1933 Act File No. 33-45753
1940 Act File No. 811-6561
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 10 ........... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9 ........................... X
111 CORCORAN FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on July 31, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
filed the Notice required by that Rule on ; or
-----------------
X intends to file the Notice required by that Rule on or about July
15, 1996; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copy to: Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin
2101 L Street, N.W.
Washington, D.C. 20037
CROSS REFERENCE SHEET
This amendment to the Registration Statement of the 111 Corcoran
Funds, which consists of three portfolios: (1) 111 Corcoran North Carolina
Municipal Securities Fund; (2) 111 Corcoran Bond Fund; and (3) 111 Corcoran
Equity Fund, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-3) Cover Page.
Item 2. Synopsis.................(1-3) Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(1-3) Financial Highlights; (1-3)
Performance Information.
Item 4. General Description of
Registrant..............(1-3) General Information; (1-3)
Investment Information; (1-3) Investment
Objective; (1-3) Investment Policies;
(1-3) Acceptable Investments; (1) North
Carolina Municipal Bonds; (1) Investment
Risks; (1) Non-Diversification; (1-3)
Investment Limitations.
Item 5. Management of the Fund...(1-3) The 111 Corcoran Funds
Information; (1-3) Management of the 111
Corcoran Funds; (1-3) Distribution of
Fund Shares; (1-3) Administration of the
Fund.
Item 6. Capital Stock and Other
Securities..............(1-3) Dividends; (1-3) Capital Gains;
(1-3) Shareholder Information; (1-3)
Voting Rights; (1-3) Effect of Banking
Laws; (1-3) Tax Information; (1-3)
Federal Income Tax; (1) North Carolina
Taxes; (1) Other State and Local
Taxes;.State and Local Taxes (2,3)
Item 7. Purchase of Securities Being
Offered.................(1-3) Net Asset Value; (3) Brokerage
Transactions; (3) Investing in the Fund;
(1-3) Share Purchases; (1-3) Minimum
Investment Required; (1-3) What Shares
Cost; (1-3) Purchases at Net Asset
Value; (1-3) Sales Charge Reallowance;
(1-3) Reducing the Sales Charge; (1-3)
Systematic Investment Program; (1-3)
Certificates and Confirmations.
Item 8. Redemption or Repurchase.(1-3) Exchange Privilege; (1-3)
Redeeming Shares; (1-3) Systematic
Withdrawal Program; (1-3) Accounts with
Low Balances; (1,2) Redemption in Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-3) Cover Page.
Item 11. Table of Contents........(1-3) Table of Contents.
Item 12. General Information and
History.................(1-3) General Information About the
Fund.
Item 13. Investment Objectives and
Policies................(1-3) Investment Objective and Policies;
(1-3) Investment Limitations.
Item 14. Management of the Fund...(1-3) 111 Corcoran Funds Management; (1-
3) Trustees' Compensation.
Item 15. Control Persons and Principal
Holders of Securities...Not applicable.
Item 16. Investment Advisory and Other
Services................(1-3) Investment Advisory Services; (1-
3) Other Services.
Item 17. Brokerage Allocation.....(1-3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.................(1-3) Purchasing Shares; (1-3)
Determining Net Asset Value; (1-3)
Exchange Privilege; (1-3) Redeeming
Shares.
Item 20. Tax Status...............(1-3) Tax Status.
Item 21. Underwriters.............Not Applicable.
Item 22. Calculation of Performance
Data....................(1-3) Total Return; (1-3) Yield; (1)
Tax-Equivalent Yield; (1-3) Performance
Comparisons.
Item 23. Financial Statements.....(Filed in Part A)
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,
1996 with the Securities and Exchange Commission ("SEC"). 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 or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-386-3111. To
obtain other information or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http:// www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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, 1996
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 9
THE 111 CORCORAN FUNDS INFORMATION 10
- ------------------------------------------------------
Management of the 111 Corcoran Funds 10
Distribution of Fund Shares 11
Administration of the Fund 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUND 11
- ------------------------------------------------------
Share Purchases 11
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Systematic Investment Program 14
Certificates and Confirmations 14
Dividends 14
Capital Gains 15
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
REDEEMING SHARES 16
- ------------------------------------------------------
Systematic Withdrawal Program 17
Accounts with Low Balances 18
Redemption in Kind 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
EFFECT OF BANKING LAWS 18
- ------------------------------------------------------
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
State and Local Taxes 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
FINANCIAL STATEMENTS 21
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 32
- ------------------------------------------------------
ADDRESSES 33
- ------------------------------------------------------
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)............................................... 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................. 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................................................................ 0.37%
Total Fund Operating Expenses(2)............................................... 0.37%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver by the
adviser. The adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.75%.
(2) Total Fund operating expenses would have been 1.12% absent the voluntary
waivers described above in note 1.
The Annual Operating Expenses were 0.32% for the fiscal year ended May 31, 1996.
The Annual Operating Expenses in the table above are based on expenses expected
to be incurred during the fiscal year ending May 31, 1997.
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 5 years 10 years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return; (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..... $ 49 $ 56 $ 65 $ 90
</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.
1
111 CORCORAN BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 32.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------
1996 1995 1994 1993 (A)
------ ------ ------ ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 9.63 $10.13 $ 10.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------
Net investment income 0.66 0.66 0.63 0.49
- -------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (0.22) 0.37 (0.50) 0.13
--------
- ------------------------------------------------------- ------ ------ ------
Total from investment operations 0.44 1.03 0.13 0.62
- -------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------
Distributions from net investment income (0.66) (0.66) (0.63) (0.49)
--------
- ------------------------------------------------------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.78 $10.00 $ 9.63 $ 10.13
- ------------------------------------------------------- ------ ------ ----- --------
TOTAL RETURN (B) 4.41% 11.32% 1.21% 6.28%
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 0.32% 0.34% 0.50% 0.70%*
- -------------------------------------------------------
Net investment income 6.65% 6.98% 6.32% 6.00%*
- -------------------------------------------------------
Expense waiver/reimbursement (c) 0.75% 0.75% 0.75% 0.78%*
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $87,883 $87,115 $97,823 $31,928
- -------------------------------------------------------
Portfolio turnover 32% 37% 76% 59%
- -------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(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 charge or
contingent deferred sales charge, if applicable.
(c) 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, 1996, which can be obtained free
of charge.
2
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The 111 Corcoran Funds was established as a Massachusetts business trust under a
Declaration of Trust dated December 11, 1991. The Declaration of Trust permits
the 111 Corcoran Funds to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. This prospectus
relates only to the 111 Corcoran Funds' fixed income portfolio, known as 111
Corcoran Bond Fund. The Fund is for trust clients of Central Carolina Bank and
its affiliates and individual investors who desire a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
investing primarily in bonds rated A or better. Central Carolina Bank is the
investment adviser to the Fund. A minimum initial investment of $1,000 is
required. Subsequent investments must be in amounts of at least $100.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve income. In pursuing this
objective the Fund's investment adviser intends to purchase portfolio securities
which it deems to be undervalued in an effort to obtain appreciation of capital.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment policies described in this
prospectus. The investment objective cannot be changed without approval of
shareholders. Unless indicated otherwise, the investment policies may be changed
by the Board of Trustees (the "Trustees") without the approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of bonds rated A or
better. The average maturity of the Fund is 3 to 10 years. As a matter of
investment policy, which may be changed without shareholder approval, the Fund
will invest so that, under normal circumstances, at least 65% of the value of
its total assets are invested in bonds rated A or better. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a professionally managed, diversified portfolio of
bonds rated A or better. The securities in which the Fund may invest are as
follows:
- domestic issues of corporate debt obligations (rated Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("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
3
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;
- mortgage-backed securities, including Adjustable Rate Mortgage Securities
("ARMS") and collateralized mortgage obligations ("CMOs"), and asset
backed securities;
- 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 ("FHLMC"); Federal
National Mortgage Association ("FNMA"); Government National Mortgage
Association ("GNMA"); 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.
MORTGAGE-BACKED SECURITIES. Some of the U.S. Government Securities in which the
Fund will invest can represent an undivided interest in a pool of residential
mortgages or may be collateralized by a pool of residential mortgages
("Mortgage-backed securities"). Mortgage-backed securities have yield and
maturity characteristics corresponding to the underlying mortgages.
Distributions to holders of
4
Mortgage-backed securities include both interest and principal payments.
Principal payments represent the amortization of the principal of the underlying
mortgages and any prepayments of principal due to prepayment, refinancing, or
foreclosure of the underlying mortgages. Although maturities of the underlying
mortgage loans may range up to 30 years, amortization and prepayments
substantially shorten the effective maturities of Mortgage-backed securities.
Due to these features, Mortgage-backed securities are less effective as a means
of "locking-in" attractive long-term interest rates than fixed-income securities
which pay only a stated amount of interest until maturity, when the entire
principal amount is returned. Prepayments, which become more likely as mortgage
interest rates decline, create a need to reinvest distribution of principal at
then-current lower rates. Since comparatively high interest rates cannot be
effectively "locked in," Mortgage-backed securities may have less potential for
capital appreciation during periods of declining interest rates than other
non-callable fixed-income government securities of comparable stated maturities.
However, Mortgage-backed securities may experience less pronounced declines in
value during periods of rising interest rates. Mortgage-backed securities
utilizing ARMs may fluctuate less in value and suffer fewer prepayments than
Mortgage-backed securities utilizing fixed rate mortgages.
ARMS. ARMS are Mortgage-backed securities representing interests in adjustable
rather than fixed interest rate mortgages. The Fund invests in ARMS issued by
the GNMA, the FNMA, the FHLMC, and by non-government and private entities and
are actively traded. The underlying mortgages which collateralize ARMS issued by
GNMA are fully guaranteed by the Federal Housing Administration ("FHA") or
Veterans Administration ("VA"), while those collateralizing ARMs issued by FHLMC
or FNMA are typically conventional residential mortgages conforming to strict
underwriting size and maturity constraints.
CMOS. CMOs are debt obligations collateralized by mortgage loans or
Mortgage-backed securities. Typically, CMOs are collateralized by GNMA, FNMA or
FHLMC certificates, but may be collateralized by whole loans or private
mortgage-backed securities.
The Fund will only invest in CMOs which are rated AAA by a Rating Agency, and
which may be: (a) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of mortgages
in which payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. Government Securities; (c) securities in
which the proceeds of the issuance are invested in mortgage securities and the
payment of the principal and interest is supported by the credit of an agency or
instrumentality of the U.S. government; or (d) collateralized by pools of
mortgages or Mortgage-backed securities not guaranteed by the U.S. government or
any government agency.
ASSET-BACKED SECURITIES. Asset-backed securities are obligations of trusts or
special purpose corporations that directly or indirectly represent a
participation in, or are secured by and payable from various types of assets. At
the present time, automobile and credit card receivables are among the most
common collateral supporting asset-backed securities. In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans
and is less likely to experience substantial prepayments. As with
Mortgage-backed securities, asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties and use
similar credit enhancement techniques.
5
Asset-backed securities present certain risks that are not presented by
Mortgage-backed securities. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of asset-backed securities backed by automobile receivables permit the
services of such receivables to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the related asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a recorded security interest in all of the
obligations backing such receivables. Therefore, there is a possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the Adviser considers any rating
given to such securities, the financial strength of the provider of credit
support, the type and extent of credit enhancement provided, as well as the
documentation and structure of the issue itself and the credit support.
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,
6
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.
7
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.
8
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
considerations 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.
9
THE 111 CORCORAN FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE 111 CORCORAN FUNDS
BOARD OF TRUSTEES. The 111 Corcoran Funds are managed by a Board of Trustees.
