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,
1995 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 1-800-386-3111.
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, 1995
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 3
Investment Limitations 8
THE 111 CORCORAN FUNDS INFORMATION 8
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Management of the 111 Corcoran Funds 8
Distribution of Fund Shares 9
Administration of the Fund 9
NET ASSET VALUE 10
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INVESTING IN THE FUND 10
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Share Purchases 10
Minimum Investment Required 11
What Shares Cost 11
Purchases at Net Asset Value 11
Sales Charge Reallowance 12
Reducing the Sales Charge 12
Systematic Investment Program 13
Certificates and Confirmations 13
Dividends 13
Capital Gains 13
EXCHANGE PRIVILEGE 14
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REDEEMING SHARES 15
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Systematic Withdrawal Program 16
Accounts with Low Balances 16
Redemption in Kind 17
SHAREHOLDER INFORMATION 17
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Voting Rights 17
Massachusetts Partnership Law 17
EFFECT OF BANKING LAWS 18
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TAX INFORMATION 18
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Federal Income Tax 18
PERFORMANCE INFORMATION 19
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FINANCIAL STATEMENTS 20
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 31
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ADDRESSES 32
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SUMMARY OF FUND EXPENSES
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<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 average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fees.......................................................................... None
Total Other Expenses................................................................ 0.34%
Total Fund Operating Expenses(2)............................................... 0.34%
</TABLE>
(1) The 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 1.09% absent the
anticipated voluntary waivers and/or reimbursement by the Fund's adviser.
* EXPENSES IN THIS TABLE ARE ESTIMATED BASED ON EXPENSES EXPECTED TO BE INCURRED
DURING THE FISCAL YEAR ENDING MAY 31, 1996. 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
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period.............. $ 48 $ 55 $ 63 $ 86
</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
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Arthur Andersen LLP, Independent Public
Accountants, on page 31.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1995 1994 1993(A)
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.63 $10.13 $10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.66 0.63 0.49
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Net realized and unrealized gain (loss) on investments 0.37 (0.50) 0.13
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Total from investment operations 1.03 0.13 0.62
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LESS DISTRIBUTIONS
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Distributions from net investment income (0.66) (0.63) (0.49)
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NET ASSET VALUE, END OF PERIOD $10.00 $9.63 $10.13
- ------------------------------------------------------------- ------ ----- -------
TOTAL RETURN(B) 11.32% 1.21% 6.28%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.34% 0.50% 0.70%(c)
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Net investment income 6.98% 6.32% 6.00%(c)
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Expense waiver/reimbursement (d) 0.75% 0.75% 0.78%(c)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $87,115 $97,823 $31,928
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Portfolio turnover 37% 76% 59%
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</TABLE>
(a) Reflects operations for the period from July 15, 1992 (date of initial
public investment) to May 31, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended May 31, 1995, which can be obtained free
of charge.
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' fixed income portfolio, known as 111
Corcoran Bond 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
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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. ("Moody's"); AAA, AA, A or BBB by
Standard & Poor's Ratings Group ("S&P"); or AAA, AA, A or BBB by Fitch
Investors Service, Inc. ("Fitch"). Bonds rated BBB by S&P or Fitch or Baa
by Moody's have speculative characteristics. 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 U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; The Student Loan Marketing Association; National
Credit Union Administration; and Tennessee Valley Authority;
- 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 S&P,
Prime-1 or Prime-2 by Moody's, or F-1 or F-2 by Fitch;
- 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. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate 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. There is the risk that
when lending portfolio securities, the securities may not be available to the
Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell
the securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.
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
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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 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, 1995, the
Trust Division managed assets in excess of $1.1 billion. The Trust Division
manages two commingled funds with assets of approximately $145 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1995, total assets in the 111 Corcoran Funds were $153
million.
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 six 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, Boston, Massachusetts, a subsidiary of Federated Investors, is
transfer agent for the shares of the Fund and dividend disbursing agent for the
Fund. Federated Services Company, Pittsburgh, Pennsylvania, also provides
certain accounting and recordkeeping services with respect to the portfolio
investments of the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
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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 1-800-386-3111.)
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 three 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 as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; 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 on the
previous page, 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, which
consists of the Fund, 111 Corcoran Equity Fund, and 111 Corcoran North Carolina
Municipal Securities Fund. Shareholders of the Fund have access to 111 Corcoran
Equity Fund and 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 1-800-386-3111. 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 1-800-386-3111) 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
Exchanges;
- 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 6,
1995, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 8,030,222
shares (93.50%) 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
111 CORCORAN BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
LONG-TERM INVESTMENTS--96.0%
- ----------------------------------------------------------------------------------
CORPORATE BONDS--33.1%
- ----------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.7%
--------------------------------------------------------------------
$ 1,000,000 Discover Card Master Trust, 6.20%, Series 1993A, 11/15/2003 $ 958,580
--------------------------------------------------------------------
500,000 Sears Credit Account Trust, 8.60%, 1991B, 5/15/1998 516,220
-------------------------------------------------------------------- -----------
Total 1,474,800
-------------------------------------------------------------------- -----------
AUTO/TRUCK MANUFACTURER--1.3%
--------------------------------------------------------------------
1,000,000 Ford Motor Co., 9.00%, 9/15/2001 1,111,519
-------------------------------------------------------------------- -----------
BANKING--3.5%
--------------------------------------------------------------------
1,500,000 Bankers Trust NY Corp., 7.25%, 1/15/2003 1,494,675
--------------------------------------------------------------------
1,500,000 Boatmens Bancshares, Inc., 7.625%, 10/1/2004 1,553,115
-------------------------------------------------------------------- -----------
Total 3,047,790
-------------------------------------------------------------------- -----------
CONSUMER PRODUCTS--4.5%
--------------------------------------------------------------------
1,000,000 Joseph E. Seagram & Sons, Inc., 9.75%, 6/15/2000 1,032,740
--------------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 1,100,670
--------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
1,000,000 Philip Morris Cos., Inc., 7.125%, 8/15/2002 1,009,220
--------------------------------------------------------------------
750,000 RJR Nabisco Inc., 8.00%, 1/15/2000 777,150
-------------------------------------------------------------------- -----------
Total 3,919,780
-------------------------------------------------------------------- -----------
FINANCE--COMMERCIAL--2.3%
--------------------------------------------------------------------
1,750,000 Ford Capital BV, 9.375%, 5/15/2001 1,971,393
-------------------------------------------------------------------- -----------
FINANCE--INSURANCE--2.6%
--------------------------------------------------------------------
500,000 AON Corp., 6.875%, 10/1/1999 503,940
--------------------------------------------------------------------
500,000 Cigna Corp., 7.40%, 1/15/2003 498,860
--------------------------------------------------------------------
1,000,000 Continental Corp., 7.25%, 3/1/2003 974,500
--------------------------------------------------------------------
250,000 Kemper Corp., 8.80%, 11/1/1998 256,028
-------------------------------------------------------------------- -----------
Total 2,233,328
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------
FINANCIAL SECURITIES--7.1%
--------------------------------------------------------------------
$ 2,000,000 Bear Stearns Cos., Inc., 6.625%, 1/15/2004 $ 1,909,320
--------------------------------------------------------------------
500,000 Merrill Lynch & Co., Inc., 4.75%, 6/24/1996 492,055
--------------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., 6.25%, 10/15/2008 906,330
--------------------------------------------------------------------
1,000,000 Salomon, Inc., 6.875%, 12/15/2003 945,310
--------------------------------------------------------------------
2,000,000 Smith Barney Holdings, 5.50%, 1/15/1999 1,920,540
-------------------------------------------------------------------- -----------
Total 6,173,555
-------------------------------------------------------------------- -----------
METALS--0.6%
--------------------------------------------------------------------
500,000 Reynolds Metals Co., 9.00%, 8/15/2003 562,790
-------------------------------------------------------------------- -----------
MULTI-INDUSTRY--1.0%
--------------------------------------------------------------------
750,000 Loews Corp., 8.875%, 4/15/2011 838,530
-------------------------------------------------------------------- -----------
OFFICE EQUIPMENT--0.7%
--------------------------------------------------------------------
610,000 Xerox Corp., 9.625%, 10/15/2000 617,241
-------------------------------------------------------------------- -----------
OIL--0.7%
--------------------------------------------------------------------
500,000 Pennzoil Co., conv. deb., 6.50%, 1/15/2003 604,450
-------------------------------------------------------------------- -----------
RETAIL--1.1%
--------------------------------------------------------------------
500,000 Sears Roebuck & Co., 9.47%, 1/23/1996 510,895
--------------------------------------------------------------------
500,000 Sears Roebuck & Co., medium-term note, 6.70%, 7/14/1997 503,690
-------------------------------------------------------------------- -----------
Total 1,014,585
-------------------------------------------------------------------- -----------
UTILITIES--6.0%
--------------------------------------------------------------------
1,000,000 Gulf States Utilities Co., 6.77%, 8/1/2005 954,750
--------------------------------------------------------------------
750,000 Hydro Quebec, 6.375%, 1/15/2002 732,982
--------------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., 7.75%, 6/30/2004 1,055,650
--------------------------------------------------------------------
1,500,000 Southwestern Bell Telephone Co., 7.375% 5/1/2012 1,471,740
--------------------------------------------------------------------
1,000,000 West Penn Power Co., 7.875%, 12/1/2004 1,053,880
-------------------------------------------------------------------- -----------
Total 5,269,002
-------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $28,719,504) 28,838,763
-------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--62.9%
- ----------------------------------------------------------------------------------
FARM CREDIT SYSTEM FINANCIAL ASSISTANT CORP.--0.6%
--------------------------------------------------------------------
$ 500,000 9.20%, 9/27/2005 $ 557,180
-------------------------------------------------------------------- -----------
FEDERAL HOME LOAN BANK--7.2%
--------------------------------------------------------------------
500,000 3.75% Structured Note, 9/3/1997 454,070
--------------------------------------------------------------------
1,000,000 6.25% Step-up, 5/11/1998 998,890
--------------------------------------------------------------------
750,000 4.425% Structured Note, 6/2/1998 661,057
--------------------------------------------------------------------
1,000,000 4.245% Structured Note, 8/25/1998 870,000
--------------------------------------------------------------------
1,000,000 5.738% Structured Note, 2/23/1999 969,490
--------------------------------------------------------------------
1,800,000 5.05% Structured Note, 3/1/1999 1,769,625
--------------------------------------------------------------------
500,000 7.47%, 5/18/1999 500,805
-------------------------------------------------------------------- -----------
Total 6,223,937
-------------------------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORPORATION--25.6%
--------------------------------------------------------------------
1,000,000 5.90%, 4/21/2000 976,370
--------------------------------------------------------------------
1,000,000 5.69%, 11/29/2000 961,690
--------------------------------------------------------------------
500,000 6.80%, 9/18/2002 496,145
--------------------------------------------------------------------
250,000 5.00%, Series 1194F, 11/15/2005 241,360
--------------------------------------------------------------------
1,500,000 7.50%, Series 1143VD, 1/15/2006 1,546,455
--------------------------------------------------------------------
1,000,000 8.00%, Series 1033G, 1/15/2006 1,043,600
--------------------------------------------------------------------
4,000,000 8.00%, Series 1171G, 11/15/2006 4,222,720
--------------------------------------------------------------------
250,000 6.00%, Series 1337C, 12/15/2006 243,138
--------------------------------------------------------------------
1,000,000 7.00%, Series 1187H, 12/15/2006 995,670
--------------------------------------------------------------------
84,445 6.50%, Series 1422E, 2/15/2007 80,978
--------------------------------------------------------------------
1,000,000 7.00%, Series 1338J, 2/15/2007 1,008,640
--------------------------------------------------------------------
1,000,000 6.25%, Series 1553E, 4/15/2007 971,690
--------------------------------------------------------------------
1,000,000 7.00%, Series 1341K, 8/15/2007 1,005,960
--------------------------------------------------------------------
1,000,000 7.00%, Series 1458J, 8/15/2007 999,130
--------------------------------------------------------------------
1,000,000 6.50%, Series 1551E, 9/15/2007 985,590
--------------------------------------------------------------------
176,459 6.50%, Series 1452C, 12/15/2007 169,240
--------------------------------------------------------------------
</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 $ 993,620
--------------------------------------------------------------------
3,000,000 6.25%, Series 1544E, 6/15/2008 2,969,280
--------------------------------------------------------------------
400,000 7.00%, Series 1324VE, 8/15/2008 401,704
--------------------------------------------------------------------
1,000,000 7.00%, Series 1477ID, 11/15/2009 997,450
--------------------------------------------------------------------
500,000 7.00%, Series 1468M, 1/15/2010 490,900
--------------------------------------------------------------------
500,000 7.00%, Series 1228H, 2/15/2022 473,375
-------------------------------------------------------------------- -----------
Total 22,274,705
-------------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--11.7%
