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. 12 ..................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 .................................... X
CCB FUNDS
(Formerly 111 Corcoran Funds)
(Exact Name of Registrant as Specified in Charter)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on July 31, 1998, 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.
Copy to: Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS REFERENCE SHEET
This amendment to the Registration Statement of CCB Funds (formerly, 111
Corcoran Funds), which consists of three portfolios: (1) CCB North Carolina
Municipal Securities Fund (formerly, 111 Corcoran North Carolina Municipal
Securities Fund); (2) CCB Bond Fund (formerly, 111 Corcoran Bond Fund); and (3)
CCB Equity Fund (formerly, 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) CCB
Funds Information; (1-3) Management of
CCB 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.
<PAGE>
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) CCB 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)
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY, 111 CORCORAN FUNDS))
PROSPECTUS
The shares of CCB Bond Fund (the "Fund") offered by this prospectus represent
interests in a diversified portfolio in CCB 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,
1998, 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. Prospectus dated July 31, 1998 <PAGE>
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
Investment Limitations 10
CCB FUNDS INFORMATION 10
- ------------------------------------------------------
Management of CCB Funds 10
Distribution of Fund Shares 11
Administration of the Fund 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 13
Sales Charge Reallowance 14
Reducing the Sales Charge 14
Systematic Investment Program 15
Confirmations and Account Statements 15
Dividends 15
Capital Gains 15
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
REDEEMING SHARES 17
- ------------------------------------------------------
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Redemption in Kind 19
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
- ------------------------------------------------------
<PAGE>
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........................................ 0.31%
Total Fund Operating Expenses(2)....................... 0.31%
</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) The Total Fund Operating Expense in the table above are based on expenses
that would have been 1.06%, absent the voluntary waiver of the management fee.
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 "CCB 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 charge. As noted in the
table above, the Fund charges no redemption fees....... $48 $55 $62 $83
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 33.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------------------------
1998 1997 1996 1995 1994 1993 (A)
------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.92 $ 9.78 $10.00 $ 9.63 $10.13 $10.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.66 0.66 0.66 0.66 0.63 0.49
- -----------------------------------------
Net realized and unrealized gain (loss)
on investments 0.26 0.14 (0.22) 0.37 (0.50) 0.13
- ----------------------------------------- ------ ------ ------ ------ ------ ---------
Total from investment operations 0.92 0.80 0.44 1.03 0.13 0.62
- -----------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------
Distributions from net investment
income (0.64) (0.66) (0.66) (0.66) (0.63) (0.49)
- ----------------------------------------- ------ ------ ------ ------ ------ ---------
NET ASSET VALUE, END OF PERIOD $10.20 $ 9.92 $ 9.78 $10.00 $ 9.63 $10.13
- ----------------------------------------- ------ ------ ------ ------ ------ ---------
TOTAL RETURN (B) 9.52% 8.37% 4.41% 11.32% 1.21% 6.28%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.31% 0.37% 0.32% 0.34% 0.50% 0.70%*
- -----------------------------------------
Net investment income 6.55% 6.51% 6.65% 6.98% 6.32% 6.00%*
- -----------------------------------------
Expense waiver/reimbursement (c) 0.75% 0.75% 0.75% 0.75% 0.75% 0.78%*
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period (000 omitted) $84,636 $85,752 $87,883 $87,115 $97,823 $31,928
- -----------------------------------------
Portfolio turnover 43% 11% 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)
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
CCB Funds was established as a Massachusetts business trust under a Declaration
of Trust dated December 11, 1991. The Declaration of Trust permits CCB Funds to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. On May 13, 1998, the Board of Trustees
("Trustees") voted to change the name of the Fund from "111 Corcoran Bond Fund"
to "CCB Bond Fund," and the name of the Trust from "111 Corcoran Funds" to "CCB
Funds." This prospectus relates only to CCB Funds' fixed income portfolio, known
as CCB Bond Fund. The Fund is for trust clients of Central Carolina Bank and
Trust Company ("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.
Year 2000 Statement. Like other mutual funds and business organizations
worldwide, the Fund's service providers (among them, the adviser, distributor,
administrator, and transfer agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Fund and its service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and believe that systems will be year 2000 compliant
when required. Analysis continues regarding the financial impact of instituting
a year 2000 compliant program on the Fund's operations.
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 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
<PAGE>
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 ("S&P"); or AAA, AA, A or BBB by Fitch IBCA, Inc.
("Fitch"). Bonds rated BBB by S&P or Fitch or Baa by Moody's have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. Downgraded
securities will be evaluated on a case-by-case basis by the adviser. The
adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold;
- obligations of the United States government;
- 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.
<PAGE>
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 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 <PAGE>
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.
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.
INVERSE FLOATERS. Certain securities issued by agencies of the U.S. government
("agency securities") that include a class bearing a floating rate of interest
also may include a class whose yield floats inversely against a specified index
rate. These "inverse floaters" are more volatile than conventional fixed or
floating rate classes of an agency security and the yield thereon, as well as
the value thereof, will fluctuate in inverse proportion to changes in the index
on which interest rate adjustments are based. As a result, the yield on an
inverse floater class of an agency security will generally increase when market
yields (as reflected by the index) decrease and decrease when market yields
increase. The extent of the volatility of inverse floaters depends on the extent
of anticipated changes in market rates of interest. Generally, inverse floaters
provide for interest rate adjustments based upon a multiple of the
<PAGE>
specified interest index, which further increases their volatility. The degree
of additional volatility will be directly proportional to the size of the
multiple used in determining interest rate adjustments.
RESETS OF INTEREST. The interest rates paid on certain agency securities in
which the Fund invests generally are readjusted at intervals of one year or less
to an increment over some predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those derived
from a calculated measure, such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year and five-year
constant maturity Treasury note rates, the three-month Treasury bill rate, the
180-day Treasury bill rate, rates on longer-term Treasury securities, the
National Media Cost of Funds, the one-month or three-month London Interbank
Offered Rate (LIBOR), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury not rate,
closely mirror changes in market interest rate levels.
To the extent that the adjusted interest rate on the agency security reflects
current market rates, the market value of an adjustable rate agency security
will tend to be less sensitive to interest rate changes than a fixed rate debt
security on the same stated maturity.
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 in restricted
securities. Certain restricted securities which the Trustees deem to be liquid
will be excluded from this limitation. The restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies but which are subject to
restriction on resale under federal securities law. The Fund will limit
investments in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits,
repurchase agreements providing for settlement in more than seven days after
notice, and over-the-counter options, to 15% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under the federal
securities law, and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view for public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity
<PAGE>
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.
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.
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
<PAGE>
with investment dealers and other financial institutions (such as commercial
banks or savings and loan associations) deemed creditworthy by the Fund's
adviser.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government at a certain time in the future. The seller of the contract
agrees to make delivery of the type of instrument called for in the contract and
the buyer agrees to take delivery of the instrument at the specified future
time.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a futures contract, the Fund is entitled (but not
obligated) to purchase a futures contract at a fixed price at any time during
the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents and/or Treasury bills, equal
to the underlying commodity value of the futures contracts (less any related
margin deposits), will be deposited in a segregated account with the Fund's
custodian (or the broker, if legally permitted) to collateralize the position
and thereby insure that the use of such futures contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly
with the prices of the securities in the Fund's portfolio. This may cause
the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest rate movements. In these events,
the Fund
<PAGE>
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.
CCB FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CCB FUNDS
BOARD OF TRUSTEES. CCB Funds are managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of CCB Funds and for
exercising all of the powers of CCB 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 CCB Funds,
investment decisions for the Fund are made by Central Carolina Bank and Trust
Company (the "Bank"), the
<PAGE>
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 0.75% of the Fund's average daily net
assets. 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, 1998, the
Trust Division managed assets in excess of $2.4 billion. The Trust Division
manages two commingled funds with assets of approximately $260 million. The
Bank has managed CCB Funds since their inception in July, 1992. As of June
30, 1998, total assets in CCB Funds were $345 million.
As part of their regular banking operations, CCB may make loans to public
companies. Thus, it may be possible, from time to time, for the Fund to
hold or acquire the securities of issuers which are lending clients of CCB.
The lending relationship will not be a factor in the selection of
securities.
James S. Agnew has been the Fund's portfolio manager since the Fund's
inception in July, 1992. Mr. Agnew joined CCB in 1969 and has, for more
than the past six years, been Vice President and Senior Trust Officer of
CCB, responsible for managing approximately $250 million in fixed income
assets. Mr. Agnew received a B.A. and M.S. in Industrial Management from
Georgia Institute of Technology and an L.L.B. from Woodrow Wilson Law
College.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the distributor for shares of the Fund. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors, Inc.
<PAGE>
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, Inc., 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>
0.150% of the first $250 million
0.125% of the next $250 million
0.100% of the next $250 million
0.075% 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
1-800-618-8573. 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
<PAGE>
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 Jr. 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.
<PAGE>
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.
<PAGE>
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.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.
DIVIDENDS
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 Fifth Third 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 CCB Funds, which consists of
the Fund, CCB Equity Fund, and CCB North Carolina Municipal Securities Fund.
Shareholders of the Fund have access to CCB Equity Fund and CCB 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, Inc. serve as investment adviser and which are distributed
by Federated Securities
<PAGE>
Corp., a subsidiary of Federated Investors, Inc. ("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
<PAGE>
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: CCB Funds, c/o Federated Shareholder Services
Company, P.O. Box 8609, Boston, Massachusetts 02266. 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:
CCB Funds, c/o Federated Shareholder Services Company, P.O. Box 8609, Boston,
Massachusetts 02266. 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.
<PAGE>
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, other than retirement accounts subject to required
minimum distributions. 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.
<PAGE>
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 CCB 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 7, 1998, Central
Carolina Bank, acting in various capacities for numerous accounts was owner of
record of 8,076,600 shares (97.18%) of the Fund.
As a Massachusetts business trust, CCB Funds are not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in CCB 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
CCB 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.
<PAGE>
Central Carolina Bank believes that it may perform the services for the Fund
contemplated by its advisory agreement with CCB 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 CCB 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.
<PAGE>
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.