The Board of Trustees is responsible for managing the business affairs of the
111 Corcoran Funds and for exercising all of the powers of the 111 Corcoran
Funds except those reserved for the shareholders. An Executive Committee of the
Board of Trustees handles the Board's responsibilities between meetings of the
Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the 111
Corcoran Funds, investment decisions for the Fund are made by Central Carolina
Bank and Trust Company (the "Bank"), the Fund's investment adviser, subject to
direction by the Trustees. The adviser continually conducts investment research
and supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser is entitled to receive an annual
investment advisory fee equal to .75% of 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, 1996, the
Trust Division managed assets in excess of $1.3 billion. The Trust Division
manages two commingled funds with assets of approximately $175 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1996, total assets in the 111 Corcoran Funds were $150
million.
10
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 the first $250 million
.125% of the next $250 million
.100% of the next $250 million
.075% 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.
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
11
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
12
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
13
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 Shareholder 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
14
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 for which affiliates of Federated Investors serve as investment
adviser and which are distributed by Federated Securities Corp., a subsidiary of
Federated Investors ("Federated Funds"). Shareholders have access to the
following Federated Funds:
- Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and
- Federated 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 Shareholder 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.
15
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 Shareholder 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 Shareholder 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
16
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.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption payable other
than to the shareholder of record must have signatures on written redemption
requests guaranteed by:
- 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 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.
17
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 5,
1996, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 8,497,985
shares (94.55%) 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.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other 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
18
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.
19
STATE AND LOCAL TAXES
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a 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 charge
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.
20
111 CORCORAN BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--98.0%
- ------------------------------------------------------------------------------------
CORPORATE BONDS--17.5%
- ------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.5%
------------------------------------------------------------------
$ 500,000 Discover Card Trust 6.25%, Series 1996 3B, 8/18/2008 $ 453,515
------------------------------------------------------------------ ------------
AUTO/TRUCK MANUFACTURER--1.2%
------------------------------------------------------------------
1,000,000 Ford Motor Co., 9.00%, 9/15/2001 1,077,920
------------------------------------------------------------------ ------------
BANKING--1.7%
------------------------------------------------------------------
1,500,000 Bankers Trust New York Corp., 7.25%, 1/15/2003 1,488,105
------------------------------------------------------------------ ------------
CONSUMER PRODUCTS--3.2%
------------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 1,072,820
------------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., 7.125%, 8/15/2002 995,820
------------------------------------------------------------------
750,000 RJR Nabisco Inc., 8.00%, 1/15/2000 773,085
------------------------------------------------------------------ ------------
Total 2,841,725
------------------------------------------------------------------ ------------
FINANCE-INSURANCE--1.7%
------------------------------------------------------------------
500,000 Cigna Corp., 7.40%, 1/15/2003 496,680
------------------------------------------------------------------
1,000,000 Continental Corp., 7.25%, 3/1/2003 991,090
------------------------------------------------------------------ ------------
Total 1,487,770
------------------------------------------------------------------ ------------
FINANCIAL SECURITIES--2.7%
------------------------------------------------------------------
500,000 Merrill Lynch & Co., Inc., 4.75%, 6/24/1996 500,080
------------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., 6.25%, 10/15/2008 891,350
------------------------------------------------------------------
1,000,000 Salomon, Inc., 6.875%, 12/15/2003 947,520
------------------------------------------------------------------ ------------
Total 2,338,950
------------------------------------------------------------------ ------------
METALS--0.6%
------------------------------------------------------------------
500,000 Reynolds Metals Co., 9.00%, 8/15/2003 540,875
------------------------------------------------------------------ ------------
MULTI-INDUSTRY--0.9%
------------------------------------------------------------------
750,000 Loews Corp., 8.875%, 4/15/2011 814,215
------------------------------------------------------------------ ------------
</TABLE>
21
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------
UTILITIES--5.0%
------------------------------------------------------------------
$ 1,000,000 Gulf States Utilities Co., 6.77%, 8/1/2005 $ 922,480
------------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co. MTN, 7.75%, 6/30/2004 1,015,200
------------------------------------------------------------------
1,500,000 Southwestern Bell Telephone Co., 7.375%, 5/1/2012 1,438,500
------------------------------------------------------------------
1,000,000 West Penn Power Co., 7.875%, 12/1/2004 986,030
------------------------------------------------------------------ ------------
Total 4,362,210
------------------------------------------------------------------ ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $15,620,995) 15,405,285
------------------------------------------------------------------ ------------
GOVERNMENT OBLIGATIONS--78.9%
- ------------------------------------------------------------------------------------
FARM CREDIT SYSTEM FINANCIAL ASSISTANCE CORP.--0.6%
------------------------------------------------------------------
500,000 9.20%, 9/27/2005 535,620
------------------------------------------------------------------ ------------
FEDERAL HOME LOAN BANK--12.7%
------------------------------------------------------------------
750,000 (a) 3.288% Structured Note, 6/2/1996 711,692
------------------------------------------------------------------
1,250,000 (a) 4.914% Structured Note, 6/2/1996 1,196,875
------------------------------------------------------------------
500,000 (a) 4.695% Structured Note, 6/3/1996 484,835
------------------------------------------------------------------
1,000,000 (a) 5.613% Structured Note, 6/23/1996 990,750
------------------------------------------------------------------
500,000 (a) 5.05% Structured Note, 6/29/1996 463,790
------------------------------------------------------------------
1,000,000 (a) 3.453% Structured Note, 8/25/1996 943,524
------------------------------------------------------------------
1,000,000 (a) 4.81% Structured Note, 10/5/1996 955,999
------------------------------------------------------------------
1,550,000 (a) 5.00% Step-Up, 10/20/1996 1,468,331
------------------------------------------------------------------
1,000,000 (a) 6.25% Step-Up, 5/11/1998 994,790
------------------------------------------------------------------
1,000,000 6.30%, 11/28/2000 969,320
------------------------------------------------------------------
1,000,000 6.48%, 3/27/2001 978,509
------------------------------------------------------------------
1,000,000 6.33%, 11/20/2001 958,260
------------------------------------------------------------------ ------------
Total 11,116,675
------------------------------------------------------------------ ------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--32.4%
------------------------------------------------------------------
2,000,000 (a) 5.00% Structured Note, 6/10/1996 1,877,180
------------------------------------------------------------------
1,000,000 (a) 4.75% Structured Note, 9/20/1996 953,700
------------------------------------------------------------------
1,000,000 5.90%, 4/21/2000 961,230
------------------------------------------------------------------
</TABLE>
22
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <S> <C>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
GOVERNMENT OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--CONTINUED
------------------------------------------------------------------
$ 1,000,000 5.69%, 11/29/2000 $ 950,600
------------------------------------------------------------------
500,000 6.80%, 9/18/2002 485,285
------------------------------------------------------------------
1,000,000 8.19%, 10/6/2004 1,024,270
------------------------------------------------------------------
169,272 5.00%, Series 1194F, 11/15/2005 165,592
------------------------------------------------------------------
1,500,000 7.50%, Series 1143VD, 1/15/2006 1,513,050
------------------------------------------------------------------
1,000,000 8.00%, Series 1033G, 1/15/2006 997,980
------------------------------------------------------------------
1,000,000 6.00%, Series 1366G, 5/15/2006 947,540
------------------------------------------------------------------
2,500,000 6.25%, Series 1506G, 10/15/2006 2,333,925
------------------------------------------------------------------
4,000,000 8.00%, Series 1171G, 11/15/2006 4,078,920
------------------------------------------------------------------
1,490,000 6.00%, Series 1337C, 12/15/2006 1,421,162
------------------------------------------------------------------
1,000,000 7.00%, Series 1187H, 12/15/2006 973,770
------------------------------------------------------------------
84,445 6.50%, Series 1422E, 2/15/2007 79,158
------------------------------------------------------------------
1,000,000 7.00%, Series 1338J, 2/15/2007 971,400
------------------------------------------------------------------
1,500,000 6.25%, Series 1553E, 4/15/2007 1,442,595
------------------------------------------------------------------
1,000,000 7.00%, Series 1341K, 8/15/2007 956,400
------------------------------------------------------------------
1,000,000 7.00%, Series 1458J, 8/15/2007 976,660
------------------------------------------------------------------
1,000,000 6.50%, Series 1551E, 9/15/2007 974,070
------------------------------------------------------------------
176,459 6.50%, Series 1452C, 12/15/2007 161,465
------------------------------------------------------------------
1,000,000 7.00%, Series 1465GA, 2/15/2008 947,710
------------------------------------------------------------------
400,000 7.00%, Series 1324VE, 8/15/2008 381,452
------------------------------------------------------------------
1,000,000 7.00%, Series 1477ID, 11/15/2009 957,260
------------------------------------------------------------------
595,000 7.00%, Series 1468M, 1/15/2010 564,542
------------------------------------------------------------------
1,000,000 6.85%, Series 1808VB, 10/15/2010 924,730
------------------------------------------------------------------
500,000 7.00%, Series 1228H, 2/15/2022 452,210
------------------------------------------------------------------ ------------
Total 28,473,856
------------------------------------------------------------------ ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--12.0%
------------------------------------------------------------------
1,700,000 (a) 6.72%, Structured Note, Inverse Floater, 12/2/1996 1,705,185
------------------------------------------------------------------
</TABLE>
23
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <C> <C>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
GOVERNMENT OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
------------------------------------------------------------------
$ 250,000 Principal STRIPS, 11/22/2001 (callable 11/22/1996 @100) $ 243,628
------------------------------------------------------------------
2,000,000 7.30%, 10/28/2002 1,977,420
------------------------------------------------------------------
2,000,000 6.625%, 4/10/2003 1,923,800
------------------------------------------------------------------
1,000,000 6.48%, 2/18/2004 935,150
------------------------------------------------------------------
2,000,000 8.25%, 10/12/2004 2,050,400
------------------------------------------------------------------
1,650,000 8.50%, 2/1/2005 1,713,822
------------------------------------------------------------------ ------------
Total 10,549,405
------------------------------------------------------------------ ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--REMICS--17.5%
------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199479G, 11/25/2004 984,170
------------------------------------------------------------------
1,450,000 7.50%, REMIC, Series 199248G, 11/25/2005 1,456,540
------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199270H, 4/25/2006 980,320
------------------------------------------------------------------
1,000,000 7.50%, REMIC, Series 199336J, 5/25/2006 986,950
------------------------------------------------------------------
2,000,000 7.00%, REMIC, Series 1993139KD, 7/25/2006 1,948,438
------------------------------------------------------------------
1,000,000 8.00%, REMIC, Series 1991150G, 11/25/2006 1,020,460
------------------------------------------------------------------
1,000,000 7.25%, REMIC, Series 199250J, 12/25/2006 979,970
------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199253G, 4/25/2007 960,170
------------------------------------------------------------------
1,000,000 6.00%, REMIC, Series 1993209H, 3/25/2008 918,780
------------------------------------------------------------------
996,078 6.00%, REMIC, Series 199376B, 6/25/2008 887,048
------------------------------------------------------------------
2,500,000 6.50%, REMIC, Series 199427CB, 9/25/2008 2,356,575
------------------------------------------------------------------
1,000,000 6.75%, REMIC, Series 199333H, 9/25/2008 962,190
------------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 1992124D, 4/25/2010 941,440
------------------------------------------------------------------ ------------
Total 15,383,051
------------------------------------------------------------------ ------------
MORTGAGE-BACKED SECURITIES--1.4%
------------------------------------------------------------------
1,250,000 (a) CMC CMO, 6.32%, Series 1994CA14, 6/25/1996 1,198,833
------------------------------------------------------------------ ------------
</TABLE>
24
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT--2.3%
------------------------------------------------------------------
$ 2,000,000 Ontario Province CDA, 7.375%, 1/27/2003 $ 2,028,520
------------------------------------------------------------------ ------------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $70,514,442) 69,285,960
------------------------------------------------------------------ ------------
U.S. TREASURY--1.6%
- ------------------------------------------------------------------------------------
1,500,000 United States Treasury Note, 5.75%, 8/15/2003
(IDENTIFIED COST $1,436,015) 1,411,860
------------------------------------------------------------------ ------------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $87,571,452) 86,103,105
------------------------------------------------------------------ ------------
MUTUAL FUND SHARES--1.2%
- ------------------------------------------------------------------------------------
1,095,844 Goldman Sachs Money Market Fund (AT NET ASSET VALUE) 1,095,844
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST $88,667,296)(B) $ 87,198,949
------------------------------------------------------------------ ------------
</TABLE>
(a) Current rate and next reset date are shown.
