE REALLOWANCE
For sales of shares of the Fund, a dealer will normally receive up to 85% of the
applicable sales charge. For shares sold with a sales charge, Central Carolina
Bank will receive 85% of the applicable sales charge for purchases of Fund
shares made directly through Central Carolina Bank.
The sales charge for shares sold other than through Central Carolina Bank or
registered broker/dealers will be retained by the distributor. However, the
distributor will, periodically, uniformly offer to pay to dealers additional
amounts in the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. Such payments, all or
a portion of which may be paid from the sales charge the distributor normally
retains or any other source available to it, will be predicated upon the amount
of shares of the Fund that are sold by the dealer.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
- quantity discounts and accumulated purchases;
- signing a 13-month letter of intent; or
- using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age 21
when it calculates the sales charge.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 3.75%, not 4.50%.
To receive the sales charge reduction, Central Carolina Bank or the distributor
must be notified by the shareholder in writing or by his financial institution
at the time the purchase is made that Fund shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
4.50% of the total amount intended to be purchased in escrow (in shares of the
Fund) until such purchase is completed.
The shares held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days; however, these previous purchases will not receive the reduced sales
charge.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Central Carolina Bank or the distributor must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to
eliminate a sales charge. If the shareholder redeems his shares in the Fund,
there may be tax consequences.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
Central Carolina Bank and invested in Fund shares at the net asset value next
determined after an order is received by the Fund, plus the applicable sales
charge. A shareholder may apply for participation in this program through
Central Carolina Bank or through the distributor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and are paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order for
shares and payment by wire are received on the same day, shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted into federal funds.
Unless cash payments are requested by contacting Central Carolina Bank,
dividends are automatically reinvested on payment dates in additional shares of
the Fund at the payment date's net asset value without a sales charge.
CAPITAL GAINS
Distributions of net long-term capital gains realized by the Fund will be made
at least annually.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of 111 Corcoran Funds (the
"Trust"), which consists of the Fund and 111 Corcoran Bond Fund. Shareholders of
the Fund have access to 111 Corcoran Bond Fund through an exchange program. In
addition, shares of the Fund may be exchanged for shares of certain funds in the
Liberty Family of Funds ("Liberty"), a group of funds distributed by Federated
Securities Corp. Shareholders have access to the following Liberty funds:
- Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and
- American Leaders Fund, Inc.--a high-quality equity fund.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
Exchanges are made at net asset value plus the difference between the Fund's
sales charge already paid and any applicable sales charge on shares of the fund
to be acquired in the exchange.
The exchange privilege is available to shareholders residing in any state in
which the participating fund shares being acquired may legally be sold. Upon
receipt by Federated Services Company of proper instructions and all necessary
supporting documents, shares submitted for exchange will be redeemed at the next
determined net asset value. If the exchanging shareholder does not have an
account in the participating fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gain
options as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration is
not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Shares by Mail.")
Exercise of this privilege is treated as a redemption and new purchase for
federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized. The Fund reserves the right to
modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination. Shareholders may obtain
further information on the exchange privilege by calling their Central Carolina
Bank representative or an authorized broker.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by telephone to their Central Carolina Bank
representative by calling 1-800-422-2080. In addition, investors may exchange
shares by calling their authorized broker directly.
An authorization form permitting the Fund to accept telephone exchange requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through a Central Carolina Bank representative or authorized broker.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received by Central Carolina Bank or an
authorized broker and transmitted to Federated Services Company before 4:00 p.m.
(Eastern time) for shares to be exchanged the same day. Shareholders who
exchange into shares of the Fund will not receive a dividend from the Fund on
the date of the exchange.
Shareholders of the Fund may have difficulty in making exchanges by telephone
through banks, brokers and other financial institutions during times of drastic
economic or market changes. If shareholders cannot contact their Central
Carolina Bank representative or authorized broker by telephone, it is
recommended that an exchange request be made in writing and sent by mail for
next day delivery.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: 111 Corcoran Funds, 111 Corcoran Street, P.O. Box
931, Durham, North Carolina 27702. In addition, an investor may exchange shares
by sending a written request to their authorized broker directly.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, the transfer agent, by a Central
Carolina Bank representative or authorized broker and deposited to the
shareholder's account before being exchanged.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemptions
must be received in proper form and can be made through Central Carolina Bank or
directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Central
Carolina Bank (call toll-free 1-800-422-2080) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund receives
the redemption request from Central Carolina Bank. Redemption requests through
Central Carolina Bank must be received by Central Carolina Bank before 3:00 p.m.
(Eastern time) and must be transmitted by Central Carolina Bank to the Fund
before 4:00 p.m. (Eastern time) in order for shares to be redeemed at that day's
net asset value. Central Carolina Bank is responsible for promptly submitting
redemption requests and providing proper redemption instructions to the Fund.
Registered broker/dealers may charge customary fees and commissions for this
service. Telephone redemption instructions may be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request to
Central Carolina Bank. The written request should include the shareholder's
name, the Fund name, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request to the Fund. Shareholders should call Central Carolina Bank for
assistance in redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, 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:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- 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 its 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 its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper redemption request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed under
this program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through his financial institution. For shares sold with a sales charge,
it is not advisable for shareholders to be purchasing shares while participating
in this program.
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 required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 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.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000, or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Fund will pay all
or a portion of the remainder of the redemption in portfolio instruments, valued
in the same way that net asset value is determined. The portfolio instruments
will be selected in a manner that the Trustees deem fair and equitable.
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the 111 Corcoran Funds have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund. As of July 3,
1994, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 3,692,845
shares (82.36%) of the Fund, and, therefore, may, for certain purposes be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As a Massachusetts business trust, the 111 Corcoran Funds are not required to
hold annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the 111 Corcoran Funds' or the Fund's operation and for the
election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the 111 Corcoran Funds.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of 111 Corcoran Funds
on behalf of the Fund. To protect shareholders of the Fund, 111 Corcoran Funds
has filed legal documents with Massachusetts that expressly disclaim the
liability of shareholders for such acts or obligations of 111 Corcoran Funds.
These documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument 111 Corcoran Funds or its Trustees enter into or sign
on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for 111 Corcoran
Funds' obligations on behalf of the Fund, 111 Corcoran Funds is required to use
its property to protect or compensate the shareholder. On request, 111 Corcoran
Funds will defend any claim made and pay any judgment against a shareholder for
any act or obligation of 111 Corcoran Funds on behalf of the Fund. Therefore,
financial loss resulting from liability as a shareholder of the Fund will occur
only if 111 Corcoran Funds
cannot meet its obligations to indemnify shareholders and pay judgments against
them from assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities. However, such
banking laws and regulations do not prohibit such a holding company affiliate or
banks generally 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 such a customer. Central Carolina Bank is
subject to such banking laws and regulations.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
Central Carolina Bank believes that it may perform the services for the Fund
contemplated by its advisory agreement with the 111 Corcoran Funds without
violation of the Glass-Steagall Act or other applicable banking 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 such or future statutes and regulations, could prevent
Central Carolina Bank from continuing to perform all or a part of the above
services for its customers and/or the Fund. If it were prohibited from engaging
in these customer-related activities, the Trustees would consider alternative
advisers and means of continuing available investment services. In such event,
changes in the operation of the Fund may occur, including possible termination
of any automatic or other Fund share investment and redemption services then
being provided by Central Carolina Bank. It is not expected that existing
shareholders would suffer any adverse financial consequences (if another adviser
with equivalent abilities to Central Carolina Bank is found) as a result of any
of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal regular income tax because it 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
other portfolios of 111 Corcoran Funds will not be combined for tax purposes
with those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds. However, under the Tax Reform Act of 1986, dividends representing net
interest income earned on some municipal bonds may be included in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds will become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of the taxpayer's "adjusted current earnings" over the taxpayer's
alternative minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and profits."
Since "earnings and profits" generally includes the full amount of any Fund
dividend, and alternative minimum taxable income does not include the portion of
the Fund's dividend attributable to municipal bonds which are not private
activity bonds, the difference will be included in the calculation of the
corporation's alternative minimum tax.
Shareholders should consult with their tax advisers to determine whether they
are subject to the alternative minimum tax or the corporate alternative minimum
tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some temporary
investments, income earned on options transactions, and any realized net
short-term gains are taxed as ordinary income. Distributions representing net
long-term capital gains realized by the Fund, if any, will be taxable as
long-term capital gains regardless of the length of time shareholders have held
their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
NORTH CAROLINA TAXES
North Carolina residents and North Carolina corporations are not required to pay
North Carolina income tax on any dividends received from the Fund that represent
interest on obligations issued by North Carolina and political subdivisions
thereof or upon the obligations of the United States or its possessions.
Dividends received from the Fund by such shareholders must be included in North
Carolina taxable income to the extent that such dividends represent interest on
obligations of states other than North Carolina and their political
subdivisions. The Fund will annually furnish to its shareholders a statement
supporting the proper allocation.
North Carolina residents and North Carolina corporations may exclude from the
share value of the Fund for the purposes of the North Carolina Intangibles
Personal Property tax that proportion of the total share value which is
attributable to the value of the direct obligations of the state of North
Carolina, of the United States, and of their political subdivisions held in the
Fund as of December 31 of the taxable year. The Fund will annually furnish to
its shareholders a statement supporting the proper allocation.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than North Carolina or from personal property taxes. State laws differ on
this issue, and 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, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
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 Securities and Exchange Commission) 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 tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a specific tax rate. The yield and
the tax-equivalent yield do not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return, yield, and tax-equivalent yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
CASH & CASH EQUIVALENTS--3.7%
- --------------------------------------------------------------------------
$ 688,800 North Carolina Daily Tax-Free Income, Inc. $ 688,800
-------------------------------------------------------
989,500 PNC, NC 989,500
------------------------------------------------------- -----------
TOTAL CASH & CASH EQUIVALENTS (AT NET ASSET VALUE) 1,678,300
------------------------------------------------------- -----------
SHORT-TERM MUNICIPAL SECURITIES--2.0%
- --------------------------------------------------------------------------
200,000 Charlotte, NC, Hospital Weekly VRDN AAA 200,000
-------------------------------------------------------
700,000 Winston-Salem, NC, Weekly VRDN NR 700,000
------------------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST) 900,000
------------------------------------------------------- -----------
LONG-TERM MUNICIPAL SECURITIES--93.4%
- --------------------------------------------------------------------------
NORTH CAROLINA--91.9%
-------------------------------------------------------
250,000 Alamance County, NC, 5.90%, 5/1/2006 AA 260,420
-------------------------------------------------------
500,000 Alamance County, NC, 4.70%, 4/1/2007 (4/1/2003 @ 102) AA 454,035
-------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
550,000 Alamance County, NC, 4.90%, 4/1/2010 AA 495,171
-------------------------------------------------------
350,000 Buncombe County, NC, 5.20% GO Bonds, 5/1/2008
(5/1/2003 @ 102) AA 333,322
-------------------------------------------------------
500,000 Buncombe County, NC, 5.25% Revenue Bonds (FGIC
Insured), 7/1/2007 AAA 487,055
-------------------------------------------------------
425,000 Cabarrus County, NC, 4.50% (FGIC Insured), 3/1/2006 AAA 387,162
-------------------------------------------------------
865,000 Cabarrus County, NC, 4.80% (FGIC Insured), 3/1/2010
(3/1/2003 @ 102) NR 773,094
-------------------------------------------------------
450,000 Caswell County, NC, 4.80% (FGIC Insured), 6/1/2010 AAA 401,765
-------------------------------------------------------
500,000 Catawba County, NC, 5.70%, 6/1/2006 AA 509,580
-------------------------------------------------------
500,000 Catawba County, NC, 5.85% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2004 AAA 515,600
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 500,000 Catawba County, NC, 5.95% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2005 (10/1/2002 @ 102) AAA $ 521,115
-------------------------------------------------------
400,000 Charlotte-Mecklenburg Hospital Authority, NC, 6.375%
OID, 1/1/2009 AA 414,320
-------------------------------------------------------
350,000 Charlotte-Mecklenburg Hospital Authority, NC, 5.75% OID
Healthcare System Revenue Bonds (Original Issue Yield:
5.75%), 1/1/2012 (1/1/2002 @ 102) AA 335,787
-------------------------------------------------------
500,000 Charlotte, NC, 5.70%, 2/1/2003 AAA 521,475
-------------------------------------------------------
500,000 Charlotte, NC, 6.50%, 2/1/2008 (2/1/2001 @ 102) AAA 544,760
-------------------------------------------------------
250,000 Charlotte, NC, 6.20% GO Bonds, 6/1/2015
(6/1/2002 @ 102) AAA 260,145
-------------------------------------------------------
750,000 Cleveland County, NC, 5.10% GO Bonds (FGIC Insured),
6/1/2006 (6/1/2003 @ 101.5) AAA 732,900
-------------------------------------------------------