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
PORTFOLIO OF INVESTMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
CORPORATE BONDS--16.1%
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.6%
------------------------------------------------------------
$ 500,000 Discover Card Trust, 6.25%, Series 1996-3B, 8/18/2008 $ 500,870
------------------------------------------------------------ ------------
CONSUMER PRODUCTS--2.5%
------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., 9.00%, 1/1/2001 1,061,220
------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., 7.125%, 8/15/2002 1,024,750
------------------------------------------------------------ ------------
Total 2,085,970
------------------------------------------------------------ ------------
FINANCE--INSURANCE--2.2%
------------------------------------------------------------
500,000 CIGNA Corp., 7.40%, 1/15/2003 520,975
------------------------------------------------------------
1,000,000 Continental Corp., 7.25%, 3/1/2003 1,039,480
------------------------------------------------------------
250,000 Ford Motor Credit Corp., 7.50%, 4/25/2011 260,030
------------------------------------------------------------ ------------
Total 1,820,485
------------------------------------------------------------ ------------
FINANCIAL SECURITIES--3.7%
------------------------------------------------------------
1,000,000 Salomon Smith Barney Holdings, Inc., 7.375%, 5/15/2007 1,067,820
------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., 7.20%, 10/15/2012 1,051,560
------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., 7.19%, Series MTN, 8/7/2012 1,032,920
------------------------------------------------------------ ------------
Total 3,152,300
------------------------------------------------------------ ------------
METALS--0.7%
------------------------------------------------------------
500,000 Reynolds Metals Co., 9.00%, 8/15/2003 558,185
------------------------------------------------------------ ------------
MULTI-INDUSTRY--1.0%
------------------------------------------------------------
750,000 Loews Corp., 8.875%, 4/15/2011 890,047
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------------
UTILITIES--5.4%
------------------------------------------------------------
$ 1,000,000 Gulf States Utilities Co., 6.77%, 8/1/2005 $ 1,008,210
------------------------------------------------------------
1,000,000 Pacific Gas & Electric Co., MTN, 7.75%, 6/30/2004 1,083,350
------------------------------------------------------------
1,500,000 Southwestern Bell Telephone Co., 7.375%, 5/1/2012 1,531,485
------------------------------------------------------------
1,000,000 West Penn Power Co., 7.875%, 12/1/2004 1,031,810
------------------------------------------------------------ ------------
Total 4,654,855
------------------------------------------------------------ ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $12,876,100) 13,662,712
------------------------------------------------------------ ------------
GOVERNMENT OBLIGATIONS--82.5%
- -------------------------------------------------------------------------------
FARM CREDIT SYSTEM FINANCIAL ASSISTANCE CORP.--3.0%
------------------------------------------------------------
2,000,000 5.875%, 1/21/2005 1,987,180
------------------------------------------------------------
500,000 9.20%, 9/27/2005 535,720
------------------------------------------------------------ ------------
Total 2,522,900
------------------------------------------------------------ ------------
FEDERAL HOME LOAN BANK--22.5%
------------------------------------------------------------
750,000 3.01%, Structured Note, 6/2/1998 750,000
------------------------------------------------------------
1,000,000 3.015%, Structured Note, 8/25/1998 995,639
------------------------------------------------------------
1,250,000 4.914%, Structured Note, 12/2/1998 1,243,486
------------------------------------------------------------
1,000,000 5.652%, Structured Note, 2/23/1999 1,000,950
------------------------------------------------------------
500,000 5.05%, Structured Note, 3/29/2000 498,480
------------------------------------------------------------
1,550,000 (a) 5.20%, 10/20/2000 1,548,775
------------------------------------------------------------
2,000,000 6.06%, 4/27/2004 1,993,620
------------------------------------------------------------
1,000,000 6.10%, 4/7/2003 999,590
------------------------------------------------------------
1,000,000 6.11%, 4/17/2003 998,750
------------------------------------------------------------
1,000,000 6.11%, 5/15/2003 1,000,440
------------------------------------------------------------
1,000,000 6.14%, 5/11/2005 997,440
------------------------------------------------------------
2,000,000 6.23%, 6/1/2005 2,000,200
------------------------------------------------------------
3,000,000 6.25%, 5/19/2004 3,003,960
------------------------------------------------------------
1,000,000 6.335%, 10/22/2002 1,002,025
------------------------------------------------------------
1,000,000 7.00%, 12/15/2009 1,004,730
------------------------------------------------------------ ------------
Total 19,038,085
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION--23.5%
------------------------------------------------------------
$ 3,000,000 5.00%, Structured Note, 3/10/2000 $ 2,986,290
------------------------------------------------------------
1,000,000 5.90%, 4/21/2000 1,000,270
------------------------------------------------------------
1,000,000 5.50%, Structured Note, 9/20/2000 1,000,530
------------------------------------------------------------
1,000,000 5.69%, 11/29/2000 996,000
------------------------------------------------------------
30,588 5.00%, Series 1194F, 11/15/2005 30,447
------------------------------------------------------------
1,000,000 8.00%, Series 1033G, 1/15/2006 1,038,650
------------------------------------------------------------
4,000,000 8.00%, Series 1171G, 11/15/2006 4,199,440
------------------------------------------------------------
1,000,000 7.00%, Series 1187H, 12/15/2006 1,020,140
------------------------------------------------------------
1,000,000 7.00%, Series 1341K, 8/15/2007 1,022,700
------------------------------------------------------------
84,445 6.50%, REMIC, Series 1422, 2/15/2007 84,445
------------------------------------------------------------
176,459 6.50%, Series 1452C, 12/15/2007 174,975
------------------------------------------------------------
400,000 7.00%, Series 1324VE, 8/15/2008 409,636
------------------------------------------------------------
1,000,000 7.00%, Series 1477ID, 11/15/2009 1,033,590
------------------------------------------------------------
1,470,000 7.00%, Series 1468M, 1/15/2010 1,527,962
------------------------------------------------------------
1,000,000 6.85%, Series 1808VB, 10/15/2010 1,001,176
------------------------------------------------------------
1,000,000 6.50%, Series 24VB, 7/25/2010 987,080
------------------------------------------------------------
1,333,000 7.00%, Series 1228H, 2/15/2022 1,367,071
------------------------------------------------------------ ------------
Total 19,880,402
------------------------------------------------------------ ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--5.3%
------------------------------------------------------------
2,500,000 6.65%, 3/8/2006 2,523,550
------------------------------------------------------------
1,500,000 Principal STRIPS, 7.16%-7.23%, 4/12/2006
(Callable 4/12/1999 @100) 1,429,410
------------------------------------------------------------
1,500,000 Federal National Mortgage Association, Medium Term Note,
Series B, 7/9/2012 509,700
------------------------------------------------------------ ------------
Total 4,462,660
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--REMIC--25.0%
------------------------------------------------------------
$ 1,000,000 7.00%, REMIC, Series 199479G, 11/25/2004 $ 1,025,320
------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199270H, 4/25/2006 1,008,580
------------------------------------------------------------
1,000,000 7.50%, REMIC, Series 199336J, 5/25/2006 1,043,100
------------------------------------------------------------
2,000,000 7.00%, REMIC, Series 1993139KD, 7/25/2006 2,039,274
------------------------------------------------------------
908,798 8.00%, REMIC, Series 1991150G, 11/25/2006 939,360
------------------------------------------------------------
1,000,000 7.25%, REMIC, Series 199250J, 12/25/2006 1,019,010
------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 199253G, 4/25/2007 1,016,880
------------------------------------------------------------
996,078 6.00%, REMIC, Series 199376B, 6/25/2008 964,134
------------------------------------------------------------
2,500,000 6.50%, REMIC, Series 199427CB, 9/25/2008 2,517,802
------------------------------------------------------------
1,500,000 6.50%, REMIC, Series 1993181O, 9/25/2008 1,482,120
------------------------------------------------------------
1,000,000 6.75%, REMIC, Series 199333H, 9/25/2008 1,012,630
------------------------------------------------------------
1,000,000 7.00%, REMIC, Series 1992124D, 4/25/2010 1,033,650
------------------------------------------------------------
1,000,000 6.50%, REMIC, Series 199668VC, 9/18/2010 1,017,250
------------------------------------------------------------
1,500,000 6.50%, REMIC, Series 199726AC, 3/25/2012 1,505,625
------------------------------------------------------------
2,500,000 6.50%, REMIC, Series 199767PL, 10/18/2012 2,493,895
------------------------------------------------------------
1,000,000 7.00%, REMIC, Series G9331H, 2/25/2013 1,037,230
------------------------------------------------------------ ------------
Total 21,155,860
------------------------------------------------------------ ------------
MORTGAGE BACKED SECURITIES--1.4%
------------------------------------------------------------
1,250,000 CMC Securities Corp. III Series 1994-C, Class A14, 5.41%,
3/25/2024 1,200,119
------------------------------------------------------------ ------------
STUDENT LOAN MARKETING ASSOCIATION--1.8%
------------------------------------------------------------
1,500,000 6.38%, 12/11/2001 1,530,344
------------------------------------------------------------ ------------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $69,024,267) 69,790,370
------------------------------------------------------------ ------------
U.S. TREASURY--0.3%
------------------------------------------------------------
250,000 United States Treasury Note, 5.75%, 8/15/2003 (IDENTIFIED
COST $239,336) 251,980
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------
MUTUAL FUND--3.0%
------------------------------------------------------------
2,557,222 Goldman Sachs Government Income Fund (AT NET ASSET VALUE) $ 2,557,222
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST $84,696,925)(B) $ 86,262,284
------------------------------------------------------------ ------------
</TABLE>
(a) Current rate and next reset date shown.
(b) The cost of investments for federal tax purposes amounts to $84,696,925. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,565,359 which is comprised of $1,868,870 appreciation and $303,511
depreciation at May 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($84,636,257) at May 31, 1998.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C> <C>
MTN -- Medium Term Note
REMIC -- Real Estate Mortgage Investment Conduit
Separate Trading of Registered Interest and Principal
STRIPS -- Securities
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$84,696,925) $86,262,284
- ------------------------------------------------------------------------
Cash 97
- ------------------------------------------------------------------------
Income receivable 782,314
- ------------------------------------------------------------------------ -----------
Total assets 87,044,695
- ------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------
Payable for investments purchased $2,000,000
- ------------------------------------------------------------
Payable for shares redeemed 16,693
- ------------------------------------------------------------
Income distribution payable 364,028
- ------------------------------------------------------------
Accrued expenses 27,717
- ------------------------------------------------------------ ----------
Total liabilities 2,408,438
- ------------------------------------------------------------------------ -----------
Net Assets for 8,294,391 shares outstanding $84,636,257
- ------------------------------------------------------------------------ -----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------
Paid in capital $86,603,642
- ------------------------------------------------------------------------
Net unrealized appreciation of investments 1,565,359
- ------------------------------------------------------------------------
Accumulated net realized loss on investments (3,715,768)
- ------------------------------------------------------------------------
Undistributed net investment income 183,024
- ------------------------------------------------------------------------ -----------
Total Net Assets $84,636,257
- ------------------------------------------------------------------------ -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------
Net Asset Value Per Share ($84,636,257 / 8,294,391 shares outstanding) $10.20
- ------------------------------------------------------------------------ -----------
Offering Price Per Share (100/95.50 of $10.20)* $10.68
- ------------------------------------------------------------------------ -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $5,810,075
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $635,044
- ----------------------------------------------------------------------
Administrative personnel and services fee 122,130
- ----------------------------------------------------------------------
Custodian fees 7,256
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 36,419
- ----------------------------------------------------------------------
Directors'/Trustees' fees 4,507
- ----------------------------------------------------------------------
Auditing fees 14,771
- ----------------------------------------------------------------------
Legal fees 1,646
- ----------------------------------------------------------------------
Portfolio accounting fees 45,252
- ----------------------------------------------------------------------
Share registration costs 11,747
- ----------------------------------------------------------------------
Printing and postage 12,390
- ----------------------------------------------------------------------
Insurance premiums 3,513
- ----------------------------------------------------------------------
Miscellaneous 6,034
- ---------------------------------------------------------------------- --------
Total expenses 900,709
- ----------------------------------------------------------------------
Waiver--
- -----------------------------------------------------------
Waiver of investment advisory fee (635,044)
- ----------------------------------------------------------- --------
Net expenses 265,665
- --------------------------------------------------------------------------------- ----------
Net investment income 5,544,410
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 331,506
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 1,919,242
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 2,250,748
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $7,795,158
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 5,544,410 $ 5,742,174
- ------------------------------------------------------------
Net realized gain (loss) on investments ($277,835 net gain and $85,572 net gain,
respectively, as computed for federal
tax purposes) 331,506 116,265
- ------------------------------------------------------------
Net change in unrealized appreciation/depreciation 1,919,242 1,114,464
- ------------------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 7,795,158 6,972,903
- ------------------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (5,361,386) (5,742,174)
- ------------------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 11,759,299 11,643,600
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 261,237 214,362
- ------------------------------------------------------------
Cost of shares redeemed (15,569,669) (15,220,474)
- ------------------------------------------------------------ ------------ ------------
Change in net assets resulting from share transactions (3,549,133) (3,362,512)
- ------------------------------------------------------------ ------------ ------------
Change in net assets (1,115,361) (2,131,783)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 85,751,618 87,883,401
- ------------------------------------------------------------ ------------ ------------
End of period $ 84,636,257 $ 85,751,618
- ------------------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
(1) ORGANIZATION
CCB 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 CCB 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.
Effective May 13, 1998, the Trust changed its name from 111 Corcoran Funds to
CCB Funds, and the Fund changed its name from 111 Corcoran Bond Fund to CCB Bond
Fund.
(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 tax are necessary.
At May 31, 1998, the Fund, for federal tax purposes, had a capital loss
carryforward of $3,721,652, 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
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
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 as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
---------------- -----------------
<S> <C>
2003 $2,534,586
2004 $1,187,066
</TABLE>
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.
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,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Shares sold 1,160,087 1,173,277
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 25,735 21,600
- ------------------------------------------------------------
Shares redeemed (1,539,772) (1,535,150)
- ------------------------------------------------------------ ---------- ----------
Net change resulting from share transactions (353,950) (340,273)
- ------------------------------------------------------------ ---------- ----------
</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.
<PAGE>
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
- --------------------------------------------------------------------------------
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.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--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.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1998, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------
PURCHASES $35,301,830
- ------------------------------------------------------------ -----------
SALES $36,066,197
- ------------------------------------------------------------ -----------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
CCB Funds (formerly, 111 Corcoran Funds)
(CCB Bond Fund (formerly, 111 Corcoran Bond Fund))
We have audited the accompanying statement of assets and liabilities of CCB Bond
Fund (an investment portfolio of CCB Funds, a Massachusetts business trust),
including the schedule of portfolio investments, as of May 31, 1998, the related
statement of operations for the year then ended, and the statement of changes in
net assets and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund'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, 1998, 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 CCB
Bond Fund, an investment portfolio of CCB Funds, as of May 31, 1998, 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 its financial highlights
for the periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 9, 1998
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CCB Bond Fund 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
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Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue
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
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
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Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
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Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
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</TABLE>
<PAGE>
CCB * FUNDS
Central Carolina Bank
(formerly, 111 Corcoran Funds)
CCB
Bond Fund
(formerly, 111 Corcoran Bond Fund)
Prospectus
A Diversified Portfolio of
CCB Funds, an Open-End,
Management Investment Company
July 31, 1998
Federated Securities Corp. is the distributor of the fund.
Cusip 682365200
2041604A (7/98)
[LOGO]
CCB BOND FUND
(FORMERLY, 111 CORCORAN BOND FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY, 111 CORCORAN FUNDS))
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of CCB Bond Fund (the "Fund"), a portfolio of CCB Funds (the "Trust") dated
July 31, 1998. 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.