(b) The cost of investments for federal tax purposes amounts to $88,667,296. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,468,347 which is comprised of $910,747 appreciation and $2,379,094
depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($87,883,401) at May 31, 1996.
The following acronyms are used throughout portfolio:
<TABLE>
<S> <C>
CMO -- Collateralized Mortgage Obligation
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
STRIPS -- Separate Trading of Registered Interest and Principal Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
25
111 CORCORAN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $88,667,296) $87,198,949
- --------------------------------------------------------------------------------
Income receivable 1,067,197
- --------------------------------------------------------------------------------
Receivable for shares sold 203,655
- --------------------------------------------------------------------------------
Deferred expenses 4,652
- -------------------------------------------------------------------------------- -----------
Total assets 88,474,453
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for shares redeemed $ 3,200
- ---------------------------------------------------------------------
Income distribution payable 585,990
- ---------------------------------------------------------------------
Accrued expenses 1,862
- --------------------------------------------------------------------- --------
Total liabilities 591,052
- -------------------------------------------------------------------------------- -----------
Net Assets for 8,988,614 shares outstanding $87,883,401
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $93,515,287
- --------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,468,347)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (4,163,539)
- -------------------------------------------------------------------------------- -----------
Total Net Assets $87,883,401
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
Net Asset Value and Redemption Proceeds Per Share
($87,883,401 / 8,988,614 shares outstanding) $9.78
- -------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $9.78)* $10.24
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
26
111 CORCORAN BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest $ 6,171,614
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee $ 662,310
- --------------------------------------------------------------------
Administrative personnel and services fee 132,832
- --------------------------------------------------------------------
Custodian fees 23,472
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 26,269
- --------------------------------------------------------------------
Directors'/Trustees' fees 4,952
- --------------------------------------------------------------------
Auditing fees 16,000
- --------------------------------------------------------------------
Legal fees 2,523
- --------------------------------------------------------------------
Portfolio accounting fees 38,889
- --------------------------------------------------------------------
Share registration costs 12,240
- --------------------------------------------------------------------
Printing and postage 7,114
- --------------------------------------------------------------------
Insurance premiums 5,021
- --------------------------------------------------------------------
Miscellaneous 9,755
- -------------------------------------------------------------------- ---------
Total expenses 941,377
- --------------------------------------------------------------------
Waiver--
- --------------------------------------------------------------------
Waiver of investment advisory fee (662,310)
- -------------------------------------------------------------------- ---------
Net expenses 279,067
- -------------------------------------------------------------------------------- -----------
Net investment income 5,892,547
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain on investments 107,010
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (2,089,765)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,982,755)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 3,909,792
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
27
111 CORCORAN BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 5,892,547 $ 6,245,751
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($1,187,066 and
$2,849,640 net losses, respectively, as computed for federal
tax purposes) 107,010 (2,910,851)
- ----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (2,089,765) 5,763,658
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 3,909,792 9,098,558
- ---------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income (5,902,091) (6,237,478)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to
shareholders (5,902,091) (6,237,478)
- ---------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 14,489,005 8,941,154
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 245,617 283,034
- ----------------------------------------------------------------
Cost of shares redeemed (11,973,664) (22,793,571)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 2,760,958 (13,569,383)
- ---------------------------------------------------------------- ------------ ------------
Change in net assets 768,659 (10,708,303)
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 87,114,742 97,823,045
- ---------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income
of $0 and $9,544, respectively) $ 87,883,401 $ 87,114,742
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
28
111 CORCORAN BOND FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
- --------------------------------------------------------------------------------
(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 three portfolios. The financial statements
included herein are only those of 111 Corcoran Bond Fund (the "Fund"), a
diversified portfolio. The investment objective of the Fund is to achieve
income. 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.
INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities
and private placement securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing service.
Short-term securities are valued at the prices provided by an independent
pricing service. However, 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, 1996 the Fund, for
federal tax purposes, had a capital loss carryforward of $4,085,059, 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, 2003 $2,849,640 and 2004 $1,187,066. Additionally, net
capital losses of $78,365 attributable to security transactions incurred
after October 31, 1995, are treated as arising on June 1, 1996, 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
29
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
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 its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(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,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
- -------------------------------------------------------------------
Shares sold 1,440,835 936,690
- -------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 24,434 29,807
- -------------------------------------------------------------------
Shares redeemed (1,187,303) (2,416,497)
- ------------------------------------------------------------------- ---------- ----------
Net change resulting from share transactions 277,966 (1,450,000)
- ------------------------------------------------------------------- ---------- ----------
</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 0.75% 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 fee paid to FAS 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.
30
111 CORCORAN BOND FUND
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Fund. The fee
paid to FSSC is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
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, 1996, the Fund paid $12,719 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
year ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $31,194,837
- ------------------------------------------------------------------------------- -----------
SALES $26,869,641
- ------------------------------------------------------------------------------- -----------
</TABLE>
31
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, 1996, the related statement of operations for the year then ended,
and the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights (see page 2 of the prospectus) for
the periods presented. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, 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,
1996, and the results of its operations, for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 12, 1996
32
ADDRESSES
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<TABLE>
<S> <C> <C>
111 Corcoran Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Central Carolina Bank and Trust Company 111 Corcoran Street
Durham, North Carolina 27702
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Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
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Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
</TABLE>
33
111 CORCORAN BOND FUND
PROSPECTUS
A Diversified Portfolio of
111 Corcoran Funds, an Open-End
Management Investment Company
July 31, 1996
FEDERATED SECURITIES CORP.
------------------------------------------
DISTRIBUTOR
CUSIP 682365200
2041604A (7/96)
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'), a portfolio of 111
Corcoran Funds (the ``Trust') dated July 31, 1996. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free of
charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
STATEMENT DATED JULY 31, 1996
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 682965200
2041604B (7/96)
GENERAL INFORMATION ABOUT THE FUND 3
INVESTMENT OBJECTIVE AND POLICIES 3
INVESTMENT LIMITATIONS 15
111 CORCORAN FUNDS MANAGEMENT 20
Fund Ownership 31
Trustees Compensation 31
Trustee Liability 31
INVESTMENT ADVISORY SERVICES 33
Adviser to the Fund 33
Advisory Fees 34
BROKERAGE TRANSACTIONS 14
OTHER SERVICES 15
PURCHASING SHARES 37
Additional Purchase Information--Payment in Kind
37
Conversion to Federal Funds 38
DETERMINING NET ASSET VALUE 38
Determining Market Value of Securities 38
EXCHANGE PRIVILEGE 39
REDEEMING SHARES 40
Redemption in Kind 40
MASSACHUSETTS PARTNERSHIP LAW 40
TAX STATUS 41
The Fund's Tax Status 41
Shareholders' Tax Status 42
TOTAL RETURN 42
YIELD 43
PERFORMANCE COMPARISONS 43
APPENDIX 46
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.);
o obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities, mortgage-backed securities, which represent an
undivided interest in a pool of residential or other mortgages or may
be collateralized by a pool of residential mortgages;
asset-backed securities, which are obligations of trusts or special
purpose corporations that directly or indirectly represent a
participation in, or are secured by and payable from various types of
assets, principally loans, leases and other receivables and may
include asset-backed commercial paper; and
CMOs, which are issued by single-purpose stand-alone finance
subsidiaries or trusts, government agencies, investment banks, or
companies related to the construction industry.
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;
oFarmers Home Administration;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association;
oGovernment National Mortgage Association; and
oStudent 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, 1996
and 1995 , the portfolio turnover rates for the Fund were 32%, and 37%,
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 5, 1996, 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 8,497,985.1300 shares
(94.55%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $1250.60
Chairman and Trustee
Thomas G. Bigley $1250.60
Trustee
John T. Conroy, Jr. $1250.60
Trustee
William J. Copeland $1250.60
Trustee
James E. Dowd $1139.77
Trustee
Lawrence D. Ellis, M.D. $1139.77
Trustee
Edward L. Flaherty, Jr. $1139.77
Trustee
Edward C. Gonzales $1139.77
Trustee
Peter E. Madden $1139.77
Trustee
Gregor F. Meyer $1139.77
Trustee
John E. Murray, Jr. $1139.77
Trustee
Wesley W. Posvar $1139.77
Trustee
Marjorie P. Smuts$1139.77
Trustee
*Information is furnished for the fiscal year ended May 31, 1996.
#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, 1996, 1995 and 1994, the Adviser earned
advisory fees of $662,310, $670,819, and $516,082, respectively, all of
which were 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.
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, 1996, 1995 and 1994, the Fund paid no
brokerage commissions.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended May 31, 1996, 1995
and 1994, the following administrative services fees were incurred on
behalf of the Fund of $132,832, $134,164, and $103,280, none of which, were
voluntarily waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company (`State Street Bank''), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
Federated Services Company, Pittsburgh, PA, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
The fee paid for this service is based upon the level of the Fund's average
net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records and receives a fee based on the size, type and number of accounts
and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
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 1-800-
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.
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.
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, 1996, and for the period from July 15, 1992 (date of inception) to May
31, 1996, were (0.28%) and 4.68%, 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 charge, 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, 1996, was 6.66%.
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 charge.
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.
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
(A PORTFOLIO OF THE 111 CORCORAN FUNDS)
PROSPECTUS
The shares of 111 Corcoran North Carolina Municipal Securities Fund (the "Fund")
offered by this prospectus represent interests in a non diversified portfolio in
the 111 Corcoran Funds (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide income which
is exempt from federal regular income tax and North Carolina state income tax.
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,
1996 with the Securities and Exchange Commission ("SEC"). 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 or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-386-3111. To
obtain other information or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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, 1996
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 11
- ------------------------------------------------------
Share Purchases 11
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 12
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Systematic Investment Program 14
Certificates and Confirmations 14
Dividends 14
Capital Gains 14
EXCHANGE PRIVILEGE 14
- ------------------------------------------------------
REDEEMING SHARES 16
- ------------------------------------------------------
Systematic Withdrawal Program 17
Accounts with Low Balances 17
Redemption in Kind 17
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
EFFECT OF BANKING LAWS 18
- ------------------------------------------------------
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
North Carolina Taxes 20
Other State and Local Taxes 20
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
FINANCIAL STATEMENTS 22
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 33
- ------------------------------------------------------
ADDRESSES 34
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)............................................... 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................. 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................................................................ 0.60%
Total Fund Operating Expenses(2)............................................... 0.60%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver by the
adviser. The adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.75%.
(2) Total Fund operating expenses would be 1.35% absent the voluntary waiver
described above in note 1.
The Annual Operating Expenses were 0.52% for the fiscal year ended May 31, 1996.
The Annual Operating Expenses in the table above are based on expenses expected
to be incurred during the fiscal year ending May 31, 1997.