225,000 Cleveland County, NC, 5.70% (AMBAC Insured), 3/1/2008
(3/1/2002 @ 102) AAA 228,193
-------------------------------------------------------
600,000 Concord, NC, Utilities System, 6.00% (MBIA Insured),
12/1/2010 (12/1/2002 @ 102) AAA 605,454
-------------------------------------------------------
500,000 Concord, NC, Utilities System, 5.75% (MBIA Insured),
12/1/2017 (12/1/2002 @ 102) AAA 482,530
-------------------------------------------------------
365,000 Craven County, NC, 6.20%, 6/1/99 A1 388,309
-------------------------------------------------------
600,000 Cumberland County, NC, 5.80% (MBIA Insured), 2/1/2007
(2/1/2003 @ 102) AAA 613,464
-------------------------------------------------------
470,000 Dublin County, NC, 5.30% GO Bonds, 4/1/2007
(6/1/2003 @ 102) AAA 463,086
-------------------------------------------------------
500,000 Durham & Wake Counties Special Airport District, NC,
5.75%, 4/1/2002 AAA 527,000
-------------------------------------------------------
375,000 Durham County, NC, 5.75%, 2/1/2006 AAA 383,932
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 225,000 East Carolina University, 5.375% (AMBAC Insured),
11/1/2001 AAA $ 230,724
-------------------------------------------------------
500,000 Fayetteville, NC, Public Works Commission, 4.60%
(FGIC Insured), 3/1/2005 (3/1/2003 @ 102) AAA 460,360
-------------------------------------------------------
250,000 Fayetteville, NC, Public Works Commission, 5.90%
(FSA Insured), 3/1/2007 (3/1/2002 @ 102) AAA 258,205
-------------------------------------------------------
600,000 Forsyth County, NC, 6.25%, 3/1/2005 (3/1/2001 @ 102) AA1 641,064
-------------------------------------------------------
750,000 Gastonia, NC, 5.25% (FGIC Insured), GO Bonds, 4/1/2006
(4/1/2003 @ 101.5) AAA 734,422
-------------------------------------------------------
500,000 Goldsboro, NC, 5.50% GO Bonds, 6/1/2008
(6/1/2003 @ 102) A1 485,750
-------------------------------------------------------
650,000 Goldsboro, NC, 5.50% GO Bonds, 6/1/2009
(6/1/2003 @ 102) A1 623,103
-------------------------------------------------------
500,000 Greensboro, NC, 6.30%, 3/1/2012 (3/1/2002 @ 102) AA1 524,030
-------------------------------------------------------
250,000 Greensboro, NC, 6.25%, 3/1/2008 (3/1/2002 @ 102) AA1 264,470
-------------------------------------------------------
500,000 Greensboro, NC, 5.20%, 5/1/2006 (5/1/2003 @ 101) AA 493,430
-------------------------------------------------------
475,000 Greenville, NC, 4.80%, 3/1/2003 AA 457,539
-------------------------------------------------------
525,000 Greenville, NC, 4.80% GO Bonds, 3/1/2005
(3/1/2003 @ 101) AA 493,799
-------------------------------------------------------
750,000 Greenville, NC, 4.80%, 3/1/2006 Aa 696,338
-------------------------------------------------------
1,000,000 Guilford County, NC, 4.90%, 4/1/2001 AA1 999,930
-------------------------------------------------------
500,000 Guilford County, NC, 5.40%, 4/1/2010 (4/1/2003 @ 102) AA1 483,435
-------------------------------------------------------
350,000 Henderson County, NC, 6.50% GO Bonds, 6/1/2007
(6/1/2001 @ 102) A1 372,999
-------------------------------------------------------
250,000 Henderson County, NC, 6.50%, 6/1/2009 (6/1/2001 @ 102) A1 263,152
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 350,000 Iredell County, NC, Statesville School Project, 6.125%
OID (FGIC Insured), 6/1/2007 (6/1/2001 @ 102) AAA $ 361,487
-------------------------------------------------------
675,000 Lee County, NC, 6.00% GO Bonds, 2/1/2004
(2/1/2002 @ 101) A1 712,402
-------------------------------------------------------
100,000 Lee County, NC, 6.00%, 2/1/2005 (2/1/2002 @ 101.5) A1 105,294
-------------------------------------------------------
475,000 Lincoln County, NC, 5.00% (FGIC Insured), 6/1/2006
(6/1/2001 @ 101) AAA 458,783
-------------------------------------------------------
500,000 Lincoln County, NC, 5.10% GO Bonds (FGIC Insured),
6/1/2007, (6/1/2004 @ 102) AAA 478,465
-------------------------------------------------------
750,000 Mecklenburg County, NC, 4.10% GO Bonds, 4/1/2002 AAA 691,500
-------------------------------------------------------
750,000 Mecklenburg County, NC, 4.10% Refunding UT Bonds,
4/1/2003 AAA 677,258
-------------------------------------------------------
280,000 Mecklenburg County, NC, 4.70%, 4/1/2007
(4/1/2003 @ 102) AAA 256,169
-------------------------------------------------------
750,000 Moore County, NC, 4.80%, 6/1/2006 A1 699,323
-------------------------------------------------------
250,000 Mooresville Grade School District, 6.30%, COPS
(AMBAC Insured), 10/1/2009 (10/1/2002 @ 102) AAA 259,195
-------------------------------------------------------
200,000 New Hanover County, NC, 7.10%, 6/1/2008 AA 221,596
-------------------------------------------------------
300,000 North Carolina Educational Authority (Elon College
Project), 6.375% (Connie Lee Insured), 1/1/2007
(1/1/2002 @ 102) AAA 316,809
-------------------------------------------------------
200,000 North Carolina Medical Care Commission 5.95%
(Presbyterian Hospital), 10/1/2007 (10/2/2002 @ 102) AA 201,514
-------------------------------------------------------
500,000 North Carolina Medical Care Commission, (Mission
Hospital Project), 5.50% (MBIA Insured), 10/1/2011 AAA 474,790
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 480,000 North Carolina Eastern Municipal Power Agency, 6.00%
OID Revenue Bonds (FGIC Insured), 1/1/2009
(1/1/2003 @ 102) AAA $ 489,384
-------------------------------------------------------
1,135,000 North Carolina Eastern Municipal Power Agency, 7.25%
OID Revenue Bonds, 1/1/2021 (1/1/97 @ 102) A 1,190,672
-------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 8.775%
Revenue Bonds (RIB)/(FGIC Insured), 1/1/2025 AAA 464,375
-------------------------------------------------------
750,000 North Carolina Municipal Power Agency Catawba,
6.00%, 1/1/2004 A 779,295
-------------------------------------------------------
250,000 North Carolina Municipal Power Agency Catawba, 6.00%
(AMBAC Insured), 1/1/2008 AAA 256,058
-------------------------------------------------------
505,000 North Carolina Municipal Power Agency Catawba, 10.50%
(Prerefunded), 1/1/2010 AAA 721,862
-------------------------------------------------------
500,000 North Carolina Municipal Power Agency Catawba, 6.00%,
1/1/2015 (1/1/98 @ 100) A 487,860
-------------------------------------------------------
500,000 North Carolina Municipal Power Agency Catawba, 6.20%
OID Revenue Bonds (FSA Insured), 1/1/2018
(1/1/96 @ 101) AAA 502,660
-------------------------------------------------------
225,000 North Carolina State, 6.10%, 3/1/99 AAA 238,446
-------------------------------------------------------
500,000 North Carolina State, 4.70%, 2/1/2004 AAA 474,775
-------------------------------------------------------
500,000 North Carolina State, 4.70%, 2/1/2007 (2/1/2004 @
101.5) AAA 457,825
-------------------------------------------------------
535,000 North Carolina State, 6.20%, 3/1/2009 (3/1/2002 @ 102) AAA 575,901
-------------------------------------------------------
500,000 Pender County, NC, 4.75% GO (AMBAC Insured), 6/1/2011
(6/1/2004 @ 102) AAA 435,890
-------------------------------------------------------
250,000 Person County, NC, 5.40%, 2/1/2009 (2/1/2003 @ 102) A1 241,625
-------------------------------------------------------
250,000 Pitt County, NC, 6.05%, COPS (FGIC Insured), 4/1/98 AAA 262,140
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 500,000 Pitt County, NC, 5.10% GO Bonds, 2/1/2006
(2/1/2003 @ 102) AA $ 482,905
-------------------------------------------------------
500,000 Pitt County, NC, 5.10% GO Bonds, 2/1/2007
(2/1/2003 @ 102) AA 477,055
-------------------------------------------------------
500,000 Randolph County, NC, 6.20%, 5/1/2005 (5/1/2002 @ 101.5) A1 532,380
-------------------------------------------------------
250,000 Rocky Mount, NC, 6.10% GO Bonds, 5/1/2005
(5/1/2002 @ 101.5) A 262,277
-------------------------------------------------------
350,000 Rocky Mount, NC, 6.10%, 5/1/2006 A 365,046
-------------------------------------------------------
250,000 Rowan County, NC, 5.25%, 12/1/99 A 252,015
-------------------------------------------------------
500,000 Rowan County, NC, 6.25% COPS, 12/1/2007 A 505,455
-------------------------------------------------------
500,000 Rowan County, NC, 5.60% (FGIC Insured), 5/1/2010 AAA 487,135
-------------------------------------------------------
500,000 Rowan County, NC, 5.60% (FGIC Insured), 5/1/2011 AAA 487,705
-------------------------------------------------------
500,000 Rutherford County, NC, 5.00% (MBIA Insured), 6/1/2002 AAA 499,345
-------------------------------------------------------
500,000 Rutherford County, NC, 5.10% (MBIA Insured), 6/1/2008,
(6/1/2003 @ 102) AAA 476,425
-------------------------------------------------------
450,000 Shelby, NC, 5.00%, 3/1/2010 AA 405,787
-------------------------------------------------------
500,000 Union County, NC, 5.80%, 3/1/2006 (3/1/2002 @ 102) A1 515,865
-------------------------------------------------------
500,000 Union County, NC, 6.50% GO Bonds, 4/1/2006
(4/1/2001 @ 102) NR 534,125
-------------------------------------------------------
500,000 University of North Carolina at Charlotte, 5.00%
Revenue Bonds (MBIA Insured), 1/1/2007 AAA 474,435
-------------------------------------------------------
500,000 Wake County, NC, 6.90% Revenue Bonds (Carolina Power &
Light Co.), 4/1/2009 (4/1/2000 @ 102) A2 526,625
-------------------------------------------------------
375,000 Watauga County, NC, 4.70% GO Bonds, 6/1/2012 (6/1/2003
@ 102) AA 310,590
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 500,000 Wilmington, NC, 6.30% GO Bonds, 3/1/2005
(3/1/2002 @ 101.5) A1 $ 540,700
-------------------------------------------------------
410,000 Winston-Salem, NC, 5.25%, COPS (Series A), 10/1/96 AA1 421,746
------------------------------------------------------- -----------
Total 42,173,393
------------------------------------------------------- -----------
PUERTO RICO--1.5%
-------------------------------------------------------
500,000 Puerto Rico Electric & Power, 5.75% (FSA Insured),
7/1/2007 (7/1/2002 @ 101.5) AAA 509,935
-------------------------------------------------------
200,000 Puerto Rico, Floating Rate Revenue Bonds (RIB), (MBIA
Insured), 1/1/2015 AAA 173,500
------------------------------------------------------- -----------
Total 683,435
------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $43,460,982) 42,856,828
------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $46,039,282) $45,435,128+
------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
+ The cost of investments for federal tax purposes amounts to $46,039,282. The
net unrealized depreciation of investments on a federal tax basis amounts to
$604,154, which is comprised of $410,666 appreciation and $1,014,820
depreciation at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($45,864,404) at May 31, 1994.
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
COPS -- Certificates of Participation
FGIC -- Financial Guaranty Insurance Co.
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
NR -- Not Rated
OID -- Original Issue Discount
RIB -- Residual Interest Bond
UT -- Unlimited Tax
VRDN -- Variable Rate Demand Note
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $46,039,282) (Note
2A) $45,435,128
- --------------------------------------------------------------------------------
Interest receivable 760,219
- --------------------------------------------------------------------------------
Receivable for investments sold 435,881
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 154,034
- --------------------------------------------------------------------------------
Deferred expenses (Note 2E) 14,289
- -------------------------------------------------------------------------------- -----------
Total assets 46,799,551
- --------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Payable for investments purchased $693,224
- ---------------------------------------------------------------------
Dividends payable 149,761
- ---------------------------------------------------------------------
Payable to Bank 48,660
- ---------------------------------------------------------------------
Payable for Fund shares redeemed 700
- ---------------------------------------------------------------------
Accrued expenses 42,802
- --------------------------------------------------------------------- --------
Total liabilities 935,147
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 4,508,900 shares of beneficial interest outstanding $45,864,404
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $46,477,298
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (604,154)
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (8,740)
- -------------------------------------------------------------------------------- -----------
Total $45,864,404
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
($45,864,404 / 4,508,900 shares of beneficial interest outstanding) $10.17
- -------------------------------------------------------------------------------- -----------
Offering Price Per Share: (100/95.5 of $10.17) $10.65*
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income (Note 2B) $ 1,912,482
- --------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------
Investment advisory fee (Note 4) $280,923
- ---------------------------------------------------------------------
Trustees' fees 5,665
- ---------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 56,185
- ---------------------------------------------------------------------
Custodian fees 11,693
- ---------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees and
expenses (Note 4) 95,650
- ---------------------------------------------------------------------
Fund share registration fees 31,205
- ---------------------------------------------------------------------
Auditing fees 16,000
- ---------------------------------------------------------------------
Legal fees 7,783
- ---------------------------------------------------------------------
Printing and postage 18,258
- ---------------------------------------------------------------------
Insurance premiums 5,480
- ---------------------------------------------------------------------
Miscellaneous 8,783
- --------------------------------------------------------------------- --------
Total expenses 537,625
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 280,923
- --------------------------------------------------------------------- --------
Net expenses 256,702
- -------------------------------------------------------------------------------- -----------
Net investment income 1,655,780
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 27,318
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (1,304,242)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (1,276,924)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 378,856
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------
1994 1993*
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 1,655,780 $ 638,300
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($30,153 net gain and $852
net loss, respectively, as computed for federal tax purposes) 27,318 (6,624)
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (1,304,242) 700,088
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 378,856 1,331,764
- ------------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (1,656,604) (637,476)
- ------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (29,434) --
- ------------------------------------------------------------------ ----------- -----------
Change in net assets from distributions to shareholders (1,686,038) (637,476)
- ------------------------------------------------------------------ ----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------
Proceeds from sale of shares 23,017,028 29,520,071
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 249,634 45,674
- ------------------------------------------------------------------
Cost of shares redeemed (4,247,085) (2,108,024)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets from Fund share transactions 19,019,577 27,457,721
- ------------------------------------------------------------------ ----------- -----------
Change in net assets 17,712,395 28,152,009
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 28,152,009 --
- ------------------------------------------------------------------ ----------- -----------
End of period (including undistributed net investment income of
$0 and $824, respectively) $45,864,404 $28,152,009
- ------------------------------------------------------------------ ----------- -----------
</TABLE>
* For the period from July 22, 1992 (date of initial public investment) to May
31, 1993.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The 111 Corcoran Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of one diversified portfolio and one non-diversified
portfolio. The financial statements included herein present only those of 111
Corcoran North Carolina Municipal Securities Fund (the "Fund"), a
non-diversified portfolio. The financial statements of the other portfolio are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service
taking into consideration yield, liquidity, risk, credit, quality, coupon, maturity, type
of issue, and any other factors or market data it deems relevant in determining
valuations for normal institutional size trading units of debt securities. The
independent pricing service does not rely exclusively on quoted prices. Investments in
other regulated investment companies are valued at net asset value. Short-term securities
with remaining maturities of sixty days or less may be stated at amortized cost, which
approximates value.
Since the Fund may invest a substantial portion of its assets in issuers located in one
state, it will be more susceptible to factors adversely affecting issuers of that state
than would be a comparable general tax-exempt mutual fund. In order to reduce the credit
risk associated with such factors, at May 31, 1994, 33.7% of the securities in the
portfolio of investments are backed by letters of credit or bond insurance of various
financial institutions and financial guaranty assurance agencies. The aggregate
percentages by financial institutions and agencies ranged from 0.7% to 16.4% of total
investments.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its tax-exempt income. Accordingly, no provisions for federal tax
are necessary.