--------------------------------------------------------------------
1,700,000 5.86458%, Structured Note, Inverse Floater, 12/2/1996 1,685,397
--------------------------------------------------------------------
1,275,000 9.2344%, Structured Note 12/29/1997 1,292,901
--------------------------------------------------------------------
250,000 Principal Strip, 11/22/2001 (callable 11/22/1996 @ 100) 228,150
--------------------------------------------------------------------
2,000,000 7.30%, 10/28/2002 2,023,820
--------------------------------------------------------------------
2,000,000 6.72%, 2/25/2003 1,980,720
--------------------------------------------------------------------
2,000,000 6.625%, 4/10/2003 1,967,600
--------------------------------------------------------------------
1,000,000 6.48%, 2/18/2004 973,880
-------------------------------------------------------------------- -----------
Total 10,152,468
-------------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--REMICS--14.1%
--------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199479G, 11/25/2004 1,009,450
--------------------------------------------------------------------
1,250,000 7.50%, REMIC, Series 199248G, 11/25/2005 1,279,100
--------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199270H, 4/25/2006 1,005,990
--------------------------------------------------------------------
1,000,000 7.50%, REMIC, Series 199336J, 5/25/2006 1,028,460
--------------------------------------------------------------------
2,000,000 7.00%, REMIC, Series 1993139KD, 7/25/2006 2,009,000
--------------------------------------------------------------------
1,000,000 8.00%, REMIC, Series 1991150G, 11/25/2006 1,047,730
--------------------------------------------------------------------
1,000,000 7.25%, REMIC, Series 199250J, 12/25/2006 1,015,920
--------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199253G, 4/25/2007 998,820
--------------------------------------------------------------------
1,000,000 6.00%, REMIC, Series 1993209H, 3/25/2008 933,980
--------------------------------------------------------------------
1,000,000 6.75%, REMIC, Series 199333H, 9/25/2008 983,080
--------------------------------------------------------------------
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--REMICS--CONTINUED
--------------------------------------------------------------------
$ 1,000,000 7.00%, REMIC, Series 1992124D, 4/25/2010 $ 988,750
-------------------------------------------------------------------- -----------
Total 12,300,280
-------------------------------------------------------------------- -----------
MORTGAGE-BACKED SECURITIES--1.3%
--------------------------------------------------------------------
1,250,000 CMC CMO, Floating Rate, Series 1994CA14, 3/25/2024 1,175,000
-------------------------------------------------------------------- -----------
SOVEREIGN GOVERNMENT--2.4%
--------------------------------------------------------------------
2,000,000 Ontario Province CDA, 7.375%, 1/27/2003 2,071,780
-------------------------------------------------------------------- -----------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $54,253,191) 54,755,350
-------------------------------------------------------------------- -----------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $82,972,695) 83,594,113
-------------------------------------------------------------------- -----------
MUTUAL FUND SHARES--3.3%
- ----------------------------------------------------------------------------------
2,936,144 Goldman Sachs Money Market Fund 2,936,144
-------------------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 2,936,144
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $85,908,839) $86,530,257+
-------------------------------------------------------------------- -----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $85,995,871. The
net unrealized appreciation of investments on a federal tax basis amounts to
$621,418, which is comprised of $2,061,095 appreciation and $1,439,677
depreciation at May 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($87,114,742) at May 31, 1995.
The following abbreviations are used in this portfolio:
CMO -- Collateralized Mortgage Obligation
conv. deb. -- Convertible Debenture
REMIC -- Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified cost $85,908,839 and tax cost
$85,995,871) $86,530,257
- --------------------------------------------------------------------------------
Income receivable 1,074,431
- --------------------------------------------------------------------------------
Receivable for shares sold 35,822
- --------------------------------------------------------------------------------
Deferred expenses 9,835
- -------------------------------------------------------------------------------- -----------
Total assets 87,650,345
- --------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Payable for shares redeemed $ 8,200
- ---------------------------------------------------------------------
Income distribution payable 467,777
- ---------------------------------------------------------------------
Payable to Bank 21,474
- ---------------------------------------------------------------------
Accrued expenses 38,152
- --------------------------------------------------------------------- --------
Total liabilities 535,603
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 8,710,648 shares outstanding $87,114,742
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $90,754,329
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 621,418
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (4,270,549)
- --------------------------------------------------------------------------------
Undistributed net investment income 9,544
- -------------------------------------------------------------------------------- -----------
Total Net Assets $87,114,742
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
Net Asset Value Per Share ($87,114,742 / 8,710,648 shares outstanding) $10.00
- -------------------------------------------------------------------------------- -----------
Computation of Offering Price
Offering Price Per Share: (100/95.50 of $10.00)* $10.47
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost."
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Interest $6,548,353
- -------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee $670,819
- -------------------------------------------------------------------------
Administrative personnel and services fee 134,164
- -------------------------------------------------------------------------
Custodian fees 15,225
- -------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 29,307
- -------------------------------------------------------------------------
Directors'/Trustees' fees 6,893
- -------------------------------------------------------------------------
Auditing fees 16,000
- -------------------------------------------------------------------------
Legal fees 4,656
- -------------------------------------------------------------------------
Portfolio accounting fees 57,655
- -------------------------------------------------------------------------
Share registration costs 15,033
- -------------------------------------------------------------------------
Printing and postage 5,471
- -------------------------------------------------------------------------
Insurance premiums 5,471
- -------------------------------------------------------------------------
Miscellaneous 12,727
- ------------------------------------------------------------------------- --------
Total expenses 973,421
- -------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 670,819
- ------------------------------------------------------------------------- --------
Net expenses 302,602
- ------------------------------------------------------------------------------------- ----------
Net investment income 6,245,751
- ------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------
Net realized loss on investments (2,910,851)
- -------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 5,763,658
- ------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 2,852,807
- ------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $9,098,558
- ------------------------------------------------------------------------------------- ----------
</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,
MAY 31, 1995 1994
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 6,245,751 $ 4,352,401
- ------------------------------------------------------------------
Net realized loss on investments ($2,849,640 and $48,353 net loss,
respectively, as computed for federal tax purposes) (2,910,851) (1,343,931)
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments 5,763,658 (5,449,487)
- ------------------------------------------------------------------ ------------ -----------
Change in net assets resulting from operations 9,098,558 (2,441,017)
- ------------------------------------------------------------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Distributions from net investment income (6,237,478) (4,351,094)
- ------------------------------------------------------------------ ------------ -----------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 8,941,154 83,855,494
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 283,034 202,267
- ------------------------------------------------------------------
Cost of shares redeemed (22,793,571) (11,370,872)
- ------------------------------------------------------------------ ------------ -----------
Change in net assets resulting from share transactions (13,569,383) 72,686,889
- ------------------------------------------------------------------ ------------ -----------
Change in net assets (10,708,303) 65,894,778
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 97,823,045 31,928,267
- ------------------------------------------------------------------ ------------ -----------
End of period (including undistributed net investment income of
$9,544 and $1,271, respectively) $ 87,114,742 $97,823,045
- ------------------------------------------------------------------ ------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN BOND FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
(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 two diversified portfolios 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 portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
INVESTMENT VALUATIONS--Listed corporate bonds (and other fixed income and asset-backed
securities), unlisted securities and short-term securities are valued at the prices
provided by an independent pricing service. Short-term securities with remaining
maturities of sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. U.S. government securities are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by an independent
pricing service. Investments in other open-end investment companies are valued at net
asset value.
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.
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 income. Accordingly, no provisions for federal taxes are
necessary.
At May 31, 1995, the Fund, for federal tax purposes, had a capital loss carryforward of
$2,897,993, 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 and 2003 $2,849,640. Additionally, net
capital losses of $1,285,410 attributable to security transactions incurred after October
31, 1994 are treated as arising on June 1, 1995, the first day of the Fund's next taxable
year.
</TABLE>
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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.
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 not to exceed a
period of five years from the Fund's commencement date.
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 shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
MAY 31, MAY 31,
1995 1994
- -------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Shares sold 936,690 8,111,488
- --------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 29,807 20,013
- --------------------------------------------------------------------
Shares redeemed (2,416,497) (1,122,983)
- -------------------------------------------------------------------- ---------- ----------
Net change resulting from share transactions (1,450,000) 7,008,518
- -------------------------------------------------------------------- ---------- ----------
</TABLE>
(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 any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the 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
for which it receives a fee. This fee is based on the size, type, and number of
accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period
plus out-of-pocket expenses.
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
ORGANIZATIONAL EXPENSES--Organizational expenses of $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 (the date the Fund became
effective). For the year ended May 31, 1995, the Fund paid $9,604 pursuant to
this agreement.
GENERAL--Certain of the Officers and Trustees of the Fund 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, 1995, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $32,202,203
- ------------------------------------------------------------------------------- -----------
SALES $45,236,123
- ------------------------------------------------------------------------------- -----------
</TABLE>
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, 1995, the related statement of operations, and the statement of
changes in net assets and financial highlights (see page 2) for the periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1995 by correspondence with the custodian. 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,
1995, 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 LLP
Pittsburgh, Pennsylvania
July 7, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<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
- -------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 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, 1995
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 682365200
2041604A (7/95)
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, 1995.
This Statement is not a prospectus itself. To receive a copy of the
prospectus, write the Fund or call toll-free 1-800-386-3111.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated July 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Fund 1
Investment Objective and Policies 1
Investment Limitations 6
111 Corcoran Funds Management 8
Fund Ownership 12
Trustees Compensation 13
Trustee Liability 13
Investment Advisory Services 14
Adviser to the Fund 14
Advisory Fees 14
Administrative Services 14
Transfer Agent and Dividend
Disbursing Agent 14
Brokerage Transactions 14
Purchasing Shares 15
Additional Purchase Information--
Payment in Kind 15
Determining Net Asset Value 15
Determining Market Value of
Securities 16
Exchange Privilege 16
Redeeming Shares 16
Redemption in Kind 16
Tax Status 17
The Fund's Tax Status 17
Shareholders' Tax Status 17
Total Return 17
Yield 17
Performance Comparisons 18
Appendix 20
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:
o 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 Ratings Group; or AAA, AA, A or BBB by Fitch Investors Service,
Inc.); and
o 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:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o 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:
o Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks, and Banks for Cooperatives;
o Farmers Home Administration;
o Federal Home Loan Banks;
o Federal Home Loan Mortgage Corporation;
o Federal National Mortgage Association;
o Government National Mortgage Association; and
o Student Loan Marketing Association.
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:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantage
price or yield for the Fund. 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled. 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 years ended May 31, 1995, and May 31,
1994, the portfolio turnover rates for the Fund were 37% and 76%,
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:
o 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
o 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."
111 Corcoran Funds Management
Officers and Trustees are listed with their addresses, present positions with
111 Corcoran Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Securities Fund: 3-5 Years; 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;; 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; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut 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;
The Virtus Funds; World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 6, 1995, 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 8,030,222 shares (93.50%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $442.00
Trustee
John T. Conroy, Jr. $650.00
Trustee
William J. Copeland $650.00
Trustee
James E. Dowd $650.00
Trustee
Lawrence D. Ellis, M.D. $592.00
Trustee
Edward L. Flaherty, Jr. $650.00
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $503.00
Trustee
Gregor F. Meyer $592.00
Trustee
John E. Murray, Jr. $293.00
Trustee
Wesley W. Posvar $592.00
Trustee
Marjorie P. Smuts $592.00
Trustee
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 3
portfolios.