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 5 years 10 years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return; (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....... $51 $63 $77 $117
</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 Independent Public Accountants, on page 33.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------
1996 1995 1994 1993 (A)
------ ------ ------ ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.44 $10.17 $10.36 $ 10.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------
Net investment income 0.49 0.48 0.47 0.37
- -------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (0.10) 0.27 (0.18) 0.36
- ------------------------------------------------------- ------ ------ ------ -------
Total from investment operations 0.39 0.75 0.29 0.73
- -------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------
Distributions from net investment income (0.49) (0.48) (0.47) (0.37)
- -------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.01) --
- ------------------------------------------------------- ------ ------ ------ -------
Total distributions (0.49) (0.48) (0.48) (0.37)
- ------------------------------------------------------- ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $10.34 $10.44 $10.17 $ 10.36
- ------------------------------------------------------- ------ ------ ------ -------
TOTAL RETURN (B) 3.72% 7.71% 2.68% 7.37%
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 0.52% 0.57% 0.69% 0.70%*
- -------------------------------------------------------
Net investment income 4.73% 4.82% 4.42% 4.51%*
- -------------------------------------------------------
Expense waiver/reimbursement (c) 0.75% 0.75% 0.75% 0.99%*
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $36,872 $39,803 $45,864 $28,152
- -------------------------------------------------------
Portfolio turnover 61% 47% 24% 17%
- -------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(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 charge or
contingent deferred sales charge, if applicable.
(c) 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, 1996, 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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 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, 1996, the
Trust Division managed assets in excess of $1.3 billion. The Trust Division
manages two commingled funds with assets of approximately $175 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1996, total assets in the 111 Corcoran Funds were $150
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 Services Company
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% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</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.
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
1-800-618-3573. 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 associations 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 Shareholder 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 for which affiliates of
Federated Investors serve as investment adviser and which are distributed by
Federated Securities Corp., a subsidiary of Federated Investors ("Federated
Funds"). Shareholders have access to the following Federated Funds:
- Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and
- Federated 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 Shareholder 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 Shareholder 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 Shareholder 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.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption payable other
than to the shareholder of record must have their signatures 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 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 5,
1996, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 2,963,877
shares (82.14%) 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.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other 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.
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.
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.
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 individual 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 charge
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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- --------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUNICIPAL SECURITIES--98.5%
- ---------------------------------------------------------------------------
NORTH CAROLINA--97.1%
---------------------------------------------------------
$ 500,000 Alamance County, NC, 4.70% GO Bonds, 4/1/2007 Aa $ 473,310
---------------------------------------------------------
550,000 Alamance County, NC, 4.90% GO Bonds, 4/1/2010 Aa 511,676
---------------------------------------------------------
250,000 Alamance County, NC, 5.90% GO Bonds, 5/1/2006 Aa 264,000
---------------------------------------------------------
500,000 Buncombe County, NC, 4.90% GO Bonds, 4/1/2007 Aa 483,520
---------------------------------------------------------
410,000 Buncombe County, NC, 4.90% GO Bonds, 4/1/2008 Aa 390,390
---------------------------------------------------------
250,000 Buncombe County, NC, 5.00% GO Refunding Bonds, 3/1/2000 Aa 254,210
---------------------------------------------------------
500,000 Buncombe County, NC, 5.10% GO Refunding Bonds, 3/1/2009 Aa 481,935
---------------------------------------------------------
500,000 Burke County, NC, 6.30% GO Bonds (MBIA Insured), 3/1/2006 AAA 537,355
---------------------------------------------------------
865,000 Cabarrus County, NC, 4.80% GO Refunding Bonds (FGIC
Insured), 3/1/2010 AAA 790,255
---------------------------------------------------------
250,000 Catawba County, NC, 5.70% GO Bonds, 6/1/2003 Aa 263,167
---------------------------------------------------------
500,000 Catawba County, NC, 5.75% GO Bonds, 6/1/2007 Aa 521,755
---------------------------------------------------------
500,000 Catawba County, NC, 5.85% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2004 AAA 526,375
---------------------------------------------------------
500,000 Catawba County, NC, 5.95% Hospital Revenue Bonds (AMBAC
Insured), 10/1/2005 AAA 526,265
---------------------------------------------------------
750,000 Charlotte, NC, 5.30% GO Bonds, 4/1/2008 AAA 753,023
---------------------------------------------------------
500,000 Charlotte, NC, 5.50% GO Bonds (Series A) 7/1/2004 AAA 521,330
---------------------------------------------------------
500,000 Charlotte, NC, 6.50% GO Bonds (Prerefunded 2/1/2001 @102) AAA 545,440
---------------------------------------------------------
400,000 Charlotte-Mecklenburg Hospital Authority, NC, 6.375%
Health Care System Revenue Refunding Bonds, 1/1/2009 AA 413,800
---------------------------------------------------------
500,000 Craven County, NC, 5.50% GO Bonds (MBIA Insured),
6/1/2010 AAA 501,210
---------------------------------------------------------
</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 (b) Craven County, NC, 5.50% GO Bonds (MBIA Insured),
6/1/2010 AAA $ 501,210
---------------------------------------------------------
600,000 Cumberland County, NC, 5.80% GO Bonds (MBIA Insured),
2/1/2007 AAA 626,892
---------------------------------------------------------
470,000 Duplin County, NC, 5.30% GO Bonds (MBIA Insured),
4/1/2007 AAA 469,619
---------------------------------------------------------
500,000 Durham & Wake Counties Special Airport District, NC,
5.75%, 4/1/2002 AAA 528,435
---------------------------------------------------------
250,000 Fayetteville, NC, Public Works Commission 5.90% Revenue
Bonds (FSA Insured), 3/1/2007 AAA 258,525
---------------------------------------------------------
500,000 Forsyth County, NC, 5.60% GO Bonds, 8/1/2009 AAA 509,530
---------------------------------------------------------
1,250,000 Forsyth County, NC, 5.70% GO Bonds, 8/1/2010 AAA 1,277,363
---------------------------------------------------------
500,000 Gaston County, NC, 5.00% GO Bonds (AMBAC Insured),
3/1/2010 AAA 472,600
---------------------------------------------------------
950,000 Gaston County, NC, 5.10% GO Bonds (AMBAC Insured),
3/1/2011 AAA 901,920
---------------------------------------------------------
500,000 Greensboro, NC, 6.30% GO Bonds (Prerefunded 3/1/2002
@102) AAA 544,735
---------------------------------------------------------
500,000 Guilford County, NC, 5.30% GO Bonds, 5/1/2009 AA+ 495,230
---------------------------------------------------------
500,000 Guilford County, NC, 5.30% GO Bonds, 5/1/2010 AA+ 490,005
---------------------------------------------------------
1,000,000 Guilford County, NC, 5.40% GO Bonds, 4/1/2009 AA+ 999,090
---------------------------------------------------------
500,000 Iredell County, NC, 5.50% COP (FGIC Insured), 6/1/2001 AAA 516,180
---------------------------------------------------------
350,000 Iredell County, NC, 6.125% COP (Statesville School
Project)/ (FGIC Insured), 6/1/2007 AAA 367,119
---------------------------------------------------------
500,000 Mecklenburg County, NC, 5.90% GO Bonds, 3/1/2004 AAA 529,175
---------------------------------------------------------
500,000 Mooresville Grade School District, 6.30% COP (AMBAC
Insured), 10/1/2009 AAA 528,975
---------------------------------------------------------
500,000 Morganton, NC, 5.60% Water & Sewer GO Bonds, (FGIC
Insured), 6/1/2007 AAA 516,300
---------------------------------------------------------
</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 Morganton, NC, 5.60% Water & Sewer GO Bonds, (FGIC
Insured) 6/1/2008 AAA $ 513,420
---------------------------------------------------------
500,000 Morganton, NC, 5.70% Water & Sewer GO Bonds, (FGIC
Insured) 6/1/2012 AAA 506,560
---------------------------------------------------------
1,000,000 New Hanover County, NC, 5.40% GO Bonds, 3/1/2009 A+ 988,940
---------------------------------------------------------
250,000 New Hanover County, NC, 5.50% GO Bonds, 3/1/2011 A+ 246,872
---------------------------------------------------------
500,000 North Carolina Eastern Municipal Power Agency, 6.00%
Revenue Bonds (Series B), 1/1/2006 A 501,415
---------------------------------------------------------
300,000 North Carolina Educational Facilities Authority, 6.375%
Revenue Bonds (Elon College Project)/(Connie Lee
Insured), 1/1/2007 AAA 314,283
---------------------------------------------------------
200,000 North Carolina Medical Care Commission, 5.95% Revenue
Bonds (Presbyterian Hospital), 10/1/2007 AA 203,196
---------------------------------------------------------
500,000 North Carolina Municipal Power Agency Catawba, 6.00%
Revenue Bonds (AMBAC Insured), 1/1/2004 AAA 527,500
---------------------------------------------------------
500,000 North Carolina Municipal Power Agency, 5.25% Revenue
Bonds (AMBAC Insured), 1/1/2008 AAA 493,370
---------------------------------------------------------
500,000 North Carolina Municipal Power Agency, 5.75% Revenue
Bonds (AMBAC Insured), 1/1/2002 AAA 520,145
---------------------------------------------------------
1,255,000 North Carolina Municipal Power Catawba, 10.50% Revenue
Bonds, 1/1/2010 AAA 1,743,195
---------------------------------------------------------
500,000 North Carolina State, 4.70% GO Bonds (Series A), 2/1/2006 AAA 482,520
---------------------------------------------------------
535,000 North Carolina State, 6.20% (Prerefunded 3/1/2002 @102) AAA 580,261
---------------------------------------------------------
250,000 Pitt County, NC, 6.05% COP (FGIC Insured), 4/1/1998 AAA 258,262
---------------------------------------------------------
500,000 Randolph County, NC, 6.20% GO Bonds, 5/1/2005 A+ 533,195
---------------------------------------------------------
500,000 Rowan County, NC, 5.60% GO Bonds (MBIA Insured), 4/1/2009 AAA 507,975
---------------------------------------------------------
500,000 Rowan County, NC, 5.60% GO Bonds (FGIC Insured), 5/1/2011 AAA 498,720
---------------------------------------------------------
</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 Rutherford County, NC, 5.10% GO Bonds (MBIA Insured),
6/1/2008 AAA $ 481,960
---------------------------------------------------------
500,000 Union County, NC, 5.80% GO Bonds, 3/1/2006 A+ 521,255
---------------------------------------------------------
500,000 Union County, NC, 6.50% GO Bonds, 4/1/2005 A+ 535,780
---------------------------------------------------------
500,000 Union County, NC, 6.50% GO Bonds, 4/1/2006 A+ 535,780
---------------------------------------------------------
500,000 University of North Carolina at Charlotte, 5.00% Revenue
Bonds (MBIA Insured), 1/1/2007 AAA 481,865
---------------------------------------------------------
500,000 Wake County, NC, 6.90% Revenue Bonds (Carolina Power &
Light Co.), 4/1/2009 A 535,345
---------------------------------------------------------
1,185,000 Wilmington, NC, 4.80% GO Bonds, 3/1/2008 A+ 1,106,115
---------------------------------------------------------
500,000 Wilmington, NC, 6.30% GO Bonds, 3/1/2005 A+ 534,960
---------------------------------------------------------
800,000 Winston-Salem, NC, 5.40% GO Bonds, 6/1/2009 AAA 799,336
---------------------------------------------------------
500,000 Winston-Salem, NC, 5.40% GO Bonds, 6/1/2011 AAA 492,380
---------------------------------------------------------
1,000,000 Winston-Salem, NC, 6.25% Water & Sewer GO Bonds,
6/1/2005 AA+ 1,073,320
--------------------------------------------------------- -----------
Total 35,809,844
--------------------------------------------------------- -----------
PUERTO RICO--1.4%
---------------------------------------------------------
500,000 Puerto Rico Electric Power Authority, 5.75% Revenue
Bonds (FSA Insured), 7/1/2007 AAA 514,115
--------------------------------------------------------- -----------
TOTAL MUNICIPAL SECURITIES (IDENTIFIED COST, $36,263,417) 36,323,959
--------------------------------------------------------- -----------
</TABLE>
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES RATING* VALUE
- ---------- --------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
MUTUAL FUND SHARES--2.0%
- ---------------------------------------------------------------------------
382,100 North Carolina Daily Tax-Free Income Money Market Fund $ 382,100
---------------------------------------------------------
341,800 PNC North Carolina Money Market Fund 341,800
--------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 723,900
--------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $36,987,317)(A) $37,047,859
--------------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $36,987,317. The
net unrealized appreciation of investments on a federal tax basis amounts to
$60,542 which is comprised of $489,271 appreciation and $428,729
depreciation at May 31, 1996.