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Additionally, net capital losses of $8,607 attributable to security transactions incurred
after October 31, 1993, are treated as arising on June 1, 1994, the first day of the
Fund's next taxable year.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------
1994 1993*
- --------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Shares sold 2,171,508 2,919,252
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 23,762 4,477
- ---------------------------------------------------------------------
Shares redeemed (402,568) (207,531)
- --------------------------------------------------------------------- --------- ---------
Net change resulting from Fund share transactions 1,792,702 2,716,198
- --------------------------------------------------------------------- --------- ---------
</TABLE>
* For the period from July 22, 1992 (date of initial public investment) to May
31, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Central Carolina Bank and Trust Company, the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to .75 of 1% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT AND ACCOUNTING FEES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($43,033) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following May 1, 1992 (date the Trust first became
effective). For the year ended May 31, 1994, the Fund paid $5,738 pursuant to
this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended May 31, 1994 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Purchases $26,446,121
- ------------------------------------------------------------------------------- -----------
Sales $ 8,515,008
- ------------------------------------------------------------------------------- -----------
</TABLE>
(6) CHANGE IN FISCAL YEAR
The Fund has changed its fiscal year end from March 31 to May 31 beginning May
31, 1992.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
111 CORCORAN FUNDS (111 Corcoran North Carolina Municipal Securities Fund):
We have audited the accompanying statement of assets and liabilities of 111
Corcoran North Carolina Municipal Securities Fund (an investment portfolio of
111 Corcoran Funds, a Massachusetts business trust), including the schedule of
portfolio investments, as of May 31, 1994, the related statement of operations,
and the statement of changes in net assets and financial highlights (see page 2
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of 111
Corcoran North Carolina Municipal Securities Fund, an investment portfolio of
111 Corcoran Funds, as of May 31, 1994, the results of its operations, the
changes in its net assets, and the financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
July 8, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
111 Corcoran North Carolina Federated Investors Tower
Municipal Securities Fund Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Investment Adviser
Central Carolina Bank and Trust Company 111 Corcoran Street
Durham, North Carolina 27702
- -------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- -------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent and Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
</TABLE>
111 CORCORAN
NORTH CAROLINA
MUNICIPAL
SECURITIES FUND
PROSPECTUS
A Non-Diversified Portfolio of
111 Corcoran Funds, an Open-End
Management Investment Company
July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
2041605A (7/94)
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
(A PORTFOLIO OF THE 111 CORCORAN FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
111 Corcoran North Carolina Municipal Securities Fund (the "Fund") dated July
31, 1994. This Statement is not a prospectus itself. To receive a copy of the
prospectus, write the Fund or call toll-free 1-800-422-2080.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1994
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ----------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ----------------------------------------------------------------
When-Issued and Delayed Delivery Transactions 1
Temporary Investments 2
Futures and Options Transactions 2
Lending of Portfolio Securities 4
Restricted and Illiquid Securities 4
Portfolio Turnover 5
INVESTMENT LIMITATIONS 5
- ----------------------------------------------------------------
THE 111 CORCORAN FUNDS MANAGEMENT 7
- ----------------------------------------------------------------
Officers and Trustees 7
The Funds 8
Fund Ownership 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
- ----------------------------------------------------------------
Adviser to the Fund 9
Advisory Fees 9
ADMINISTRATIVE SERVICES 10
- ----------------------------------------------------------------
BROKERAGE TRANSACTIONS 10
- ----------------------------------------------------------------
PURCHASING SHARES 10
- ----------------------------------------------------------------
Additional Purchase Information--
Payment in Kind 10
Conversion to Federal Funds 11
DETERMINING NET ASSET VALUE 11
- ----------------------------------------------------------------
Valuing Municipal Bonds 11
Use of Amortized Cost 11
EXCHANGE PRIVILEGE 11
- ----------------------------------------------------------------
REDEEMING SHARES 11
- ----------------------------------------------------------------
Redemption in Kind 11
TAX STATUS 12
- ----------------------------------------------------------------
The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12
- ----------------------------------------------------------------
YIELD 12
- ----------------------------------------------------------------
TAX-EQUIVALENT YIELD 12
- ----------------------------------------------------------------
Tax-Equivalency Table 13
PERFORMANCE COMPARISONS 13
- ----------------------------------------------------------------
APPENDIX 15
- ----------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in the 111 Corcoran Funds which was established as a
Massachusetts business trust under a Declaration of Trust dated December 11,
1991.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide for its shareholders income which
is exempt from federal regular income tax and North Carolina state income tax.
In addition, the Fund intends to qualify as an investment substantially exempt
from the North Carolina intangible personal property tax. The objective cannot
be changed without approval of shareholders.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by the
Fund are subject to repayment of principal (usually within seven days) on
the Fund's demand. The terms of these variable rate demand instruments
require payment of principal obligations by the issuer of the
participation interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that
the certificate trustee cannot accelerate lease obligations upon default.
The trustee would only be able to enforce lease payments as they become
due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable
substitute source of payment or that the substitute source of payment
will generate tax-exempt income.
When determining whether municipal leases purchased by the Fund will be
classified as a liquid or illiquid security, the Board of Trustees
("Trustees") has directed the investment adviser to consider certain
factors such as: the frequency of trades and quotes for the security; the
volatility of quotations and trade prices for the security; the number of
dealers willing to purchase or sell the security and the number of
potential purchases; dealer undertaking to make a market in the security;
the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer); the rating of the
security and the financial condition and prospects of the issuer of the
security; whether the lease can be terminated by the lessee; the
potential recovery, if any, from a sale of the leased property upon
termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and
prospects); the likelihood that the lessee will discontinue appropriating
funding for the lease property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of
nonappropriation"); any credit enhancement or legal recourse provided
upon an event of nonappropriation of other termination of the lease; and
such other factors as may be relevant to the Fund's ability to dispose of
the security.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. 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.
- --------------------------------------------------------------------------------
No fees or expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to be
purchased are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
As a matter of policy, the Fund does 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 its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes. The Fund might invest in temporary investments:
- - as a reaction to market conditions;
- - while waiting to invest proceeds of sales of shares or portfolio securities,
although generally proceeds from sales of shares will be invested in municipal
bonds as quickly as possible; or
- - in anticipation of redemption requests.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price
within one year from the date of acquisition. The Fund or its custodian
will take possession of the securities subject to repurchase agreements.
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. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund may only enter into
repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are found by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Trustees.
From time to time, such as when suitable North Carolina municipal securities are
not available, the Fund may invest a portion of its assets in cash. Any portion
of the Fund's assets maintained in cash will reduce the amount of assets in
North Carolina municipal securities and thereby reduce the Fund's yield.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, the Fund may buy and sell call and put options on portfolio
securities.
FINANCIAL FUTURES CONTRACTS
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. Financial
futures contracts call for the delivery of particular debt securities
issued or guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts
for U.S. government securities. 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.
The Fund would purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. 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, the Fund will normally close out its option by
selling an identical option. If the hedge is successful, the proceeds
received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option. 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 the Fund neither closes out
nor exercises an option, the option will expire on the date provided in
the option contract, and the premium paid for the contract will be lost.
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts for U.S. government securities
to hedge its portfolio against an increase in market interest rates. When
the 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 market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under a call
option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the 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 the Fund keeps the premium received for the option. This premium
can offset the drop in value of the Fund's fixed income portfolio which
is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the 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 the Fund for the initial option. The
net premium income of the Fund will then offset the decrease in value of
the hedged securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts for
U.S. government securities to hedge its portfolio against a decrease in
market interest rates. When the Fund writes a put option on a futures
contract, it receives a premium for undertaking the obligation to assume
a long futures position (buying a futures contract) at a fixed price at
any time during the life of the option. As market interest rates
decrease, the market price of the underlying futures contract normally
increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the market.
The premium received by the Fund can then be used to offset the higher
prices of portfolio securities to be purchased in the future due to the
decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of buying the second option will be less
than the premium received by the Fund for the initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call
option on a futures contract, it is purchasing the right (not the
obligation) to assume a long futures position (buy a futures contract) at
a fixed price at any time during the life of the option. As market
interest rates fall, the value of the underlying futures contract will
normally increase, resulting in an increase in value of the Fund's option
position. When the market price of the underlying futures contract
increases above the strike price plus premium paid, the Fund could
exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option the Fund could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its 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,
the 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.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the 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 futures
contract initial margin does not involve the borrowing of funds by the
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 the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the 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 the Fund but is instead settlement between the 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 Fund will
mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities. 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. A call option gives the Fund, in return for a premium, the
right to buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. As a writer of a put option, the Fund has
the obligation to purchase a security from the purchaser of the option
upon the exercise of the option.
The Fund may write covered call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount of
any additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the 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 the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund 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 Fund does 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.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. The Fund will not invest more than 10% of the value of
its total assets in restricted securities; however, certain restricted
securities which the Trustees deem to be liquid will be excluded from this 10%
limitation.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an 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
securities subject to restrictions on resale under federal securities laws. The
Rule provides an exemption from 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 Rule 144A. The Fund believes that the Staff of the SEC has left the
question of determining the liquidity of all restricted securities (eligible for
resale under Rule 144A) for
- --------------------------------------------------------------------------------
determination to the Trustees. The Trustees consider the following criteria in
determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the fiscal year ended May 31, 1994, and for the period from
July 22, 1992 (date of initial public investment), to May 31, 1993, the
portfolio turnover rates for the Fund were 24% and 17%, respectively.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities. The deposit or payment by
the Fund of initial or variation margin in connection with futures
contracts or related options transactions is not considered the purchase
of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of its total assets at the time of the pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933, as amended,
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate including limited partnership
interests, although it may invest in municipal bonds secured by real
estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund, will not purchase or sell commodities. However, the Fund may
purchase put and call options on portfolio securities and on financial
futures contracts. In addition, the Fund reserves the right to hedge the
portfolio by entering into financial futures contracts and to sell puts
and calls on financial futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. The Fund may, however,
acquire publicly or non-publicly issued municipal bonds or temporary
investments or enter into repurchase agreements in accordance with its
investment objective, policies, and limitations or the Declaration of
Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry, or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments more than 25% of
the value of its assets in cash or cash items, securities issued or
- --------------------------------------------------------------------------------
guaranteed by the U.S. government, its agencies, or instrumentalities, or
instruments secured by these money market instruments, such as repurchase
agreements.
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 ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in
more than seven days after notice, over-the-counter options and certain
restricted securities and municipal leases determined by the Board of
Trustees not to be liquid.
WRITING COVERED CALL OPTION AND PURCHASING PUT OPTIONS
The 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. The Fund will not purchase put options
on securities unless the securities are held in the Fund's portfolio. The
Fund will not write put or call options or purchase put or call options
in excess of 5% of the value of its total assets.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase or sell, oil, gas, or other mineral
exploration or development programs, or leases.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
THE 111 CORCORAN FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Central Carolina Bank,
Federated Investors, Federated Services Company, Federated Securities Corp.,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors and Trustee Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Wood and Associates, Inc., Realtors; President, Northgate Village
Commercial Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood & ventures in southwest Florida; Director, Trustee, or Managing General
Associates, Inc. Realtors Partner of the Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- --------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Pittsburgh, PA Homes, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors Treasurer and and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Trustee Research; Executive President, Treasurer, and Director, Federated Securities
Pittsburgh, PA Corp.; Chairman, Treasurer, and Director, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly President, State
Boston, MA Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
- --------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee and President, Federated
Federated Investors Advisers, Federated Management, and Federated Research; Director and
Tower President, Federated Research Corp; President, Passport Research, Ltd;
Pittsburgh, PA Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Joseph S. Machi Vice President Vice President, Federated Administrative Services; Vice President and
Federated Investors and Assistant Assistant Treasurer of some of the Funds.
Towers Treasurer
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Director, Federated
Administrative Services; Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the Fund.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash
- --------------------------------------------------------------------------------
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc. Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 3, 1994, the following shareholder of record owned 5% or more of the
outstanding shares of the Fund: Central Carolina Bank and Trust Company, Durham,
North Carolina, owned approximately 3,692,845 shares (82.36%).
TRUSTEE LIABILITY
The 111 Corcoran Funds' 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.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Central Carolina Bank (the "Adviser"). The
Adviser shall not be liable to the Fund or any shareholder for any losses that
may be sustained in the purchase, holding, lending, 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 Fund.
Because of internal controls maintained by Central Carolina Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of Central Carolina Bank's or its affiliates' relationships with an
issuer.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the fiscal year ended May 31, 1994 and for the period from July 22, 1992
(date of initial public investment) to May 31, 1993, the Adviser earned advisory
fees of $280,923 and $106,242, respectively, all of which were voluntarily
waived.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with expense limitations established
by certain states for investment companies whose shares are registered
for sale in those states. If the Fund's normal operating expenses
(including the investment advisory fee, but not including brokerage
commissions, interest, taxes and extraordinary expenses) exceed 2 1/2%
per year of the first $30 million of average net assets, 2% per year of
the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the Adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. For the fiscal year ended May 31, 1994 and for the period from July
22, 1992 (date of initial public investment) to May 31, 1993, the Fund incurred
$56,185 and $42,828, respectively, in administrative services of which $0 and
$23,286, respectively, were voluntarily waived.
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. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund 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.
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.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated 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.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus a sales charge on days 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 Fund."
ADDITIONAL PURCHASE INFORMATION--PAYMENT IN KIND
In addition to payment by check, shares of the Fund may be purchased by
customers of Central Carolina Bank in exchange for securities held by an
investor which are acceptable to that Fund. Investors interested in exchanging
securities must first telephone Central Carolina Bank at (800) 422-2080 for
instructions regarding submission of a written description of the securities the
investor wishes to exchange. Within five business days of the receipt of the
written description, Central Carolina Bank will advise the investor by telephone
whether the securities to be exchanged are acceptable to the Fund whose shares
the investor desires to purchase and will instruct the investor regarding
delivery of the securities. There is no charge for this review.
Securities accepted by the Fund are valued in the manner and on the days
described in the section entitled "Net Asset Value" as of 4:00 p.m. (Eastern
time). Acceptance may occur on any day during the five-day period afforded
Central Carolina Bank to review the acceptability of the securities. Securities
which have been accepted by the Fund must be delivered within five days
following acceptance.
The value of the securities to be exchanged and of the shares of the Fund may be
higher or lower on the day Fund shares are offered than on the date of receipt
by Central Carolina Bank of the written description of the securities to be
exchanged. The basis of the exchange of such securities for shares of the Fund
will depend on the value of the securities and the net asset value of Fund
shares next determined following acceptance of the day Fund shares are offered.
Securities to be exchanged must be accompanied by a transmittal form which is
available from Central Carolina Bank.
A gain or loss for federal income tax purposes may be realized by the investor
upon the securities exchange depending upon the cost basis of the securities
tendered. All interest, dividends, subscription or other rights with respect to
accepted securities which go "ex" after the time of valuation become the
property of the Fund and must be delivered to the Fund by the investor forthwith
upon receipt from the issuer. Further, the investor must represent and agree
that all securities offered to the Fund are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933, or otherwise.
- --------------------------------------------------------------------------------
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. Central Carolina Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus. Net asset value will not
be calculated on Good Friday and on certain federal holidays.
VALUING MUNICIPAL BONDS
The Trustee uses an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less shall be
their amortized cost value, unless the particular circumstances of the security
indicate otherwise. Under this method, portfolio instruments and assets are
valued at the acquisition cost as adjusted for amortization of premium or
accumulation of discount rather than at current market value. The Executive
Committee periodically assesses this method of valuation and recommends changes
where necessary to assure that the Fund's portfolio instruments are valued at
their fair value as determined in good faith by the Trustees.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders using the exchange privilege must exchange shares having a new
asset value of at least $1,000. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
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 shares of the other fund.
Instructions for exchanges may be given in writing or by telephone. Exchange
procedures are explained in the prospectus under "Exchange Privilege."
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
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 Fund's portfolio. Redemption in kind will be
made in conformity with applicable Securities and Exchange Commission 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.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund 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.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet 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, the Fund must, among other requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the dividends
received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
- the availability of higher relative yields;
- differentials in market values;
- new investment opportunities;
- changes in creditworthiness of an issuer; or
- an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's average annual total return for the one-year period ended May 31,
1994, was (1.96%).