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 years ended May 31, 1995 and May 31, 1994, and for the period
from April 7, 1992 (start of business), to May 31, 1993, the Adviser earned
advisory fees of $670,819, $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 years ended May 31, 1995 and May 31,
1994, and for the period from April 7, 1992 (start of business) to May 31,
1993, the Fund incurred $134,164 , $103,280, and $43,231, respectively, in
administrative services of which $0, $0 and $4,689, respectively, were
voluntarily waived.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type and number of accounts
and transactions made by shareholders.
Federated Services Company 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.
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:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o 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.
During the fiscal years ended May 31, 1995 and May 31, 1994, and for the
period from April 7, 1992 (start of business) to May 31, 1993, the Fund paid
no brokerage commissions.
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) 386-3111 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:
o according to the last sale price on a national securities exchange, if
available;
o in the absence of recorded sales for bonds and other fixed-income
securities, as determined by an independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices, as furnished by an independent pricing service, or for short-
term obligations with maturities of less than 60 days at the time of
purchase, at amortized cost unless the Trustees determine this is not
fair value; or
o 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:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o 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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
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:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o 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 returns for the one-year period ended May 31,
1995, and for the period from July 15, 1992 (date of inception) to May 31,
1995, were 6.35% and 4.77%, respectively.
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, 1995, was 6.05%.
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:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o 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:
o Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed rate, non-convertible domestic bonds of 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.
o 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 Ratings Group
rating of BBB, a minimum Moody's Investors Service, Inc. rating of Baa,
or a minimum Fitch Investors Service, Inc. rating of BBB.
o 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.
o Merrill Lynch Corporate & Government Master Index is an unmanaged index
comprised of approximately 4,821 issues which include corporate 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 Ratings Group and Moody's Investors Service, Inc. Only
notes and bonds with a minimum maturity of one year are included.
o 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 & Poor's Ratings Group and Moody's Investors Service, Inc. Only
bonds with a minimum maturity of one year are included.
o 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 Ratings Group 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 Ratings Group 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.
Cusip 682365200
2041604B (7/95)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
(A PORTFOLIO OF 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.
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,
1995 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 1-800-386-3111.
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, 1995
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 4
North Carolina Municipal Bonds 8
Investment Risks 8
Non-Diversification 9
Investment Limitations 9
THE 111 CORCORAN FUNDS INFORMATION 9
- ------------------------------------------------------
Management of the 111 Corcoran Funds 9
Distribution of Fund Shares 11
Administration of the Fund 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUND 12
- ------------------------------------------------------
Share Purchases 12
Minimum Investment Required 12
What Shares Cost 13
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 14
Systematic Investment Program 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 15
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
REDEEMING SHARES 17
- ------------------------------------------------------
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Redemption in Kind 18
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 19
EFFECT OF BANKING LAWS 19
- ------------------------------------------------------
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
North Carolina Taxes 21
Other State and Local Taxes 21
PERFORMANCE INFORMATION 22
- ------------------------------------------------------
FINANCIAL STATEMENTS 23
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 34
- ------------------------------------------------------
ADDRESSES 35
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<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 projected average net assets)
Management Fee (after waiver)(1).......................................... 0.00%
12b-1 Fees................................................................ None
Total Other Expenses...................................................... 0.45%
Total Fund Operating Expenses (2).................................... 0.45%
</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 1.20% absent the
anticipated voluntary waiver and/or reimbursement by the Fund's adviser. The
Total Fund Operating Expenses were 0.57% for the fiscal year ended May 31, 1995,
and were 1.32% absent the voluntary waiver and/or reimbursement for the fiscal
year ended May 31, 1995.
*EXPENSES IN THIS TABLE ARE ESTIMATED BASED ON EXPENSES EXPECTED TO BE INCURRED
DURING THE FISCAL YEAR ENDING MAY 31, 1996. 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 invest-
ment assuming (1) 5% annual return and (2) redemption at
the end of each time period............................. $49 $59 $69 $99
</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
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Arthur Andersen LLP, Independent Public
Accountants, on page 34.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------
1995 1994 1993(A)
------ ------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.17 $10.36 $10.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income 0.48 0.47 0.37
- -----------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.27 (0.18) 0.36
- ----------------------------------------------------------------- ------ ------ -------
Total from investment operations 0.75 0.29 0.73
- -----------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Distributions from net investment income (0.48) (0.47) (0.37)
- -----------------------------------------------------------------
Distributions from net realized gain on investment transactions -- (0.01) --
- ----------------------------------------------------------------- ------ ------ -------
Total distributions (0.48) (0.48) (0.37)
- ----------------------------------------------------------------- ------ ------ -------
NET ASSET VALUE, END OF PERIOD $10.44 $10.17 $10.36
- ----------------------------------------------------------------- ------ ------ -------
TOTAL RETURN(B) 7.71% 2.68% 7.37 %
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses 0.57% 0.69% 0.70 %(c)
- -----------------------------------------------------------------
Net investment income 4.82% 4.42% 4.51 %(c)
- -----------------------------------------------------------------
Expense waiver/reimbursement(d) 0.75% 0.75% 0.99 %(c)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted) $39,803 $45,864 $28,152
- -----------------------------------------------------------------
Portfolio turnover rate 47% 24% 17%
- -----------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from July 22, 1992 (date of initial
public investment) to May 31, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended May 31, 1995, which can be obtained free
of charge.
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' North Carolina municipal securities
portfolio, known as 111 Corcoran North Carolina Municipal Securities 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. (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 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 and North Carolina state income 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.
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 Ratings Group ("S&P"). 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 S&P
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 S&P 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 securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at
current market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits or
losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate 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. There is the risk that
when lending portfolio securities, the securities may not be available to the
Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell
the securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.
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 and North Carolina state income
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.
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, 1995, the
Trust Division managed assets in excess of $1.1 billion. The Trust Division
manages 2 commingled funds with assets of approximately $145 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1995, total assets in the 111 Corcoran Funds were $153
million.
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 six 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
- --------------------- -----------------------------------
<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, Boston, Massachusetts, a subsidiary of Federated Investors, is
transfer agent for the shares of the Fund, and dividend disbursing agent for the
fund. Federated Services Company, Pittsburgh, Pennsylvania, also provides
certain accounting and recordkeeping services with respect to the portfolio
investments of the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
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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 1-800-386-3111.)
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 three 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 as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; 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 on the
previous page, 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, which
consists of the Fund, 111 Corcoran Bond Fund, and 111 Corcoran Equity Fund.
Shareholders of the Fund have access to 111 Corcoran Bond Fund and 111 Corcoran
Equity 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 1-800-386-3111. 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 1-800-386-3111) 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
Exchanges;
- 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 6,
1995, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 2,977,291
shares (78.90%) 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.
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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--96.9%
- --------------------------------------------------------------------------
NORTH CAROLINA--95.1%
-------------------------------------------------------
$ 500,000 Alamance County, NC, 4.70%, 4/1/2007 AA $ 478,500
-------------------------------------------------------
550,000 Alamance County, NC, 4.90%, 4/1/2010 AA 521,059
-------------------------------------------------------
250,000 Alamance County, NC, 5.90%, 5/1/2006 AA 266,713
-------------------------------------------------------
500,000 Burke County, NC, 6.30% GO Bonds (MBIA Insured),
3/1/2006 AAA 538,570
-------------------------------------------------------
865,000 Cabarrus County, NC, 4.80% (FGIC Insured), 3/1/2010 AAA 794,035
-------------------------------------------------------
450,000 Caswell County, NC, 4.80% (FGIC Insured), 6/1/2010 AAA 411,651
-------------------------------------------------------
250,000 Catawba County, NC, 5.70% GO Bonds, 6/1/2003 AA- 265,313
-------------------------------------------------------
500,000 Catawba County, NC, 5.75% GO Bonds, 6/1/2007 AA- 525,395
-------------------------------------------------------
500,000 Catawba County, NC, 5.85% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2004 AAA 531,350
-------------------------------------------------------
500,000 Catawba County, NC, 5.95% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2005 AAA 531,205
-------------------------------------------------------
500,000 Charlotte, NC, 5.50% GO Bonds (Series A), 7/1/2004 AAA 526,820
-------------------------------------------------------
500,000 Charlotte, NC, 6.50%, 2/1/2008 AAA 554,870
-------------------------------------------------------
400,000 Charlotte-Mecklenburg Hospital Authority, NC, 6.375%
Health Care System Revenue Refunding Bonds, 1/1/2009 AA 416,176
-------------------------------------------------------
750,000 Cleveland County, NC, 5.10% GO Bonds (FGIC Insured),
6/1/2006 AAA 756,915
-------------------------------------------------------
365,000 Craven County, NC, 6.20%, 6/1/1999 A1 389,546
-------------------------------------------------------
600,000 Cumberland County, NC, 5.80% (MBIA Insured), 2/1/2007 AAA 631,740
-------------------------------------------------------
470,000 Duplin County, NC, 5.30%, 4/1/2007 AAA 477,191
-------------------------------------------------------
500,000 Durham & Wake Counties Special Airport District, NC,
5.75%, 4/1/2002 AAA 535,470
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 500,000 Fayetteville, NC, Public Works Commission, 4.60%
Revenue Bonds (FGIC Insured), 3/1/2005 AAA $ 478,350
-------------------------------------------------------
250,000 Fayetteville, NC, Public Works Commission, 5.90%
Revenue Bonds (FSA Insured), 3/1/2007 AAA 260,725
-------------------------------------------------------
600,000 Forsyth County, NC, 6.25%, 3/1/2005 AA1 649,188
-------------------------------------------------------
1,100,000 Greensboro, NC, 4.90% GO Bonds, 2/1/2003 AAA 1,112,540
-------------------------------------------------------
500,000 Greensboro, NC, 6.30%, 3/1/2012 AA1 530,930
-------------------------------------------------------
475,000 Greenville, NC, 4.80%, 3/1/2003 AA 472,687
-------------------------------------------------------
525,000 Greenville, NC, 4.80%, 3/1/2005 AA 513,371
-------------------------------------------------------
750,000 Greenville, NC, 4.80%, 3/1/2006 AA 726,668
-------------------------------------------------------
1,000,000 Guilford County, NC, 4.90%, 4/1/2001 AA1 1,019,230
-------------------------------------------------------
350,000 Henderson County, NC, 6.50%, 6/1/2007 A1 379,753
-------------------------------------------------------
500,000 Iredell County, NC, 5.50% COP (FGIC Insured), 6/1/2001 AAA 520,435
-------------------------------------------------------
350,000 Iredell County, NC, 6.125% COP (Statesville School
Project)/(FGIC Insured), 6/1/2007 AAA 372,001
-------------------------------------------------------
450,000 Laurinburg, NC, 5.30% Sanitation & Sewer GO Bonds,
6/1/2003 A 468,135
-------------------------------------------------------
675,000 Lee County, NC, 6.00%, 2/1/2004 A1 721,629
-------------------------------------------------------
500,000 Lincoln County, NC, 5.10% GO Bonds (FGIC Insured),
6/1/2007 AAA 496,895
-------------------------------------------------------
750,000 Mecklenburg County, NC, 4.10% Refunding Bonds, 4/1/2003 AAA 712,245
-------------------------------------------------------
750,000 Mecklenburg County, NC, 4.10%, 4/1/2002 AAA 722,212
-------------------------------------------------------
500,000 Mecklenburg County, NC, 6.75% GO Bonds, 4/1/2002 AAA 551,915
-------------------------------------------------------
750,000 Moore County, NC, 4.80% (AMBAC Insured), 6/1/2006 AAA 727,545
-------------------------------------------------------
500,000 Mooresville Grade School District, 6.30% COP (AMBAC
Insured), 10/1/2009 AAA 538,300
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 500,000 Morgantown, NC, 5.70% Water & Sewer GO Bonds (FGIC
Insured), 6/1/2012 AAA $ 514,300
-------------------------------------------------------
200,000 New Hanover County, NC, 7.10%, 6/1/2008 A+ 222,112
-------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 6.00%
Revenue Bonds (Series B), 1/1/2006 A 501,520
-------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 7.00%
Revenue Bonds (Series A), 1/1/2000 A 527,200
-------------------------------------------------------
300,000 North Carolina Educational Facilities Authority, 6.375%
Revenue Bonds (Elon College Project)/(Connie Lee
Insured), 1/1/2007 AAA 320,394
-------------------------------------------------------
200,000 North Carolina Medical Care Commission, 5.95% Revenue
Bonds (Presbyterian Hospital), 10/1/2007 AA 206,042
-------------------------------------------------------