(b) Represents delayed delivery security.
* 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
($36,871,997) at May 31, 1996.
The following acronyms 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
</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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $36,987,317) $37,047,859
- ---------------------------------------------------------------------------------
Income receivable 613,857
- ---------------------------------------------------------------------------------
Receivable for investments sold 384,412
- ---------------------------------------------------------------------------------
Deferred expenses 4,532
- --------------------------------------------------------------------------------- -----------
Total assets 38,050,660
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $1,005,298
- --------------------------------------------------------------------
Payable for shares redeemed 595
- --------------------------------------------------------------------
Income distribution payable 169,528
- --------------------------------------------------------------------
Accrued expenses 3,242
- -------------------------------------------------------------------- ----------
Total liabilities 1,178,663
- --------------------------------------------------------------------------------- -----------
Net Assets for 3,566,869 shares outstanding $36,871,997
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid in capital $37,139,566
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 60,542
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (328,111)
- --------------------------------------------------------------------------------- -----------
Total Net Assets $36,871,997
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------
Net Asset Value and Redemption Proceeds Per Share
($36,871,997 / 3,566,869 shares outstanding) $10.34
- --------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $10.34)* $10.83
- --------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $1,960,531
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $ 279,921
- ---------------------------------------------------------------------
Administrative personnel and services fee 55,986
- ---------------------------------------------------------------------
Custodian fees 22,210
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 23,760
- ---------------------------------------------------------------------
Directors'/Trustees' fees 4,806
- ---------------------------------------------------------------------
Auditing fees 14,108
- ---------------------------------------------------------------------
Legal fees 3,515
- ---------------------------------------------------------------------
Portfolio accounting fees 35,261
- ---------------------------------------------------------------------
Share registration costs 13,456
- ---------------------------------------------------------------------
Printing and postage 8,645
- ---------------------------------------------------------------------
Insurance premiums 4,303
- ---------------------------------------------------------------------
Miscellaneous 8,949
- --------------------------------------------------------------------- ---------
Total expenses 474,920
- ---------------------------------------------------------------------
Waiver--
- ---------------------------------------------------------------------
Waiver of investment advisory fee (279,921)
- --------------------------------------------------------------------- ---------
Net expenses 194,999
- --------------------------------------------------------------------------------- ----------
Net investment income 1,765,532
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 452,751
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (780,988)
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized loss on investments (328,237)
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $1,437,295
- --------------------------------------------------------------------------------- ----------
</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,
---------------------------
1996 1995
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 1,765,532 $ 2,038,748
- -----------------------------------------------------------------
Net realized gain (loss) on investments ($54,981 and $780,862
net losses, respectively, as computed for federal tax purposes) 452,751 (772,122)
- -----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (780,988) 1,445,684
- ----------------------------------------------------------------- ----------- ------------
Change in net assets resulting from operations 1,437,295 2,712,310
- ----------------------------------------------------------------- ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------
Distributions from net investment income (1,766,573) (2,037,708)
- ----------------------------------------------------------------- ----------- ------------
Change in net assets resulting from distributions to
shareholders (1,766,573) (2,037,708)
- ----------------------------------------------------------------- ----------- ------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------
Proceeds from sale of shares 6,836,955 4,742,618
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 255,401 303,412
- -----------------------------------------------------------------
Cost of shares redeemed (9,694,151) (11,781,966)
- ----------------------------------------------------------------- ----------- ------------
Change in net assets resulting from share transactions (2,601,795) (6,735,936)
- ----------------------------------------------------------------- ----------- ------------
Change in net assets (2,931,073) (6,061,334)
- -----------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------
Beginning of period 39,803,070 45,864,404
- ----------------------------------------------------------------- ----------- ------------
End of period (including undistributed net investment income of
$0 and $1,040, respectively) $36,871,997 $ 39,803,070
- ----------------------------------------------------------------- ----------- ------------
</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, 1996
- --------------------------------------------------------------------------------
(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 three portfolios. The financial statements
included herein are only those of 111 Corcoran North Carolina Municipal
Securities Fund (the "Fund"), a non-diversified portfolio. 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 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.
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. Short-term securities are valued at the
prices provided by an independent pricing service. However, 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, 1996 the Fund, for
federal tax purposes, had a capital loss carryforward of $327,976, 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 $272,995 and 2004 $54,981.
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
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------
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 its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(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,
-----------------------
1996 1995
- --------------------------------------------------------------------- -------- ----------
<S> <C> <C>
Shares sold 651,305 478,316
- ---------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 24,282 30,434
- ---------------------------------------------------------------------
Shares redeemed (923,053) (1,203,315)
- --------------------------------------------------------------------- -------- ----------
Net change resulting from share transactions (247,466) (694,565)
- --------------------------------------------------------------------- -------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Central Carolina Bank & Trust Company, the Fund's
investment adviser, (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.75% 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 fee paid to FAS 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 AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and
111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND
- --------------------------------------------------------------------------------
dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $43,033 were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following May 1, 1992 (the date the Fund became
effective). For the period ended May 31, 1996, the Fund paid $11,714 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
year ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $22,345,449
- ------------------------------------------------------------------------------- -----------
SALES $24,200,387
- ------------------------------------------------------------------------------- -----------
</TABLE>
(6) 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 tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such factors, at
May 31, 1996, 37% 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 from any one institution or agency did
not exceed 12% of total investments.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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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, 1996, the related statement of operations
for the year then ended, and the statement of changes in net assets for each of
the two years in the period then ended, and financial highlights (see page 2 of
the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the custodian and broker. 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, 1996, and the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 12, 1996
ADDRESSES
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<TABLE>
<S> <C> <C>
111 Corcoran North Carolina Federated Investors Tower
Municipal Securities Fund Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Central Carolina Bank and Trust Company 111 Corcoran Street
Durham, North Carolina 27702
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Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
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Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- -------------------------------------------------------------------------------------------------
</TABLE>
111 CORCORAN FUND
111 CORCORAN NORTH CAROLINA
MUNICIPAL SECURITIES FUND
PROSPECTUS
A Portfolio of 111 Corcoran Funds,
an Open-End Management Investment Company
July 31, 1996
LOGO
2041605A (7/96)
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 Municipal Securities Fund (the `Fund''), a
portfolio of 111 Corcoran Funds (the `Trust'') dated July 31, 1996.
This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-386-3111.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1996
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 682365101
2041605B (7/96)
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
INVESTMENT LIMITATIONS 11
111 CORCORAN FUNDS MANAGEMENT 15
Fund Ownership 23
Trustees' Compensation 23
Trustee Liability 25
INVESTMENT ADVISORY SERVICES 25
Adviser to the Fund 25
Advisory Fees 26
OTHER SERVICES 28
BROKERAGE TRANSACTIONS 15
PURCHASING SHARES 28
Additional Purchase Information--Payment
in Kind 29
Conversion to Federal Funds 30
DETERMINING NET ASSET VALUE 30
Valuing Municipal Bonds 30
Use of Amortized Cost 30
EXCHANGE PRIVILEGE 31
REDEEMING SHARES 31
Redemption in Kind 31
Massachusetts Partnership Law 32
TAX STATUS 32
The Fund's Tax Status 32
Shareholders' Tax Status 33
TOTAL RETURN 33
YIELD 34
TAX-EQUIVALENT YIELD 35
Tax-Equivalency Table 35
PERFORMANCE COMPARISONS 37
APPENDIX 38
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, 1996
and 1995, the portfolio turnover rates for the Fund were 61% and 47%,
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. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee 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 or Trustee 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 or Trustee 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 or Trustee 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 or
Trustee 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 or Trustee 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 or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
New port, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.
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 or Trustee 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 or Trustee 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 or Trustee of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some 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. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some 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.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the
responsibilities of the Board between meetings of the Board.
As used in the table above, `The Funds'' and ``Funds'' mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; Newpoint
Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 5, 1996, 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 2,963,877.2680 shares
(82.14%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $1250.60
Chairman and Trustee
Thomas G. Bigley $1250.60
Trustee
John T. Conroy, Jr. $1250.60
Trustee
William J. Copeland $1250.60
Trustee
James E. Dowd $1139.77
Trustee
Lawrence D. Ellis, M.D. $1139.77
Trustee
Edward L. Flaherty, Jr. $1139.77
Trustee
Edward C. Gonzales $1139.77
Trustee
Peter E. Madden $1139.77
Trustee
Gregor F. Meyer $1139.77
Trustee
John E. Murray, Jr. $1139.77
Trustee
Wesley W. Posvar $1139.77
Trustee
Marjorie P. Smuts$1139.77
Trustee
*Information is furnished for the fiscal year ended May 31, 1996.
#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, 1996, 1995, and 1994, the Adviser earned
advisory fees of $279,921, $317,233, and $280,923, respectively, all of
which were 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.
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 guidelines established by the
Trustees. The Adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund
or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the Adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The Adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended May 31, 1996, 1995 and
1994, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended May 31, 1996, 1995
and 1994, the following administrative fees were incurred on behalf of the
Fund of $55,986, $63,447, and $56,185, none of which were waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company (`State Street Bank''), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
Federated Services Company, Pittsburgh, PA, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
The fee paid for this service is based upon the level of the Fund's average
net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records and receives a fee based on the size, type and number of accounts
and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
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 1-800-
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.
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.
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:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan 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, 1996, and for the period from
July 22, 1992 (date of inception) to May 31, 1996, were (0.93%) and 4.32%,
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 charge, 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, 1996, 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,
1996, 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 1996
STATE OF NORTH CAROLINA
COMBINED
FEDERAL
AND STATE:22.00% 35.00% 38.75% 43.75% 47.35%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
Tax-Exempt
Yield Taxable Yield Equivalent
3.50% 4.49% 5.38% 5.71% 6.22% 6.65%
4.00% 5.13% 6.15% 6.53% 7.11% 7.60%
4.50% 5.77% 6.92% 7.35% 8.00% 8.55%
5.00% 6.41% 7.69% 8.16% 8.89% 9.50%
5.50% 7.05% 8.46% 9.98% 9.78% 10.45%
6.00% 7.69% 9.23% 9.80% 10.67% 11.40%
6.50% 8.33% 10.00% 10.61% 11.56% 12.35%
7.00% 8.97% 10.77% 11.43% 12.44% 13.30%
7.50% 9.62% 11.54% 12.24% 13.33% 14.25%
8.00% 10.26% 12.31% 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.
111 CORCORAN EQUITY FUND
(A Portfolio of the 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 investment 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,
1996 with the Securities and Exchange Commission ("SEC"). 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 or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-386-3111. To
obtain other information or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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, 1996
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 11
Administration of the Fund 12
BROKERAGE TRANSACTIONS 12
- ------------------------------------------------------
NET ASSET VALUE 12
- ------------------------------------------------------
INVESTING IN THE FUND 12
- ------------------------------------------------------
Share Purchases 12
Minimum Investment Required 13
What Shares Cost 13
Purchases at Net Asset Value 14
Sales Charge Reallowance 14
Reducing the Sales Charge 14
Systematic Investment Program 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 16
EXCHANGE PRIVILEGE 16
- ------------------------------------------------------
REDEEMING SHARES 17
- ------------------------------------------------------
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
EFFECT OF BANKING LAWS 19
- ------------------------------------------------------
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
State and Local Taxes 20
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 Charge Imposed on Purchases (as a percentage of offering price).................. 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)....... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ 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)............................................................... 0.65%
12b-1 Fees(2).................................................................................. 0.00%
Total Other Expenses........................................................................... 0.60%
Shareholder Services Fees(2)...................................................... 0.00%
Total Fund Operating Expenses(3)...................................................... 1.25%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver by the
adviser. The adviser can terminate this voluntary waiver at any time at its sole
discretion. 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) Total Fund operating expenses would have been 1.45% absent the voluntary
waiver described above in note 1.