CCB BOND FUND
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated July 31, 1998
[GRAPHIC OMITTED]
Cusip 682965200
2041604B (7/98)
<PAGE>
I
TABLE OF CONTENTS
<PAGE>
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
Portfolio Turnover 6
Investment Limitations 6
CCB FUNDS MANAGEMENT 8
Fund Ownership 12
Trustees' Compensation 12
Trustee Liability 12
INVESTMENT ADVISORY SERVICES 13
Adviser to the Fund 13
Advisory Fees 13
BROKERAGE TRANSACTIONS 13
OTHER SERVICES 13
Trust Administration 13
Custodian and Portfolio Accountant13
Transfer Agent 14
Independent Public Accountants 14
PURCHASING SHARES 14
Additional Purchase Information
--Payment in Kind 14
Conversion to Federal Funds 14
DETERMINING NET ASSET VALUE 14
Determining Market Value of Securities 14
EXCHANGE PRIVILEGE 15
REDEEMING SHARES 15
Redemption in Kind 15
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 16
The Fund's Tax Status 16
Shareholders' Tax Status 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
APPENDIX 19
<PAGE>
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in CCB Funds, which was established as a Massachusetts
business trust under a Declaration of Trust dated December 11, 1991. On May 13,
1998, the Board of Trustees ("Trustees") voted to change the name of the Fund
from "111 Corcoran Bond Fund" to "CCB Bond Fund," and the name of the Trust from
"111 Corcoran Funds" to "CCB Funds."
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 ("S&P); or AAA, AA, A or BBB by Fitch IBCA, Inc. ("Fitch"));
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;
o Farmers Home Administration;
o Federal Home Loan Banks;
o Federal Home Loan Mortgage Corporation;
o Federal National Mortgage Association;
o Government National Mortgage Association; and
o Student Loan Marketing Association.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are
any securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on
resale under federal securities law. The Fund will not invest more than
15% 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 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, 1998 and 1997, the portfolio
turnover rates for the Fund were 43% and 11%, 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 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 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.
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 CCB FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with CCB Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chief Executive Officer and Director or Trustee of the Funds; Chairman and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Director or Trustee of the Funds; President, Investment Properties
Corporation; Senior Vice-President, John R. Wood and Associates, Inc., Realtors;
Partner or Trustee in private real estate ventures in Southwest Florida;
formerly, President, Naples Property Management, Inc. and Northgate Village
Development Corporation.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; Director and Member of the Executive
Committee, Michael Baker, Inc.; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc.; Director, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund; Chaiman, Pittsburgh
Civic Light Opera.
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director, The Emerging
Germany Fund, Inc.; formerly, President, Boston Stock Exchange, Inc.; Regional
Administrator, United States Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center Downtown;
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
formerly, Member, National Board of Trustees, Leukemia Society of America.
Edward L. Flaherty, Jr., Esq.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney, Of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation ; Director, VISA USA and VISA International; Chairman
and Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer and Trustee
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
- ------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; President and Trustee, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; Director or Trustee of some of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* THIS TRUSTEE IS DEEMED TO BE AN "INTERESTED PERSON" AS DEFINED IN THE
INVESTMENT COMPANY ACT OF 1940.
@ MEMBER OF THE EXECUTIVE COMMITTEE. THE EXECUTIVE COMMITTEE OF THE BOARD OF
TRUSTEES HANDLES THE RESPONSIBILITIES OF THE BOARD BETWEEN MEETINGS OF THE
BOARD.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: CCB Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
WesMark Funds; WCT Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 7, 1998, the following shareholder of record owned 5% or more of the
shares of the Fund: Central Carolina Bank & Trust Company, Durham, North
Carolina, owned approximately 8,076,600 shares (97.18%). TRUSTEES' COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $1,237.52
Trustee
John T. Conroy, Jr. $1,361.48
Trustee
William J. Copeland $1,361.48
Trustee
James E. Dowd, Esq. $1,361.48
Trustee
Lawrence D. Ellis, M.D. $1,237.52
Trustee
Edward L. Flaherty, Jr., Esq. $1,361.48
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $1,237.52
Trustee
John E. Murray, Jr., J.D., S.J.D. $1,237.52
Trustee
Wesley W. Posvar $1,237.52
Trustee
Marjorie P. Smuts $1,237.52
Trustee
* Information is furnished for the fiscal year ended May 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of 3
portfolios.
TRUSTEE LIABILITY
CCB 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, 1998,
1997, and 1996, the Adviser earned advisory fees of $635,044, $661,225, and
$662,310, respectively, all of which were voluntarily waived.
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 years ended May 31, 1998, 1997, and 1996, 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, Inc.
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended May 31, 1998, 1997, and
1996, the following administrative services fees were incurred on behalf of the
Fund of $122,130, $130,476, and $132,832.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
Fifth Third Bank, Cincinnati, Ohio, 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.
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 CCB Funds on behalf
of the Fund. To protect shareholders of the Fund, CCB Funds has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders for such acts or obligations of CCB Funds. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument CCB Funds or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for CCB Funds'
obligations on behalf of the Fund, CCB Funds is required to use its property to
protect or compensate the shareholder. On request, CCB Funds will defend any
claim made and pay any judgment against a shareholder for any act or obligation
of CCB Funds on behalf of the Fund. Therefore, financial loss resulting from
liability as a shareholder of the Fund will occur only if CCB 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 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 and five-year periods
ended May 31, 1998, and for the period from July 15, 1992 (date of inception) to
May 31, 1998, were 4.57%, 5.91%, and 6.11%, 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, 1998, was 5.90%. 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 BOND 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 rating of BBB, a minimum Moody's Investors Service, Inc. rating of
Baa, or a minimum Fitch IBCA, 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
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 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.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
<PAGE>
APPENDIX
STANDARD AND POOROSSTANDARD & POOR'S ("S&P") 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 IBCA, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally 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 POOROS RATINGS GROUPSTANDARD & POOR'S 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 IBCA, 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.
<PAGE>
CCB FUNDS
Central Carolina Bank
(formerly, 111 Corcoran Funds)
CCB
North Carolina
Municipal
Securities Fund
(formerly, 111 Corcoran North Carolina
Municipal Securities Fund)
Prospectus
A Non-Diversified Portfolio of
CCB Funds, an Open-End,
Management Investment Company
July 31, 1998
Federated Securities Corp. is the distributor of the fund.
Cusip 682365101
2041605A (7/98) [logo]
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY 111 CORCORAN FUNDS))
PROSPECTUS
The shares of CCB North Carolina Municipal Securities Fund (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio in CCB
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,
1998 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated July 31, 1998
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 4
Acceptable Investments 4
Investment Limitations 9
CCB FUNDS INFORMATION 9
- ------------------------------------------------------
Management of CCB Funds 9
Distribution of Fund Shares 10
Administration of the Fund 10
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 12
Reducing the Sales Charge 13
Systematic Investment Program 14
Confirmations and Account Statements 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
- ------------------------------------------------------
<PAGE>
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........................................ 0.51%
Total Fund Operating Expenses(2)....................... 0.51%
</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) The Total Fund Operating Expense in the table above are based on expenses
would have been 1.26%, absent the voluntary waiver of the management fee.
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 "CCB 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 charge. As noted in the
table above, the Fund charges no redemption fees....... $50 $61 $72 $107
</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.
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 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,
----------------------------------------------------------------
1998 1997 1996 1995 1994 1993(A)
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57 $ 10.34 $ 10.44 $ 10.17 $ 10.36 $ 10.00
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.45 0.49 0.49 0.48 0.47 0.37
- ------------------------------------
Net realized and unrealized gain
(loss) on investments 0.32 0.23 (0.10) 0.27 (0.18) 0.36
- ------------------------------------ ------- ------- ------- ------- ------- -------
Total from investment operations 0.77 0.72 0.39 0.75 0.29 0.73
- ------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------
Distributions from net investment
income (0.45) (0.49) (0.49) (0.48) (0.47) (0.37)
- ------------------------------------
Distributions from net realized gain
on investments -- -- -- -- (0.01) --
- ------------------------------------ ------- ------- ------- ------- ------- -------
Total distributions (0.45) (0.49) (0.49) (0.48) (0.48) (0.37)
- ------------------------------------ ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.89 $ 10.57 $ 10.34 $ 10.44 $ 10.17 $ 10.36
- ------------------------------------ ------- ------- ------- ------- ------- -------
TOTAL RETURN (B) 7.77% 7.13% 3.72% 7.71% 2.68% 7.37%
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 0.51% 0.63% 0.52% 0.57% 0.69% 0.70%*
- ------------------------------------
Net investment income 4.50% 4.60% 4.73% 4.82% 4.42% 4.51%*
- ------------------------------------
Expense waiver/reimbursement (c) 0.75% 0.75% 0.75% 0.75% 0.75% 0.99%*
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period (000
omitted) $36,013 $35,892 $36,872 $39,803 $45,864 $28,152
- ------------------------------------
Portfolio turnover 41% 30% 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)
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
CCB Funds was established as a Massachusetts business trust under a Declaration
of Trust dated December 11, 1991. The Declaration of Trust permits CCB Funds to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. On May 13, 1998, the Board of Trustees
("Trustees") voted to change the name of the Fund from "111 Corcoran North
Carolina Municipal Securities Fund" to "CCB North Carolina Municipal Securities
Fund" and the name of the Trust from "111 Corcoran Funds" to "CCB Funds". This
prospectus relates only to CCB Funds' North Carolina municipal securities
portfolio, known as CCB North Carolina Municipal Securities Fund. The Fund is
for trust clients of Central Carolina Bank and Trust Company ("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.
YEAR 2000 STATEMENT. Like other mutual funds and business organizations
worldwide, the Fund's service providers (among them, the adviser, distributor,
administrator and transfer agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Fund and its service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and believe that systems will be year 2000 compliant
when required. Analysis continues regarding the financial impact of instituting
a year 2000 compliant program on the Fund's operations.
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
<PAGE>
changed by 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.
<PAGE>
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 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.
<PAGE>
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.
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.
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. <PAGE>
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 <PAGE>
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
<PAGE>
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.
CCB FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CCB FUNDS
BOARD OF TRUSTEES. CCB Funds are managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of CCB Funds and for
exercising all of the powers of CCB 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 CCB 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 0.75% of the Fund's average daily net
assets. The investment advisory contract allows the
<PAGE>
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, 1998, the
Trust Division managed assets in excess of $2.4 billion. The Trust Division
manages two commingled funds with assets of approximately $260 million. The
Bank has managed CCB Funds since their inception in July, 1992. As of June
30, 1998, total assets in CCB Funds were $345 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, Inc.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, Inc., provides the Fund with the administrative personnel
and services necessary to operate the Fund.
<PAGE>
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>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% 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
1-800-618-8573. 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.
<PAGE>
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 Jr. 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.
<PAGE>
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
<PAGE>
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.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions) In addition, shareholders will receive periodic
statements reporting all account activity, including dividends paid. The Fund
will not issue share certificates.
DIVIDENDS
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 Fifth Third 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 CCB Funds, which consists of
the Fund, CCB Bond Fund, and CCB Equity Fund. Shareholders of the Fund have
access to CCB Bond Fund and CCB 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, Inc. serve as investment adviser and
which are distributed by Federated Securities Corp., a subsidiary of Federated
Investors, Inc. ("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.
<PAGE>
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.
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: CCB Funds, c/o Federated Shareholder Services
Company, P.O. Box 8609, Boston,
<PAGE>
Massachusetts, 02266. 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:
CCB Funds, c/o Federated Shareholder Services Company, P.O. Box 8609, Boston,
Massachusetts, 02266. 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.
<PAGE>
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, other than retirement accounts subject to required
minimum distributions. 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.
<PAGE>
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 CCB 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 7, 1998, Central
Carolina Bank, acting in various capacities for numerous accounts, was the owner
of record of 2,946,914 shares 86.45% of the Fund.
As a Massachusetts business trust, CCB Funds are not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in CCB 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
CCB 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 CCB 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.