560,000 North Carolina Municipal Power Agency Catawba,
10.50% Revenue Bonds, 1/1/2010 AAA 802,586
-------------------------------------------------------
750,000 North Carolina Municipal Power Agency Catawba,
6.00% Revenue Bonds, 1/1/2004 A 781,590
-------------------------------------------------------
500,000 North Carolina Municipal Power Agency, 5.25% Revenue
Bonds (AMBAC Insured), 1/1/2008 AAA 499,975
-------------------------------------------------------
500,000 North Carolina Municipal Power Agency, 5.75% Revenue
Bonds (AMBAC Insured), 1/1/2002 AAA 526,230
-------------------------------------------------------
535,000 North Carolina State, 6.20%, 3/1/2009 AAA 590,367
-------------------------------------------------------
500,000 North Carolina State, 6.60%, 8/1/1997 AAA 517,430
-------------------------------------------------------
500,000 Orange County, NC, 5.10%, 6/1/2007 AA+ 500,890
-------------------------------------------------------
500,000 Pender County, NC, 4.75% (AMBAC Insured), 6/1/2011 AAA 461,435
-------------------------------------------------------
250,000 Person County, NC, 5.40%, 2/1/2009 A1 252,145
-------------------------------------------------------
500,000 Pitt County, NC, 5.10%, 2/1/2007 AA 500,835
-------------------------------------------------------
250,000 Pitt County, NC, 6.05% COP (FGIC Insured), 4/1/1998 AAA 260,925
-------------------------------------------------------
500,000 Randolph County, NC, 6.20%, 5/1/2005 A1 537,590
-------------------------------------------------------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
-------------------------------------------------------
$ 365,000 Rocky Mount, NC, 6.30%, 5/1/2009 A+ $ 387,029
-------------------------------------------------------
500,000 Rowan County, NC, 5.60% (FGIC Insured), 5/1/2011 AAA 508,955
-------------------------------------------------------
500,000 Rowan County, NC, 5.60% GO Bonds (MBIA Insured),
4/1/2009 AAA 510,840
-------------------------------------------------------
500,000 Rowan County, NC, 6.25% COP, 12/1/2007 A 525,715
-------------------------------------------------------
500,000 Rutherford County, NC, 5.10% (MBIA Insured), 6/1/2008 AAA 496,245
-------------------------------------------------------
500,000 Rutherford County, NC, 5.70% GO Bonds (MBIA Insured),
6/1/2011 AAA 538,935
-------------------------------------------------------
500,000 Union County, NC, 5.80%, 3/1/2006 A1 525,675
-------------------------------------------------------
500,000 Union County, NC, 6.50%, 4/1/2005 A+ 546,860
-------------------------------------------------------
500,000 Union County, NC, 6.50%, 4/1/2006 NR 544,200
-------------------------------------------------------
500,000 University of North Carolina at Charlotte, 5.00%
Revenue Bonds (MBIA Insured), 1/1/2007 AAA 494,565
-------------------------------------------------------
500,000 University of North Carolina, 4.90% Utilities System
Revenue Refunding Bonds, 8/1/2003 AA 503,310
-------------------------------------------------------
500,000 Wake County, NC, 4.20% GO Bonds,4/1/1998 AAA 500,770
-------------------------------------------------------
500,000 Wake County, NC, 6.90% Revenue Bonds (Carolina Power &
Light Co.), 4/1/2009 A2 528,690
-------------------------------------------------------
500,000 Wilmington, NC, 6.30%, 3/1/2005 A1 544,575
-------------------------------------------------------
500,000 Wilmington, NC, 6.40% Water & Sewer GO Bonds, 3/1/2007 A+ 543,495
-------------------------------------------------------
500,000 Winston-Salem, NC, 5.25%, COP (Series A), 10/1/1996 AA1 507,420
------------------------------------------------------- -----------
Total 37,858,118
------------------------------------------------------- -----------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
- ----------- ------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--CONTINUED
- --------------------------------------------------------------------------
PUERTO RICO--1.8%
-------------------------------------------------------
$ 500,000 Puerto Rico Electric & Power, 5.75% Electric Revenue
Refunding Bonds (FSA Insured), 7/1/2007 AAA $ 520,785
-------------------------------------------------------
200,000 Puerto Rico, Floating Rate Revenue Bonds (RIB)/(MBIA
Insured), 1/16/2015 AAA 196,500
------------------------------------------------------- -----------
Total 717,285
------------------------------------------------------- -----------
TOTAL MUNICIPAL SECURITIES (IDENTIFIED COST,
$37,733,873) 38,575,403
------------------------------------------------------- -----------
MUTUAL FUNDS SHARES--0.9%
- --------------------------------------------------------------------------
5,600 North Carolina Daily Tax-Free Income Money Market Fund 5,600
-------------------------------------------------------
361,900 PNC North Carolina Money Market Fund 361,900
------------------------------------------------------- -----------
Total 367,500
------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $38,101,373) $38,942,903+
------------------------------------------------------- -----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $38,101,373. The
net unrealized appreciation of investments on a federal tax basis amounts to
$841,530 which is comprised of $1,044,627 appreciation and $203,097
depreciation at May 31, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($39,803,070) at May 31, 1995.
The following abbreviations are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
COP -- Certificates of Participation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Investors Assurance
RIB -- Residual Interest Bond
</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, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $38,101,373) $38,942,903
- ---------------------------------------------------------------------------------
Income receivable 633,984
- ---------------------------------------------------------------------------------
Receivable for investments sold 1,621,216
- ---------------------------------------------------------------------------------
Receivable for shares sold 169,887
- ---------------------------------------------------------------------------------
Deferred expenses 9,410
- --------------------------------------------------------------------------------- -----------
Total assets 41,377,400
- ---------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Payable for investments purchased $1,406,771
- --------------------------------------------------------------------
Income distribution payable 127,352
- --------------------------------------------------------------------
Accrued expenses 40,207
- -------------------------------------------------------------------- ----------
Total liabilities 1,574,330
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 3,814,335 shares outstanding $39,803,070
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $39,741,362
- ---------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 841,530
- ---------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (780,862)
- ---------------------------------------------------------------------------------
Undistributed net investment income 1,040
- --------------------------------------------------------------------------------- -----------
Total Net Assets $39,803,070
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
($39,803,070 / 3,814,335 shares outstanding) $10.44
- --------------------------------------------------------------------------------- -----------
Computation of Offering Price
Offering Price Per Share: (100/95.5 of $10.44)* $10.93
- --------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost."
(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, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income $2,277,946
- ---------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------
Investment advisory fee $317,233
- ----------------------------------------------------------------------
Administrative personnel and services fee 63,447
- ----------------------------------------------------------------------
Custodian fees 22,428
- ----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 29,629
- ----------------------------------------------------------------------
Directors'/Trustees' fees 8,101
- ----------------------------------------------------------------------
Auditing fees 16,000
- ----------------------------------------------------------------------
Legal fees 4,534
- ----------------------------------------------------------------------
Portfolio accounting fees 48,946
- ----------------------------------------------------------------------
Share registration costs 19,767
- ----------------------------------------------------------------------
Printing and postage 9,696
- ----------------------------------------------------------------------
Insurance premiums 4,644
- ----------------------------------------------------------------------
Miscellaneous 12,006
- ---------------------------------------------------------------------- --------
Total expenses 556,431
- ----------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 317,233
- ---------------------------------------------------------------------- --------
Net expenses 239,198
- --------------------------------------------------------------------------------- ----------
Net investment income 2,038,748
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain (loss) on investments (772,122)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 1,445,684
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 673,562
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $2,712,310
- --------------------------------------------------------------------------------- ----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 2,038,748 $ 1,655,780
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($272,995 net loss and
$30,153 net gain, respectively, as computed for federal income
tax purposes) (772,122) 27,318
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 1,445,684 (1,304,242)
- ------------------------------------------------------------------ ----------- -----------
Change in assets resulting from operations 2,712,310 378,856
- ------------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Distributions from net investment income (2,037,708) (1,656,604)
- ------------------------------------------------------------------
Distributions from net realized gains -- (29,434)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from distributions to
shareholders (2,037,708) (1,686,038)
- ------------------------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 4,742,618 23,017,028
- ------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 303,412 249,634
- ------------------------------------------------------------------
Cost of Shares redeemed (11,781,966) (4,247,085)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from share transactions (6,735,936) 19,019,577
- ------------------------------------------------------------------ ----------- -----------
Change in net assets (6,061,334) 17,712,395
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 45,864,404 28,152,009
- ------------------------------------------------------------------ ----------- -----------
End of period (including undistributed net investment income of
$1,040 and $0, respectively) $39,803,070 $45,864,404
- ------------------------------------------------------------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
(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 two diversified portfolios 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 portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
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 the pricing service 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. Short-term
securities with remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value. Investments in other
open-end regulated investment companies are valued at net asset value.
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.
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 income. Accordingly, no provisions for federal taxes are
necessary. At May 31, 1995 the Fund, for federal tax purposes, had a capital loss
carryforward of $272,995, 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 2003.
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Additionally, net capital losses of $507,733 attributable to security transactions
incurred after October 31, 1994, are treated as arising on June 1, 1995, the first day of
the Fund's next taxable year.
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.
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 not to exceed a
period of five years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests 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, 1995,
34.5% 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 value of investments insured by or supported (backed) by a letter of credit
for any one institution or agency does not exceed 13.1% of total investments.
</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 shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
MAY 31, MAY 31,
1995 1994
- -------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Shares Sold 478,316 2,171,508
- --------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 30,434 23,762
- --------------------------------------------------------------------
Shares redeemed (1,203,315) (402,568)
- -------------------------------------------------------------------- ---------- ---------
Net change resulting from share transactions (694,565) 1,792,702
- -------------------------------------------------------------------- ---------- ---------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL
SECURITIES FUND
- --------------------------------------------------------------------------------
(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 any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the 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
for which it receives a fee. This fee is based on the size, type and number of
accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
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 of $43,033 were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the first five year period following May 1, 1992 (the date the Fund
became effective). For the year ended May 31, 1995 the Fund paid $8,845 pursuant
to this agreement.
GENERAL--Certain of the Officers and Trustees of the Fund 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, 1995 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Purchases $19,234,311
- ------------------------------------------------------------------------------- -----------
Sales $24,081,622
- ------------------------------------------------------------------------------- -----------
</TABLE>
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, 1995, the related statement of operations,
and the statement of changes in net assets and financial highlights (see page 2)
for the periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1995, 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, 1995, 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 LLP
Pittsburgh, Pennsylvania
July 7, 1995
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 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 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, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cuisp 682365101
2041605A (7/95)
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, 1995. This Statement is not a prospectus itself.
To receive a copy of the prospectus, write the Fund or call toll-free 1-
800-386-3111.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated July 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Fund 1
Investment Objective and Policies 1
Investment Limitations 5
111 Corcoran Funds Management 8
Fund Ownership 12
Trustees Compensation 13
Trustee Liability 13
Investment Advisory Services 14
Adviser to the Fund 14
Advisory Fees 14
Administrative Services 14
Transfer Agent and Dividend
Disbursing Agent 14
Brokerage Transactions 14
Purchasing Shares 15
Additional Purchase Information--
Payment in Kind 15
Determining Net Asset Value 16
Valuing Municipal Bonds 16
Use of Amortized Cost 16
Exchange Privilege 16
Redeeming Shares 16
Redemption in Kind 16
Tax Status 16
The Fund's Tax Status 16
Shareholders' Tax Status 17
Total Return 17
Yield 17
Tax-Equivalent Yield 17
Tax-Equivalency Table 17
Performance Comparisons 18
Appendix 20
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. 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 non appropriation"); any credit enhancement
or legal recourse provided upon an event of non appropriation 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 made to secure what is considered to be an advantageous
price and yield for the Fund. 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled. 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:
o as a reaction to market conditions;
o 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
o 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:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
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 years ended May 31, 1995, and May 31,
1994, the portfolio turnover rates for the Fund were 47% and 24%,
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."