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 5 years 10 years
- ----------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return; (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 $ 111 $189
</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 EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 33.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------
1996 1995 (A)
- ------------------------------------------------------------------ ------ ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.48 $ 10.00
- ------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------
Net investment income 0.14 0.11
- ------------------------------------------------------------------
Net realized and unrealized gain on investments 2.57 1.44
- ------------------------------------------------------------------ ------ -------
Total from investment operations 2.71 1.55
- ------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------
Distributions from net investment income (0.16) (0.07)
- ------------------------------------------------------------------
Distributions from net realized gain on investments (0.23) --
- ------------------------------------------------------------------ ------ -------
Total distributions (0.39) (0.07)
- ------------------------------------------------------------------ ------ -------
NET ASSET VALUE, END OF PERIOD $13.80 $ 11.48
- ------------------------------------------------------------------ ------ -------
TOTAL RETURN (b) 23.91% 15.55%
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------
Expenses 1.25% 1.25%*
- ------------------------------------------------------------------
Net investment income 1.08% 3.00%*
- ------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 1.42%*
- ------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets, end of period (000 omitted) $29,194 $24,581
- ------------------------------------------------------------------
Portfolio turnover 69% 4%
- ------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(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 charge or
contingent deferred sales charge, if applicable.
(c) 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, 1996, 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. 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 as 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 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, 1996, the
Trust Division managed assets in excess of $1.3 billion. The Trust Division
manages two commingled funds with assets of approximately $175 million. The
Bank has managed the 111 Corcoran Funds since their inception in July,
1992. As of June 30, 1996, total assets in the 111 Corcoran Funds were $150
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 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 6330
Quadrangle Drive, Chapel Hill, North Carolina, 27514, is a registered
investment advisory firm founded in 1990. The Sub-Adviser manages assets in
excess of $575 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.
William B. Thompson, Jr. has been a co-portfolio manager to the Fund since
November 1, 1995. Mr. Thompson is a partner with Franklin Street Partners,
Inc., the parent company of Franklin Street Advisors, Inc. Prior to joining
Franklin Street Partners, he was co-founder and President of
Peacock-Thompson Investment Management in Cary, 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 the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by 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% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</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.
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 1-800-368-3111.)
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 Shareholder 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 Municipal Securities Fund through an exchange
program. In addition, shares of the Fund may be exchanged for shares of certain
funds for which affiliates of Federated Investors serve as investment adviser
and which are distributed by Federated Securities Corp., a subsidiary of
Federated Investors ("Federated Funds"). Shareholders have access to the
following Federated Funds:
- Liberty U.S. Government Money Market Trust--a U.S. government money
market fund; and
- Federated 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 Shareholder 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 Shareholder 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 Shareholder 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.
SIGNATURES. Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund or a redemption payable other
than to the shareholder of record must have their signatures 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 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 5,
1996, Central Carolina Bank and Trust Company, Durham, North Carolina, acting in
various capacities for numerous accounts, was the owner of record of 1,916,097
shares (90.65%) 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.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other 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.
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.
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.
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.
STATE AND LOCAL TAXES
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a 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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--99.0%
- ------------------------------------------------------------------------------------
AEROSPACE--3.5%
-----------------------------------------------------------------
11,000 Allied-Signal Inc. $ 602,250
-----------------------------------------------------------------
3,800 United Technologies Corp. 415,625
----------------------------------------------------------------- -----------
Total 1,017,875
----------------------------------------------------------------- -----------
AUTOMOBILE--5.0%
-----------------------------------------------------------------
16,500 General Motors Corp. 909,563
-----------------------------------------------------------------
9,000 General Motors Corp., Class H 546,750
----------------------------------------------------------------- -----------
Total 1,456,313
----------------------------------------------------------------- -----------
CHEMICALS--10.1%
-----------------------------------------------------------------
5,000 Air Products & Chemicals, Inc. 297,500
-----------------------------------------------------------------
6,000 Dow Chemical Co. 501,750
-----------------------------------------------------------------
7,300 du Pont E.I. de Nemours & Co. 582,175
-----------------------------------------------------------------
8,000 Eastman Kodak Co. 595,000
-----------------------------------------------------------------
9,000 Grace W.R. & Co. 670,500
-----------------------------------------------------------------
7,700 Praxair, Inc. 312,812
----------------------------------------------------------------- -----------
Total 2,959,737
----------------------------------------------------------------- -----------
CONSUMER GOODS--2.8%
-----------------------------------------------------------------
10,000 General Electric Co. 827,500
----------------------------------------------------------------- -----------
ELECTRONICS--8.2%
-----------------------------------------------------------------
13,000 AMP, Inc. 547,625
-----------------------------------------------------------------
6,500 Duracell International, Inc. 303,062
-----------------------------------------------------------------
13,000 Intel Corp. 981,500
-----------------------------------------------------------------
7,500 Raychem Corp. 560,625
----------------------------------------------------------------- -----------
Total 2,392,812
----------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
ENTERTAINMENT--3.4%
-----------------------------------------------------------------
15,000 Carnival Corp., Class A $ 446,250
-----------------------------------------------------------------
9,000 Disney Walt Co. 546,750
----------------------------------------------------------------- -----------
Total 993,000
----------------------------------------------------------------- -----------
FINANCE--6.5%
-----------------------------------------------------------------
18,700 American Express Co. 855,525
-----------------------------------------------------------------
14,000 Associates First Capital Corp. 518,000
-----------------------------------------------------------------
6,000 J.P. Morgan & Co., Inc. 521,250
----------------------------------------------------------------- -----------
Total 1,894,775
----------------------------------------------------------------- -----------
FOOD & BEVERAGE--5.1%
-----------------------------------------------------------------
10,000 Coca-Cola Co. 460,000
-----------------------------------------------------------------
15,000 Dole Food, Inc. 566,250
-----------------------------------------------------------------
14,000 PepsiCo, Inc. 465,500
----------------------------------------------------------------- -----------
Total 1,491,750
----------------------------------------------------------------- -----------
HEALTH CARE--10.2%
-----------------------------------------------------------------
13,000 Abbott Laboratories 560,625
-----------------------------------------------------------------
7,000 Columbia/HCA Healthcare 377,125
-----------------------------------------------------------------
7,500 Johnson & Johnson 730,312
-----------------------------------------------------------------
4,600 Merck & Co., Inc. 297,275
-----------------------------------------------------------------
15,000 Pharmacia & Upjohn, Inc. 613,125
-----------------------------------------------------------------
8,000 SmithKline Beecham Corp., ADR 408,000
----------------------------------------------------------------- -----------
Total 2,986,462
----------------------------------------------------------------- -----------
HOUSEHOLD PRODUCTS--1.4%
-----------------------------------------------------------------
4,600 Procter & Gamble Co. 404,225
----------------------------------------------------------------- -----------
INDUSTRIAL SERVICES--1.8%
-----------------------------------------------------------------
12,000 Foster Wheeler Corp. 534,000
----------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
INSURANCE--4.9%
-----------------------------------------------------------------
8,000 Chubb Corp. $ 373,000
-----------------------------------------------------------------
12,000 Equitable Cos., Inc. 289,500
-----------------------------------------------------------------
15,000 Jefferson-Pilot Corp. 770,625
----------------------------------------------------------------- -----------
Total 1,433,125
----------------------------------------------------------------- -----------
METALS--1.1%
-----------------------------------------------------------------
5,000 Aluminum Co. of America 308,125
----------------------------------------------------------------- -----------
MORTGAGE--2.4%
-----------------------------------------------------------------
4,000 Federal Home Loan Mortgage Corp. 330,500
-----------------------------------------------------------------
11,800 Federal National Mortgage Association 364,325
----------------------------------------------------------------- -----------
Total 694,825
----------------------------------------------------------------- -----------
NATURAL GAS--1.5%
-----------------------------------------------------------------
7,500 Mapco Inc. 433,125
----------------------------------------------------------------- -----------
OFFICE EQUIPMENT--2.2%
-----------------------------------------------------------------
6,000 International Business Machines Corp. 640,500
----------------------------------------------------------------- -----------
OIL--11.5%
-----------------------------------------------------------------
8,500 Amoco Corp. 616,250
-----------------------------------------------------------------
5,000 British Petroleum Co. PLC, ADR 526,875
-----------------------------------------------------------------
10,000 Chevron Corp. 597,500
-----------------------------------------------------------------
6,000 Exxon Corp. 508,500
-----------------------------------------------------------------
10,000 Halliburton Co. 556,250
-----------------------------------------------------------------
5,000 Mobil Corp. 564,375
----------------------------------------------------------------- -----------
Total 3,369,750
----------------------------------------------------------------- -----------
PAPER PRODUCTS--1.1%
-----------------------------------------------------------------
7,000 Champion International Corp. 308,875
----------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
RESTAURANTS--2.5%
-----------------------------------------------------------------
9,000 McDonald's Corp. $ 433,125
-----------------------------------------------------------------
16,000 Wendy's International, Inc. 288,000
----------------------------------------------------------------- -----------
Total 721,125
----------------------------------------------------------------- -----------
RETAIL--2.6%
-----------------------------------------------------------------
15,000 Sears, Roebuck & Co. 763,125
----------------------------------------------------------------- -----------
TELECOMMUNICATIONS--5.0%
-----------------------------------------------------------------
12,800 AT&T Corp. 798,400
-----------------------------------------------------------------
10,000 Motorola, Inc. 667,500
----------------------------------------------------------------- -----------
Total 1,465,900
----------------------------------------------------------------- -----------
TRANSPORTATION--1.8%
-----------------------------------------------------------------
6,000 CSX Corp. 297,000
-----------------------------------------------------------------
2,700 Norfolk Southern Corp. 232,875
----------------------------------------------------------------- -----------
Total 529,875
----------------------------------------------------------------- -----------
UTILITIES--4.4%
-----------------------------------------------------------------
24,000 Houston Industries, Inc. 525,000
-----------------------------------------------------------------
20,000 Public Service Co. North Carolina, Inc. 322,500
-----------------------------------------------------------------
10,500 Texas Utilities Co. 429,188
----------------------------------------------------------------- -----------
Total 1,276,688
----------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $24,230,034) 28,903,487
----------------------------------------------------------------- -----------
MUTUAL FUND SHARES--1.0%
- ------------------------------------------------------------------------------------
296,801 Goldman Sachs Money Market Fund (AT NET ASSET VALUE) 296,801
----------------------------------------------------------------- -----------
</TABLE>
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
U.S. GOVERNMENT SECURITIES--3.4%
- ------------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage Discount Note, 5.30%, due 6/3/1996
(AT AMORTIZED COST) $ 999,705
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $25,526,540)(A) $30,199,993
------------------------------------------------------------------ -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $25,526,540. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,673,453 which is comprised of $4,759,117 appreciation and $85,664
depreciation at May 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($29,194,396) at May 31, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost
$25,526,540) $30,199,993
- ---------------------------------------------------------------------------------
Income receivable 77,400
- ---------------------------------------------------------------------------------
Receivable for investments sold 253,520
- ---------------------------------------------------------------------------------
Receivable for shares sold 14,566
- ---------------------------------------------------------------------------------
Deferred expenses 5,599
- --------------------------------------------------------------------------------- -----------
Total assets 30,551,078
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $1,319,123
- --------------------------------------------------------------------
Accrued expenses 37,559
- -------------------------------------------------------------------- ----------
Total liabilities 1,356,682
- --------------------------------------------------------------------------------- -----------
Net Assets for 2,115,744 shares outstanding $29,194,396
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid in capital $22,940,810
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,673,453
- ---------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,533,922
- ---------------------------------------------------------------------------------
Undistributed net investment income 46,211
- --------------------------------------------------------------------------------- -----------
Total Net Assets $29,194,396
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------
Net Asset Value and Redemption Proceeds Per Share
($29,194,396 / 2,115,744 shares outstanding) $13.80
- --------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $13.80)* $14.45
- --------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $ 96,217
- ---------------------------------------------------------------------------------
Dividends 538,284
- --------------------------------------------------------------------------------- ----------
Total income 634,501
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $231,522
- ----------------------------------------------------------------------
Administrative personnel and services fee 50,000
- ----------------------------------------------------------------------
Custodian fees 14,300
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 21,630
- ----------------------------------------------------------------------
Directors'/Trustees' fees 2,399
- ----------------------------------------------------------------------
Auditing fees 10,000
- ----------------------------------------------------------------------
Legal fees 2,049
- ----------------------------------------------------------------------
Portfolio accounting fees 40,979
- ----------------------------------------------------------------------
Share registration costs 13,157
- ----------------------------------------------------------------------
Printing and postage 4,900
- ----------------------------------------------------------------------
Insurance premiums 3,000
- ----------------------------------------------------------------------
Miscellaneous 1,009
- ---------------------------------------------------------------------- --------
Total expenses 394,945
- ----------------------------------------------------------------------
Waiver--
- ----------------------------------------------------------------------
Waiver of investment advisory fee (54,476)
- ---------------------------------------------------------------------- --------
Net expenses 340,469
- --------------------------------------------------------------------------------- ----------
Net investment income 294,032
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 1,973,979
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments 3,538,240
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 5,512,219
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $5,806,251
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
111 CORCORAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------
1996 1995*
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 294,032 $ 128,312
- ------------------------------------------------------------------
Net realized gain on investments ($1,973,979 and $39,734 net gain,
respectively, as computed for federal tax purposes) 1,973,979 39,734
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 3,538,240 1,135,213
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 5,806,251 1,303,259
- ------------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Distributions from net investment income (337,321) (38,812)
- ------------------------------------------------------------------
Distributions from net realized gains (479,791) 0
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from distributions to
shareholders (817,112) (38,812)
- ------------------------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 5,713,327 24,299,699
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 47,934 2,285
- ------------------------------------------------------------------
Cost of shares redeemed (6,136,880) (985,555)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from share transactions (375,619) 23,316,429
- ------------------------------------------------------------------ ----------- -----------
Change in net assets 4,613,520 24,580,876
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 24,580,876 0
- ------------------------------------------------------------------ ----------- -----------
End of period (including undistributed net investment income of
$46,211 and $89,500, respectively) $29,194,396 $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, 1996
- --------------------------------------------------------------------------------
(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 three portfolios. The financial statements
included herein are only those of 111 Corcoran Equity Fund (the "Fund"), a
diversified portfolio. 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 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.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
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"). Dividend
income and 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 tax are necessary.