The average annual total return for the Fund 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 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, less any applicable sales load, adjusted
over the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the thirty-day period ended May 31, 1994, was 4.55%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share on the last day
of the period. This value 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 the Fund because of certain adjustments required by the Securities and
Exchange Commission 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 the Fund,
the performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The Fund's tax-equivalent yield for the thirty-day period ended May 31, 1994,
was 7.00%.
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 28% tax rate and assuming that income is 100%
tax-exempt.
- --------------------------------------------------------------------------------
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free from
state and local taxes as well. As the table below indicates, a "tax-free"
investment is an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF NORTH CAROLINA
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TAX BRACKET:
- -------------------------------------------------------------------------------------------------------------------------
FEDERAL 15.00% 28.00% 31.00% 31.00% 36.00% 39.60%
- -------------------------------------------------------------------------------------------------------------------------
COMBINED
FEDERAL AND
STATE 22.00% 35.00% 38.00% 38.75% 43.75% 47.35%
- -------------------------------------------------------------------------------------------------------------------------
JOINT RETURN: $1-38,000 $38,001-91,850 $91,851-100,000 $100,001-140,000 $140,001-250,000 Over $250,000
SINGLE RETURN: $1-22,750 $22,751-55,100 $55,101-60,000 $60,001-115,000 $115,001-250,000 Over $250,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX-EXEMPT TAXABLE YIELD EQUIVALENT
YIELD
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
3.50% 4.49% 5.38% 5.65% 5.71% 6.22% 6.65%
4.00% 5.13% 6.15% 6.45% 6.53% 7.11% 7.60%
4.50% 5.77% 6.92% 7.26% 7.35% 8.00% 8.55%
5.00% 6.41% 7.69% 8.06% 8.16% 8.89% 9.50%
5.50% 7.05% 8.46% 8.87% 8.98% 9.78% 10.45%
6.00% 7.69% 9.23% 9.68% 9.80% 10.67% 11.40%
6.50% 8.33% 10.00% 10.48% 10.61% 11.56% 12.35%
7.00% 8.97% 10.77% 11.29% 11.43% 12.44% 13.30%
7.50% 9.62% 11.54% 12.10% 12.24% 13.33% 14.25%
8.00% 10.26% 12.31% 12.90% 13.06% 14.22% 15.19%
</TABLE>
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING THE
TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE AND LOCAL TAXES
PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO INCREASE FEDERAL
DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an indication of
past or future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's expenses; and
- - various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return as
described below.
Investors may use financial publications and/or indices to obtain a more
complete view of the 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 Fund uses 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 as set value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the general
municipal bond funds category in advertising and sales literature.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
- - LEHMAN BROTHERS STATE GENERAL OBLIGATION BOND INDEX is comprised of state
general obligation debt issues. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total returns
calculated for one, three, and twelve month periods as well as year-to-date.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION MUNICIPAL BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. 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 effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than 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 S&P 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. MUNICIPAL BOND RATINGS DEFINITIONS
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
edged." 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 some time in the future.
NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT 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 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.
2041605B (7/94)
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED MAY 31, 1994
INVESTMENT REVIEW
---------------------------------------------------------------------------
The 111 Corcoran North Carolina Municipal Securities Fund (the "Fund")
had a total return of 2.68%, on a net asset basis, for the year ended May
31, 1994, -1.96% taking into account the sales charge.*
Interest rates have sharply escalated the last several months as the
Federal Reserve Board initiated a policy of higher rates. This action,
designed to thwart future inflation, also resulted in lowering the
principal value of the Fund.
As Fund assets have grown, Fund management has consolidated the
smaller dollar positions, providing an opportunity to increase the current
income generated by the Fund.
The average maturity of the Fund is 12 3/4 years, and we see no reason
to extend maturities at this time.
Management feels municipal bonds represent good value at this stage of
the economic recovery and will continue to purchase high-quality
intermediate maturity issues.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES
FUND
SINCE INCEPTION AS OF MAY 31, 1994.
The graph below illustrates the hypothetical investment of $10,000 in the
111 Corcoran North Carolina Municipal Securities Fund (the "Fund") from July 22,
1992 (start of performance) to May 31, 1994 compared to the Lehman Brothers
State G.O. Bond Index ("LSGOB").
Graphic representation "A" omitted. See Appendix.
<TABLE>
<CAPTION>
111 Corcoran
North Caro-
lina Munici- Lehman
pal Brothers
Measurement Period Securities State G.O.
(Fiscal Year Covered) Fund Bond Index
<S> <C> <C>
July 22, 1992 9550 10000
May 31, 1993 10254 10983
May 31, 1994 10530 11305
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED MAY 31, 1994
(Based on Offering Price)
<TABLE>
<S> <C>
1 Year.............................................................. (1.96)%
Start of Performance, July 22, 1992 (cumulative).................... 5.30%
Start of Performance, July 22, 1992................................. 2.82%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus dated July
31, 1994, and, together with the financial statements contained therein,
constitutes the Fund's annual report.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge
= $9,550). The Fund's performance assumes the reinvestment of all dividends
and distributions.
The LSGOB is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance. The LSGOB has been
adjusted to reflect reinvestment of dividends on securities in the index.
FEDERATED SECURITIES CORP.
(LOGO)
- --------------------------------------------------------------------------------
Distributor
G00316-01 (7/94)
111 CORCORAN BOND FUND
(A PORTFOLIO OF THE 111 CORCORAN FUNDS)
PROSPECTUS
The shares of 111 Corcoran Bond Fund (the "Fund") offered by this prospectus
represent interests in a diversified portfolio in the 111 Corcoran Funds (the
"Trust"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to achieve income. The Fund pursues this
objective by investing primarily in bonds rated A or better.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF CENTRAL
CAROLINA BANK AND TRUST COMPANY OR ITS AFFILIATES, ARE NOT ENDORSED OR
GUARANTEED BY CENTRAL CAROLINA BANK AND TRUST COMPANY OR ITS AFFILIATES, 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 July 31,
1994 with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing or calling the Fund at 1-800-422-2080.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Investing in Securities of Other
Investment Companies 4
Restricted and Illiquid Securities 5
Temporary Investments 5
Repurchase Agreements 5
When-Issued and Delayed
Delivery Transactions 5
Lending of Portfolio Securities 5
Put and Call Options 6
Financial Futures and
Options on Futures 6
Risks 7
Foreign Securities 7
Investment Limitations 7
THE 111 CORCORAN FUNDS INFORMATION 8
- ------------------------------------------------------
Management of the 111 Corcoran Funds 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Fund Shares 9
Administration of the Fund 9
Administrative Services 9
Custodian 9
Transfer Agent, Dividend Disbursing
Agent and Portfolio Recordkeeper 9
Legal Counsel 10
Independent Public Accountants 10
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN THE FUND 10
- ------------------------------------------------------
Share Purchases 10
Through Central Carolina Bank 10
Through Authorized
Broker/Dealers 10
Minimum Investment Required 10
What Shares Cost 11
Purchases at Net Asset Value 11
Sales Charge Reallowance 11
Reducing the Sales Charge 12
Quantity Discounts and
Accumulated Purchases 12
Letter of Intent 12
Reinvestment Privilege 12
Systematic Investment Program 12
Certificates and Confirmations 13
Dividends 13
Capital Gains 13
EXCHANGE PRIVILEGE 13
- ------------------------------------------------------
Exchange by Telephone 14
Written Exchange 14
REDEEMING SHARES 15
- ------------------------------------------------------
By Telephone 15
By Mail 15
Systematic Withdrawal Program 16
Accounts with Low Balances 16
Redemption in Kind 16
SHAREHOLDER INFORMATION 17
- ------------------------------------------------------
Voting Rights 17
Massachusetts Partnership Law 17
EFFECT OF BANKING LAWS 17
- ------------------------------------------------------
TAX INFORMATION 18
- ------------------------------------------------------
Federal Income Tax 18
PERFORMANCE INFORMATION 19
- ------------------------------------------------------
FINANCIAL STATEMENTS 20
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 33
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................................... 4.50%
Maximum Sales Load 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)............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of estimated average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fees.......................................................................... None
Total Other Expenses................................................................ 0.35%
Total Fund Operating Expenses(2)............................................... 0.35%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver and/or reimbursement by the investment adviser. The investment
adviser, at its sole discretion, can terminate this voluntary waiver and/or
reimbursement at any time. The maximum management fee is 0.75%.
(2) The Total Fund Operating Expenses are estimated to be 1.10% absent the
anticipated voluntary waivers and/or reimbursement by the Fund's adviser. The
Total Fund Operating Expenses were 0.50% for the fiscal year ended May 31, 1994,
and were 1.25% absent the voluntary waiver and/or reimbursement for the fiscal
year ended May 31, 1994.
* EXPENSES IN THIS TABLE ARE ESTIMATED BASED ON EXPENSES EXPECTED TO BE INCURRED
DURING THE FISCAL YEAR ENDING MAY 31, 1995. 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 "THE 111 CORCORAN FUNDS INFORMATION."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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.............. $ 48 $ 56 $ 64 $ 87
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
111 CORCORAN BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 33.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------
1994 1993*
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.13 $10.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.63 0.49
- --------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.50) 0.13
- -------------------------------------------------------------------------- ------- -------
Total from investment operations 0.13 0.62
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.63) (0.49)
- --------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions -- (0.00)
- -------------------------------------------------------------------------- ------- -------
TOTAL DISTRIBUTIONS (0.63) (0.49)
- -------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.63 $10.13
- -------------------------------------------------------------------------- ------- -------
TOTAL RETURN** 1.21% 6.28%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.50% 0.70%(b)
- --------------------------------------------------------------------------
Net investment income 6.32% 6.00%(b)
- --------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.75% 0.78%(b)
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $97,823 $31,928
- --------------------------------------------------------------------------
Portfolio turnover rate 76% 59%
- --------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 15, 1992 (date of initial public
investment) to May 31, 1993.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
annual report dated May 31, 1994, which can be obtained free of charge.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The 111 Corcoran Funds was established as a Massachusetts business trust under a
Declaration of Trust dated December 11, 1991. The Declaration of Trust permits
the 111 Corcoran Funds to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. This prospectus
relates only to the 111 Corcoran Funds' fixed income portfolio, known as 111
Corcoran Bond Fund (the "Fund"). The Fund is for trust clients of Central
Carolina Bank and its affiliates and individual investors who desire a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio investing primarily in bonds rated A or better. Central
Carolina Bank is the investment adviser to the Fund. A minimum initial
investment of $1,000 is required. Subsequent investments must be in amounts of
at least $100.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve income. In pursuing this
objective the Fund's investment adviser intends to purchase portfolio securities
which it deems to be undervalued in an effort to obtain appreciation of capital.
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. The investment objective cannot be changed without approval of
shareholders. Unless indicated otherwise, the investment policies may be changed
by the Board of Trustees (the "Trustees") without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of bonds rated "A" or
better. The average maturity of the Fund is 3 to 10 years. As a matter of
investment policy, which may be changed without shareholder approval, the Fund
will invest so that, under normal circumstances, at least 65% of the value of
its total assets are invested in bonds rated "A" or better. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a professionally managed, diversified portfolio of
bonds rated A or better. The securities in which the Fund may invest are as
follows:
- domestic issues of corporate debt obligations (rated Aaa, Aa, A or Baa by
Moody's Investors Service, Inc.; AAA, AA, A or BBB by Standard & Poor's
Corporation; or AAA, AA, A or BBB by Fitch Investors Service, Inc.).
Bonds rated "BBB" by Standard & Poor's Corporation or Fitch Investors
Service, Inc. or "Baa" by Moody's Investors Service, Inc. have
speculative characteris-
tics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. Downgraded securities will be evaluated
on a case-by-case basis by the adviser. The adviser will determine
whether or not the security continues to be an acceptable investment. If
not, the security will be sold;
- obligations of the United States government;
- notes, bonds, and discount notes of the following U.S. government
agencies or instrumentalities: Federal Home Loan Bank System, Federal
National Mortgage Association, Government National Mortgage Association,
Bank for Cooperatives (including Central Bank for Cooperatives), Federal
Land Banks, Federal Intermediate Credit Banks, Tennessee Valley
Authority, Export-Import Bank of the United States, Commodity Credit
Corporation, Federal Financing Bank, The Student Loan Marketing
Association, Federal Home Loan Mortgage Corporation, or National Credit
Union Administration;
- commercial paper which matures in 270 days or less so long as at least
two ratings are high quality ratings by nationally recognized statistical
rating organizations. Such ratings would include: A-1 or A-2 by Standard
& Poor's Corporation, Prime-1 or Prime-2 by Moody's Investors Service,
Inc., or F-1 or F-2 by Fitch Investors Service, Inc.;
- time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC"), or in institutions whose accounts are
insured by the Savings Association Insurance Fund ("SAIF"), which is also
administered by the FDIC, including certificates of deposit issued by and
other time deposits in foreign branches of BIF-insured banks;
- zero coupon bonds;
- bankers' acceptances;
- repurchase agreements collateralized by eligible investments; and
- foreign securities which are traded publicly in the United States.
The obligations of U.S. government agencies or instrumentalities which the Fund
may buy are backed in a variety of ways by the U.S. government, its agencies or
instrumentalities. Some of these obligations, such as Government National
Mortgage Association mortgage-backed securities and obligations of the Farmers
Home Administration, are backed by the full faith and credit of the U.S.
Treasury. Obligations of the Farmers Home Administration are also backed by the
issuer's right to borrow from the U.S. Treasury. Obligations of Federal Home
Loan Banks and The Student Loan Marketing Association are backed by the
discretionary authority of the U.S. government to purchase certain obligations
of agencies or instrumentalities. Obligations of Federal Home Loan Banks,
Federal Farm Credit Banks, Federal National Mortgage Association, and Federal
Home Loan Mortgage Corporation are backed by the credit of the agency or
instrumentality issuing the obligations.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will invest
in
other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. It should
be noted that investment companies incur certain expenses such as management
fees and, therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expense.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. Certain restricted securities which the
Trustees deem to be liquid will be excluded from this limitation. The
restriction is not applicable to commercial paper issued under Section 4(2) of
the Securities Act of 1933. Restricted securities are any securities in which
the Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restriction on resale under federal securities law. The
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, 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.
The 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 the federal
securities law, and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view for 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 Fund 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 Fund believes 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 Fund intends,
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 Fund's investment adviser, as liquid and not subject to the
investment limitations applicable to illiquid securities.
TEMPORARY INVESTMENTS. From time to time, when the adviser determines that
market conditions call for a temporary defensive posture, the Fund may invest in
acceptable investments with short-term maturities.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/ dealers, and other recognized financial institutions sell
U.S. government securities or certificates of deposit 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 of any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term basis up to one-third of the
value of its total assets to broker/ dealers, banks, or other institutional
borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the 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.
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may also write (sell) put and call
options on all or any portion of its portfolio to generate income for the Fund.
The Fund will write call options on securities either held in its portfolio or
for which it has the right to obtain without payment of further consideration or
for which it has segregated cash in the amount of any additional consideration.
In the case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.
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
since 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 and loan
associations) deemed creditworthy by the Fund's 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.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government 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.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the 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 also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a
futures contract, the Fund is entitled (but not obligated) to purchase a futures
contract at a fixed price at any time 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 and/or Treasury bills, 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 contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
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 Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest rate 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 investment adviser will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market on an exchange 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 positions depends on
this secondary market.