111 Corcoran Funds Management
Officers and Trustees are listed with their addresses, present positions with
111 Corcoran Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Securities Fund: 3-5 Years; 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;; 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; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut 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;
The Virtus Funds; World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 6, 1995, 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 2,977,291 shares (78.90%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $407.00
Trustee
John T. Conroy, Jr. $597.00
Trustee
William J. Copeland $597.00
Trustee
James E. Dowd $597.00
Trustee
Lawrence D. Ellis, M.D. $543.00
Trustee
Edward L. Flaherty, Jr. $597.00
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $461.00
Trustee
Gregor F. Meyer $543.00
Trustee
John E. Murray, Jr. $271.00
Trustee
Wesley W. Posvar $543.00
Trustee
Marjorie P. Smuts $543.00
Trustee
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 3
portfolios.
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 years ended May 31, 1995 and 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 $317,233, $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 years ended May 31, 1995 and May 31,
1994, and for the period from July 22, 1992 (date of initial public
investment) to May 31, 1993, the Fund incurred $63,447, $56,185, and $42,828,
respectively, in administrative services of which $0, $0, and $23,286,
respectively, were voluntarily waived.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type and number of accounts
and transactions made by shareholders.
Federated Services Company 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.
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:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o 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.
During the fiscal years ended May 31, 1995 and May 31, 1994, and for the
period from April 7, 1992 (start of business) to May 31, 1993, the Fund paid
no brokerage commissions.
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) 386-3111 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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
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:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o 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 returns for the one-year period ended May 31,
1995, and for the period from July 22, 1992 (date of inception) to May 31,
1995, were 2.86% and 4.54%, respectively.
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, 1995, was 4.43%.
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, 1995,
was 6.82%.
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 1995
STATE OF NORTH CAROLINA
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 $1- $39,001- $94,251- $100,001- $143,601- OVER
RETURN 39,000 94,250 100,000 143,600 256,500 $256,500
SINGLE $1- $23,351- $56,551- $60,001- $117,951- OVER
RETURN 23,350 56,550 60,000 117,950 256,500 $256,500
Tax-Exempt
Yield Taxable Yield Equivalent
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%
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
indicator of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o 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:
o 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.
o 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.
o 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 Ratings Group 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.
Cusip 682365101
2041605B (7/95)
111 CORCORAN EQUITY FUND
(A PORTFOLIO OF 111 CORCORAN FUNDS)
PROSPECTUS
The shares of 111 Corcoran Equity Fund (the "Fund") offered by this prospectus
represent interests in a diversified portfolio in the 111 Corcoran Funds (the
"Trust"), an open-end management investments company (a mutual fund). The
investment objective of the Fund is to provide high total return over longer
periods of time through appreciation of capital and current income provided by
dividends and interest payments. The Fund pursues this objective by investing
primarily in dividend paying common stocks.
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,
1995 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 at 1-800-386-3111.
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, 1995
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
Investment Limitations 8
Portfolio Turnover 9
THE 111 CORCORAN FUNDS INFORMATION 9
- ------------------------------------------------------
Management of the 111 Corcoran Funds 9
Distribution of Fund Shares 10
Administration of the Fund 12
BROKERAGE TRANSACTIONS 12
- ------------------------------------------------------
NET ASSET VALUE 12
- ------------------------------------------------------
INVESTING IN THE FUND 13
- ------------------------------------------------------
Share Purchases 13
Minimum Investment Required 13
What Shares Cost 14
Purchases at Net Asset Value 14
Sales Charge Reallowance 14
Reducing the Sales Charge 15
Systematic Investment Program 16
Certificates and Confirmations 16
Dividends 16
Capital Gains 16
EXCHANGE PRIVILEGE 16
- ------------------------------------------------------
REDEEMING SHARES 18
- ------------------------------------------------------
Systematic Withdrawal Program 19
Accounts with Low Balances 19
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 19
EFFECT OF BANKING LAWS 20
- ------------------------------------------------------
TAX INFORMATION 21
- ------------------------------------------------------
Federal Income Tax 21
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
FINANCIAL STATEMENTS 22
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 33
- ------------------------------------------------------
ADDRESSES 34
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<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 Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)............................................................... 0.58%
12b-1 Fees(2).................................................................................. 0.00%
Total Other Expenses........................................................................... 0.67%
Shareholder Services Fees(2)...................................................... 0.00%
Total Fund Operating Expenses(3)...................................................... 1.25%
</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 0.85%.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
or shareholder servicing agent fees. The Fund will not pay or accrue 12b-1 or
shareholder servicing agent fees until a separate class of shares has been
created for certain trust and institutional investors, including qualified
employee benefit plans. At that point the Fund will be able to pay up to 0.35%
of the Fund's average daily net assets for 12b-1 fees and up to 0.25% of the
Fund's average daily net assets for shareholder servicing agent fees. See "The
111 Corcoran Funds Information."
(3) The Total Fund Operating Expenses are estimated to be 1.52% absent the
anticipated voluntary waivers and/or reimbursement by the Fund's adviser. The
Total Fund Operating Expenses were 1.25% for the fiscal year ended May 31, 1995,
and were 2.67% absent the voluntary waiver and/or reimbursement for the fiscal
year ended May 31, 1995.
* Total Fund Operating Expenses are estimated based on average expenses expected
to be incurred during the period ending May 31, 1996. 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 "Investing in the Fund" and "The 111 Corcoran Funds Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return; (2) redemption at the end of each time period; and (3) payment of the maximum
sales load. As noted in the table above, the Fund charges no redemption fees......... $ 57 $83
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDED MAY 31,
1996.
111 CORCORAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Arthur Andersen LLP, Independent Public
Accountants, on page 33.
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1995(A)
---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.11
- --------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.44
- -------------------------------------------------------------------- ----------
Total from investment operations 1.55
- --------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Distributions from net investment income (0.07)
- -------------------------------------------------------------------- ----------
NET ASSET VALUE, END OF PERIOD $ 11.48
- -------------------------------------------------------------------- ----------
TOTAL RETURN(B) 15.55%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 1.25%(c)
- --------------------------------------------------------------------
Net investment income 3.00%(c)
- --------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.42%(c)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $24,581
- --------------------------------------------------------------------
Portfolio turnover 4%
- --------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from December 5, 1994 (date of initial
public investment) to May 31, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended May 31, 1995, which can be obtained free
of charge.
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' equity portfolio, known as 111 Corcoran
Equity 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 dividend paying common stocks. Central Carolina Bank is
the investment adviser to the Fund, and Franklin Street Advisors, Inc. is the
Fund's sub-adviser. 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 provide high total return over longer
periods of time through appreciation of capital and current income provided by
dividends and interest payments. 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 described below 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 primarily in
a broad, diversified range of dividend paying common stocks. As a matter of
investment policy, the Fund will invest so that, under normal circumstances, at
least 65% of its total assets are invested in equity securities.
ACCEPTABLE INVESTMENTS
The securities in which the Fund invests include, but are not limited to:
- common stocks of U.S. companies which are either listed on the New York
or American Stock Exchanges or traded in over-the-counter markets,
preferred stocks of such companies, warrants, and preferred stocks
convertible into common stocks of such companies;
- convertible bonds rated, at the time of purchase, at least BBB by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or at least Baa by Moody's Investors Service, Inc.
("Moody's"), or, if not rated, determined by the Fund's adviser to be of
comparable quality;
- domestic issues of corporate debt obligations, including zero coupon
bonds, rated, at the time of purchase, at least Baa by Moody's or at
least BBB by S&P or Fitch, or, if not rated, determined by the Fund's
adviser to be of comparable quality;
- American Depositary Receipts ("ADRs") of foreign companies traded on the
New York Stock Exchange or in the over-the-counter market;
- obligations of the United States government;
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; The Student Loan Marketing Association; National
Credit Union Administration; and Tennessee Valley Authority;
- money market instruments rated, at the time of purchase, A-1 or A-2 by
S&P, Prime-1 or Prime-2 by Moody's, or F-1 or F-2 by Fitch, or, if not
rated, determined by the adviser to be of comparable quality; and
- repurchase agreements collateralized by eligible investments.
In addition, the Fund may borrow money, lend portfolio securities, invest in
securities of other investment companies, and engage in when-issued and delayed
delivery transactions. The Fund may also invest in put and call options,
futures, and options on futures, for hedging purposes.
Obligations rated BBB by S&P or Baa by Moody's have speculative characteristics.
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
Fund's adviser. The Fund's adviser will determine whether or not the security
continues to be an acceptable investment. If not, the security will be sold. A
description of the rating categories is contained in the Appendix to the
Statement of Additional Information.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
COMMON STOCKS. As described above, the Fund invests primarily in dividend paying
common stocks. Stocks available for purchase in the Fund must either currently
pay a dividend or have paid a dividend within the past five years. As with other
mutual funds that invest primarily in common stocks, the Fund is subject to
market risks. That is, the possibility exists that common stocks will decline
over short or even extended periods of time, and the United States equity market
tends to be cyclical, experiencing both periods when stock prices generally
increase and periods when stock prices generally decrease. The Fund may, from
time to time, invest in issuers with smaller capitalization. Small
capitalization stocks have historically been more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Index. This is because, among other things, smaller companies have a lower
degree of liquidity in the equity market and tend to have a greater sensitivity
to changing economic conditions. Further, in addition to exhibiting greater
volatility, these stocks may, to some degree, fluctuate independently of the
stocks of large companies. That is, the stocks of small capitalization companies
may decline in price as the price of large company stocks rises or vice versa.
Therefore, investors should expect that there will be periods of time when the
Fund will exhibit greater volatility than broad stock market indices such as the
Standard & Poor's 500 Index.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities which
may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities.
Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities. The
holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in whole
or in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial. The Fund will not invest more than 10% of its total
assets in securities of foreign issuers.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon bonds and zero coupon
convertible securities. The Fund may invest in zero coupon bonds in order to
receive the rate of return through the appreciation of the bond. This
application is extremely attractive in a falling rate environment as the price
of the bond rises rapidly in value a opposed to regular coupon bonds. A zero
coupon bond makes no periodic interest payments and the entire obligation
becomes due only upon maturity.
Zero coupon convertible securities are debt securities which are issued at a
discount to their face amount and do not entitle the holder to any periodic
payments of interest prior to maturity. Rather, interest earned on zero coupon
convertible securities accretes at a stated yield until the security reaches its
face amount at maturity. Zero coupon convertible securities are convertible into
a specific number of shares of the issuer's common stock. In addition, zero
coupon convertible securities usually have put features that provide the holder
with the opportunity to sell the bonds back to the issuer at a stated price
before maturity.
Generally, the price of zero coupon securities are more sensitive to fluctuation
in interest than are conventional bonds and convertible securities.
Additionally, federal tax law requires the holder of a zero coupon security to
recognize income from the security prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid liability
of federal income taxes, the Fund will be required to distribute income accrued
from zero coupon securities which it owns, and may have to sell portfolio
securities (perhaps at disadvantageous times) in order to generate cash to
satisfy these distribution requirements.
U.S. GOVERNMENT OBLIGATIONS. These securities include but are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds and discount notes of U.S. government agencies or
instrumentalities.
Some of these obligations, such as Government National Mortgage Association
mortgage-backed securities, are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These agencies and instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other open-end investment companies and in the securities of
closed-end 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 its short-term cash
which has not yet been invested in other portfolio instruments. However, from
time to time, on a temporary basis, the Fund may invest exclusively in one other
investment company managed similarly to it. Shareholders should realize that,
when the Fund invests in other investment companies, certain fund expenses, such
as custodian fees and administrative fees, may be duplicated. The adviser will
waive its investment advisory fee on assets invested in securities of other
investment companies.
PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities as a hedge to attempt to protect securities which the Fund holds, or
will be purchasing, against decreases in value. The Fund may also write (sell)
call options on all or any portion of its portfolio to generate income. The Fund
will write call options on securities either held in its portfolio or which it
has the right to obtain without payment of further consideration, or for which
it has segregated cash or U.S. government securities in the amount of any
additional consideration.
The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures and stock index futures contracts to hedge all or a portion of
its portfolio against changes in the price of its portfolio securities, but will
not engage in futures transactions for speculative purposes.
The Fund may also write call options and purchase put options on financial
futures and stock index futures contacts as a hedge to attempt to protect
securities in its portfolio against decreases in value.
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.
RISKS. When the Fund writes a call option, the Fund risks not participating
in any rise in the value of the underlying security. In addition, when the
Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may
not correlate perfectly with the prices of the securities in the Fund's
portfolio. This may cause the futures contract and any related options to
react differently than the portfolio securities to market changes. In
addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors, such as
interest rate and stock price movements. In these events, the Fund may lose
money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or options will exist at all times. Although the investment
adviser will consider liquidity before entering into option transactions,
there is no assurance that a liquid secondary market 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. In such proportions as, in the judgment of its investment
adviser, prevailing market conditions warrant, the Fund may, for temporary
defensive purposes, invest in:
- 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 S&P,
Prime-1 or Prime-2 by Moody's, or F-1 or F-2 by Fitch;
- 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; and
- bankers' acceptances.
DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
been applied to certain contracts (including, futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an underlying
security, currency, commodity or index. Certain types of securities that
incorporate the performance characteristics of these contracts are also referred
to as "derivatives." The term has also been applied to securities "derived" from
the cash flows from underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Fund will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that the Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objectives, policies, and limitations.
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 restrictions on resale under federal securities laws. However,
the Fund will limit investments in illiquid securities, including certain
restricted securities not determined by the Trustees to be liquid, to 15% of its
net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
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. There is the risk that when lending portfolio securities, the
securities may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
REPURCHASE AGREEMENTS. The U.S. government securities and other securities in
which the Fund invests may be purchased pursuant to repurchase agreements.
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities.
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 arrangement 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
assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in the Fund's portfolio will be sold whenever the
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. Generally, a high portfolio turnover rate results in increased
transaction costs and higher taxes paid by the Fund's shareholders. In addition,
a high rate of portfolio turnover may result in the realization of a larger
amount of capital gains which, when distributed to the Fund's shareholders, are
taxable to them. Nevertheless, transactions for the Fund's portfolio will be
based only upon investment considerations and will not be limited by any other
considerations when the Fund's adviser deems it appropriate to make changes in
the Fund's portfolio.
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 0.85 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, 1995, the
Trust Division managed assets in excess of $1.1 billion. The Trust Division
manages two commingled funds with assets of approximately $145 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1995, total assets in the 111 Corcoran Funds were $153
million.
As part of their regular banking operations, the Bank 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
the Bank. The lending relationship will not be a factor in the selection of
securities.
SUB-ADVISER. Pursuant to the terms of an investment sub-advisory agreement
between the adviser and Franklin Street Advisors, Inc. (the "Sub-Adviser"),
the Sub-Adviser furnishes certain investment advisory Services to the
adviser, including investment research, statistical and other factual
information, and recommendations, based on the Sub-Adviser's analysis, and
assists the adviser in identifying securities for potential purchase and/or
sale on behalf of the Fund's portfolio. For the services provided and the
expenses incurred by the Sub-Adviser pursuant to the sub-advisory
agreement, the Sub-Adviser is entitled to receive an annual sub-advisory
fee equal to 0.65 of 1% of the daily assets of the Fund payable by the
investment adviser from the Advisory fees. The Sub-Adviser may elect to
waive some or all of its fee. In no event shall the Fund be responsible for
any fees due to the Sub-Adviser for its services to the adviser.
SUB-ADVISER'S BACKGROUND. The Sub-Adviser, which is located at 1506 East
Franklin Street, Chapel Hill, North Carolina, 27514, is a registered
investment advisory firm founded in 1990. The Sub-Adviser manages assets in
excess of $300 million. The Sub-Adviser is a wholly-owned subsidiary of
Franklin Street Partners, Inc., a privately-owned holding company that also
owns a private non-depository trust bank. Franklin Street Partners, Inc.
has guaranteed to the adviser the performance of the Sub-Adviser's
obligations under the sub-advisory agreement.
Robert C. Eubanks, Jr. has been the Fund's portfolio manager since its
inception. Mr. Eubanks is the President of Franklin Street Advisors, Inc.,
and has served in that capacity since 1990. He is also vice-chairman and
chief investment officer of Franklin Street Trust, an affiliate of the
Sub-Adviser. Prior to founding Franklin Street Trust, he was co-founder and
president of McMillion Eubanks Capital Management in Greensboro, North
Carolina.
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.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund will pay to the distributor an amount computed at an annual rate of
0.35% of the Fund's average daily net assets to finance any activity which is
principally intended to result in the sale of shares subject to the Distribution
Plan. The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.
The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to distributor except as described above. Therefore, the Fund does not
pay for unreimbursed expenses of the distributor, including amounts expended by
the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by shares
under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "services
plan") with respect to shares. Under the services plan, financial institutions
will enter into shareholder service agreements with the Fund to provide
administrative support services to their customers who from time to time may be
owners of record or beneficial owners of the shares. In return for providing
these support services, a financial institution may receive payments from the
Fund at a rate not exceeding 0.25% of the average daily net assets of the shares
beneficially owned by the financial institution's customers for whom it is the
holder of record or with whom it has a servicing relationship.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.
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 laws.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay financial
institutions a fee based on the average net asset value of shares of their
customers invested in the Fund for providing administrative services. This fee
is in addition to the amounts paid under the Distribution Plan for
administrative services, and, if paid, will be reimbursed by the Bank and not by
the Fund.
The Bank or its affiliates may also offer to pay a fee from their own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares furnished by the financial institution. These payments will be made by
the Bank and will not be made from the assets of the Fund.
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 and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO RECORDKEEPER. Federated
Services Company, Boston, Massachusetts, a subsidiary of Federated Investors, is
transfer agent for the shares of the Fund and dividend disbursing agent for the
Fund. Federated Services Company, Pittsburgh, Pennsylvania, also provides
certain accounting and recordkeeping services with respect to the portfolio
investments of the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
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 utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Trust. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
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 1-800-386-3111.)
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 three 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 as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; 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. In addition, customers, employee benefit plans, and employees of
Franklin Street Advisors, Inc. and its affiliated companies (other than Franklin
Street Securities) 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 on the
previous page, 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 quarterly and paid quarterly to all shareholders invested
in the Fund on the record date. 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, if any, will
be made at least annually.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of the 111 Corcoran Funds which
consists of the Fund, 111 Corcoran Bond Fund, and 111 Corcoran North Carolina
Municipal Securities Fund. Shareholders of the Fund have access to 111 Corcoran
Bond Fund and 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 1-800-386-3111. 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 1-800-386-3111) 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
Exchanges;
- 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.
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 6,
1995, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 2,053,009
shares (95.50%) 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
111 CORCORAN EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--85.2%
- -------------------------------------------------------------------------------------
AEROSPACE--2.0%
-------------------------------------------------------------------
11,000 Allied Signal Inc. $ 444,125
-------------------------------------------------------------------
500 United Technologies Corp. 37,938
------------------------------------------------------------------- -----------
Total 482,063
------------------------------------------------------------------- -----------
AUTOMOBILE--2.7%
-------------------------------------------------------------------
3,000 Chrysler Corp. 130,875
-------------------------------------------------------------------
11,000 General Motors Corp. 528,000
------------------------------------------------------------------- -----------
Total 658,875
------------------------------------------------------------------- -----------
BANKING--1.7%
-------------------------------------------------------------------
10,000 Mellon Bank Corp. 427,500
------------------------------------------------------------------- -----------
BROADCASTING--0.5%
-------------------------------------------------------------------
2,000 CBS, Inc. 134,000
------------------------------------------------------------------- -----------
CHEMICALS--9.2%
-------------------------------------------------------------------
8,500 Air Products & Chemicals, Inc. 451,562
-------------------------------------------------------------------
1,500 Dow Chemical Co. 110,062
-------------------------------------------------------------------
1,000 duPont E.I. de Nemours & Co. 67,875
-------------------------------------------------------------------
6,000 Eastman Chemical Co. 360,000
-------------------------------------------------------------------
1,300 Eastman Kodak Co. 78,488
-------------------------------------------------------------------
3,000 Engelhard Corp. 124,875
-------------------------------------------------------------------
9,000 Grace W.R. & Co. 578,250
-------------------------------------------------------------------
20,000 Praxair, Inc. 497,500
------------------------------------------------------------------- -----------
Total 2,268,612
------------------------------------------------------------------- -----------
CONSUMER GOODS--5.4%
-------------------------------------------------------------------
4,000 General Electric Co. 232,000
-------------------------------------------------------------------
8,000 Georgia-Pacific Corp. 622,000
-------------------------------------------------------------------
11,000 Goodyear Tire and Rubber 464,750
------------------------------------------------------------------- -----------
Total 1,318,750
------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
ELECTRONICS--4.6%
-------------------------------------------------------------------
2,000 AMP, Inc. $ 85,250
-------------------------------------------------------------------
1,000 Avnet, Inc. 45,500
-------------------------------------------------------------------
2,000 Hewlett-Packard Co. 132,250
-------------------------------------------------------------------
12,000 Raychem Corp. 436,500
-------------------------------------------------------------------
30,000 Westinghouse Electric Corp. 435,000
------------------------------------------------------------------- -----------
Total 1,134,500
------------------------------------------------------------------- -----------
ENTERTAINMENT--2.4%
-------------------------------------------------------------------
9,000 Disney Walt Co. 500,625
-------------------------------------------------------------------
2,000 Promus Cos., Inc. 83,750
------------------------------------------------------------------- -----------
Total 584,375
------------------------------------------------------------------- -----------
FINANCE--6.0%
-------------------------------------------------------------------
15,000 American Express Co. 534,375
-------------------------------------------------------------------
1,500 Household International, Inc. 74,062
-------------------------------------------------------------------
2,000 Merrill Lynch & Co., Inc. 94,000
-------------------------------------------------------------------
6,000 Morgan J.P. & Co., Inc. 425,250
-------------------------------------------------------------------
3,000 Morgan Stanley Group, Inc. 228,375
-------------------------------------------------------------------
3,000 Travelers Group, Inc. 126,750
------------------------------------------------------------------- -----------
Total 1,482,812
------------------------------------------------------------------- -----------
HEALTH CARE--3.7%
-------------------------------------------------------------------
11,000 Columbia/HCA Healthcare 449,625
-------------------------------------------------------------------
1,000 Johnson & Johnson 66,250
-------------------------------------------------------------------
8,000 SmithKline Beecham PLC 316,000
-------------------------------------------------------------------
2,000 Upjohn Co. 72,750
------------------------------------------------------------------- -----------
Total 904,625
------------------------------------------------------------------- -----------
INSURANCE--9.0%
-------------------------------------------------------------------
6,000 Chubb Corp. 494,250
-------------------------------------------------------------------
16,000 Equitable Companies, Inc. 338,000
-------------------------------------------------------------------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
INSURANCE--CONTINUED
-------------------------------------------------------------------
7,000 ITT Corp. $ 783,125
-------------------------------------------------------------------
8,000 Jefferson-Pilot Corp. 422,000
-------------------------------------------------------------------
5,000 Providian Corp. 181,875
------------------------------------------------------------------- -----------
Total 2,219,250
------------------------------------------------------------------- -----------
METALS--0.4%
-------------------------------------------------------------------
2,000 Aluminum Co. of America 93,000
------------------------------------------------------------------- -----------
MINING--1.2%
-------------------------------------------------------------------
2,000 Barrick Gold Corp. 50,500
-------------------------------------------------------------------
5,000 Fluor Corp. 247,500
------------------------------------------------------------------- -----------
Total 298,000
------------------------------------------------------------------- -----------
MORTGAGE--1.4%
-------------------------------------------------------------------
1,000 Federal Home Loan Mortgage Corp. 68,125
-------------------------------------------------------------------
2,950 Federal National Mortgage Association 274,350
------------------------------------------------------------------- -----------
Total 342,475
------------------------------------------------------------------- -----------
NATURAL GAS--2.2%
-------------------------------------------------------------------
9,000 Mapco Inc. 529,875
------------------------------------------------------------------- -----------
OFFICE EQUIPMENT--0.4%
-------------------------------------------------------------------
1,000 International Business Machines 93,250
------------------------------------------------------------------- -----------