<PAGE>
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 CCB 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
PORTFOLIO OF INVESTMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- --------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
MUNICIPALS SECURITIES--95.8%
- ---------------------------------------------------------------------------
NORTH CAROLINA--95.8%
---------------------------------------------------------
$ 500,000 Buncombe County, NC, 4.75% Certificate Participation
Refunding Bonds, (AMBAC INS), 12/1/2011 AAA $ 497,045
---------------------------------------------------------
500,000 Cabarrus County, NC, 5.30% GO UT, (MBIA Insurance
Corporation INS), 2/1/2010 AAA 532,620
---------------------------------------------------------
250,000 Catawba County, NC, 5.70% GO UT Bonds, 6/1/2003 AA- 267,935
---------------------------------------------------------
500,000 Catawba County, NC, 5.75% GO UT Bonds, 6/1/2007 AA- 542,440
---------------------------------------------------------
500,000 Catawba County, NC, 5.85% Hospital Refunding Revenue
Bond, (Catawba Memorial Hospital)/(AMBAC INS)/ (Original
Issue Yield: 5.90%), 10/1/2004 AAA 540,525
---------------------------------------------------------
500,000 Catawba County, NC, 5.95% Hospital Refunding Revenue
Bonds, (Catawba Memorial Hospital)/(AMBAC INS)/ (Original
Issue Yield: 6.00%), 10/1/2005 AAA 540,415
---------------------------------------------------------
500,000 Catawba County, NC, 6.20% Revenue Bonds, (Catawba
Memorial Hospital)/(AMBAC INS)/(Original Issue Yield:
6.25%), 10/1/2009 AAA 547,395
---------------------------------------------------------
500,000 Charlotte, NC, 5.30% GO UT Bonds, 4/1/2008 AAA 532,785
---------------------------------------------------------
1,000,000 Charlotte, NC, 5.30% GO UT Public Improvement Bonds,
4/1/2008 AAA 1,065,570
---------------------------------------------------------
500,000 Charlotte, NC, 5.50% GO UT Refunding Bonds (Series A),
7/1/2004 AAA 529,935
---------------------------------------------------------
500,000 Chatham County, NC, 5.40% GO UT Bonds, 4/1/2007 A+ 535,965
---------------------------------------------------------
500,000 Chatham County, NC, 5.40% GO UT Bonds, 4/1/2010 A+ 534,140
---------------------------------------------------------
465,000 Chatham County, NC, 5.25% GO UT Refunding Bonds,
(Original Issue Yield: 5.35%), 5/1/2010 A+ 492,305
---------------------------------------------------------
500,000 Chatham County, NC, 5.40% GO UT, (Original Issue Yield:
5.50%), 4/1/2012 A+ 527,815
---------------------------------------------------------
</TABLE>
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- --------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
NORTH CAROLINA--CONTINUED
---------------------------------------------------------
$1,000,000 Craven County, NC, 5.50% GO UT Bonds, (MBIA INS),
6/1/2010 AAA $ 1,076,400
---------------------------------------------------------
480,000 Cumberland County, NC, 5.00% GO UT, (MBIA INS)/ (Original
Issue Yield: 5.15%), 3/1/2015 AAA 483,221
---------------------------------------------------------
470,000 Duplin County, NC, 5.30% GO UT Bonds, (MBIA INS)/
(Original Issue Yield: 5.40%), 4/1/2007 AAA 496,687
---------------------------------------------------------
500,000 Durham & Wake Counties Special Airport District, NC, 5.75% GO
UT Refunding Bonds, (Original Issue Yield:
5.80%), 4/1/2002 AAA 530,455
---------------------------------------------------------
250,000 Fayetteville, NC Public Works Commission, 5.90% Revenue Bonds
(Series B), (FSA INS)/(Original Issue Yield:
6.00%), 3/1/2007 AAA 268,430
---------------------------------------------------------
500,000 Fayetteville, NC Public Works Commission, 5.40% Revenue
Bonds, (AMBAC INS)/(Original Issue Yield: 5.50%),
3/1/2009 AAA 531,190
---------------------------------------------------------
500,000 Forsyth County, NC, 4.75% GO UT, (Original Issue Yield:
5.00%), 2/1/2013 AAA 498,920
---------------------------------------------------------
750,000 Gaston County, NC, 5.70% GO UT, 3/1/2004 AAA 808,523
---------------------------------------------------------
500,000 Gastonia, NC, 5.50% GO UT, (MBIA INS)/(Original Issue
Yield: 5.55%), 5/1/2013 AAA 533,195
---------------------------------------------------------
500,000 Guilford County, NC, 5.30% GO UT Bonds, (Original Issue
Yield: 5.40%), 5/1/2010 AA+ 533,765
---------------------------------------------------------
500,000 Guilford County, NC, 5.30% GO UT Bonds, 5/1/2009 AA+ 534,425
---------------------------------------------------------
500,000 Guilford County, NC, 5.40% GO UT Bonds, (Original Issue
Yield: 5.55%), 4/1/2009 AA+ 528,975
---------------------------------------------------------
500,000 Guilford County, NC, 5.40% GO UT, (Original Issue Yield:
5.55%), 5/1/2012 AA+ 530,650
---------------------------------------------------------
575,000 High Point, NC, 5.60% Revenue Bonds, (Original Issue
Yield: 5.85%), 3/1/2014 AA 611,426
---------------------------------------------------------
500,000 Iredell County, NC, 5.50% Certificates of Participation,
(FGIC INS)/(Original Issue Yield: 5.60%), 6/1/2001 AAA 520,320
---------------------------------------------------------
</TABLE>
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- --------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
NORTH CAROLINA--CONTINUED
---------------------------------------------------------
$ 350,000 Iredell County, NC, 6.125% Certificates of Participation,
(FGIC INS)/(Original Issue Yield: 6.23%), 6/1/2007 AAA $ 379,715
---------------------------------------------------------
500,000 Johnston County, NC, 5.00% GO UT, 5/1/2010 AAA 519,110
---------------------------------------------------------
500,000 Mecklenburg County, NC, 5.90% GO UT Refunding Bonds,
(Original Issue Yield: 6.05%), 3/1/2004 AAA 534,390
---------------------------------------------------------
350,000 Mecklenburg County, NC, 5.50% GO UT, (Original Issue
Yield: 5.60%), 4/1/2011 AAA 371,872
---------------------------------------------------------
500,000 Mooresville, NC Grade School District Facilities Corp.,
6.30% Certificates of Participation, (AMBAC
INS)/(Original Issue Yield: 6.348%), 10/1/2009 AAA 549,360
---------------------------------------------------------
500,000 Morganton, NC, 5.60% Water & Sewer GO UT Revenue Bonds,
(FGIC INS), 6/1/2007 AAA 540,780
---------------------------------------------------------
500,000 Morganton, NC, 5.60% Water & Sewer GO UT Revenue Bonds,
(FGIC INS), 6/1/2008 AAA 541,365
---------------------------------------------------------
1,000,000 New Hanover County, NC, (Project R-5) 5.40% GO UT Bonds,
(Original Issue Yield: 5.45%), 3/1/2009 A+ 1,067,870
---------------------------------------------------------
500,000 New Hanover County, NC, 5.30% GO UT Bonds, (Original
Issue Yield: 5.50%), 5/1/2014 A+ 520,600
---------------------------------------------------------
500,000 New Hanover County, NC, 5.50% GO UT Bonds, (Original
Issue Yield: 5.70%), 3/1/2012 A+ 529,295
---------------------------------------------------------
750,000 North Carolina Educational Facilities Finance Agency,
6.625% Revenue Bonds, (Duke University), 10/1/2008 AA+ 821,580
---------------------------------------------------------
200,000 North Carolina Medical Care Commission Hospital, 5.95%
Revenue Bonds, (Presbyterian Health Services Corp)/
(Original Issue Yield: 6.00%), 10/1/2007 AA 217,954
---------------------------------------------------------
500,000 North Carolina Medical Care Commission Hospital, 6.25%
Revenue Refunding Bonds, (Rex Hospital)/(Original Issue
Yield: 6.33%), 6/1/2017 A+ 555,280
---------------------------------------------------------
1,750,000 North Carolina Municipal Power Agency No. 1, 10.50%
Revenue Bonds, (Catawba Electric)/(ETM), 1/1/2010 AAA 2,416,803
---------------------------------------------------------
</TABLE>
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- --------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
NORTH CAROLINA--CONTINUED
---------------------------------------------------------
$ 500,000 North Carolina Municipal Power Agency No. 1, 5.25%
Revenue Refunding Bonds, (Catawba Electric)/(AMBAC
INS)/(Original Issue Yield: 5.55%), 1/1/2008 AAA $ 528,725
---------------------------------------------------------
500,000 North Carolina Municipal Power Agency No. 1, 5.75%
Revenue Refunding Bonds, (Catawba Electric)/(AMBAC
INS)/(Original Issue Yield: 5.80%), 1/1/2002 AAA 526,400
---------------------------------------------------------
500,000 North Carolina State, 5.00% GO UT, 6/1/2004 AAA 524,010
---------------------------------------------------------
500,000 North Carolina State, 5.10% GO UT, 3/1/2008 AAA 529,120
---------------------------------------------------------
1,000,000 Pitt County, NC, 5.10% GO UT (Original Issue Yield:
5.20%), 2/1/2006 AA- 1,045,770
---------------------------------------------------------
500,000 Randolph County, NC, 6.20% GO UT Bonds, 5/1/2005 A+ 544,160
---------------------------------------------------------
750,000 Rocky Mount, NC, 5.00% GO UT Refunding Bonds, 2/1/2009 AAA 785,348
---------------------------------------------------------
500,000 Rowan County, NC, 5.60% GO UT Bonds, (MBIA INS), 4/1/2009 AAA 540,275
---------------------------------------------------------
500,000 Stokes County, NC, 4.90% GO UT Bonds, (FGIC INS),
6/1/2012 AAA 509,145
---------------------------------------------------------
1,000,000 Transylvania County, NC, 4.75% GO UT Bonds, (MBIA INS),
2/1/2011 AAA 1,006,570
---------------------------------------------------------
500,000 Union County, NC, (Series B) 5.20% GO UT, (MBIA INS)/
(Original Issue Yield: 5.35%), 6/1/2012 AAA 519,925
---------------------------------------------------------
600,000 Wake County, NC Industrial Facilities & PCFA, 6.90%
Revenue Bonds, (Carolina Power & Light Co.), 4/1/2009 A 639,396
---------------------------------------------------------
500,000 Winston-Salem, NC, 5.40% GO UT Bonds, (Original Issue
Yield: 5.30%), 6/1/2009 AAA 536,295
---------------------------------------------------------
500,000 Winston-Salem, NC, 5.40% GO UT Bonds, (Original Issue
Yield: 5.50%), 6/1/2011 AAA 531,365
--------------------------------------------------------- -----------
TOTAL MUNICIPAL SECURITIES (IDENTIFIED COST $33,086,270) 34,505,950
--------------------------------------------------------- -----------
</TABLE>
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES RATING* VALUE
- ---------- --------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
MUTUAL FUND SHARES--3.1%
- ---------------------------------------------------------------------------
1,114,625 Blackrock Municipal Money Market Fund $ 1,114,625
---------------------------------------------------------
5,000 North Carolina Daily Municipal Fund 5,000
--------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 1,119,625
--------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $34,205,895(A) $35,625,575
--------------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $34,205,895. The
net unrealized appreciation/depreciation of investments on a federal tax
basis amounts to $1,419,680 which is comprised of $1,424,898 appreciation
and $5,218 depreciation at May 31, 1998.
* 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
($36,012,693) at May 31, 1998.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation COL -- Collateralized ETM
- -- Escrowed to Maturity FGIC -- Financial Guaranty Insurance Company FSA --
Financial Security Assurance GO -- General Obligation INS -- Insured LOC --
Letter of Credit MBIA -- Municipal Bond Investors Assurance PCFA -- Pollution
Control Finance Authority UT -- Unlimited Tax </TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$34,205,895) $35,625,575
- ----------------------------------------------------------------------
Cash 92
- ----------------------------------------------------------------------
Income receivable 514,679
- ---------------------------------------------------------------------- -----------
Total assets 36,140,346
- ----------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------
Income distribution payable $118,974
- ------------------------------------------------------------
Accrued expenses 8,679
- ------------------------------------------------------------ --------
Total liabilities 127,653
- ---------------------------------------------------------------------- -----------
Net Assets for 3,307,223 shares outstanding $36,012,693
- ---------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------
Paid in capital $34,350,838
- ----------------------------------------------------------------------
Net unrealized appreciation of investments 1,419,680
- ----------------------------------------------------------------------
Accumulated net realized gain on investments 242,175
- ---------------------------------------------------------------------- -----------
Total Net Assets $36,012,693
- ---------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ----------------------------------------------------------------------
Net Asset Value Per Share ($36,012,693 / 3,307,223 shares outstanding) $ 10.89
- ---------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $10.89)* $ 11.40
- ---------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $1,846,012
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $ 276,004
- ---------------------------------------------------------------------
Administrative personnel and services fee 53,099
- ---------------------------------------------------------------------
Custodian fees 3,429
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 36,000
- ---------------------------------------------------------------------
Directors'/Trustees' fees 3,500
- ---------------------------------------------------------------------
Auditing fees 13,098
- ---------------------------------------------------------------------
Legal fees 2,140
- ---------------------------------------------------------------------
Portfolio accounting fees 52,875
- ---------------------------------------------------------------------
Share registration costs 11,000
- ---------------------------------------------------------------------
Printing and postage 10,000
- ---------------------------------------------------------------------
Insurance premiums 2,800
- ---------------------------------------------------------------------
Miscellaneous 1,500
- --------------------------------------------------------------------- ---------
Total expenses 465,445
- ---------------------------------------------------------------------
Waiver--
- ---------------------------------------------------------------------
Waiver of investment advisory fee (276,004)
- --------------------------------------------------------------------- ---------
Net expenses 189,441
- --------------------------------------------------------------------------------- ----------
Net investment income 1,656,571
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 562,076
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 543,069
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 1,105,145
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $2,761,716
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 1,656,571 $ 1,681,826
- ------------------------------------------------------------
Net realized gain (loss) on investments ($562,076 net gain and $8,210 net gain,
respectively, as computed for federal
tax purposes) 562,076 8,210
- ------------------------------------------------------------
Net change in unrealized appreciation/depreciation 543,069 816,069
- ------------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 2,761,716 2,506,105
- ------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (1,656,571) (1,681,826)
- ------------------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 5,401,737 5,209,295
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 169,069 203,101
- ------------------------------------------------------------
Cost of shares redeemed (6,554,865) (7,217,065)
- ------------------------------------------------------------ ----------- -----------
Change in net assets resulting from share transactions (984,059) (1,804,669)
- ------------------------------------------------------------ ----------- -----------
Change in net assets 121,086 (980,390)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 35,891,607 36,871,997
- ------------------------------------------------------------ ----------- -----------
End of period $36,012,693 $35,891,607
- ------------------------------------------------------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
(1) ORGANIZATION
CCB 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 CCB 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.
Effective May 13, 1998, the Trust changed its name from 111 Corcoran Funds to
CCB Funds, and the Fund changed its name from 111 Corcoran North Carolina
Municipal Securities Fund to CCB North Carolina Municipal Securities Fund.