FOREIGN SECURITIES. The Fund reserves the right to invest in foreign securities
which are traded publicly in the United States. Investments in foreign
securities, particularly those of non-governmental issuers, involve
consideration which are not ordinarily associated with investments in domestic
issuers. These considerations include the possibility of expropriation, the
unavailability of financial information or the difficulty of interpreting
financial information prepared under foreign accounting standards, less
liquidity and more volatility in foreign securities markets, the impact of
political, social or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The Fund's investment adviser will consider these and
other factors before investing in foreign securities and will not make such
investments unless, in its opinion, such investments will meet the Fund's
standards and objectives. The Fund will only purchase securities issued in U.S.
dollar denominations. The Fund will not invest more than 15% in foreign
securities.
INVESTMENT LIMITATIONS
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 and pledge up
to 10% of the value of those assets to secure such borrowings; or
- sell securities short except, under strict limitations, it may maintain
open short positions so long as not more than 5% of the value of its net
assets is held as collateral for those positions.
The above limitations cannot be changed without shareholder approval. The
following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
- invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations.
THE 111 CORCORAN FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE 111 CORCORAN FUNDS
BOARD OF TRUSTEES. The 111 Corcoran Funds are managed by a Board of Trustees.
The Board of Trustees is responsible for managing the business affairs of the
111 Corcoran Funds and for exercising all of the powers of the 111 Corcoran
Funds except those reserved for the shareholders. An 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 111
Corcoran Funds, investment decisions for the Fund are made by Central Carolina
Bank and Trust Company (the "Bank"), the Fund's investment 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 Fund.
ADVISORY FEES. The Fund's adviser is entitled to receive an annual
investment advisory fee equal to .75 of 1% of the Fund's average daily net
assets. The fee paid by the Fund, while higher than the advisory fee paid
by other mutual funds in general, is comparable to fees paid by many mutual
funds with similar objectives and policies. The investment advisory
contract allows the voluntary waiver, in whole or in part, of the
investment advisory fee or the reimbursement of expenses by the adviser
from time to time. The adviser can terminate any voluntary waiver of its
fee or reimbursement of expenses at any time at its sole discretion.
Investment decisions for the Fund will be made independently from those of
any fiduciary or other accounts that may be managed by the Bank or its
affiliates. If, however, such accounts, the Fund, or the Bank for its own
account are simultaneously engaged in transactions involving the same
securities, the transactions may be combined and allocated to each account.
This system may adversely affect the price the Fund pays or receives, or
the size of the position it obtains. The Bank may engage, for its own
account or for other accounts managed by the Bank, in other transactions
involving fixed income securities which may have adverse effects on the
market for securities in the Fund's portfolio.
ADVISER'S BACKGROUND. The Bank was founded in 1903 as Durham Bank and
Trust Company. The Bank was created from Durham Bank and Trust Company on
September 30, 1961. The Bank is the lead bank within CCB Financial
Corporation, which is a multibank holding company that includes a
commercial bank subsidiary with offices also in North Carolina. CCB
Financial Corp.
was incorporated in North Carolina in November 1982. The principal
executive offices of the Bank are located at 111 Corcoran Street, Durham,
North Carolina 27702. The activities of the Bank encompass a full range of
commercial banking services, including trust services.
The Bank has managed commingled funds since 1953. As of June 30, 1994, the
Trust Division managed assets in excess of $1.3 billion. The Trust Division
manages 2 commingled funds with assets of approximately $52.5 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992.
As part of their regular banking operations, CCB may make 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 lending clients of CCB.
The lending relationship will not be a factor in the selection of
securities.
James S. Agnew has been the Fund's portfolio manager since the Fund's
inception in July 1992. Mr. Agnew joined CCB in 1969 and has, for more than
the past five years, been Vice President and Senior Trust Officer of CCB,
responsible for managing approximately $250 million in fixed income assets.
Mr. Agnew received a B.A. and M.S. in Industrial Management from Georgia
Institute of Technology and an L.L.B. from Woodrow Wilson Law College.
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 principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- --------------------- -------------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO RECORDKEEPER. Federated
Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
is transfer agent for the shares
of the Fund and dividend disbursing agent for the Fund. Federated Services
Company also provides certain accounting and recordkeeping services with respect
to the portfolio investments of the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
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.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through Central Carolina Bank or
through brokers or dealers which have a sales agreement with the distributor. 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.
THROUGH CENTRAL CAROLINA BANK. An investor may call Central Carolina Bank to
place an order to purchase shares of the Fund. (Call toll-free 1-800-422-2080.)
Texas residents must purchase shares through Federated Securities Corp. at
1-800-618-8573. Orders through Central Carolina Bank are considered received
when the Fund is notified of the purchase order. Purchase orders must be
received by Central Carolina Bank before 3:00 p.m. (Eastern time) and must be
transmitted by Central Carolina Bank to the Fund before 4:00 p.m. (Eastern time)
in order for shares to be purchased at that day's price. Payment is normally
required in five business days. It is the responsibility of Central Carolina
Bank to transmit orders promptly to the Fund.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of the Fund. Shares will be
purchased at the public offering price next determined after the Fund receives
the purchase request. Purchase requests through registered broker/ dealers must
be received by the broker/dealer and transmitted by the broker/dealer to Central
Carolina Bank before 3:00 p.m. (Eastern time) and then transmitted by Central
Carolina Bank to the Fund by 4:00 p.m. (Eastern time) in order for shares to be
purchased at that day's public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $100. These minimums may be waived
for purchases by the Trust Division of Central Carolina Bank for its fiduciary
or custodial accounts. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge, as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF NET
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE AMOUNT INVESTED
-------------------------------------- ----------------------- ------------------
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million but less than $2 million 0.25% 0.25%
$2 million or more 0.00% 0.00%
</TABLE>
The net asset value is determined at or after the close of 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; and (iii)
the following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
PURCHASES AT NET ASSET VALUE
Shares of the Fund may be purchased at net asset value, without a sales charge,
by the Trust Division of Central Carolina Bank for accounts in which the Trust
Division holds or manages assets, by trust companies, trust departments of other
financial institutions and by banks and savings and loans for their own
accounts. Trustees, emeritus trustees, employees and retired employees of the
Trust, CCB Financial Corp., Central Carolina Bank, or Federated Securities Corp.
or their affiliates, or any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund, and their spouses and
children under 21, may also buy shares at net asset value, without a sales
charge.
SALES CHARGE REALLOWANCE
For sales of shares of the Fund, a dealer will normally receive up to 85% of the
applicable sales charge. For shares sold with a sales charge, Central Carolina
Bank will receive 85% of the applicable sales charge for purchases of Fund
shares made directly through Central Carolina Bank.
The sales charge for shares sold other than through Central Carolina Bank or
registered broker/dealers will be retained by the distributor. However, the
distributor will, periodically, uniformly offer to pay to dealers additional
amounts in the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. Such payments, all or
a portion of which may be paid from the sales charge the distributor normally
retains or any other source available to it, will be predicated upon the amount
of shares of the Fund that are sold by the dealer.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
- quantity discounts and accumulated purchases;
- signing a 13-month letter of intent; or
- using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age 21
when it calculates the sales charge.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 3.75%, not 4.50%.
To receive the sales charge reduction, Central Carolina Bank or the distributor
must be notified by the shareholder in writing or by his financial institution
at the time the purchase is made that Fund shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
4.50% of the total amount intended to be purchased in escrow (in shares of the
Fund) until such purchase is completed.
The shares held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days; however, these previous purchases will not receive the reduced sales
charge.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Central Carolina Bank or the distributor must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to
eliminate a sales charge. If the shareholder redeems his shares in the Fund,
there may be tax consequences.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
Central Carolina Bank and invested in Fund shares at the
net asset value next determined after an order is received by the Fund, plus the
applicable sales charge. A shareholder may apply for participation in this
program through Central Carolina Bank or through the distributor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and are paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order for
shares and payment by wire are received on the same day, shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted into federal funds.
Unless cash payments are requested by contacting Central Carolina Bank,
dividends are automatically reinvested on payment dates in additional shares of
the Fund at the payment date's net asset value without a sales charge.
CAPITAL GAINS
Distributions of net long-term capital gains realized by the Fund will be made
at least annually.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the 111 Corcoran Funds (the
"Trust") which consists of the Fund and 111 Corcoran North Carolina Municipal
Securities Fund. Shareholders of the Fund have access to 111 Corcoran North
Carolina Municipal Securities Fund though an exchange program. In addition,
shares of the Fund may be exchanged for shares of certain funds in the Liberty
Family of Funds ("Liberty"), a group of Funds distributed by Federated
Securities Corp. Shareholders have access to the following Liberty funds:
- Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and
- American Leaders Fund, Inc.--a high-quality equity fund.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the participating fund into which an
exchange is to be made.
Exchanges are made at net asset value plus the difference between the fund's
sales charge already paid and any applicable sales charge on shares of the fund
to be acquired in the exchange.
The exchange privilege is available to shareholders residing in any state in
which the participating fund shares being acquired may legally be sold. Upon
receipt by Federated Services Company of proper instructions and all necessary
supporting documents, shares submitted for exchange will be redeemed at the
next-determined net asset value. If the exchanging shareholder does not have an
account in the participating fund whose shares are being acquired, a new account
will be established with the same registration, dividend and capital gain
options as the account from which shares are exchanged, unless otherwise
specified by the shareholder. In the case where the new account registration is
not identical to that of the existing account, a signature guarantee is
required. (See "Redeeming Shares by Mail").
Exercise of this privilege is treated as a redemption and new purchase for
federal income tax purposes and, depending on the circumstances, a short or
long-term capital gain or loss may be realized. The Fund reserves the right to
modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination. Shareholders may obtain
further information on the exchange privilege by calling their Central Carolina
Bank representative or an authorized broker.
EXCHANGE BY TELEPHONE. Shareholders may provide instructions for exchanges
between participating funds by telephone to their Central Carolina Bank
representative by calling 1-800-422-2080. In addition, investors may exchange
shares by calling their authorized broker directly.
An authorization form permitting the Fund to accept telephone exchange requests
must first be completed. It is recommended that investors request this privilege
at the time of their initial application. If not completed at the time of
initial application, authorization forms and information on this service can be
obtained through a Central Carolina Bank representative or authorized broker.
Shares may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received by Central Carolina Bank, or an
authorized broker and transmitted to Federated Services Company before 4:00 p.m.
(Eastern time) for shares to be exchanged the same day. Shareholders who
exchange into shares of the Fund will not receive a dividend from the Fund on
the date of the exchange.
Shareholders of the Fund may have difficulty in making exchanges by telephone
through banks, brokers and other financial institutions during times of drastic
economic or market changes. If shareholders cannot contact their Central
Carolina Bank representative or authorized broker by telephone, it is
recommended that an exchange request be made in writing and sent by mail for
next day delivery.
WRITTEN EXCHANGE. A shareholder wishing to make an exchange by written request
may do so by sending it to: 111 Corcoran Funds, 111 Corcoran Street, P.O. Box
931, Durham, North Carolina 27702. In addition, an investor may exchange shares
by sending a written request to their authorized broker directly.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, the transfer agent, by a Central
Carolina Bank representative or authorized broker and deposited to the
shareholder's account before being exchanged.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemptions
must be received in proper form and can be made through Central Carolina Bank or
directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Central
Carolina Bank (call toll-free 1-800-422-2080) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund receives
the redemption request from Central Carolina Bank. Redemption requests through
Central Carolina Bank must be received by Central Carolina Bank before 3:00 p.m.
(Eastern time) and must be transmitted by Central Carolina Bank to the Fund
before 4:00 p.m. (Eastern time) in order for shares to be redeemed at that day's
net asset value. Central Carolina Bank is responsible for promptly submitting
redemption requests and providing proper redemption instructions to the Fund.
Registered broker/dealers may charge customary fees and commissions for this
service. Telephone redemption instructions may be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request to
Central Carolina Bank. The written request should include the shareholder's
name, the Fund name, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request to the Fund. Shareholders should call Central Carolina Bank for
assistance in redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, 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:
- a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the FDIC;
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by SAIF, which is administered by the FDIC; or
- 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 its 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 its transfer agent reserve the right
to amend these standards at anytime without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed under
this program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through his financial institution. For shares sold with a sales charge,
it is not advisable for shareholders to be purchasing shares while participating
in this program.
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 required minimum value of $1,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $1,000 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.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000, or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Fund will pay all
or a portion of the remainder of the redemption in portfolio instruments, valued
in the same way that net asset value is determined. The portfolio instruments
will be selected in a manner that the Trustees deem fair and equitable.
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the 111 Corcoran Funds have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund. As of July 3,
1994, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 9,460,794
shares (94.40%) of the Fund, and, therefore, may, for certain purposes be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As a Massachusetts business trust, the 111 Corcoran Funds are not required to
hold annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the 111 Corcoran Funds' or the Fund's operation and for the
election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the 111 Corcoran Funds.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of 111 Corcoran Funds
on behalf of the Fund. To protect shareholders of the Fund, 111 Corcoran Funds
has filed legal documents with Massachusetts that expressly disclaim the
liability of shareholders for such acts or obligations of 111 Corcoran Funds.
These documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument 111 Corcoran Funds or its Trustees enter into or sign
on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for 111 Corcoran
Funds' obligations on behalf of the Fund, 111 Corcoran Funds is required to use
its property to protect or compensate the shareholder. On request, 111 Corcoran
Funds will defend any claim made and pay any judgment against a shareholder for
any act or obligation of 111 Corcoran Funds on behalf of the Fund. Therefore,
financial loss resulting from liability as a shareholder of the Fund will occur
only if 111 Corcoran Funds cannot meet its obligations to indemnify shareholders
and pay judgments against them from assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities. However, such
banking laws and regulations do not prohibit such a holding company affiliate or
banks generally 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 such a customer. Central Carolina Bank is
subject to such banking laws and regulations.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
Central Carolina Bank believes that it may perform the services for the Fund
contemplated by its advisory agreement with the 111 Corcoran Funds without
violation of the Glass-Steagall Act or other applicable banking 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 such or future statutes and regulations, could prevent
Central Carolina Bank from continuing to perform all or a part of the above
services for its customers and/or the Fund. If it were prohibited from engaging
in these customer-related activities, the Trustees would consider alternative
advisers and means of continuing available investment services. In such event,
changes in the operation of the Fund may occur, including possible termination
of any automatic or other Fund share investment and redemption services then
being provided by Central Carolina Bank. It is not expected that existing
shareholders would suffer any adverse financial consequences (if another adviser
with equivalent abilities to Central Carolina Bank is found) as a result of any
of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal regular income tax because it 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
other portfolios of 111 Corcoran Funds will not be combined for tax purposes
with those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distribution, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the shares.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
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 Securities and Exchange Commission) 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.