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
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
are being amortized using the straight-line method not to exceed a period
of five years from the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(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,
----------------------
1996 1995*
- ---------------------------------------------------------------------- -------- ---------
<S> <C> <C>
Shares sold 457,100 2,229,804
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 3,800 210
- ----------------------------------------------------------------------
Shares redeemed (485,448) (89,732)
- ---------------------------------------------------------------------- -------- ---------
Net change resulting from share transactions (24,548) 2,140,282
- ---------------------------------------------------------------------- -------- ---------
* For the period December 5, 1994 (date of initial public investment) to May 31, 1995.
</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 0.85% 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.
Under the terms of an investment sub-advisory agreement between the Adviser and
Franklin Street Advisers, Inc., (the "Sub-Adviser"), the Sub-Adviser receives an
annual fee from the Adviser equal to 0.65% of the Fund's advisory fee. The
Sub-Adviser may voluntarily choose to waive any portion of its fee.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period. FAS
may voluntarily choose to waive a portion of its fee.
111 CORCORAN EQUITY FUND
- --------------------------------------------------------------------------------
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. ("FSC"), 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 0.35% of the average daily net
assets of the Trust shares, annually, to compensate FSC.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Fund. The fee
paid to FSSC is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--Fserv maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily 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, 1996, the Fund paid $3,337 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
year ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $19,947,847
- ------------------------------------------------------------------------------- -----------
SALES $17,502,492
- ------------------------------------------------------------------------------- -----------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
111 CORCORAN FUNDS (111 Corcoran Equity):
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, 1996, the related statement of operations for the year then ended,
and the statement of changes in net assets and financial highlights (see page 2
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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, 1996 by correspondence with the custodian and broker. 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, 1996, and the results of its operations, for the year then ended, 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 12, 1996
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. 6330 Quadrangle Drive
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 Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ----------------------------------------------------------------------------------------------
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, 1996
LOGO
005826A (7/96)
Cusip 682365309
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''), a portfolio of
111 Corcoran Funds (the `Trust'') dated July 31, 1996. This Statement
is not a prospectus. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-386-3111.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1996
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 682365309
005902 (7/96)
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
INVESTMENT LIMITATIONS 10
111 CORCORAN FUNDS MANAGEMENT 16
Fund Ownership 24
Trustees' Compensation 24
Trustee Liability 24
INVESTMENT ADVISORY SERVICES 26
Adviser to the Fund 26
Advisory Fees 26
Sub-Adviser to the Fund 27
Sub-Advisory Fees 27
BROKERAGE TRANSACTIONS 14
OTHER SERVICES 15
PURCHASING SHARES 16
Distribution and Shareholder Services
Plans 30
DETERMINING NET ASSET VALUE 31
Determining Market Value of Securities
31
EXCHANGE PRIVILEGE 32
REDEEMING SHARES 32
Redemption in Kind 32
MASSACHUSETTS PARTNERSHIP LAW 33
TAX STATUS 34
The Fund's Tax Status 34
Shareholders' Tax Status 34
TOTAL RETURN 35
YIELD 35
PERFORMANCE COMPARISONS 36
APPENDIX 37
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 fiscal year ended May
31, 1996 and for the period from December 5, 1994 (date of initial public
investment) to
May 31, 1995, the portfolio turnover rates for the Fund were 69% and 4%,
respectively.
INVESTMENT LIMITATIONS
The following limitations are fundamental [except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, or assets exempted
by the Securities and Exchange Commission) in an open-end investment
company with substantially the same investment objectives].
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 [except that no investment limitation
of the Fund shall prevent the Fund from investing substantially all of its
assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, or assets exempted
by the Securities and Exchange Commission) in an open-end investment
company with substantially the same investment objectives]. Shareholders
will be notified before any material changes in these limitations become
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. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee 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 or Trustee 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 or Trustee 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 or Trustee 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 or
Trustee 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 or Trustee 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 or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
New port, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.
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 or Trustee 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 or Trustee 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 or Trustee of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some 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. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some 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.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the
responsibilities of the Board between meetings of the Board.
As used in the table above, `The Funds'' and ``Funds'' mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; Newpoint
Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 5, 1996, 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 1,916,096.5710 shares
(90.65%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $1250.60
Chairman and Trustee
Thomas G. Bigley $1250.60
Trustee
John T. Conroy, Jr. $1250.60
Trustee
William J. Copeland $1250.60
Trustee
James E. Dowd $1139.77
Trustee
Lawrence D. Ellis, M.D. $1139.77
Trustee
Edward L. Flaherty, Jr. $1139.77
Trustee
Edward C. Gonzales $1139.77
Trustee
Peter E. Madden $1139.77
Trustee
Gregor F. Meyer $1139.77
Trustee
John E. Murray, Jr. $1139.77
Trustee
Wesley W. Posvar $1139.77
Trustee
Marjorie P. Smuts$1139.77
Trustee
*Information is furnished for the fiscal year ended May 31, 1996.
#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 year ended May
31, 1996 and for the period from December 5, 1994 (date of initial public
investment) to
May 31, 1995, the Adviser earned advisory fees of $231,522 and $36,380,
respectively, of which, $54,476 and $36,380, respectively, were 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 fiscal year ended May
31, 1996 and for the period from December 5, 1994 (date of initial public
investment) to
May 31, 1995, the Sub-Adviser earned sub-advisory fees of $177,046 and
$27,820, respectively, of which $0 and $27,820, respectively, were
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.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the
fiscal year ended May 31, 1996 and for the period from December 5, 1994
(date of initial public investment) to May 31, 1995, the Fund paid total
brokerage commissions of $48,500 and $29,480, respectively.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust for a fee as
described in the prospectus. For the fiscal year ended May 31, 1996, and
for the period from December 5, 1994 (date of initial public investment) to
May 31, 1995, the following administrator fees were incurred on behalf of
the Fund of $50,000 and $24,247, respectively, of which $0, and $24,247,
respectively, were voluntarily waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company (`State Street Bank''), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
Federated Services Company, Pittsburgh, PA provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
The fee paid for this service is based upon the level of the Fund's average
net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its subsidiary and registered transfer
agent, Federated Shareholder Services Company, maintains all necessary
shareholder records and receives a fee based on the size, type and number
of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
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 fiscal year ended May 31, 1996 and for the period from December 5,
1994 ( date of initial public investment) to May 31, 1995, no payments 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.
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.
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:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or an attempt to preserve
gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
The Fund's average annual total return for the fiscal year ended May 31,
1996, and for the period from
December 5, 1994 (date of initial public investment) to May 31, 1996, were
18.35% and 23.36%, 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 charge, 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, 1996 was 0.92%.
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. In addition, 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.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (filed in Part A).
(b) Exhibits:
(1) (i)
Conformed Copy of Declaration of Trust of the
Registrant (7);
(ii)
Conformed Copy of Amendment No. 1 to
Declaration of Trust dated February 3, 1992
(7);
(iii)
Conformed copy of Amendment No. 2 to
Declaration of Trust dated August 25, 1994 (6);
(2) Copy of By-Laws of the Registrant (7);
(3) Not applicable;
(4) (i)
Copy of Specimen Certificate for Shares of
Beneficial Interest of the 111 Corcoran Bond
Fund (5);
(ii)
Copy of Specimen Certificate for Shares of
Beneficial Interest of the 111 Corcoran North
Carolina Municipal Securities Fund (5);
(iii)
Copy of Specimen Certificate for Shares of
Beneifical Interest of the 111 Corcoran Equity
Fund (7);
(5) (i)
Conformed copy of Investment Advisory Contract
of the Registrant and Exhibits A and B thereto
(6);
(ii)
Conformed Copy of Exhibit C to the present
Investment Advisory Contract to add 111
Corcoran Equity Fund (7);
(iii)
Conformed Copy of Sub-Advisory Agreement
including Exhibit A on behalf of 111 Corcoran
Equity Fund (7);
(6) (i)
Conformed copy of Distributor's Contract of the
Registrant and Exhibit A thereto (6);
(ii) Conformed Copy of Exhibit B to Distributor's
Contract to add 111 Corcoran Equity Fund (7);
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant
(7);
+ All exhibits have been filed electronically.
(5) Response is incorporated by reference to Registrant's Initial
Registration Statement on form N-1A filed February 19, 1992 (File Nos.
33-45753 and 811-6561)
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 of form N-1A filed October 3, 1994 (File Nos. 33-45753
and 811-6561)
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed May 24, 1995 (File Nos. 33-45753
and 811-6561)
(9) (i)
Conformed copy of Fund Accounting and
Shareholder Recordkeeping Agreement of the
Registrant (7);
(ii)
Conformed copy of Administrative Services
Agreement (5);
(iii)
Conformed Copy of Shareholder Services Plan
(7);
(iv)
Conformed Copy of Exhibit A to Shareholder
Services Plan on behalf of 111 Corcoran Equity
Fund (7);
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered (7);
(11) Conformed copy of Consent of Independent Auditors;+
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (7);
(14) Not Applicable;
(15) (i)
Copy of Rule 12b-1 Distribution Plan (6);
(ii) Conformed Copy of Exhibit A to Rule 12b-1 Plan on
behalf of 111 Corcoran Equity Fund (7);
(iii)Copy of Rule 12b-1 Agreement (6);
(iv)Copy of Fee Schedule for Rule 12b-1 Agreement
with Federated Securities Corp.(6);
(16) (i)
Copy of 111 Corcoran Bond Fund Schedule
for Computation of Fund Performance Data
(3);
(ii)Copy of 111 Corcoran North Carolina Municipal
Securities Fund Schedule for Computation of Fund
Performance Data (3);
(iii)Copy of 111 Corcoran Equity Fund Schedule for
Computation of Fund Performance Data (7);
(17) Financial Data Schedules;+
(18) Not applicable;
(19) Conformed Copy of Power of Attorney +.