(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 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
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 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.
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,
--------------------
1998 1997
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
Shares sold 501,030 496,835
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 15,643 19,318
- ------------------------------------------------------------
Shares redeemed (605,325) (687,147)
- ------------------------------------------------------------ -------- --------
Net change resulting from share transactions (88,652) (170,994)
- ------------------------------------------------------------ -------- --------
</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.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--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.
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
- --------------------------------------------------------------------------------
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.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1998, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------
PURCHASES $14,431,582
- ------------------------------------------------------------ -----------
SALES $15,458,661
- ------------------------------------------------------------ -----------
</TABLE>
(7) 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, 1998, 32.8% 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 percentage of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 14.5% of total investments.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
CCB Funds (formerly, 111 Corcoran Funds)
(CCB North Carolina Municipal Securities Fund (formerly, 111 Corcoran North
Carolina Municipal Securities Fund))
We have audited the accompanying statement of assets and liabilities of CCB
North Carolina Municipal Securities Fund (an investment portfolio of CCB Funds,
a Massachusetts business trust), including the schedule of portfolio
investments, as of May 31, 1998, the related statement of operations for the
year then ended, and the statement of changes in net assets and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund'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, 1998, 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 CCB
North Carolina Municipal Securities Fund, an investment portfolio of CCB Funds,
as of May 31, 1998, 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 its financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 9, 1998
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CCB North Carolina Municipal Securities Fund 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
- -----------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------
Investment Adviser
Central Carolina Bank and Trust Company 111 Corcoran Street
Durham, North Carolina 27702
- -----------------------------------------------------------------------------------------------------------------
Custodian
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -----------------------------------------------------------------------------------------------------------------
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>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
(FORMERLY, 111 CORCORAN NORTH CAROLINA MUNICIPAL SECURITIES FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY, 111 CORCORAN FUNDS))
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of CCB North Carolina Municipal Securities Fund (the "Fund"), a portfolio
of CCB Funds (the "Trust") dated July 31, 1998. 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.
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated July 31, 1998
[GRAPHIC OMITTED]
Cusip 682365101
2041605B (7/98)
<PAGE>
I
TABLE OF CONTENTS
<PAGE>
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Portfolio Turnover 5
Investment Limitations 5
CCB FUNDS MANAGEMENT 7
-
Fund Ownership 11
Trustees' Compensation 11
Trustee Liability 12
INVESTMENT ADVISORY SERVICES 12
--
Adviser to the Fund 12
Advisory Fees 12
BROKERAGE TRANSACTIONS 12
OTHER SERVICES 13
Trust Administration 13
Custodian and Portfolio Accountant 13
Transfer Agent 13
Independent Public Accountants 13
PURCHASING SHARES 13
Additional Purchase Information
--Payment in Kind 13
Conversion to Federal Funds 14
DETERMINING NET ASSET VALUE 14
--
Valuing Municipal Bonds 14
Use of Amortized Cost 14
EXCHANGE PRIVILEGE 14
REDEEMING SHARES 14
Redemption in Kind 15
MASSACHUSETTS PARTNERSHIP LAW 15
TAX STATUS 15
--
The Fund's Tax Status 15
Shareholders' Tax Status 15
TOTAL RETURN 16
YIELD 16
TAX-EQUIVALENT YIELD 16
Tax-Equivalency Table 16
PERFORMANCE COMPARISONS 17
APPENDIX 18
<PAGE>
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in CCB Funds (the "Trust"), which was established as a
Massachusetts business trust under a Declaration of Trust dated December 11,
1991. On May 13, 1998, the Board of Trustees ("Trustees") voted to change the
name of the Fund from "111 Corcoran North Carolina Municipal Securities Fund" to
"CCB North Carolina Municipal Securities Fund" and the name of the Trust from
"111 Corcoran Funds" to "CCB Funds".
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide 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 Trustees have
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
15% 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 15% 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, 1998
and 1997, the portfolio turnover rates for the Fund were 41% and 30%%,
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.
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.
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."
CCB FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with CCB Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chief Executive Officer and Director or Trustee of the Funds; Chairman and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.
<PAGE>
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Director or Trustee of the Funds; President, Investment Properties
Corporation; Senior Vice-President, John R. Wood and Associates, Inc., Realtors;
Partner or Trustee in private real estate ventures in Southwest Florida;
formerly, President, Naples Property Management, Inc. and Northgate Village
Development Corporation.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; Director and Member of the Executive
Committee, Michael Baker, Inc.; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc.; Director, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund; Chaiman, Pittsburgh
Civic Light Opera.
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director, The Emerging
Germany Fund, Inc.; formerly, President, Boston Stock Exchange, Inc.; Regional
Administrator, United States Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center Downtown;
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
formerly, Member, National Board of Trustees, Leukemia Society of America.
Edward L. Flaherty, Jr., Esq.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney, Of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation ; Director, VISA USA and VISA International; Chairman
and Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer and Trustee
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; President and Trustee, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; Director or Trustee of some of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* THIS TRUSTEE IS DEEMED TO BE AN "INTERESTED PERSON" AS DEFINED IN THE
INVESTMENT COMPANY ACT OF 1940.
@ MEMBER OF THE EXECUTIVE COMMITTEE. THE EXECUTIVE COMMITTEE OF THE BOARD OF
TRUSTEES HANDLES THE RESPONSIBILITIES OF THE BOARD BETWEEN MEETINGS OF THE
BOARD.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: CCB Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
WesMark Funds; WCT Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 7, 1998, the following shareholder of record owned 5% or more of the
outstanding shares of the Fund: Central Carolina Bank & Trust Company, Durham,
North Carolina, owned approximately 2,946,914 shares (86.45%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $1,238
Trustee
John T. Conroy, Jr. $1,361
Trustee
William J. Copeland $1,361
Trustee
James E. Dowd, Esq. $1,361
Trustee
Lawrence D. Ellis, M.D. $1,238
Trustee
Edward L. Flaherty, Jr., Esq. $1,361
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $1,238
Trustee
John E. Murray, Jr., J.D., S.J.D. $1,238
Trustee
Wesley W. Posvar $1,238
Trustee
Marjorie P. Smuts $1,238
Trustee
* Information is furnished for the fiscal year ended May 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised
of 3 portfolios.
TRUSTEE LIABILITY
CCB 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, 1998, 1997, and 1996, the Adviser earned
advisory fees of $276,004, $273,979, and $279,921, respectively, all of which
were voluntarily waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
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, 1998, 1997 and 1996, 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, Inc.,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended May 31, 1998, 1997 and
1996, the following administrative fees were incurred on behalf of the Fund of
$53,099, $54,052, and $55,986, none of which were waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
Fifth Third Bank, Cincinnati, Ohio, 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.
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 CCB Funds on behalf
of the Fund. To protect shareholders of the Fund, CCB Funds has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders for such acts or obligations of CCB Funds. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument CCB Funds or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for CCB Funds'
obligations on behalf of the Fund, CCB Funds is required to use its property to
protect or compensate the shareholder. On request, CCB Funds will defend any
claim made and pay any judgment against a shareholder for any act or obligation
of CCB Funds on behalf of the Fund. Therefore, financial loss resulting from
liability as a shareholder of the Fund will occur only if CCB 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 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 and five-year periods
ended May 31, 1998, and for the period from July 22, 1992 (date of inception) to
May 31, 1998, were 2.90%, 4.81% and 5.38%, 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, 1998, was 3.61%. 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, 1998,
was 5.01%. 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 1998
STATE OF NORTH CAROLINA
TAX BRACKET:
FEDERAL: 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE: 22.00% 35.00% 38.75% 43.75% 47.35%
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.92% 2.31% 2.45% 2.67% 2.85%
2.00% 2.56% 3.08% 3.27% 3.56% 3.80%
2.50% 3.21% 3.85% 4.08% 4.44% 4.75%
3.00% 3.85% 4.62% 4.90% 5.33% 5.70%
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% 8.98% 9.78% 10.45%
6.00% 7.69% 9.23% 9.80% 10.67% 11.40%
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 charge.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
APPENDIX
STANDARD AND POOR'S ("S&P") 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 IBCA, INC. ("FITCH")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.
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY, 111 CORCORAN FUNDS))
PROSPECTUS
The shares of CCB Equity Fund (the "Fund") offered by this prospectus represent
interests in a diversified portfolio in CCB 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,
1998, 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated July 31, 1998
<PAGE>
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
Investment Limitations 8
Portfolio Turnover 9
CCB FUNDS INFORMATION 9
- ------------------------------------------------------
Management of the CCB 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
Confirmations and Account Statements 15
Dividends 15
Capital Gains 15
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 20
- ------------------------------------------------------
FINANCIAL STATEMENTS 21
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 32
- ------------------------------------------------------
ADDRESSES 33
- ------------------------------------------------------
<PAGE>
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)................................... 0.78%.
12b-1 Fees(2)...................................................... 0.00%
Total Other Expenses (after waiver)................................ 0.22%
Shareholder Services Fees(2)................................... 0.00%
Total Fund Operating Expenses(3).......................... 1.00%
</TABLE>
(1) The management fee has been reduced to reflect a voluntary waiver by the
investment advisor. The advisor 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 "CCB
Funds Information."
(3) Total Fund operating expenses would have been 1.07% 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 "CCB FUNDS INFORMATION."
WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL
FEES.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
<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........................................................ $55 $75 $ 98 $162
</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.
<PAGE>
CCB EQUITY FUND
(FORMERLY, 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 32.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------------
1998 1997 1996 1995(A)
------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.33 $13.80 $11.48 $10.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.07 0.13 0.14 0.11
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
options 3.93 3.72 2.57 1.44
- ------------------------------------------------------------ ------ ------ ------ -------
Total from investment operations 4.00 3.85 2.71 1.55
- ------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.07) (0.13) (0.16) (0.07)
- ------------------------------------------------------------
Distributions from net realized gain on investments and
options (1.02) (0.19) (0.23) --
- ------------------------------------------------------------ ------ ------ ------ -------
Total distributions (1.09) (0.32) (0.39) (0.07)
- ------------------------------------------------------------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $20.24 $17.33 $13.80 $11.48
- ------------------------------------------------------------ ------ ------ ------ -------
TOTAL RETURN (b) 23.86% 28.25% 23.91% 15.55%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 1.00% 1.03% 1.25% 1.25%*
- ------------------------------------------------------------
Net investment income 0.39% 0.81% 1.08% 3.00%*
- ------------------------------------------------------------
Expense waiver/reimbursement(c) 0.07% 0.16% 0.20% 1.42%*
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $219,694 $167,503 $29,194 $24,581
- ------------------------------------------------------------
Average commission rate paid (d) $0.0583 $0.0598 -- --
- ------------------------------------------------------------
Portfolio turnover 69% 55% 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
CCB Funds was established as a Massachusetts business trust under a Declaration
of Trust dated December 11, 1991. The Declaration of Trust permits CCB Funds to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. On May 13, 1998, the Board of Trustees
("Trustees") voted to change the name of the Fund from "111 Corcoran Equity
Fund" to "CCB Equity Fund," and the name of the Trust from "111 Corcoran Funds"
to "CCB Funds." This prospectus relates only to CCB Funds' equity portfolio,
known as CCB Equity Fund. The Fund is for trust clients of Central Carolina Bank
and Trust Company ("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.
Year 2000 Statement. Like other mutual funds and business organizations
worldwide, the Fund's service providers (among them, the adviser, distributor,
administrator, and transfer agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Fund and its service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and believe that systems will be year 2000 compliant
when required. Analysis continues regarding the financial impact of instituting
a year 2000 compliant program on the Fund's operations.
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 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.
<PAGE>
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 ("S&P") or Fitch IBCA, 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
<PAGE>
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 S&P 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 S&P 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
<PAGE>
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 management fees may be duplicated.
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
<PAGE>
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
<PAGE>
"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.
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.
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
<PAGE>
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.
CCB FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CCB FUNDS
BOARD OF TRUSTEES. CCB Funds are managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of CCB Funds and for
exercising all of the powers of CCB 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 CCB 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 the Fund's average daily net
assets. 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.
<PAGE>
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, 1998, the
Trust Division managed assets in excess of $2.4 billion. The Trust Division
manages two commingled funds with assets of approximately $260 million. The
Bank has managed CCB Funds since their inception in July, 1992. As of June
30, 1998, total assets in CCB Funds were $345 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, 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.
<PAGE>
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, Inc.
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.
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.
<PAGE>
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, Inc., provides the Fund with the administrative personnel
and services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- ------------------ -----------------------------------
<C> <S>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% 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 1-800-386-3111.)
Texas residents must purchase shares
<PAGE>
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 Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
<PAGE>
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
<PAGE>
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.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.
DIVIDENDS
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.
<PAGE>
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
All shareholders of the Fund are shareholders of CCB Funds, which consists of
the Fund, CCB Bond Fund, and CCB North Carolina Municipal Securities Fund.
Shareholders of the Fund have access to CCB Bond Fund and CCB North Carolina
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, Inc. serve as investment adviser and which are distributed
by Federated Securities Corp., a subsidiary of Federated Investors, Inc.
("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.
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.