The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
111 CORCORAN BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CASH AND CASH EQUIVALENTS--2.9%
- ----------------------------------------------------------------------------------
$ 2,812,544 Goldman Sachs Money Market Fund $ 2,812,544
-------------------------------------------------------------------- -----------
TOTAL CASH & CASH EQUIVALENTS (AT NET ASSET VALUE) 2,812,544
-------------------------------------------------------------------- -----------
CORPORATE BONDS--43.8%
- ----------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.4%
--------------------------------------------------------------------
1,000,000 Discover Card, 6.20%, 11/15/2003 903,650
--------------------------------------------------------------------
500,000 Sears Credit Account, 8.60%, 5/15/98 521,245
-------------------------------------------------------------------- -----------
Total 1,424,895
-------------------------------------------------------------------- -----------
AUTO/TRUCK MANUFACTURER--1.3%
--------------------------------------------------------------------
1,000,000 Ford Motor Co., 7.50%, 11/15/99 999,590
--------------------------------------------------------------------
250,000 General Motors Corp., 7.625%, 2/15/97 253,973
-------------------------------------------------------------------- -----------
Total 1,253,563
-------------------------------------------------------------------- -----------
BANKING--2.8%
--------------------------------------------------------------------
350,000 Bank America, 7.75%, 7/15/2002 347,546
--------------------------------------------------------------------
1,500,000 Bankers Trust NY Corp., 7.25%, 1/15/2003 1,434,885
--------------------------------------------------------------------
250,000 Boatmens Bancshares, 6.75%, 3/15/2003 232,395
--------------------------------------------------------------------
500,000 Boatmens Bancshares, 7.625%, 10/1/2004 495,545
--------------------------------------------------------------------
250,000 Korea Development Bank, 6.25%, 5/1/2000 234,913
-------------------------------------------------------------------- -----------
Total 2,745,284
-------------------------------------------------------------------- -----------
CHEMICALS--2.4%
--------------------------------------------------------------------
450,000 ICI Wilmington, 9.50%, 11/15/2000 494,883
--------------------------------------------------------------------
1,750,000 ICI Wilmington, 8.75%, 5/1/2001 1,838,953
-------------------------------------------------------------------- -----------
Total 2,333,836
-------------------------------------------------------------------- -----------
CONSUMER PRODUCTS--4.6%
--------------------------------------------------------------------
250,000 American Brands Co., 5.25%, 7/15/95 247,265
--------------------------------------------------------------------
500,000 American Brands Co., medium-term note, 8.52%, 2/8/96 513,300
--------------------------------------------------------------------
250,000 Corning, Inc., 7.10%, 8/14/2000 243,442
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
CONSUMER PRODUCTS--CONTINUED
--------------------------------------------------------------------
$ 500,000 Joseph E. Seagram & Sons, 9.75%, 6/15/2000 $ 530,175
--------------------------------------------------------------------
750,000 Philip Morris, 9.00%, 5/15/98 787,245
--------------------------------------------------------------------
500,000 Philip Morris, 9.00%, 1/1/2001 537,605
--------------------------------------------------------------------
1,000,000 Philip Morris, 7.125%, 8/15/2002 952,290
--------------------------------------------------------------------
750,000 RJR Nabisco Holdings Corp., 8.00%, 1/15/2000 705,240
-------------------------------------------------------------------- -----------
Total 4,516,562
-------------------------------------------------------------------- -----------
FINANCE--COMMERCIAL--3.1%
--------------------------------------------------------------------
1,000,000 Ford Capital BV, 9.375%, 5/15/2001 1,093,500
--------------------------------------------------------------------
250,000 General Electric Capital Corp., 5.25%, 11/15/95 247,358
--------------------------------------------------------------------
500,000 General Electric Capital Corp., 7.875%, 12/1/2006 505,220
--------------------------------------------------------------------
750,000 General Motors Acceptance Corp., 7.00%, 9/15/2002 690,548
--------------------------------------------------------------------
500,000 ITT Financial, 8.625%, 2/15/2005 522,260
-------------------------------------------------------------------- -----------
Total 3,058,886
-------------------------------------------------------------------- -----------
FINANCE--INSURANCE--3.7%
--------------------------------------------------------------------
500,000 AON Corp., 6.875%, 10/1/99 483,520
--------------------------------------------------------------------
500,000 Cigna Corp., 7.40%, 1/15/2003 483,155
--------------------------------------------------------------------
500,000 Continental Corp., 7.25%, 3/1/2003 475,490
--------------------------------------------------------------------
250,000 Kemper Corp., 8.80%, 11/1/98 255,115
--------------------------------------------------------------------
2,000,000 Travelers Corp., 6.125%, 6/15/2000 1,877,100
-------------------------------------------------------------------- -----------
Total 3,574,380
-------------------------------------------------------------------- -----------
FINANCE--RETAIL--0.3%
--------------------------------------------------------------------
250,000 Discover Credit Corp., 7.68%, 4/22/97 252,610
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
FOREST PRODUCTS--0.7%
--------------------------------------------------------------------
250,000 Temple Inland, Inc., 8.875%, 2/1/96 259,082
--------------------------------------------------------------------
400,000 Temple Inland, Inc., 7.25%, 9/15/2004 381,520
-------------------------------------------------------------------- -----------
Total 640,602
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
INDUSTRIAL--0.7%
--------------------------------------------------------------------
$ 250,000 Bell Atlantic Financial Services, Inc., medium-term note, 5.45%,
4/22/98 $ 235,982
--------------------------------------------------------------------
250,000 Dow Capital, 6.30%, 4/24/95 250,522
--------------------------------------------------------------------
250,000 Dow Capital, 5.75%, 9/15/97 242,740
-------------------------------------------------------------------- -----------
Total 729,244
-------------------------------------------------------------------- -----------
METALS--0.5%
--------------------------------------------------------------------
500,000 Reynolds Metals Co., 9.00%, 8/15/2003 530,745
-------------------------------------------------------------------- -----------
MULTI-INDUSTRY--2.2%
--------------------------------------------------------------------
500,000 Eastman Kodak Co., 9.875%, 11/1/2004 546,390
--------------------------------------------------------------------
575,000 ITT Corp., 7.25%, 11/15/96 581,446
--------------------------------------------------------------------
750,000 Loews Corp., 8.875%, 4/15/2011 782,595
--------------------------------------------------------------------
250,000 Pacific Dunlop Ltd., medium-term note, 4.85%, 5/13/96 242,990
-------------------------------------------------------------------- -----------
Total 2,153,421
-------------------------------------------------------------------- -----------
OFFICE EQUIPMENT--1.5%
--------------------------------------------------------------------
175,000 Xerox Corp., 9.20%, 7/15/99 183,421
--------------------------------------------------------------------
610,000 Xerox Corp., 9.625%, 10/15/2000 636,828
--------------------------------------------------------------------
650,000 Xerox Corp., 7.15%, 8/1/2004 624,124
-------------------------------------------------------------------- -----------
Total 1,444,373
-------------------------------------------------------------------- -----------
OIL--0.4%
--------------------------------------------------------------------
147,000 Imperial Oil Limited, 9.75%, 9/15/2009 152,851
--------------------------------------------------------------------
200,000 Pennzoil Co., conv. deb., 6.50%, 1/15/2003 226,000
-------------------------------------------------------------------- -----------
Total 378,851
-------------------------------------------------------------------- -----------
PUBLISHING--0.8%
--------------------------------------------------------------------
750,000 Knight Ridder, Inc., 8.50%, 9/1/2001 781,005
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
RETAIL--4.5%
--------------------------------------------------------------------
500,000 JC Penney, Inc., 9.375%, 2/1/98 511,350
--------------------------------------------------------------------
200,000 JC Penney, Inc., 9.45%, 4/15/98 205,330
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
RETAIL--CONTINUED
--------------------------------------------------------------------
$ 1,000,000 K Mart Corp., 8.375%, 1/15/2017 $ 1,054,400
--------------------------------------------------------------------
500,000 Sears Roebuck & Co., 9.47%, 1/23/96 522,310
--------------------------------------------------------------------
500,000 Sears Roebuck & Co., 9.00%, 9/15/96 521,075
--------------------------------------------------------------------
500,000 Sears Roebuck & Co., medium-term note, 6.70%, 7/14/97 495,170
--------------------------------------------------------------------
1,000,000 Sears Roebuck & Co., 9.375%, 11/1/2011 1,096,160
-------------------------------------------------------------------- -----------
Total 4,405,795
-------------------------------------------------------------------- -----------
SECURITIES--5.8%
--------------------------------------------------------------------
1,500,000 Bear Stearns Cos., Inc., 6.625%, 1/15/2004 1,362,750
--------------------------------------------------------------------
1,550,000 Merrill Lynch Corp., 8.00%, 2/1/2002 1,534,330
--------------------------------------------------------------------
500,000 Merrill Lynch Corp., 7.375%, 8/17/2002 483,285
--------------------------------------------------------------------
1,250,000 Morgan Stanley, 6.375%, 12/15/2003 1,120,450
--------------------------------------------------------------------
250,000 Salomon Brothers, Inc., 7.24%, 5/27/2003 234,142
--------------------------------------------------------------------
1,000,000 Salomon Brothers, Inc., 6.875%, 12/15/2003 925,120
-------------------------------------------------------------------- -----------
Total 5,660,077
-------------------------------------------------------------------- -----------
TECHNOLOGY--1.0%
--------------------------------------------------------------------
1,000,000 International Business Machines Corp., 7.25%, 11/1/2002 968,950
-------------------------------------------------------------------- -----------
UTILITIES--6.1%
--------------------------------------------------------------------
1,000,000 Alabama Power Co., 6.75%, 2/1/2003 937,880
--------------------------------------------------------------------
1,000,000 Gulf States Utilities Co., 6.77%, 8/1/2005 904,030
--------------------------------------------------------------------
750,000 Hydro Quebec, 6.375%, 1/15/2002 700,800
--------------------------------------------------------------------
250,000 Jersey Central Power & Light Co., 7.25%, 10/1/98 246,352
--------------------------------------------------------------------
250,000 Northern Illinois Gas Co., 5.875%, 5/1/2000 238,815
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
UTILITIES--CONTINUED
--------------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 7.75%, 6/30/2004 971,910
--------------------------------------------------------------------
1,000,000 Public Service Electric & Gas Co., 7.875%, 11/1/2001 1,011,900
--------------------------------------------------------------------
1,000,000 West Penn Power Co., 7.875%, 12/1/2004 992,940
-------------------------------------------------------------------- -----------
Total 6,004,627
-------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $45,249,506) 42,857,706
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--52.0%
- ----------------------------------------------------------------------------------
FARM CREDIT SYSTEM FINANCIAL ASSISTANT CORP.--0.6%
--------------------------------------------------------------------
$ 500,000 9.20%, 9/27/2005 $ 552,115
-------------------------------------------------------------------- -----------
FEDERAL FARM CREDIT BANKS--0.9%
--------------------------------------------------------------------
1,000,000 4.44%, 4/28/98 916,820
-------------------------------------------------------------------- -----------
FEDERAL HOME LOAN BANK--2.7%
--------------------------------------------------------------------
500,000 5.75%, 9/3/97 484,970
--------------------------------------------------------------------
1,000,000 4.06%, 5/11/98 985,130
--------------------------------------------------------------------
750,000 5.127%, 6/2/98 707,595
--------------------------------------------------------------------
500,000 7.47% 5/18/99 508,200
-------------------------------------------------------------------- -----------
Total 2,685,895
-------------------------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION--17.1%
--------------------------------------------------------------------
1,000,000 5.90%, 4/21/2000 944,120
--------------------------------------------------------------------
1,000,000 5.69%, 11/29/2000 919,300
--------------------------------------------------------------------
500,000 6.80%, 9/18/2002 505,540
--------------------------------------------------------------------
2,000,000 6.31%, 2/23/2004 1,841,160
--------------------------------------------------------------------
250,000 5.00%, Series 1194F, 11/15/2005 238,592
--------------------------------------------------------------------
1,000,000 8.00%, Series 1033G, 1/15/2006 999,300
--------------------------------------------------------------------
2,000,000 8.00%, Series 1171G, 11/15/2006 2,018,640
--------------------------------------------------------------------
250,000 6.00%, Series 1337C, 12/15/2006 227,030
--------------------------------------------------------------------
1,000,000 7.00%, Series 1187H, 12/15/2006 951,870
--------------------------------------------------------------------
88,752 6.50%, Series 1422E, 2/15/2007 87,772
--------------------------------------------------------------------
1,000,000 7.00%, Series 1338J, 2/15/2007 935,030
--------------------------------------------------------------------
1,000,000 6.25%, Series 1553E, 4/15/2007 919,820
--------------------------------------------------------------------
1,000,000 7.00%, Series 1341K, 8/15/2007 924,250
--------------------------------------------------------------------
1,000,000 7.00%, Series 1462D, 8/15/2007 939,370
--------------------------------------------------------------------
1,000,000 6.50%, Series 1551E, 9/15/2007 924,860
--------------------------------------------------------------------
176,459 6.50%, Series 1452C, 12/15/2007 161,135
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--CONTINUED
--------------------------------------------------------------------
1,000,000 7.00%, Series 1465GA, 2/15/2008 923,800
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--CONTINUED
--------------------------------------------------------------------
$ 400,000 7.00%, Series 1324VE, 8/15/2008 $ 379,992
--------------------------------------------------------------------
1,000,000 7.00%, Series 1477ID, 11/15/2009 919,370
--------------------------------------------------------------------
500,000 7.00%, Series 1468M, 1/15/2010 461,175
--------------------------------------------------------------------
500,000 7.00%, Series 1228H, 2/15/2022 470,560
-------------------------------------------------------------------- -----------
Total 16,692,686
-------------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--26.2%
--------------------------------------------------------------------
1,000,000 7.42%, 12/2/96 1,029,260
--------------------------------------------------------------------
1,275,000 11.07%, 12/29/97 1,438,710
--------------------------------------------------------------------
1,000,000 4.906%, 2/17/98 978,750
--------------------------------------------------------------------
1,500,000 5.65%, 2/23/98 1,441,845
--------------------------------------------------------------------
1,000,000 4.95%, 9/30/98 924,700
--------------------------------------------------------------------
1,500,000 4.75%, 10/26/98 1,378,575
--------------------------------------------------------------------
1,000,000 5.30%, 12/10/98 934,600
--------------------------------------------------------------------
250,000 0.00%, 11/22/2001 212,557
--------------------------------------------------------------------
4,000,000 6.72%, 2/25/2003 3,760,480
--------------------------------------------------------------------
1,000,000 6.40%, 3/25/2003 927,350
--------------------------------------------------------------------
1,000,000 6.32%, 12/23/2003 906,870
--------------------------------------------------------------------
1,000,000 6.48%, 2/18/2004 917,370
--------------------------------------------------------------------
1,000,000 7.00%, Series 199479G, 11/25/2004 963,150
--------------------------------------------------------------------
1,250,000 7.50%, Series 199248G, 11/25/2005 1,233,637
--------------------------------------------------------------------
1,000,000 7.00%, Series 199270H, 4/25/2006 966,000
--------------------------------------------------------------------
1,000,000 7.50%, Series 199336J, 5/25/2006 975,160
--------------------------------------------------------------------
2,000,000 7.00%, Series 1993139KD, 7/25/2006 1,870,080
--------------------------------------------------------------------
1,000,000 7.25%, Series 199250J, 12/25/2006 950,790
--------------------------------------------------------------------
1,000,000 7.00%, Series 199253G, 4/25/2007 934,400
--------------------------------------------------------------------
1,000,000 6.75%, Series 199333H, 9/25/2008 915,990
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
--------------------------------------------------------------------
$ 1,000,000 7.00%, Series 1992124D, 4/25/2010 $ 940,970
--------------------------------------------------------------------
1,000,000 8.00%, Series 1993017C, 11/25/2010 992,920
-------------------------------------------------------------------- -----------
Total 25,594,164
-------------------------------------------------------------------- -----------
GOVERNMENT AGENCY--0.5%
--------------------------------------------------------------------
500,000 Private Export Funding Corp., 8.90%, 3/15/95 511,960
-------------------------------------------------------------------- -----------
MORTGAGE-BACKED SECURITIES--1.3%
--------------------------------------------------------------------
1,250,000 CMC CMO, 7.17%, 3/25/2024 1,251,563
-------------------------------------------------------------------- -----------
SOVEREIGN GOVERNMENT--2.0%
--------------------------------------------------------------------
1,000,000 Ontario Province CDA, 7.75%, 6/4/2002 1,002,200
--------------------------------------------------------------------
1,000,000 Ontario Province CDA, 7.375%, 1/27/2003 978,040
-------------------------------------------------------------------- -----------
Total 1,980,240
-------------------------------------------------------------------- -----------
U.S. TREASURY NOTES--0.7%
--------------------------------------------------------------------
750,000 5.125%, 3/31/98 713,715
-------------------------------------------------------------------- -----------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $53,649,598) 50,899,158
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $101,711,648) $96,569,408+
-------------------------------------------------------------------- -----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $101,711,648. The
net unrealized depreciation of investments on a federal tax basis amounts to
$5,142,240, which is comprised of $103,465 appreciation and $5,245,705
depreciation at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($97,823,045) at May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $101,711,648)(Note
2A) $ 96,569,408
- --------------------------------------------------------------------------------
Receivable for investments sold 3,392,625
- --------------------------------------------------------------------------------
Interest receivable 1,461,820
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 111,114
- --------------------------------------------------------------------------------
Deferred expenses (Note 2E) 15,017
- -------------------------------------------------------------------------------- ------------
Total assets 101,549,984
- --------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------
Payable for investments purchased $2,986,923
- -------------------------------------------------------------------
Dividends payable 559,261