OIL SERVICE--11.9%
-------------------------------------------------------------------
1,500 Amoco Corp. 102,562
-------------------------------------------------------------------
10,000 Anadarko Petroleum Corp. 433,750
-------------------------------------------------------------------
1,000 British Petroleum PLC 85,375
-------------------------------------------------------------------
5,000 Chevron Corp. 245,625
-------------------------------------------------------------------
13,000 Halliburton Co. 507,000
-------------------------------------------------------------------
20,000 Questar Corp. 600,000
-------------------------------------------------------------------
1,000 Schlumberger Ltd. 65,000
-------------------------------------------------------------------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
OIL SERVICE--CONTINUED
-------------------------------------------------------------------
13,000 Total S.A. $ 403,000
-------------------------------------------------------------------
17,000 Unocal Corp. 503,625
------------------------------------------------------------------- -----------
Total 2,945,937
------------------------------------------------------------------- -----------
PAPER PRODUCTS--1.3%
-------------------------------------------------------------------
5,000 Champion International Corp. 231,875
-------------------------------------------------------------------
1,500 Consolidated Papers, Inc. 77,625
------------------------------------------------------------------- -----------
Total 309,500
------------------------------------------------------------------- -----------
PUBLISHING--0.8%
-------------------------------------------------------------------
5,000 Reader's Digest Association, Inc. 207,500
------------------------------------------------------------------- -----------
REAL ESTATE--0.6%
-------------------------------------------------------------------
6,500 Pennsylvania Real Estate Investment Trust 142,187
------------------------------------------------------------------- -----------
RESTAURANTS--0.5%
-------------------------------------------------------------------
3,000 McDonald's Corp. 113,625
------------------------------------------------------------------- -----------
RETAIL--4.7%
-------------------------------------------------------------------
4,000 Dayton Hudson Corp. 283,500
-------------------------------------------------------------------
20,000 * Federated Department Stores, Inc. 460,000
-------------------------------------------------------------------
10,000 Home Depot, Inc. 416,250
------------------------------------------------------------------- -----------
Total 1,159,750
------------------------------------------------------------------- -----------
SERVICES--1.9%
-------------------------------------------------------------------
13,000 Browning Ferris Industries, Inc. 463,125
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--5.7%
-------------------------------------------------------------------
7,000 AT & T Corp. 355,250
-------------------------------------------------------------------
12,500 GTE Corp. 417,188
-------------------------------------------------------------------
7,000 Motorola, Inc. 419,125
-------------------------------------------------------------------
2,600 SBC Communications Inc. 117,000
-------------------------------------------------------------------
4,500 Tele Communications, Inc. 95,063
------------------------------------------------------------------- -----------
Total 1,403,626
------------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
TRANSPORTATION--1.7%
-------------------------------------------------------------------
3,000 CSX Corp. $ 228,750
-------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C>
2,700 Norfolk Southern Corp. 184,950
------------------------------------------------------------------- -----------
Total 413,700
------------------------------------------------------------------- -----------
UTILITIES--3.3%
-------------------------------------------------------------------
12,000 Houston Industries, Inc. 517,500
-------------------------------------------------------------------
20,000 Public Service Co. of North Carolina, Inc. 297,500
------------------------------------------------------------------- -----------
Total 815,000
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST, $19,810,699) 20,945,912
------------------------------------------------------------------- -----------
MUTUAL FUND SHARES--4.0%
- -------------------------------------------------------------------------------------
972,490 Goldman Sachs Money Market Fund (AT NET ASSET VALUE) 972,490
------------------------------------------------------------------- -----------
U.S. GOVERNMENT SECURITIES--19.5%
- -------------------------------------------------------------------------------------
GOVERNMENT AGENCIES
-------------------------------------------------------------------
4,800,000 Federal Home Loan Mortgage Discount Notes, 5.81%-6.10%, 6/1/95
(AT AMORTIZED COST) 4,800,000
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $25,583,189) $26,718,402+
------------------------------------------------------------------- -----------
</TABLE>
* Non-income producing security.
+ The cost of investments for federal tax purposes amounts to $25,583,189. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,135,213, which is comprised of $1,244,908 appreciation and $109,695
depreciation at May 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($24,580,876) at May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $25,583,189) $26,718,402
- ---------------------------------------------------------------------------------
Income receivable 62,735
- ---------------------------------------------------------------------------------
Receivable for shares sold 116,128
- --------------------------------------------------------------------------------- -----------
Total assets 26,897,265
- ---------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Payable for investments purchased $2,286,218
- --------------------------------------------------------------------
Accrued expenses 30,171
- -------------------------------------------------------------------- ----------
Total liabilities 2,316,389
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 2,140,292 shares outstanding $24,580,876
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $23,316,429
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,135,213
- ---------------------------------------------------------------------------------
Accumulated net realized gain on investments 39,734
- ---------------------------------------------------------------------------------
Undistributed net investment income 89,500
- --------------------------------------------------------------------------------- -----------
Total Net Assets $24,580,876
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Proceeds Per Share:
Net Asset Value Per Share ($24,580,876 / 2,140,292 shares outstanding) $11.48
- --------------------------------------------------------------------------------- -----------
Computation of Offering Price
Offering Price Per Share: (100/95.50 of $11.48) $12.02*
- --------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost."
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1995*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $ 79,628
- -----------------------------------------------------------------------------------
Dividends 102,184
- ----------------------------------------------------------------------------------- ----------
Total income 181,812
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee $ 36,380
- -----------------------------------------------------------------------
Administrative personnel and services fee 24,247
- -----------------------------------------------------------------------
Custodian fees 4,977
- -----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 4,884
- -----------------------------------------------------------------------
Directors/Trustees fees 1,500
- -----------------------------------------------------------------------
Legal fees 2,000
- -----------------------------------------------------------------------
Portfolio accounting fees 24,947
- -----------------------------------------------------------------------
Printing and postage 9,000
- -----------------------------------------------------------------------
Miscellaneous 6,192
- ----------------------------------------------------------------------- --------
Total expenses 114,127
- -----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $36,380
- -------------------------------------------------------------
Waiver of administrative personnel and services fee 24,247
- ------------------------------------------------------------- -------
Total waivers/reimbursements 60,627
- -----------------------------------------------------------------------
Net expenses 53,500
- ----------------------------------------------------------------------------------- ----------
Net investment income/operating loss 128,312
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized gain on investments 39,734
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 1,135,213
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 1,174,947
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $1,303,259
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from December 5, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1995*
--------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 128,312
- ----------------------------------------------------------------------------
Net realized gain on investments ($39,734 net gain as computed for federal
income tax purposes) 39,734
- ----------------------------------------------------------------------------
Net change in unrealized appreciation of investments 1,135,213
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations 1,303,259
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------
Distributions from net investment income (38,812)
- ---------------------------------------------------------------------------- -------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 24,299,699
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 2,285
- ----------------------------------------------------------------------------
Cost of shares redeemed (985,555)
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from share transactions 23,316,429
- ---------------------------------------------------------------------------- -------------
Change in net assets 24,580,876
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 0
- ---------------------------------------------------------------------------- -------------
End of period (including undistributed net investment income of $89,500) $ 24,580,876
- ---------------------------------------------------------------------------- -------------
</TABLE>
*For the period from December 5, 1994 (date of initial public investment) to May
31, 1995.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
(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 two diversified portfolios and one
non-diversified portfolio. The financial statements included herein present only
those of 111 Corcoran Equity Fund (the "Fund"), a diversified portfolio. The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost, which approximates fair
market value. Listed equity securities are valued at the last sale price reported on
national securities exchanges. Investments in other open-end investment companies are
valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income and expenses are
accrued daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code").
FEDERAL TAXES--It is the Trust'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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in when-issued or
delayed delivery transactions. The Trust 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.
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).
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1995*
- ------------------------------------------------------------------------- -------------
<S> <C>
Shares sold 2,229,804
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 210
- -------------------------------------------------------------------------
Shares redeemed (89,732)
- ------------------------------------------------------------------------- ------------
Net change resulting from share transactions 2,140,282
- ------------------------------------------------------------------------- ------------
</TABLE>
* For the period December 5, 1994 (date of initial public investment) to May 31,
1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Central Carolina Bank and Trust Company, the Trust's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to .85 of 1% of the Trust's average daily net
assets.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
Under the terms of an investment sub-advisory agreement between the Adviser and
Franklin Street Advisers, Inc. (the "Sub-Adviser"), the Sub-Adviser furnishes
certain investment advisory services to the Adviser. The Sub-Adviser receives
from the Adviser an annual fee equal to .65 of 1% of the Fund's advisory fee.
The Sub-Adviser may voluntarily choose to waive any portion of it's fee.
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.
DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Trust will compensate Federated Securities Corp., the principal distributor,
from the net assets of the Trust to finance activities intended to result in the
sale of the Trust's Trust class of shares. The Plan provides that the Trust may
incur distribution expenses up to .35 of 1% of the average daily net assets of
the Trust shares, annually, to compensate Federated Securities Corp.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT AND ACCOUNTING FEES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund
for which it receives a fee. This fee is based on the size, type and number of
accounts and transactions made by shareholders.
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
FServ also maintains the Fund's accounting records for which it receives a fee.
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 of $35,000 were borne initially
by FAS.
The Fund has agreed to reimburse FAS for the organizational expenses during the
five year period following December 2, 1994 (the date the Fund became
effective). For the period ended May 31, 1995, the Trust paid $2,333 pursuant to
this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES $ 20,071,627
- ------------------------------------------------------------------------------ ------------
SALES $ 300,700
- ------------------------------------------------------------------------------ ------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
111 CORCORAN FUNDS (111 Corcoran Equity Fund):
We have audited the accompanying statement of assets and liabilities of 111
Corcoran Equity Fund (an investment portfolio of 111 Corcoran Funds, a
Massachusetts business trust), including the schedule of portfolio investments,
as of May 31, 1995, the related statement of operations, and the statement of
changes in net assets for the period from December 2, 1994 (start of business)
to May 31, 1995, and financial highlights (see page 2) for the period from
December 5, 1994 (date of initial public investment) to May 31, 1995. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1995 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 Equity Fund, an investment portfolio of 111 Corcoran Funds, as of May
31, 1995, the results of its operations, the changes in its net assets for the
period from December 2, 1994 (start of business) to May 31, 1995, and the
financial highlights for the period from December 5, 1994 (date of initial
public investment) to May 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 7, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
111 Corcoran Equity 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
- ----------------------------------------------------------------------------------------------
Sub-Adviser
Franklin Street Advisors, Inc. 1506 East Franklin Street
Chapel Hill, North Carolina 27514
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ----------------------------------------------------------------------------------------------
Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
111 CORCORAN
EQUITY FUND
PROSPECTUS
A Diversified Portfolio of
111 Corcoran Funds, an Open-End,
Management Investment Company
July 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
682365309
005826 (7/95)
111 Corcoran Equity 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 Equity Fund (the "Fund") dated July 31, 1995.
This Statement is not a prospectus itself. To receive a copy of the
prospectus, write the Fund or call toll-free 1-800-386-3111.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated July 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
General Information About the Fund 1
Investment Objective and Policies 1
111 Corcoran Funds Management 8
Fund Ownership 12
Trustees Compensation 13
Trustee Liability 13
Investment Advisory Services 14
Adviser to the Fund 14
Advisory Fees 14
Sub-Adviser to the Fund 14
Sub-Advisory Fees 14
Administrative Services 14
Transfer Agent and Dividend
Disbursing Agent 14
Brokerage Transactions 15
Distribution and Shareholder
Services Plans 15
Determining Net Asset Value 16
Determining Market Value of
Securities 16
Exchange Privilege 16
Redeeming Shares 16
Redemption in Kind 16
Tax Status 17
The Fund's Tax Status 17
Shareholders' Tax Status 17
Total Return 17
Yield 17
Performance Comparisons 18
Appendix 19
General Information About the Fund
The Fund is a portfolio in the 111 Corcoran Funds (the "Trust"), 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 high total return over longer
periods of time through appreciation of capital and current income provided by
dividends and interest payments. The objective cannot be changed without
approval of shareholders. Unless otherwise indicated, the investment policies
described below may be changed by the Board of Trustees ("Trustees") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
Types of Investments
The Fund invests principally in a professionally-managed and diversified
portfolio of dividend paying common stocks. Although the Fund may invest in
other securities and in money market instruments, it is the Fund's policy,
under normal market conditions, to invest at least 65% of its assets in equity
securities. The securities in which the Fund may invest include foreign
securities, as described in the prospectus.