<PAGE>
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: CCB Funds, c/o Federated Shareholder Services
Company, P.O. Box 8609, Boston, Massachusetts 02266. 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:
CCB Funds, c/o Federated Shareholder Services Company, P.O. Box 8609, Boston,
Massachusetts 02266. The written request should include the shareholder's name,
the Fund name, the account number, and the
<PAGE>
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, other than retirement accounts subject to required
minimum distributions. 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. <PAGE>
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 CCB 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 7, 1998, Central
Carolina Bank, acting in various capacities for numerous accounts, was the owner
of record of 10,455,100 shares (96.3%) of the Fund.
As a Massachusetts business trust, CCB Funds are not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in CCB 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
CCB 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 CCB 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.
<PAGE>
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 CCB 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 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.
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
PORTFOLIO OF INVESTMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------ ------------
<S> <C> <C> <C>
COMMON STOCKS--95.9%
- ------------------------------------------------------------------------------
AEROSPACE--4.2%
------------------------------------------------------------
120,000 Allied-Signal, Inc. $ 5,130,000
------------------------------------------------------------
96,000 (a) Gulfstream Aerospace Corp. 4,080,000
------------------------------------------------------------ ------------
Total 9,210,000
------------------------------------------------------------ ------------
CHEMICALS--3.2%
------------------------------------------------------------
90,000 Du Pont (E.I.) de Nemours & Co. 6,930,000
------------------------------------------------------------ ------------
CONSUMER GOODS--4.9%
------------------------------------------------------------
60,000 Emerson Electric Co. 3,645,000
------------------------------------------------------------
84,400 General Electric Co. 7,036,850
------------------------------------------------------------ ------------
Total 10,681,850
------------------------------------------------------------ ------------
CONSUMER DURABLES--3.2%
------------------------------------------------------------
100,000 Mattel, Inc. 3,787,500
------------------------------------------------------------
98,000 Rubbermaid, Inc. 3,197,250
------------------------------------------------------------ ------------
Total 6,984,750
------------------------------------------------------------ ------------
CONSUMER NON-DURABLES--4.1%
------------------------------------------------------------
75,000 Anheuser-Busch Cos., Inc. 3,445,313
------------------------------------------------------------
70,000 Unilever N.V., ADR 5,525,625
------------------------------------------------------------ ------------
Total 8,970,938
------------------------------------------------------------ ------------
ELECTRONICS--10.2%
------------------------------------------------------------
45,000 (a) Cisco Systems, Inc. 3,403,125
------------------------------------------------------------
150,000 Compaq Computer Corp. 4,096,875
------------------------------------------------------------
60,000 (a) Computer Sciences Corp. 3,116,250
------------------------------------------------------------
150,000 (a) EMC Corp. Mass 6,215,625
------------------------------------------------------------
40,000 Intel Corp. 2,857,500
------------------------------------------------------------
55,000 Texas Instruments, Inc. 2,825,625
------------------------------------------------------------ ------------
Total 22,515,000
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------ ------------
<S> <C> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------
ENTERTAINMENT--2.6%
------------------------------------------------------------
50,000 Disney (Walt) Co. $ 5,656,250
------------------------------------------------------------ ------------
FINANCE--15.1%
------------------------------------------------------------
60,000 American Express Co. 6,157,500
------------------------------------------------------------
49,000 American International Group, Inc. 6,066,813
------------------------------------------------------------
40,000 BankAmerica Corp. 3,307,500
------------------------------------------------------------
30,000 Citicorp 4,473,750
------------------------------------------------------------
60,000 MGIC Investment Corp. 3,596,250
------------------------------------------------------------
250,000 Pennsylvania Real Estate Investment Trust 5,890,625
------------------------------------------------------------
60,000 Travelers Group, Inc. 3,660,000
------------------------------------------------------------ ------------
Total 33,152,438
------------------------------------------------------------ ------------
HEALTH TECHNOLOGY--10.0%
------------------------------------------------------------
40,000 Abbott Laboratories 2,967,500
------------------------------------------------------------
80,000 American Home Products Corp. 3,865,000
------------------------------------------------------------
125,000 Biomet, Inc. 3,609,375
------------------------------------------------------------
52,000 Johnson & Johnson 3,591,250
------------------------------------------------------------
35,000 Merck & Co., Inc. 4,097,187
------------------------------------------------------------
110,000 (a) Tenet Healthcare Corp. 3,850,000
------------------------------------------------------------ ------------
Total 21,980,312
------------------------------------------------------------ ------------
INDUSTRIAL SERVICES--2.9%
------------------------------------------------------------
90,000 Baker Hughes, Inc. 3,240,000
------------------------------------------------------------
140,000 (a) Cendant Corp. 3,036,250
------------------------------------------------------------ ------------
Total 6,276,250
------------------------------------------------------------ ------------
INSURANCE--2.7%
------------------------------------------------------------
105,000 Jefferson-Pilot Corp. 6,011,250
------------------------------------------------------------ ------------
METALS--1.0%
------------------------------------------------------------
32,000 Aluminum Co. of America 2,220,000
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------ ------------
<S> <C> <C> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------
MORTGAGE--2.9%
------------------------------------------------------------
105,000 Federal National Mortgage Association $ 6,286,875
------------------------------------------------------------ ------------
OFFICE EQUIPMENT--2.3%
------------------------------------------------------------
50,000 Xerox Corp. 5,137,500
------------------------------------------------------------ ------------
OIL--9.1%
------------------------------------------------------------
50,000 British Petroleum Co. PLC, ADR 4,431,250
------------------------------------------------------------
30,000 Chevron Corp. 2,396,250
------------------------------------------------------------
34,000 Exxon Corp. 2,397,000
------------------------------------------------------------
111,600 Halliburton Co. 5,287,050
------------------------------------------------------------
70,000 Mobil Corp. 5,460,000
------------------------------------------------------------ ------------
Total 19,971,550
------------------------------------------------------------ ------------
PHARMACEUTICALS--2.9%
------------------------------------------------------------
120,000 (a) Watson Pharmaceuticals, Inc. 5,250,000
------------------------------------------------------------
60,000 (a) Shire Pharmaceuticals Group PLC, ADR 1,170,000
------------------------------------------------------------ ------------
Total 6,420,000
------------------------------------------------------------ ------------
PRODUCER MANUFACTURING--3.4%
------------------------------------------------------------
120,000 Dover Corp. 4,500,000
------------------------------------------------------------
100,000 (a) U.S. Filter Corp. 3,043,750
------------------------------------------------------------ ------------
Total 7,543,750
------------------------------------------------------------ ------------
RETAIL--7.0%
------------------------------------------------------------
90,000 (a) Federated Department Stores, Inc. 4,663,125
------------------------------------------------------------
90,000 Ikon Office Solutions, Inc. 1,906,875
------------------------------------------------------------
70,000 Wal-Mart Stores, Inc. 3,863,125
------------------------------------------------------------
140,000 Walgreen Co. 4,926,250
------------------------------------------------------------ ------------
Total 15,359,375
------------------------------------------------------------ ------------
</TABLE>
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ---------- ------------------------------------------------------------ ------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------
TECHNOLOGY SERVICES--3.1%
------------------------------------------------------------
50,000 (a) CIENA Corp. $ 2,600,000
------------------------------------------------------------
27,000 (a) Microsoft Corp. 2,289,937
------------------------------------------------------------
60,000 (a) SunGuard Data Systems, Inc. 2,047,500
------------------------------------------------------------ ------------
Total 6,937,437
------------------------------------------------------------ ------------
UTILITIES--1.1%
------------------------------------------------------------
45,000 MCI Communications Corp. 2,406,094
------------------------------------------------------------ ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $161,571,372) 210,651,619
------------------------------------------------------------ ------------
PREFERRED STOCKS--1.4%
- ------------------------------------------------------------------------------
80,000 Cendant Corp., Conv. Pfd., $.94 (IDENTIFIED COST $3,492,762) 3,020,000
------------------------------------------------------------ ------------
MUTUAL FUNDS--2.7%
- ------------------------------------------------------------------------------
$5,874,323 Goldman Sachs Money Market Fund (AT NET ASSET VALUE) 5,874,323
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST $170,938,457)(B) $219,545,942
------------------------------------------------------------ ------------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to $170,938,457.
The net unrealized appreciation/depreciation of investments on a federal tax
basis amounts to $48,607,485 which is comprised of $52,849,855 appreciation
and $4,242,370 depreciation at May 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($219,693,656) at May 31, 1998.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$170,938,457) $219,545,942
- ----------------------------------------------------------------------
Income receivable 483,746
- ----------------------------------------------------------------------
Deferred organizational costs 10,327
- ----------------------------------------------------------------------
Other assets 2,864
- ---------------------------------------------------------------------- ------------
Total assets 220,042,879
- ----------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------
Payable for shares redeemed $ 8,348
- ------------------------------------------------------------
Options written, at value (Premium Received $131,322) 17,813
- ------------------------------------------------------------
Accrued expenses 323,062
- ------------------------------------------------------------ --------
Total liabilities 349,223
- ---------------------------------------------------------------------- ------------
Net Assets for 10,854,836 shares outstanding $219,693,656
- ---------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------
Paid in capital $154,164,564
- ----------------------------------------------------------------------
Net unrealized appreciation of investments and options 48,720,994
- ----------------------------------------------------------------------
Accumulated net realized gain on investments and options 16,503,028
- ----------------------------------------------------------------------
Undistributed net investment income 305,070
- ---------------------------------------------------------------------- ------------
Total Net Assets $219,693,656
- ---------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ----------------------------------------------------------------------
Net Asset Value Per Share ($219,693,656 / 10,854,836 shares
outstanding) $20.24
- ---------------------------------------------------------------------- ------------
Offering Price Per Share (100/95.50 of $20.24)* $21.19
- ---------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Dividends
- -------------------------------------------------------------------------------------
Interest
- -------------------------------------------------------------------------------------
Total income
- -------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 1,713,011
- ----------------------------------------------------------------------
Administrative personnel and services fee 290,642
- ----------------------------------------------------------------------
Custodian fees 9,103
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 38,306
- ----------------------------------------------------------------------
Directors'/Trustees' fees 5,000
- ----------------------------------------------------------------------
Auditing fees 13,000
- ----------------------------------------------------------------------
Legal fees 2,451
- ----------------------------------------------------------------------
Portfolio accounting fees 56,670
- ----------------------------------------------------------------------
Share registration costs 15,033
- ----------------------------------------------------------------------
Printing and postage 8,000
- ----------------------------------------------------------------------
Insurance premiums 3,000
- ----------------------------------------------------------------------
Miscellaneous 2,253
- ---------------------------------------------------------------------- -----------
Total expenses 2,156,469
- ----------------------------------------------------------------------
Waiver--
- ----------------------------------------------------------------------
Waiver of investment advisory fee (141,072)
- ---------------------------------------------------------------------- -----------
Net expenses
- -------------------------------------------------------------------------------------
Net investment income
- -------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------
Net realized gain on investments and options
- -------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and options
- -------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and options
- -------------------------------------------------------------------------------------
Change in net assets resulting from operations
- -------------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 784,199 $ 872,046
- ------------------------------------------------------------
Net realized gain (loss) on investments and options
($21,100,147 net gain and $6,774,291 net gain, respectively,
as computed for federal tax purposes) 21,189,873 6,209,703
- ------------------------------------------------------------
Net change in unrealized appreciation/depreciation 19,481,961 24,565,580
- ------------------------------------------------------------ ------------ ------------
Change in net assets resulting from operations 41,456,033 31,647,329
- ------------------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (721,356) (676,030)
- ------------------------------------------------------------
Distributions from net realized gains (10,530,395) (1,900,075)
- ------------------------------------------------------------ ------------ ------------
Change in net assets resulting from distributions to
shareholders (11,251,751) (2,576,105)
- ------------------------------------------------------------ ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 18,796,021 119,180,895
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 9,786,538 311,240
- ------------------------------------------------------------
Cost of shares redeemed (6,596,418) (10,254,522)
- ------------------------------------------------------------ ------------ ------------
Change in net assets resulting from share transactions 21,986,141 109,237,613
- ------------------------------------------------------------ ------------ ------------
Change in net assets 52,190,423 138,308,837
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 167,503,233 29,194,396
- ------------------------------------------------------------ ------------ ------------
End of period (including undistributed net investment income
of $305,070 and $242,227, respectively) $219,693,656 $167,503,233
- ------------------------------------------------------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
- --------------------------------------------------------------------------------
(1) ORGANIZATION
CCB 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 CCB Equity Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. 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.
Effective May 13, 1998, the Trust changed its name from 111 Corcoran Funds to
CCB Funds, and the Fund changed its name from 111 Corcoran Equity Fund to CCB
Equity Fund.
(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. Unlisted equity
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"). 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
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY 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.
OPTION CONTRACTS--The Fund may write option contracts. A written option
obligates the Fund to deliver (a call), or to receive (a put), the contract
amount upon exercise by the holder of the option. The principal reason for
writing call or put options is to obtain, through receipt of premiums, a
greater current return that would be realized on underlying securities
alone. By writing a call option, the Fund risks becoming obligated to sell
the underlying security for more than its current market price upon
exercise. By writing a put option, the Fund risks becoming obligated to
purchase the underlying security for more than its current market price
upon exercise. Premiums received from writing options are recorded as a
liability and an unrealized gain or loss is measured and recorded by the
difference between the current value and the premium received. For the
period ended May 31, 1998, the Fund had a realized gain of $183,843 on
written options.