- -------------------------------------------------------------------
Payable to Bank 63,771
- -------------------------------------------------------------------
Payable for Fund shares redeemed 36,327
- -------------------------------------------------------------------
Accrued expenses 80,657
- ------------------------------------------------------------------- ----------
Total liabilities 3,726,939
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 10,160,648 shares of beneficial interest outstanding $ 97,823,045
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $104,323,712
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (5,142,240)
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (1,359,698)
- --------------------------------------------------------------------------------
Undistributed net investment income 1,271
- -------------------------------------------------------------------------------- ------------
Total $ 97,823,045
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($97,823,045 / 10,160,648 shares of beneficial interest outstanding) $9.63
- -------------------------------------------------------------------------------- ------------
Offering Price Per Share (100/95.5 of $9.63) $10.08*
- -------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income (Note 2B) $ 4,695,043
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------
Investment advisory fee (Note 4) $516,082
- ------------------------------------------------------------------------
Trustees' fees 6,884
- ------------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 103,280
- ------------------------------------------------------------------------
Custodian fees 11,689
- ------------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees and
expenses (Note 4) 102,111
- ------------------------------------------------------------------------
Fund share registration fees 57,048
- ------------------------------------------------------------------------
Auditing fees 16,000
- ------------------------------------------------------------------------
Legal fees 8,182
- ------------------------------------------------------------------------
Printing and postage 21,470
- ------------------------------------------------------------------------
Insurance premiums 5,563
- ------------------------------------------------------------------------
Miscellaneous 10,415
- ------------------------------------------------------------------------ --------
Total expenses 858,724
- ------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 516,082
- ------------------------------------------------------------------------ --------
Net expenses 342,642
- ------------------------------------------------------------------------------------ -----------
Net investment income 4,352,401
- ------------------------------------------------------------------------------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (1,343,931)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (5,449,487)
- ------------------------------------------------------------------------------------ -----------
Net realized and unrealized gain (loss) on investments (6,793,418)
- ------------------------------------------------------------------------------------ -----------
Change in net assets resulting from operations ($2,441,017)
- ------------------------------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------
1994 1993*
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 4,352,401 $ 1,098,003
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($48,353 net loss and
$5,891 net gain, respectively, as computed for federal income
tax purposes) (1,343,931) (9,761)
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (5,449,487) 307,247
- ------------------------------------------------------------------ ------------ -----------
Change in net assets resulting from operations (2,441,017) 1,395,489
- ------------------------------------------------------------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (4,351,094) (1,098,039)
- ------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions -- (6,006)
- ------------------------------------------------------------------ ------------ -----------
Change in net assets from distributions to shareholders (4,351,094) (1,104,045)
- ------------------------------------------------------------------ ------------ -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------------
Proceeds from sale of shares 83,855,494 34,694,409
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 202,267 43,730
- ------------------------------------------------------------------
Cost of shares redeemed (11,370,872) (3,201,316)
- ------------------------------------------------------------------ ------------ -----------
Change in net assets from Fund share transactions 72,686,889 31,536,823
- ------------------------------------------------------------------ ------------ -----------
Change in net assets 65,894,778 31,828,267
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 31,928,267 100,000
- ------------------------------------------------------------------ ------------ -----------
End of period (including undistributed net investment income of
$1,271 and $0, respectively) $ 97,823,045 $31,928,267
- ------------------------------------------------------------------ ------------ -----------
</TABLE>
*For the period from April 7, 1992 (start of business) to May 31, 1993.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The 111 Corcoran Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of one diversified portfolio and one non-diversified
portfolio. The financial statements included herein present only those of 111
Corcoran Bond Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolio are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Corporate bonds (and other fixed-income and asset backed securities) are valued
at the last sale price reported on national securities exchanges on that day, if
available. Otherwise, corporate bonds (and other fixed-income and asset backed
securities) and short-term obligations are valued at the prices provided by an
independent pricing service. Investments in other regulated investment companies are
valued at net asset value. Short-term securities with remaining maturities of sixty days
or less may be stated at amortized cost, which approximates value.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax is
necessary.
At May 31, 1994, the Fund, for federal tax purposes, had a capital loss carryforward of
$48,353 which will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary to relieve
the Fund of any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2002 ($48,353).
Additionally, net capital losses of $1,311,230 attributable to security transactions
incurred after October 31, 1993, are treated as arising on June 1, 1994, the first day of
the Fund's next taxable year.
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------
1994 1993*
- ------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Shares sold 8,111,488 3,455,710
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Shares issued to shareholders in payment of dividends
declared 20,013 4,382
- -------------------------------------------------------------
Shares redeemed (1,122,983) (317,962)
- ------------------------------------------------------------- ---------- ---------
Net change resulting from Fund share transactions 7,008,518 3,142,130
- ------------------------------------------------------------- ---------- ---------
</TABLE>
*For the period from April 7, 1992 (start of business) to May 31, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Central Carolina Bank and Trust Company, the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to .75 of 1% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND ACCOUNTING FEES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($46,033) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five-year period following May 1, 1992 (date the Trust first became
effective). For the year ended May 31, 1994, the Fund paid $6,230 pursuant to
this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended May 31, 1994, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES $117,668,676
- ------------------------------------------------------------------------------ ------------
SALES $ 50,027,807
- ------------------------------------------------------------------------------ ------------
</TABLE>
(6) CHANGE IN FISCAL YEAR
The Fund has changed its fiscal year end from March 31 to May 31 beginning May
31, 1992.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
111 CORCORAN FUNDS (111 Corcoran Bond Fund):
We have audited the accompanying statement of assets and liabilities of 111
Corcoran Bond Fund (an investment portfolio of 111 Corcoran Funds, a
Massachusetts business trust), including the schedule of portfolio investments,
as of May 31, 1994, the related statement of operations, and the statement of
changes in net assets and financial highlights (see page 2 of the prospectus)
for the periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of 111
Corcoran Bond Fund, an investment portfolio of 111 Corcoran Funds, as of May 31,
1994, the results of its operations, the changes in its net assets, and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
July 8, 1994
ADDRESSES
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<TABLE>
<S> <C> <C>
111 Corcoran Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Investment Adviser
Central Carolina Bank and Trust Company 111 Corcoran Street
Durham, North Carolina 27702
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Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- -------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent and
Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
PROSPECTUS
A Diversified Portfolio of
111 Corcoran Funds, an Open-End
Management Investment Company
July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
2041604A (7/94)
111 CORCORAN BOND FUND
(A PORTFOLIO OF THE 111 CORCORAN FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
111 Corcoran Bond Fund (the "Fund") dated July 31, 1994. This Statement is not a
prospectus itself. To receive a copy of the prospectus, write the Fund or call
toll-free 1-800-422-2080.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1994
FEDERATED SECURITIES CORP.
- ---------------------------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Restricted and Illiquid Securities 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 2
Futures and Options Transactions 2
Lending of Portfolio Securities 4
Reverse Repurchase Agreements 4
Zero-Coupon Securities 4
Portfolio Turnover 5
INVESTMENT LIMITATIONS 5
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THE 111 CORCORAN FUNDS MANAGEMENT 7
- ---------------------------------------------------------------
Officers and Trustees 7
The Funds 9
Fund Ownership 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
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Adviser to the Fund 9
Advisory Fees 10
ADMINISTRATIVE SERVICES 10
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 10
- ---------------------------------------------------------------
PURCHASING SHARES 10
- ---------------------------------------------------------------
Additional Purchase Information--
Payment in Kind 11
Conversion to Federal Funds 11
DETERMINING NET ASSET VALUE 11
- ---------------------------------------------------------------
Determining Market Value of Securities 11
EXCHANGE PRIVILEGE 12
- ---------------------------------------------------------------
REDEEMING SHARES 12
- ---------------------------------------------------------------
Redemption in Kind 12
TAX STATUS 12
- ---------------------------------------------------------------
The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 13
- ---------------------------------------------------------------
YIELD 13
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 13
- ---------------------------------------------------------------
APPENDIX 15
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in the 111 Corcoran Funds, which was established as a
Massachusetts business trust under a Declaration of Trust dated December 11,
1991.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve income. The objective cannot be
changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests primarily in bonds rated A or better. Acceptable investments
include, among other investments:
- - domestic issuers of corporate debt obligations (rated Aaa, Aa, A or Baa by
Moody's Investors Service, Inc.; AAA, AA, A or BBB by Standard & Poor's
Corporation; or AAA, AA, A or BBB by Fitch Investors Service, Inc.); and
- - obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Federal Farm Credit System;
- Federal Home Loan Bank System;
- The Student Loan Marketing Association;
- Federal National Mortgage Association; and
- Federal Home Loan Mortgage Corporation.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. The Fund will not invest more than 10% of the value of
its total assets in restricted securities; however, certain restricted
securities which the Board of Trustees ("Trustees") deem to be liquid will be
excluded from this limitation.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an 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
securities subject to restrictions on resale under federal securities laws. The
Rule provides an exemption from 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 Rule 144A. The Fund believes that the Staff of the SEC has left the
question of determining the liquidity of all restricted securities (eligible for
resale under Rule 144A) for determination to the Trustees. The Trustees consider
the following criteria in determining the liquidity of certain restricted
securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
- --------------------------------------------------------------------------------
These transactions are made to secure what is considered to be an advantage
price or yield for the Fund. 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.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payments for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
As a matter of policy, the Fund does 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 its assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less the repurchase price on any sale of
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, the Fund may buy and sell call and put options on portfolio
securities.
FINANCIAL FUTURES CONTRACTS
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. Financial
futures contracts call for the delivery of particular debt securities
issued or guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts
for U.S. government securities. 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.
The Fund would purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. 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, the Fund will normally close out its
option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be
large enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option. 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 the Fund neither closes out
nor exercises an option, the option will expire on the date provided in
the option contract, and the premium paid for the contract will be lost.
- --------------------------------------------------------------------------------
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts for U.S. government securities
to hedge its portfolio against an increase in market interest rates. When
the 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 market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under a call
option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the 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 the Fund keeps the premium received for the option. This premium
can offset the drop in value of the Fund's fixed income portfolio which
is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the 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 the Fund for the initial option. The
net premium income of the Fund will then offset the decrease in value of
the hedged securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts for
U.S. government securities to hedge its portfolio against a decrease in
market interest rates. When the Fund writes a put option on a futures
contract, it receives a premium for undertaking the obligation to assume
a long futures position (buying a futures contract) at a fixed price at
any time during the life of the option. As market interest rates
decrease, the market price of the underlying futures contract normally
increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the market.
The premium received by the Fund can then be used to offset the higher
prices of portfolio securities to be purchased in the future due to the
decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of buying the second option will be less
than the premium received by the Fund for the initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call
option on a futures contract, it is purchasing the right (not the
obligation) to assume a long futures position (buy a futures contract) at
a fixed price at any time during the life of the option. As market
interest rates fall, the value of the underlying futures contract will
normally increase, resulting in an increase in value of the Fund's option
position. When the market price of the underlying futures contract
increases above the strike price plus premium paid, the Fund could
exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option the Fund could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its 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, the 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.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the 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 futures
contract initial margin does not involve the borrowing of funds by the
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 the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the 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 the Fund but is instead settlement between the 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 Fund will
mark-to-market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities. 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. A call option gives the Fund, in return for a premium, the
right to buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. As a writer of a put option, the Fund has
the obligation to purchase a security from the purchaser of the option
upon the exercise of the option.
The Fund may write covered call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount of
any additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the 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 the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund 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 Fund does 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.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the 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 the 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 the 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. The securities are marked to market daily and
maintained until the transaction is settled.
ZERO-COUPON SECURITIES
Zero-coupon securities in which a Fund may invest are debt obligations which are
generally issued at a discount and payable in full at maturity, and which do not
provide for current payments of interest prior to maturity. Zero-coupon
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a Fund investing in
zero-coupon securities may fluctuate over a greater range than shares of other
Funds and other mutual funds investing in securities making current
distributions of interest and having similar maturities.
- --------------------------------------------------------------------------------
Zero-coupon securities may include U.S. Treasury bills issued directly by the
U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer of holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury Department has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, a fund will be able to have its beneficial ownership of U.S.
Treasury zero-coupon securities recorded directly in the book-entry record
keeping system in lieu of having to hold certificates or other evidence of
ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest coupons by
the holder, the stripped coupons are sold separately. The principal or corpus is
sold at a deep discount because the buyer receives only the right to receive a
future fixed payment on the security and does not receive any rights to periodic
cash interest payments. Once stripped or separated, the corpus and coupons may
be sold separately. Typically, the coupons are sold separately or grouped with
other coupons with like maturity dates and sold in such bundled form. Purchasers
of stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero-coupon securities issued directly by the
obligor.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the fiscal year ended May 31, 1994, and for the period from
April 7, 1992 (start of business), to May 31, 1993, the portfolio turnover rates
for the Fund were 76% and 59%, respectively.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for the clearance of transactions.
The deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the borrowing.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate including limited partnership
interests, although it 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 Fund will not purchase or sell commodities. However, the Fund may
purchase put and call options on portfolio securities and on financial
futures contracts. In addition, the Fund reserves the right to hedge the
portfolio by entering into financial futures contracts and to sell puts
and calls on financial futures contracts.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933, as amended,
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third the value of its total assets. This shall not prevent the
purchasing or holding of corporate bonds, debenture, notes, certificates
of indebtedness or other debt securities of an issuer, repurchase
agreements or other transactions which are permitted by the Fund's
investment objective, policies and limitations or the Declaration of
Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry. However, investing in U.S. government obligations shall
not be considered investments in any one industry.
SELLING SHORT
The Fund will not sell securities short unless:
- during the time the short position is open, it owns an equal amount of
the securities sold or securities readily and freely convertible into
or exchangeable, without payment of additional consideration, for
securities of the same issuer as, and equal in amount to, the
securities sold short; and
- not more than 5% of the Fund's net assets (taken at current value) is
held as collateral for such sales at any one time.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of the Fund's total assets the Fund will
not invest more than 5% of the value of its total assets in any one
issuer (except cash and cash items, repurchase agreements, and U.S.
government obligations).
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following restrictions, however, may be changed by the
Trustees without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
portfolio instruments of unseasoned issuers, including their
predecessors, that have been in operation for less than three years.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase
the securities of issuers which invest in or sponsor such programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter
options, and certain restricted securities.
- --------------------------------------------------------------------------------
WRITING COVERED CALL OPTION AND PURCHASING PUT OPTIONS
The 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. The Fund will not purchase put options
on securities unless the securities are held in the Fund's portfolio. The
Fund will not write put or call options or purchase put or call options
in excess of 5% of the value of its total assets.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. The Fund has not borrowed money in an amount exceeding 5% of the
value of its net assets in the preceding year and has no present intent to do so
in the next coming fiscal year.
The use of short sales will allow the Fund to retain certain bonds in its
portfolio longer than it would without such sales. To the extent the Fund
receives the income produced by such bonds for a longer period than it might
otherwise, the Fund's investment objective of achieving income is furthered.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
THE 111 CORCORAN FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Central Carolina Bank,
Federated Investors, Federated Services Company, Federated Securities Corp.,
Federated Administrative Services, and the Funds (as defined below.)
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman and Trustee Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Wood & Associates, Inc., Realtors; President, Northgate Village Development
Commercial Department Corporation; General Partner or Trustee in private real estate ventures in
John R. Wood & southwest Florida; Director, Trustee or Managing General Partner of the
Associates, Inc. Realtors Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- --------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Pittsburgh, PA Homes, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc.; and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower and Trustee Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly President, State
Boston, MA Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
- --------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
- --------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee and President, Federated
Federated Investors Advisers, Federated Management, and Federated Research; Director and
Tower President, Federated Research Corp., President, Passport Research, Ltd;
Pittsburgh, PA Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Joseph S. Machi Vice President and Vice President, Federated Administrative Services; Vice President and
Federated Investors Assistant Treasurer Assistant Treasurer of some of the Funds.
Tower
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Director, Federated
Administrative Services; Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the Fund.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 3, 1994, the following shareholder of record owned 5% or more of the
outstanding shares of the Fund:
Central Carolina Bank and Trust Company, Durham, North Carolina, owned
approximately 9,460,794 shares (94.40%).
TRUSTEE LIABILITY
The 111 Corcoran Funds' 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.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Central Carolina Bank (the "Adviser"). The
Adviser shall not be liable to the Fund or any shareholder for any losses that
may be sustained in the purchase, holding, lending, 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 Fund.
- --------------------------------------------------------------------------------
Because of internal controls maintained by Central Carolina Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of Central Carolina Bank's or its affiliates' lending relationships
with an issuer.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the fiscal year ended May 31, 1994, and for the period from April 7, 1992
(start of business), to May 31, 1993, the Adviser earned advisory fees of
$516,082 and $137,300, respectively, all of which were voluntarily waived.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with expense limitations established
by certain states for investment companies whose shares are registered
for sale in those states. If the Fund's normal operating expenses
(including the investment advisory fee, but not including brokerage
commissions, interest, taxes and extraordinary expenses) exceed 2 1/2%
per year of the first $30 million of average net assets, 2% per year of
the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the Adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. For the fiscal year ended May 31, 1994, and for the period from
April 7, 1992 (start of business), to May 31, 1993, the Fund incurred $103,280
and $43,231, respectively, in administrative services of which $0 and $4,689,
respectively, were voluntarily waived.
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. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund 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.
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.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated 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.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus a sales charge on days 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 Fund."
- --------------------------------------------------------------------------------
ADDITIONAL PURCHASE INFORMATION--PAYMENT IN KIND
In addition to payment by check, shares of the Fund may be purchased by
customers of Central Carolina Bank in exchange for securities held by an
investor which are acceptable to that Fund. Investors interested in exchanging
securities must first telephone Central Carolina Bank at (800) 422-2080 for
instructions regarding submission of a written description of the securities the
investor wishes to exchange. Within five business days of the receipt of the
written description, Central Carolina Bank will advise the investor by telephone
whether the securities to be exchanged are acceptable to the Fund whose shares
the investor desires to purchase and will instruct the investor regarding
delivery of the securities. There is no charge for this review.
Securities accepted by the Fund are valued in the manner and on the days
described in the section entitled "Net Asset Value" as of 4:00 p.m. (Eastern
time). Acceptance may occur on any day during the five-day period afforded
Central Carolina Bank to review the acceptability of the securities. Securities
which have been accepted by the Fund must be delivered within five days
following acceptance.
The value of the securities to be exchanged and of the shares of the Fund may be
higher or lower on the day Fund shares are offered than on the date of receipt
by Central Carolina Bank of the written description of the securities to be
exchanged. The basis of the exchange of such securities for shares of the Fund
will depend on the value of the securities and the net asset value of Fund
shares next determined following acceptance of the day Fund shares are offered.
Securities to be exchanged must be accompanied by a transmittal form which is
available from Central Carolina Bank.
A gain or loss for federal income tax purposes may be realized by the investor
upon the securities exchange depending upon the cost basis of the securities
tendered. All interest, dividends, subscription or other rights with respect to
accepted securities which go "ex" after the time of valuation become the
property of the Fund and must be delivered to the Fund by the investor forthwith
upon receipt from the issuer. Further, the investor must represent and agree
that all securities offered to the Fund are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933, or otherwise.
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. Central Carolina Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus. Net asset value will not
be calculated on Good Friday and on certain federal holidays.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
- - according to the last sale price on a national securities exchange, if
available;
- - in the absence of recorded sales for bonds and other fixed-income securities,
as determined by an independent pricing service;
- - 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 maturities of less than 60 days at the time of purchase, at
amortized cost unless the Trustees determine this is not fair value; or
- - 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.
Pricing services may consider:
- - yield;
- - quality;
- - coupon rate;
- - maturity;
- - type of issue;
- - trading characteristics; and
- - other market data.
Over-the-counter put options will be valued at the mean between the bid and the
asked prices.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders using the exchange privilege must exchange shares having a new
asset value of at least $1,000. Before the exchange, the shareholder must
receive a prospectus of the fund for which the exchange is being made.
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 shares of the other fund.
Instructions for exchanges may be given in writing or by telephone. Exchange
procedures are explained in the prospectus under "Exchange Privilege."
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
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 Fund's portfolio. Redemption in kind will be
made in conformity with applicable Securities and Exchange Commission 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.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund 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.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet 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, the Fund must, among other requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the dividends
received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
- the availability of higher relative yields;
- differentials in market values;
- new investment opportunities;
- changes in creditworthiness of an issuer; or
- an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
-----------------------------------------------------------------------
The Fund's average annual total return for the one-year period ended May 31,
1994, was (3.38%).
The average annual total return for the Fund 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 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, less any applicable sales load, adjusted
over the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the thirty-day period ended May 31, 1994, was 7.07%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share on the last day
of the period. This value 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 the Fund because of certain adjustments required by the Securities and
Exchange Commission 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 the Fund,
the performance will be reduced for those shareholders paying
those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's expenses; and
- - various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return as
described below.
Investors may use financial publications and/or indices to obtain a more
complete view of the 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 Fund uses in advertising may include:
- - LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued, fixed
rate, non-convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds approximates nine
years. Tracked by Lehman Brothers, the index calculates total returns for
one-month, three-months, twelve-month, and ten-year periods and year-to-date.
- - LEHMAN BROTHERS AGGREGATE BONDS INDEX is a total return index measuring both
the capital price changes and income provided by the underlying universe of
securities, weighted by market value outstanding. The Aggregate Bond Index is
comprised of the Lehman Brothers Government Bond Index, Corporate Bond Index,
Mortgage-Backed Securities Index, and Yankee Bond Index. These indices
include: U.S. Treasury obligations, including bonds and notes; U.S. agency
obligations, including those of the Federal Farm Credit Bank, Federal Land
Bank, and the Bank for Cooperatives; foreign obligations; and U.S.
investment-grade corporate debt and mortgage-backed obligations. All corporate
debt included in the Aggregate Bond Index has a minimum Standard & Poor's
Corporation rating of BBB, a minimum Moody's rating of Baa, or a minimum Fitch
rating of BBB.
- - SALOMON BROTHERS AAA-AA CORPORATE INDEX calculates total returns of
approximately 775 issues which include long-term, high-grade domestic
corporate taxable bonds rated AAA-AA with maturities of twelve years or more
and companies in industry, public utilities, and finance.
- --------------------------------------------------------------------------------
- - MERRILL LYNCH CORPORATE & GOVERNMENT MASTER INDEX is an unmanaged index
comprised of approximately 4,821 issues which include corporated debt
obligations rated BBB or better and publicly issued, non-convertible domestic
debt of the U.S. government or any agency thereof. These quality parameters
are based on composites of ratings assigned by Standard & Poor's Corporation
and Moody's Investors Service, Inc. Only notes and bonds with a minimum
maturity of one year are included.
- - MERRILL LYNCH CORPORATE MASTER INDEX is an unmanaged index comprised of
approximately 4,356 corporate debt obligations rated BBB or better. These
quality parameters are based on composites of ratings assigned by Standard and
Poor's Corporation and Moody's Investors Service, Inc. Only bonds with a
minimum maturity of one year are included.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. 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 effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. S&P may apply a plus (+) or
minus (-) to the above rating classifications to show relative standing within
the classifications.
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
edged." 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 some time in the future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
FITCH INVESTORS SERVICE, 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 rate "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.
BBB--Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
- --------------------------------------------------------------------------------
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or 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:
leading market positions in well-established industries, high rates of return on
funds employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
PRIME-2--Issuers rate Prime-2 (or 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 INVESTORS SERVICE, INC., SHORT-TERM DEBT 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 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 for
issues assigned F-1+ and F-1 ratings.
2041604B (7/94)
111 CORCORAN BOND FUND
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ANNUAL REPORT FOR FISCAL YEAR ENDED MAY 31, 1994
INVESTMENT REVIEW
---------------------------------------------------------------------------
The 111 Corcoran Bond Fund (the "Fund") had a total return of 1.21%,
on a net asset basis, for the year ended May 31, 1994, -3.38% taking into
account the sales charge.* During this period, yields on ten-year
Treasuries increased from 6.15% to 7.15% as the Federal Reserve Board took
action to increase rates as a means to thwart future inflation. This caused
a deterioration in principal value, but creates an opportunity to increase
the current income being produced by the Fund.
With total assets in excess of $100,000,000, the Fund's management
expended considerable effort to consolidate smaller bond positions,
providing an opportunity to upgrade the quality of the portfolio as well as
enhancing the yield.
The average maturity of the Fund is eight years, which is in line with
its objective of using high-quality intermediate securities. Government
obligations and conservative government mortgages comprise 52% of the
portfolio, as we perceive this sector to be undervalued.
We feel bonds represent good value at this stage of the economic
cycle, and management will continue to invest Fund assets in high-quality
bonds to enhance the return.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN 111 CORCORAN BOND FUND
SINCE INCEPTION AS OF MAY 31, 1994.
The graph below illustrates the hypothetical investment of $10,000 in the
111 Corcoran Bond Fund (the "Fund") from July 15, 1992 (start of performance) to
May 31, 1994 compared to the Lehman Brothers Aggregate Bond Index ("LABI").
Graphic representation "B" omitted. See Appendix.
<TABLE>
<CAPTION>
Lehman Ag-
Measurement Period 111 Corcoran gregate Bond
(Fiscal Year Covered) Bond Fund Index
<S> <C> <C>
July 15, 1992 9550 10000
May 31, 1993 10150 10980
May 31, 1994 10273 11058
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED MAY 31, 1994
(Based on Offering Price)
<TABLE>
<S> <C>
1 Year.............................................................. (3.38%)
Start of Performance, July 15, 1992 (cumulative).................... 2.73%
Start of Performance, July 15, 1992................................. 1.45%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus dated July
31, 1994, and, together with the financial statements contained therein,
constitutes the Fund's annual report.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge
= $9,550). The Fund's performance assumes the reinvestment of all dividends
and distributions.
The LABI is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance. The LABI has been
adjusted to reflect reinvestment of dividends on securities in the index.
FEDERATED SECURITIES CORP.
(LOGO)
- --------------------------------------------------------------------------------
Distributor
G00315-01 (7/94)
APPENDIX
A1. The graphic presentation here displayed consists of a
legend in the upper left quadrant indicating the components
of the corresponding line graph. 111 Corcoran Bond Fund
(the "Fund") is represented by a solid line. The Lehman
Brothers Aggregate Bond Index is represented by a broken
line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
purchase in the Fund and the Lehman Brothers Aggregate Bond
Index. The "y" axis reflects the cost of the investment.
The "x" axis reflects computation periods from the Fund's
start of business, July 15, 1992, through May 31, 1994. The
right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the Lehman Brothers
Aggregate Bond Index; the ending values are $10,273 and
$11,058, respectively. There is also a legend directly
below the graphic representation which indicates the Average
Annual Total Return for the period ended May 31, 1994,
beginning with the inception date of the Fund (July 15,
1992), and the one-year period; the Average Annual Total
Returns are 1.45% and (3.38%) .
B1. The graphic presentation here displayed consists of a
legend in the upper left quadrant indicating the components
of the corresponding line graph. 111 Corcoran North
Carolina Municipal Securities Fund (the "Fund") is
represented by a solid line. The Lehman Brothers State G.
O. Bond Index is represented by a broken line. The line
graph is visual representation of a comparison of the change
in value of a hypothetical $10,000 purchase in the Fund and
the Lehman Brothers State G. O. Bond Index. The "y" axis
reflects the cost of the investment. The "x" axis reflects
computation periods from the Fund's start of business, July
22, 1992, through May 31, 1994. The right margin reflects
the ending value of the hypothetical investment in the Fund
as compared to the Lehman Brothers State G. O. Index; the
ending values are $10,530 and $11,305, respectively. There
is also a legend directly below the graphic representation
which indicates the Average Annual Total Return for the
period ended May 31, 1994, beginning with the inception date
of the Fund (July 22, 1994), and the one-year period; the
Average Annual Total Returns are 2.82% and (1.96%).