Convertible Securities
When owned as part of a unit along with warrants, which are options to buy the
common stock, convertible securities function as convertible bonds, except
that the warrants generally will expire before the bond's maturity.
Convertible securities are senior to equity securities, and therefore, have a
claim to assets of the corporation prior to the holders of common stock in the
case of liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same company. The
interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than non-convertible securities of similar quality.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in which, in
the investment adviser's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving its investment
objective. Otherwise, the Fund will hold or trade the convertible securities.
In selecting convertible securities for the Fund, the Fund's adviser evaluates
the investment characteristics of the convertible security as a fixed income
instrument, and the investment potential of the underlying equity security for
capital appreciation. In evaluating these matters with respect to a particular
convertible security, the Fund's adviser considers numerous factors, including
the economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
Warrants
Warrants are basically options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However,
most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and
have no right with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may end to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.
Futures and Options Transactions
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge its portfolio by buying and selling
financial futures contracts and stock index futures contracts, buying put
options on portfolio securities and listed put options on futures contracts,
and writing call options on futures contracts. The Fund may also write covered
call options on portfolio securities to attempt to increase its current
income.
The Fund will maintain its positions in securities, options and segregated
cash subject to puts and calls until the options are exercised, closed, or
have expired. An option position on financial futures contracts may be closed
out over-the-counter or on a nationally-recognized exchange which provides a
secondary market for options of the same series.
In addition to purchasing put options and writing call options as described in
the prospectus, the Fund may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers of
the options when options on the portfolio securities held by the Fund are not
traded on an exchange.
The Fund purchases and writes options only with investment dealers and other
financial institutions (such as commercial banks or savings and loan
associations) deemed creditworthy by the Fund's investment adviser.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
The Fund may also write call options and purchase put options on financial
futures and stock index futures contracts as a hedge to attempt to protect
securities in its portfolio against decreases in value.
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.
A stock index futures contract is a bilateral agreement which obligates
the seller to deliver (and the purchaser to take delivery of) an amount
of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of trading of the
contract and the price at which the agreement is originally made. There
is no physical delivery of the stocks constituting the index and no
price is paid upon entering into a futures contract. In general,
contracts are closed out prior to their expiration.
Put Options on Financial Futures Contracts
The Fund may purchase listed put options on financial futures contracts.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, 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 decrease in
value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would then
deliver the futures contract in return for payment of the strike price.
If the Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and only the premium
paid for the contract will be lost.
Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts to hedge its portfolio. 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 stock prices fall, 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 substantially offset the drop in value of the Fund's fixed
income or indexed 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 substantially offset the
decrease in value of the hedged securities.
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 initial
margin in futures transactions 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 or 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.
The Fund will comply with the following restrictions when purchasing and
selling futures contracts. First, the Fund will not participate in
futures transactions if the sum of its initial margin deposits on open
contracts will exceed 5% of the market value of the Fund's total assets,
after taking into account the unrealized profits and losses on those
contracts it has entered into. Second, the Fund will not enter into
these contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor
serve as a vehicle for trading in the commodities futures or commodity
options markets. Connected with this, the Fund will disclose to all
prospective investors, the limitations on its futures and option
transactions, and make clear that these transactions are entered into
only for bona fide hedging purposes, or other permissible purposes
pursuant to regulations promulgated by the Commodity Futures Trading
Commission ("CFTC"). Finally, because the Fund will submit to the CFTC
special calls for information, the Fund will not register as a
commodities pool operator.
Restricted and Illiquid Securities
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission (the "SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving 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 the
Rule. The Trust, on behalf of the Fund, believes that the Staff of the SEC has
left the question of determining the liquidity of all restricted securities
for determination to the Trustees. The Trustees consider the following
criteria in determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or other 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. 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 requires its custodian to take possession of the securities subject
to repurchase agreements and these securities are marked to market daily. To
the extent that the original seller does not repurchase the securities from
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 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.
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. These securities are marked to market daily
and are maintained until the transaction is settled.
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.
Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered necessary
to meet its investment objective. For the period from December 5, 1994 (date
of initial public investment) to May 31, 1995, the porftolio turnover rate for
the Fund was 4%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities
on margin, other than in connection with buying stock index futures
contracts, put options on stock index futures, put options on financial
futures and portfolio securities, and writing covered call options, but
may obtain such short-term credits as may be necessary for clearance of
purchases and sales of portfolio securities. A deposit or payment by 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 directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total 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 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. For purposes of this limitation, the
following will not be deemed to be pledges of the Fund's assets: (a) the
deposit of assets in escrow in connection with the writing of covered
put or call options and the purchase of securities on a when-issued
basis; and (b) collateral arrangements with respect to (i) the purchase
and sale of stock options (and options on stock indices) and (ii)
initial or variation margin for futures contracts.
Investing in Real Estate
The Fund will not purchase 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, commodity contracts, or
commodity futures contracts. However, the Fund may purchase put options
on stock index futures, put options on financial futures, stock index
futures contracts, and put options on portfolio securities, and may
write covered call options.
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 in
connection with the sale of securities which the Fund may purchase
pursuant to its investment objective, policies, and limitations.
Diversification of Investments
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if, as a
result, at the time of such purchase, more than 5% of the value of its
total assets would be invested in the securities of that issuer, or if
it would own more than 10% of the outstanding voting securities of any
one issuer.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total assets in
any one industry. However, the Fund may invest 25% or more 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.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding money market
instruments, repurchase agreements, obligations of the U.S. government,
its agencies or instrumentalities, variable rate demand notes, bonds
debentures, notes, certificates of indebtedness, or certain debt
instruments as permitted by its investment objective, policies, and
limitations or the Trust's Declaration of Trust.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 5% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable fixed
time deposits with maturities over seven days, over-the-counter options,
and certain securities not determined by the Trustees to be liquid.
Investing in Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such programs.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets
in securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
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.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for purpose of
exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American Stock
Exchanges to 2% of its net assets. (If State restrictions change, this
latter restriction may be revised without notice to shareholders). For
purposes of this investment restriction, warrants acquired by the Fund
in units with or attached to securities may be deemed to be without
value.
The Fund will not invest more than 5% of its net assets in warrants. No
more than 2% of the Fund's net assets, to be included within the overall
5% limit on investments in warrants, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange.
Investing in Options
The Fund will not purchase put or call options on securities or on
futures contracts if more than 5% of the value of the Fund's total
assets would be invested in premiums on open option positions.
Writing Covered Call 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 write call options
in excess of 5% of the value of its total assets.
Investing in Securities Of Other Investment Companies
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total assets
in investment companies in general. The Fund will purchase securities of
closed-end 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, reorganization, or acquisition of 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 does not intend to borrow money or pledge securities in excess of 5%
of the value of its net assets during the coming fiscal year.
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."
To comply with registration requirements in certain states, the Fund (1) will
limit the aggregate value of the assets underlying covered call options or put
options written by the Fund to not more than 25% of its net assets, (2) will
limit the premiums paid for options purchased by the Fund to 5% of its net
assets, (3) will limit the margin deposits on futures contracts entered into
by the Fund to 5% of its net assets, and (4) will limit investments in
warrants to 5% of its net assets. No more than 2% will be in warrants which
are listed on the New York or American Stock Exchanges. (If state requirements
change, these restrictions may be revised without shareholder notification.)
111 Corcoran Funds Management
Officers and Trustees are listed with their addresses, present positions with
111 Corcoran Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Secuities Fund: 3-5 Years; 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;; 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; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut 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;
The Virtus Funds; World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 6, 1995, 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 2,053,009 shares (95.50%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $0
Trustee
John T. Conroy, Jr. $0
Trustee
William J. Copeland $0
Trustee
James E. Dowd $0
Trustee
Lawrence D. Ellis, M.D. $0
Trustee
Edward L. Flaherty, Jr. $0
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $0
Trustee
Gregor F. Meyer $0
Trustee
John E. Murray, Jr. $0
Trustee
Wesley W. Posvar $0
Trustee
Majorie P. Smuts $0
Trustee
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 3
portfolios.
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 period from December 5, 1994 (date
of initial public investment) to May 31, 1995, the Adviser earned advisory
fees of $36,380, all of which was voluntarily waived.
Sub-Adviser to the Fund
The Fund's sub-adviser is Franklin Street Advisors, Inc. (the "Sub-Adviser").
The Sub-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 the Sub-Adviser to restrict the
flow of non-public information, Fund investments are typically made without
any knowledge of the Sub-Adviser's or its affiliates' lending relationships
with an issuer.
Sub-Advisory Fees
For its sub-advisory services, the Sub-Adviser receives an annual sub-advisory
fee as described in the prospectus. For the period from December 5, 1994 (date
of initial public investment) to May 31, 1995, the Sub-Adviser earned sub-
advisory fees of $27,820, all of which was voluntarily waived.
State Expense Limitations
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 period from December 5, 1994 (date of initial
public investment) to May 31, 1995, the Fund incurred $24,247, in
administrative services fees, all of which was voluntarily waived.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type and number of accounts
and transactions made by shareholders.
Federated Services Company 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.
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:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o 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 in advising
the Funds and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it would
tend to reduce its expenses.
For the period from December 5, 1994 (date of initial public investment) to
May 31, 1995, the Fund paid $29,480 in brokerage commissions on brokerage
transactions.
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."
Distribution and Shareholder Services Plans
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to:
marketing efforts; providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary
or beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and
assisting clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, the Board of Trustees expects that the Fund
will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment objective.
By identifying potential investors whose needs are served by the Fund's
objective, and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the period from December 5, 1994 ( date of initial public investment) to
May 31, 1995, payments in the amount of $0, and $0, respectively, were made
pursuant to the Distribution Plan and the Shareholder Services Plans.
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:
o according to the last sale price on a national securities exchange, if
available;
o in the absence of recorded sales for bonds and other fixed-income
securities, as determined by an independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices, as furnished by an independent pricing service, or for short-
term obligations with maturities of less than 60 days at the time of
purchase, at amortized cost unless the Trustees determine this is not
fair value; or
o 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:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o 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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
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:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o 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 cumulative total return from December 5, 1994 (date of initial
public investment) to May 31, 1995, was 10.36%. Cumulative total return
reflects the Fund's total performance over a specific period of time. This
total return assumes and is reduced by the payment of the maximum sales load.
The Fund's total return is representative of only six months of investment
activity since the Fund's effective date.
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, 1995 was 2.08%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the maximum offering price per share 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 SEC and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o 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:
o Standard & Poor's Ratings Group Daily Stock Price Index of 500 Common
Stocks, which is a composite index of common stocks in industry,
transportation, and financial and public utility companies, and can be
used to compare to the total returns of funds whose portfolios are
invested primarily in common stocks. Inaddition, the S&P index assumes
reinvestments of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated in S&P figures.
o 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 the maximum offering
price over a specific period of time. From time to time, the Fund will
quote its Lipper ranking in the "index funds" category in advertising
and sales literature.
o 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 & Poor's Ratings Group 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.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt 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.
NR--NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category, Plus
and minus signs, however, are not used in the "AAA" category.
Standard & Poor's Ratings Group 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 rated 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.
Cusip 682365309
005902 (7/95)