The following is a summary of the Fund's written options activity:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
CONTRACTS CONTRACTS FACE VALUE
--------- ---------- -----------
<S> <C> <C>
Outstanding at prior period-end 250 $ 185,889
Contracts opened 8,610 2,113,805
Contracts closed (6,660) (1,712,204)
Contracts exercised (150) (81,595)
Contracts expired (1,450) (374,573)
------ -----------
Outstanding at May 31, 1998 600 $ 131,322
====== ===========
</TABLE>
At May 31, 1998, the Fund had the following outstanding options:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION EXERCISE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
------ ---- ----------- -------- ---------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
American Express Co. Call June 1998 $ 110 150 $ 52,048 $ 9,375
Compaq Computer Corp. Call June 1998 $32.5 300 24,412 4,688
Xerox Corp. Call June 1998 $ 115 150 37,049 3,750
-------- -------
Totals $113,509 $17,813
======== =======
</TABLE>
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.
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
- --------------------------------------------------------------------------------
(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,
---------------------
1998 1997
--------- --------
<S> <C> <C>
Shares sold 986,350 8,209,160
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 541,306 19,662
- ------------------------------------------------------------
Shares redeemed (338,851) (678,535)
- ------------------------------------------------------------ --------- --------
Net change resulting from share transactions 1,188,805 7,550,287
- ------------------------------------------------------------ --------- --------
</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 Advisors, Inc., ( the "Sub-Adviser"), the Sub-Adviser receives
an annual fee from the Adviser equal to 0.65% of the Fund's daily assets. The
Sub-Adviser may voluntarily 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.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp., ("FSC") the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund shares. The Plan provides that the Fund may incur distribution
expenses up to 0.35% of the average daily net assets of the Fund annually, to
compensate FSC. The Fund did not pay or accrue distribution expenses during the
period ended May 31, 1998.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with FAS, the Fund will pay FAS up to 0.25% of average daily net assets of the
Fund for the period. The fee paid to FAS is used to finance certain services for
shareholders and to maintain shareholder accounts. The Fund did not pay or
accrue shareholder services expenses during the period ended May 31, 1998.
<PAGE>
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--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 the Adviser. The Fund has reimbursed the Adviser for these expenses. These
expenses have been deferred and are being amortized over the five year period
following the Fund's effective date. For the year ended May 31, 1998, the Fund
expensed $2,637 of organizational expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1998, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------
PURCHASES $145,405,749
- ------------------------------------------------------------ ------------
SALES $136,894,203
- ------------------------------------------------------------ ------------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
CCB Funds (formerly, 111 Corcoran Funds)
(CCB Equity Fund (formerly, 111 Corcoran Equity Fund))
We have audited the accompanying statement of assets and liabilities of CCB
Equity Fund (an investment portfolio of CCB Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of May 31, 1998, the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund'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, 1998 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 CCB
Equity Fund, an investment portfolio of CCB Funds, as of May 31, 1998, 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 its financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 9, 1998
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CCB Equity Fund 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
- -----------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue
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
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -----------------------------------------------------------------------------------------------------------------
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>
CCB FUNDS
Central Carolina Bank
(formerly, 111 Corcoran Funds)
CCB
Equity Fund
(formerly, 111 Corcoran Equity Fund)
Prospectus
A Diversified Portfolio of
CCB Funds, an Open-End,
Management Investment Company
JULY 31, 1998
Federated Securities Corp. is the distributor of the fund.
CUSIP 682365309
005826 (7/98) [logo]
CCB EQUITY FUND
(FORMERLY, 111 CORCORAN EQUITY FUND)
(A PORTFOLIO OF CCB FUNDS (FORMERLY, 111 CORCORAN FUNDS))
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of CCB Equity Fund (the "Fund"), a portfolio of CCB Funds (the "Trust")
dated July 31, 1998. 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.
CCB EQUITY FUND
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7010
Statement dated July 31, 1998
[GRAPHIC OMITTED]
Cusip 682365309
005902 (07/98)
<PAGE>
I
TABLE OF CONTENTS
<PAGE>
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
Portfolio Turnover 5
Investment Limitations 5
CCB FUNDS MANAGEMENT 7
-
Fund Ownership 11
Trustees' Compensation 12
Trustee Liability 12
INVESTMENT ADVISORY SERVICES 13
--
Adviser to the Fund 13
Advisory Fees 13
Sub-Adviser to the Fund 13
Sub-Advisory Fees 13
BROKERAGE TRANSACTIONS 13
OTHER SERVICES 14
Trust Administration 14
Custodian and Portfolio Accountant 14
Transfer Agent 14
Independent Public Accountants 14
PURCHASING SHARES 14
Distribution and Shareholder Services Plans 14
DETERMINING NET ASSET VALUE 14
Determining Market Value of Securities15
EXCHANGE PRIVILEGE 15
REDEEMING SHARES 15
Redemption in Kind 15
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 16
--
The Fund's Tax Status 16
Shareholders' Tax Status 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
APPENDIX 19
<PAGE>
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in CCB Funds (the "Trust"), which was established as a
Massachusetts business trust under a Declaration of Trust dated December 11,
1991. On May 13, 1998, the Board of Trustees ("Trustees") voted to change the
name of the Fund from "111 Corcoran Equity Fund" to "CCB Equity Fund," and the
name of the Trust from"111 Corcoran Funds" to "CCB Funds."
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 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 years ended May 31, 1998 and 1997,
the portfolio turnover rates for the Fund were 69% and 55%, 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 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.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purpose of
exercising control or management.
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.
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."
111 CORCORAN CCB FUNDS MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with CCB Funds, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chief Executive Officer and Director or Trustee of the Funds; Chairman and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd.; Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Director or Trustee of the Funds; President, Investment Properties
Corporation; Senior Vice-President, John R. Wood and Associates, Inc., Realtors;
Partner or Trustee in private real estate ventures in Southwest Florida;
formerly, President, Naples Property Management, Inc. and Northgate Village
Development Corporation.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; Director and Member of the Executive
Committee, Michael Baker, Inc.; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp.; Director, Ryan Homes, Inc.; Director, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund; Chaiman, Pittsburgh
Civic Light Opera.
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director, The Emerging
Germany Fund, Inc.; formerly, President, Boston Stock Exchange, Inc.; Regional
Administrator, United States Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center Downtown;
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
formerly, Member, National Board of Trustees, Leukemia Society of America.
Edward L. Flaherty, Jr., Esq.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney, Of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation ; Director, VISA USA and VISA International; Chairman
and Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President, Treasurer and Trustee
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
- ------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; President and Trustee, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; Director or Trustee of some of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President and Assistant Treasurer of some of the Funds.
* THIS TRUSTEE IS DEEMED TO BE AN "INTERESTED PERSON" AS DEFINED IN THE
INVESTMENT COMPANY ACT OF 1940.
@ MEMBER OF THE EXECUTIVE COMMITTEE. THE EXECUTIVE COMMITTEE OF THE BOARD OF
TRUSTEES HANDLES THE RESPONSIBILITIES OF THE BOARD BETWEEN MEETINGS OF THE
BOARD.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: CCB Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
WesMark Funds; WCT Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 7,1998, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: Central Carolina Bank & Trust Company, Durham,
North Carolina, owned approximately 10,455,100 shares (96.3%).
<PAGE>
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
TRUST TRUST*#
John F. Donahue $0
Chairman and Trustee
Thomas G. Bigley $1,237.52
Trustee
John T. Conroy, Jr. $1,361.48
Trustee
William J. Copeland $1,361.48
Trustee
James E. Dowd, Esq. $1,361.48
Trustee
Lawrence D. Ellis, M.D. $1,237.52
Trustee
Edward L. Flaherty, Jr., Esq. $1,361.48
Trustee
Edward C. Gonzales $0
Trustee
Peter E. Madden $1,237.52
Trustee
John E. Murray, Jr., J.D., S.J.D. $1,237.52
Trustee
Wesley W. Posvar $1,237.52
Trustee
Marjorie P. Smuts $1,237.52
Trustee
* Information is furnished for the fiscal year ended May 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of 3
portfolios.
TRUSTEE LIABILITY
CCB 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, 1998,
1997, and 1996, the Adviser earned advisory fees of $1,713,011, $913,689, and
$231,522, respectively, of which $141,072, $166,477, and $54,476, 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 years ended May 31, 1998,
1997, and 1996, the Sub-Adviser earned sub-advisory fees of $1,309,949,
$747,211, and $177,046, respectively, of which $0, $0, and $0, respectively,
were voluntarily waived.
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 years ended May 31, 1998, 1997, and 1996, the Fund paid total
brokerage commissions of $291,312, $205,818, and $48,500, 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, Inc.,
provides administrative personnel and services to the Trust for a fee as
described in the prospectus. For the fiscal years ended May 31, 1998, 1997, and
1996, administrator fees were incurred on behalf of the Fund of $290,642,
$160,784, and $50,000, respectively, of which $0, $9,702, and $0, respectively,
were voluntarily waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
Fifth Third Bank, Cincinnati, Ohio, 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 years ended May 31, 1998, 1997, and 1996 , 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.
<PAGE>
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 CCB Funds on behalf
of the Fund. To protect shareholders of the Fund, CCB Funds has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders for such acts or obligations of CCB Funds. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument CCB Funds or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for CCB Funds'
obligations on behalf of the Fund, CCB Funds is required to use its property to
protect or compensate the shareholder. On request, CCB Funds will defend any
claim made and pay any judgment against a shareholder for any act or obligation
of CCB Funds on behalf of the Fund. Therefore, financial loss resulting from
liability as a shareholder of the Fund will occur only if CCB 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 invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the dividends
received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or an attempt to preserve
gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
The Fund's average annual total return for the fiscal year ended May 31, 1998,
and for the period from December 5, 1994 (date of initial public investment) to
May 31, 1998, were 18.27% and 24.89%, 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, 1998, was 0.35%. 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 ("S&P") 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 charge.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
<PAGE>
APPENDIX
STANDARD & POOROS RATINGS GROUP STANDARD & POOR'S ("S&P") 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 IBCA, INC. ("FITCH"), 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 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 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;
(iv) Conformed Copy of Amendment No. 3 to
Declaration of Trust dated August 25, 1994;+
(v) Conformed Copy of Amendment No. 4 to
Declaration of Trust dated May 13, 1998;+
(2) (i) Copy of By-Laws of the Registrant 7;
(ii) Copy of Amendment No.1 to By-Laws of
Registrant;+
(iii) Copy of Amendment No.2 to By-Laws of
Registrant;+
(iv) Copy of Amendment No.3 to By-Laws of
Registrant;+
(v) Copy of Amendment No.4 to By-Laws of
Registrant;+
(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;
+ 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)
(8) (i) Conformed copy of Custody Agreement of the
Registrant, and Exhibits A, B, and C, thereto
(Exhibit C is Custodian Fee Schedule);+
(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 Amendment No.1 to
Administrative Services Agreement;+
(iv) Conformed Copy of Shareholder Services Plan 7;
(v) 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 8.
+ 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)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 filed July 28, 1996 (File Nos. 33-45753 and 811-6561)
<PAGE>
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 7, 1998
Shares of beneficial interest
no par value
CCB Bond Fund 239
CCB Equity Fund 192
CCB North Carolina Municipal
Securities Fund 267
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, 1998,
the Trust Division managed assets in excess of $2.4 billion. The
Trust Division manages 2 commingled funds with assets of
approximately $260 million.
Franklin Street Advisors, Inc. is CCB 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)
<PAGE>
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.
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
<S> <C> <C>
Ernest C. Roessler Chairman; President; Chairman, President
Chief Executive Officer and Chief Executive
and Director Officer, CCB Financial Corporation
David B. Jordan Vice Chairman Vice Chairman, CCB
and Director Financial Corporation
W.L. Burns, Jr. Chairman Emeritus Retired Chairman of
and Director the Board, Central Carolina Bank Financial Corporation; Retired President
and Chief Executive Officer, CCB Financial Corporation and Central
Carolina Bank and Trust Company
W.L. ("Roy") Abercrombie, Jr. Director Chairman, President and Chief Executive Officer, American Federal Bank,
FSB
John M Barnhardt Director President, Treasurer and Chairman, Barnhardt & Walker, Inc.
J. Harper Beall, III Director President and Chief Executive Officer, Fairfield
Chair Company
James B. Brame, Jr. Director President, Brame Specialty Co., Inc.
Timothy B. Burnett Director President, Bessemer Improvement Company
Blake P. Garrett, Jr. Director Partner, Garrett & Garrett Co.
Edward S. Holmes Director Partner, Holmes & McLaurin, Attorneys at Law
Dan C. Joyner Director President, Western South Carolina The Prudential/C. Dan Joyner Co.
<PAGE>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
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.
Bonnie McElveen-Hunter Director President and Chief Executive Officer, Pace Communications, Inc.
Hamilton W. McKay, Jr., M.D. Director Physician, Carolina Asthma & Allergy Center, P.A.
George J. Morrow Director Managing Director, Glaxo Wellcome UK Ltd.
Eric B. Munson Director Executive Director; University of North Carolina Hospitals
Dr. David Emory Shi Director Pesident, Furman University
Jimmy K. Stegall Director President, Service Oil of Monroe, Inc.