+ All exhibits have been filed electronically.
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on form N-1A filed October 23, 1992 (File Nos. 33-
45753 and 811-6561)
(5) Response is incorporated by reference to Registrant's Initial
Registration Statement on form N-1A filed February 19, 1992 (File Nos.
33-45753 and 811-6561)
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on form N-1A filed October 3, 1994 (File Nos. 33-45753
and 811-6561)
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed May 24, 1995 (File Nos. 33-45753
and 811-6561)
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of July 5, 1996
Shares of beneficial interest
no par value
111 Corcoran Bond Fund 8,987,468.3120
111 Corcoran Equity Fund 2,113,801.2560
111 Corcoran North Carolina Municipal
Securities Fund 3,608,288.9980
Item 27. Indemnification: (1)
Item 28.
Business and Other Connections of Investment Adviser and
Sub-Adviser:
(a) Central Carolina Bank and Trust Company (CCB), the Fund's
adviser, was founded in 1903 as Durham Bank and Trust Company.
Central Carolina Bank was created from Durham Bank and Trust
Company on September 30, 1961. CCB 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.
CCB 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.
Franklin Street Advisors, Inc. is the 111 Corcoran Equity Fund's
sub-adviser. The principal executive offices of the sub-adviser
are located at 6330 Quadrangle Drive, Chapel Hill, North Carolina
27514. The sub-adviser is a registered investment advisory firm
founded in 1990, and currently manages assets in excess of $575
million. Franklin Street Advisors, Inc. has not previously acted
as an investment adviser to an investment company. Franklin
Street Advisors, Inc. is a wholly-owned subsidiary of Franklin
Street Partners, Inc., a privately-owned holding company.
Franklin Street Partners, Inc. also owns a private non-depository
trust bank, Franklin Street Trust Company, as well as another
subsidiary, Franklin Street Securities, Inc.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed February 19, 1992 (File Nos.
33-45753 and 811-6561)
The principal executive officers of the Fund's Investment Adviser
and Sub-Adviser, the Directors of the Fund's Adviser and Sub-
Adviser, and Partners of the Fund's Sub-Adviser are set forth in
the following tables.
(b)
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
W.L. Burns, Jr. Chairman and Chairman of the Board
Director Central Carolina Bank
Financial Corporation;
Retired President and Chief
Executive Officer, CCB
Financial Corporation and
Central Carolina Bank and
Trust Company
Ernest C. Roessler President; Chief President, Chief
Executive Officer Executive Officer,
and Director CCB Financial Corporation
J. Harper Beall, III Director President, Fairfield
Chair Company
James B. Brame, Jr. Director President, Brame Specialty
Co., Inc.
Timothy B. Burnett Director President, Bessemer
Improvement Company
Edward S. Holmes Director Partner Holmes & McLaurin,
Attorneys at Law
Owen G. Kenan Director President, Kenan
Enterprises, Inc., Kenan
Oil Co., Inc., Kenan
Developments, Inc.;
Director, Kenan Transport
Co., Inc.; Vice Chairman,
Flagler Systems, Inc.;
Chairman, Kenan Global
Ent., LLC
Other Substantial
Eugene J. McDonald Director President; Duke Management
Company; Executive Vice
President; Duke University;
Director SBSF Funds, Inc.,
Sphinx Phar.
Hamilton W. McKay, Jr., M.D. Director
Physician, Carolina
Asthma & Allergy Center,
P.A.
Eric B. Munson Director Executive Director;
University of North
Carolina Hospitals
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
H. Allen Tate, Jr. Director President, Allen Tate
Company, Inc.
Dr. Phail Wynn, Jr. Director President, Durham Technical
Community College
Other Substantial
Robert C. Eubanks Director; President; President; Franklin
and Partner Street Partners, Inc.;
Director, Franklin Street
Trust Company, Director and
President, Franklin Street
Securities, Inc.; founder,
McMillion and Eubanks
Capital Management, Inc.;
former Chairman of the
Board of Trustees,
University of North
Carolina
George M. Salley Director, Vice President
Vice President, and Franklin Street
Partner Advisors, Inc. and Franklin
Street Trust Company;
former Senior Vice
President and portfolio
manager, Wachovia
Investment Management
Thomas W. Hudson, Jr. Director and Partner Director, Franklin Street
Trust Company, former
Executive with Kohlberg,
Kravis, Roberts & Co.,
former Partner with
Deloitte, Huskins & Sells
William M. Moore, Jr. Director and Partner Director, Franklin Street
Trust Co., founder and
Chief Executive Officer of
Trident Financial
Corporation
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
Richard V. Fulp Director and Partner Director, Franklin Street
Trust Company; former Group
Executive Vice President,
Bank of America; Director,
Depository Trust Company;
former Chairman of American
Bankers Association Trust
and Investment Management
Division
Paul J. Rizzo Director and Partner Director, Franklin Street
Trust Company, and Franklin
Street Securities, Inc.;
Vice Chairman of the Board,
IBM; former Dean, Kenan
Flagler Business School
(University of North
Carolina); and serves as
independent director of
several corporations traded
on the New York Stock
Exchange
M. Rex Teaney, III Director and Partner President and Director,
Franklin Street Trust
Company; former Senior Vice
President, Wachovia
National Bank of North
Carolina; Member, Board of
Directors, Public
Securities Association and
Bank Capital Markets
Association; Member,
Municipal Securities
Rulemaking Board
Other Substantial
Position with Business, Profession,
Name the Sub-Adviser Vocation or Employment
H. Michael Weaver Director and Partner Director, Franklin Street
Trust Company, and Franklin
Street Securities, Inc.;
Chairman of the Board, W.H.
Weaver Construction Co.
(Greensboro, NC); former
Chairman of the Board of
Trustees, University of
North Carolina
Carol E. Manzon Secretary- Secretary-Treasurer,
Treasurer Franklin Street Partners,
Inc., Franklin Street Trust
Company and Franklin Street
Securities, Inc.
Susan T. Kaderbek Vice President Vice President, Franklin
Street Securities, Inc.;
former tax analyst, Bear
Stearns; former associate,
McGladrey & Pullen and
Arthur Andersen
Malcolm M. Trevillian Vice President Vice President, Franklin
Street Trust Company, Vice
President, Franklin Street
Advisors, former Vice
President and Portfolio
Manager, First Union
Capital Management, former
President, North Carolina
Society of Financial
Analysts
Item 29. Principal Underwriters:
(a)
Federated Securities Corp., the Distributor for shares of the Registrant,
also acts as principal underwriter for the following open-end investment
companies: 111 Corcoran Funds; Annuity Management Series; Arrow Funds;
Automated Government Money Trust; BayFunds; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; SouthTrust
Vulcan Funds; Star Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Biltmore Funds; The Biltmore Municipal Funds; The Monitor Funds;
The Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus
Funds; Tower Mutual Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Vision Group of Funds, Inc.; and World
Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter
With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President,Secretary
Pittsburgh, PA 15222-3779 and Treasurer
John B. Fisher President-Institutional Sales,
--
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter
With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary,
--
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter
With Registrant
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter
With Registrant
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President,
--
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President,
--
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter
With Registrant
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:
Registrant
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder
Services Company....
....................P.O. Box 8600
(`Transfer Agent and Dividend
Boston, MA 02266-8600
Disbursing Agent')
Federated Administrative Services
Federated Investors Tower
(`Administrator'')
Pittsburgh, PA 15222-3779
Central Carolina Bank and Trust
111 Corcoran Street
Company
Durham, NC 27702
(`Adviser'')
Franklin Street Advisors, Inc.
1506 East Franklin Street
(`Sub-Adviser'')
Chapel Hill, NC 27514
State Street Bank and Trust
P.O. Box 8600
Company
Boston, MA 02266-8600
(`Custodian'')
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
reholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, 111 CORCORAN FUNDS,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 26th day of July, 1995.
111 CORCORAN FUNDS
BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
July 29, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/C. Grant Anderson Attorney In Fact July 29, 1996
C. Grant Anderson For the Persons
ASSISTANT SECRETARY Listed Below
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer
and Trustee (Principal
Financial and Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr. Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
*By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under 601/Reg SK
ARTHUR ANDERSON LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in Post-Effective Amendment No. 10 to
Registration Statement (No. 33-45753 ) of 111 Corcoran Funds of our report
dated July 12, 1996 appearing in the Prospectus, which is part of such
Registration Statement, and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
By: ARTHUR ANDERSON LLP
Arthur Anderson LLP
Pittsburgh, Pennsylvania
July 25, 1996
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of 111 Corcoran Funds and
the Deputy General Counsel of Federated Service Company, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and Trustee July 1, 1996
John F. Donahue
/s/ Edward C. Gonzales President and Treasurer and July 1, 1996
Edward C. Gonzales Trustee (Principal Financial
and Accounting Officer)
/s/ Thomas G. Bigley Trustee July 1, 1996
Thomas G. Bigley
/s/ John T. Conroy, Jr. Trustee July 1, 1996
John T. Conroy, Jr.
/s/ William J. Copeland Trustee July 1, 1996
William J. Copeland
/s/ James E. Dowd Trustee July 1, 1996
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Trustee July 1, 1996
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Trustee July 1, 1996
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Trustee July 1, 1996
Peter E. Madden
/s/ Gregor F. Meyer Trustee July 1, 1996
Gregor F. Meyer
/s/ John E. Murray, Jr. Trustee July 1, 1996
John E. Murray, Jr.
/s/ Wesley W. Posvar Trustee July 1, 1996
Wesley W. Posvar
/s/ Marjorie P. Smuts Trustee July 1, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 1st day of July, 1996.
/s/ Marie M. Hamm
Notary Public
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<NAME> 111 Corcoran Funds
111 Corcoran Bond Fund
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<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 88,667,296
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<EXPENSES-NET> 279,067
<NET-INVESTMENT-INCOME> 5,892,547
<REALIZED-GAINS-CURRENT> 107,010
<APPREC-INCREASE-CURRENT> (2,089,765)
<NET-CHANGE-FROM-OPS> 3,909,792
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,902,091
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,440,835
<NUMBER-OF-SHARES-REDEEMED> 1,187,303
<SHARES-REINVESTED> 24,434
<NET-CHANGE-IN-ASSETS> 768,659
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<GROSS-ADVISORY-FEES> 664,154
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 943,221
<AVERAGE-NET-ASSETS> 88,491,709
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.660
<PER-SHARE-GAIN-APPREC> (0.220)
<PER-SHARE-DIVIDEND> 0.660
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<RETURNS-OF-CAPITAL> 0.000
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<TABLE> <S> <C>
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<NAME> 111 Corcoran Funds
111 Corcoran Equity Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> May-31-1996
<PERIOD-END> May-31-1996
<INVESTMENTS-AT-COST> 25,526,540
<INVESTMENTS-AT-VALUE> 30,199,993
<RECEIVABLES> 345,486
<ASSETS-OTHER> 5,599
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,551,078
<PAYABLE-FOR-SECURITIES> 1,319,123
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,559
<TOTAL-LIABILITIES> 1,356,682
<SENIOR-EQUITY> 0
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> 111 Corcoran Funds
111 Corcoran North Carolina Municipal Securities
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</TABLE>