H. Allen Tate, Jr. Director President, Allen Tate Company, Inc.
James L. Williamson Director Retired Partner, KPMG Peat Marwick
Dr. Phail Wynn, Jr. Director President, Durham Technical Community College
<PAGE>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
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
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
<PAGE>
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
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
<PAGE>
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
</TABLE>
<PAGE>
Item 29. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
Automated Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIGGS Funds; SouthTrust Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael R. Manning 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
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Colin B. Starks 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
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant 5800 Corporate Drive
Pittsburgh, PA 15237-7010
Federated Shareholder Services P.O. Box 8600
Company Boston, MA 02266-8600
("Transfer Agent and Dividend
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
Fifth Third Bank 38 Fountain Square Plaza
("Custodian") Cincinnati, Ohio 45263
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, CCB FUNDS (formerly, 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 21st day of July, 1998.
CCB FUNDS
(formerly, 111 Corcoran Funds)
BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
July 21, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/C. Grant Anderson Attorney In Fact July 21, 1998
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
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
EXHIBIT 1(IV) UNDER FORM N-1A
EXHIBIT 3(I) UNDER ITEM 601/REG. S-K
111 CORCORAN FUNDS
Amendment No. 3
to
DECLARATION OF TRUST
dated December 11, 1991
THIS Declaration of Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III from the Declaration
of Trust and substitute in its place the following:
"Section 5. Establishment and Designation of Series or Class.
Without limiting the authority of the Trustees set forth in Article
XII, Section 8, inter alia, to establish and designate any additional
series or class or to modify the rights and preferences of any existing
Series or Class, the initial series shall be, and are established and
designated as:
111 Corcoran Bond Fund
111 Corcoran Equity Fund
111 Corcoran North Carolina Municipal Securities Fund"
The undersigned Assistant Secretary of 111 Corcoran Funds hereby certifies
that the above stated Amendment is a true and correct Amendment to the
Declaration of Trust, as adopted by the Board of Trustees on the 25th day of
August, 1994.
WITNESS the due execution hereof this 25th day of August, 1994.
/s/C. Grant Anderson
C. Grant Anderson
Assistant Secretary
EXHIBIT 1(V) UNDER FORM N-1A
EXHIBIT 3(I) UNDER ITEM 601/REG. S-K
111 CORCORAN FUNDS
Amendment No. 4
to
DECLARATION OF TRUST
dated December 11, 1991
Strike Section 1 of Article I from the Declaration of Trust and substitute
in its place the following:
"Section 1. Name.
This Trust shall be known as CCB FUNDS."
Strike section (b) of Section 2 of Article I from the Declaration of Trust
and substitute in its place the following:
"(b) The "Trust" refers to CCB FUNDS."
Strike the first paragraph of Section 5 of Article III from the Declaration
of Trust and substitute in its place the following:
"Section 5. Establishment and Designation of Series or Class.
Without limiting the authority of the Trustees set forth in Article
XII, Section 8, INTER ALIA, to establish and designate any additional
Series or Class, or to modify the rights and preferences of any existing
Series or Class the Series and Classes of the Trust are established and
designated as:
CCB Bond Fund
CCB Equity Fund
CCB North Carolina Municipal Securities Fund
Strike Section 9 of Article XII from the Declaration of Trust and substitute
in its place the following:
"Section 9. Use of Name.
The Trust acknowledges that CENTRAL CAROLINA BANK & TRUST has
reserved the right to grant the non-exclusive use of the name "CCB FUNDS"
or any derivative thereof to any other investment company, investment
company portfolio, investment adviser, distributor, or any other business
enterprise, and to withdraw from the Trust or one or more Series or
Classes any right to the use of the name "CCB FUNDS."
The undersigned hereby certify that the above-stated amendment is a true and
correct Amendment to the Declaration of Trust, as adopted by the Board of
Trustees on the 13th day of May, 1998.
WITNESS the due execution hereof this 13th day of May, 1998.
/s/ John F. Donahue /s/ Edward L. Flaherty
John F. Donahue Edward L. Flaherty
/s/ Thomas G. Bigley /s/ Edward C. Gonzales
Thomas G. Bigley Edward C. Gonzales
/s/ John T. Conroy, Jr. /s/ Peter E. Madden
John T. Conroy, Jr. Peter E. Madden
/s/ Nicholas P. Constantakis /s/ John E. Murray, Jr.
Nicholas P. Constantakis John E. Murray, Jr.
/s/ William J. Copeland /s/ Wesley W. Posvar
William J. Copeland Wesley W. Posvar
/s/ James E. Dowd /s/ Marjorie P. Smuts
James E. Dowd Marjorie P. Smuts
/s/ Lawrence D. Ellis, M.D.
Lawrence D. Ellis, M.D.
EXHIBIT 2(II) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K
111 Corcoran Funds
Amendment No. 1
to the By-Laws
Effective November 18, 1997
Delete Article III, Section 7 and replace with the following:
Action by Consent of the Board of Trustees, Executive Committee or Other
Committee. Subject to Article V, Section 2 of these By-Laws, any action required
or permitted to be taken at any meeting of the Trustees, Executive Committee or
any other duly appointed Committee may be taken without a meeting if consents in
writing setting forth such action are signed by all members of the Board or such
committee and such consents are filed with the records of the Trust. In the
event of the death, removal, resignation or incapacity of any Board or committee
member prior to that Trustee signing such consent, the remaining Board or
committee members may re-constitute themselves as the entire Board or committee
until such time as the vacancy is filled in order to fulfill the requirement
that such consents be signed by all members of the Board of committee.
EXHIBIT 2(III) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K
111 CORCORAN FUNDS
AMENDMENT #2
TO THE BY-LAWS
(EFFECTIVE FEBRUARY 23, 1998)
Delete Sections 1, 2 and 3 of Article I, OFFICERS AND THEIR ELECTION, and
replace with:
Section 1. Officers. The Officers of the Trust shall be a President, one
or more Vice Presidents, a Treasurer, and a Secretary. The Board of
Trustees, in its discretion, may also elect or appoint a Chairman of the
Board of Trustees (who must be a Trustee) and other Officers or agents,
including one or more Assistant Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. A Vice President, the
Secretary or the Treasurer may appoint an Assistant Vice President, an
Assistant Secretary or an Assistant Treasurer, respectively, to serve
until the next election of Officers. Two or more offices may be held by a
single person except the offices of President and Vice President may not
be held by the same person concurrently. It shall not be necessary for any
Trustee or any Officer to be a holder of shares in any Series or Class of
the Trust.
Section 2. Election of Officers. The Officers shall be elected annually by
the Trustees. Each Officer shall hold office for one year and until the
election and qualification of his successor, or until earlier resignation
or removal. The Chairman of the Board of Trustees, if there is one, shall
be elected annually by and from the Trustees, and serve until a successor
is so elected and qualified, or until earlier resignation or removal.
Section 3. Resignations and Removals and Vacancies. Any Officer of the
Trust may resign at any time by filing a written resignation with the
Board of Trustees (or Chairman of the Trustees, if there is one), with the
President, or with the Secretary. Any such resignation shall take effect
at the time specified therein or, if no time is specified, at the time of
receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any Officer
elected by the Board of Trustees or whose appointment has been ratified by
the Board of Trustees may be removed with or without cause at any time by
a majority vote of all of the Trustees. Any other employee of the Trust
may be removed or dismissed at any time by the President. Any vacancy in
any of the offices, whether by resignation, removal or otherwise, may be
filled for the unexpired portion of the term by the President. A vacancy
in the office of Assistant Vice President may be filled by a Vice
President; in the office of Assistant Secretary by the Secretary; or in
the office of Assistant Treasurer by the Treasurer. Any appointment to
fill any vacancy shall serve subject to ratification by the Board of
Trustees at its next regular meeting.
EXHIBIT 2(IV) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K
111 CORCORAN FUNDS
AMENDMENT #3
TO THE BY-LAWS
(EFFECTIVE FEBRUARY 27, 1998)
Delete Section 5 Proxies of Article IV Shareholders' Meetings, and replace with
the following:
Section 5. Proxies. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic means
including facsimile, or by proxy, but no proxy which is dated more than
six months before the meeting named therein shall be accepted unless
otherwise provided in the proxy. Every proxy shall be in writing,
subscribed by the shareholder or his duly authorized agent or be in such
other form as may be permitted by law, including documents conveyed by
electronic transmission. Every proxy shall be dated, but need not be
sealed, witnessed or acknowledged. The placing of a shareholder's name on
a proxy or authorizing another to act as the shareholder's agent, pursuant
to telephone or electronically transmitted instructions obtained in
accordance with procedures reasonably designed to verify that such
instructions have been authorized by such shareholder, shall constitute
execution of a proxy by or on behalf of such shareholder. Where Shares are
held of record by more than one person, any co-owner or co-fiduciary may
execute the proxy or give authority to an agent, unless the Secretary of
the Trust is notified in writing by any co-owner or co-fiduciary that the
joinder of more than one is to be required. All proxies shall be filed
with and verified by the Secretary or an Assistant Secretary of the Trust,
or the person acting as Secretary of the Meeting. Unless otherwise
specifically limited by their term, all proxies shall entitle the holders
thereof to vote at any adjournment of such meeting but shall not be valid
after the final adjournment of such meeting.
EXHIBIT 2(V) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K
111 CORCORAN FUNDS
AMENDMENT #4
TO THE BY-LAWS
(EFFECTIVE MAY 12, 1998)
Strike Section 3 - Place of Meeting of Article IV - Shareholders' Meetings and
replace it with the following:
Section 3. Place of Meeting. Meetings of the shareholders of the Trust or
a particular Series or Class shall be held at such place within or without
The Commonwealth of Massachusetts as may be fixed from time to time by
resolution of the Trustees.
Strike Section 6 - Place of Meeting of Article V - Trustees' Meetings and
replace it with the following:
Section 6. Place of Meeting. Meetings of the Trustees shall be held at
such place within or without The Commonwealth of Massachusetts as fixed
from time to time by resolution of the Trustees, or as the person or
persons requesting said meeting to be called may designate, but any
meeting may adjourn to any other place.
EXHIBIT 8(I) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of the 12th day of September, 1996, by and between
111 CORCORAN FUNDS, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), and THE FIFTH THIRD BANK, a banking
company organized under the laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios and any additional portfolios of the Trust, as each are or
will be identified in Exhibit A hereto (such current investment portfolios and
any additional portfolios individually referred to herein as a "Fund") and
collectively as the "Funds"), be held and administered by the Custodian pursuant
to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Trust and named in Exhibit B hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time serving
under the Trust's Agreement and Declaration of Trust, dated December 11, 1991,
as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part d350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Trust of such variance but such Oral Instructions will govern unless
the Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust Company and
(provided that Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Trust) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 (the "1934 Act"), which acts as a system for
the central handling of Securities where all Securities of any particular class
or series of an issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery of
the Securities.
1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust.
1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Trustees shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS) or any other
similar electronic instruction system acceptable to Custodian and approved by
resolutions of the Board of Trustees, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the Custodian
as custodian of all Securities and cash owned by or in the possession of the
Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of trustees and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loan of Securities, and deliveries and returns of
collateral consisting of Securities. Any change made to the initial
resolution of the Board of Trustees regarding the use of a Securities
Depository or Book-Entry System for the deposit of Securities of the
Funds shall require the Trust to deliver a copy thereof, certified by
an Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the
books of the Book-Entry System and Securities Depository as the case
may be, with respect to Securities of a Fund maintained in a
Book-Entry System or Securities Depository shall, by book-entry, or
otherwise identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund are held in
a Book-Entry System or Securities Depository, the Custodian shall
transfer such Securities upon (i) receipt of advice from the
Book-Entry System or Securities Depository that payment for such
Securities has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies of
any report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on
the internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the
Trust resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-custodian appointed
pursuant to Section 3.3 above or any of its or their employees, or
(ii) from failure of Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-Entry System
or Securities Depository. At its election, the Trust shall be
subrogated to the rights of the Custodian with respect to any claim
against a Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and to the
extent that the Trust has been made whole for any such loss or
damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below in proper form
for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title thereto in
favor of the Trust or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Trust and a bank which is a member of the
Federal Reserve System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account
of a Fund: interest; taxes; administration; investment management,
investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating expenses of a
Fund; in all cases, whether or not such expenses are to be in whole
or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Trust;
(g) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or
any contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Trust's
Executive Committee or Board of Trustees, certified by an Officer,
specifying the amount and purpose of such payment, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section 3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the case or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Trust, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any deposit
agreement, including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund'
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund,
but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Trust on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Trust on behalf of a Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Trust's Executive Committee or Board of Trustees, certified by an
Officer, specifying the Securities to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income
and other payments to which the Trust is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of
the Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Trust on behalf of a Fund, if eligible
therefor. All other Securities held for a Fund may be registered in the name of
the Trust on behalf of such Fund, the Custodian, or any sub-custodian appointed
pursuant to Section 3.3 above, or in the name of any nominee of any of them, or
in the name of a Book-Entry System, Securities Depository or any nominee of
either thereof; provided, however, that such Securities are held specifically
for the account of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by Fund, of the Securities and moneys held for the Trust under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered hold of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify the
Trust of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Daily Card Service, J.J. Kenny
Called Bond Service, DTC, or received by first class mail from the agent. For
market announcements not yet received and distributed by Custodian's services,
Trust will inform its custody representative with appropriate instructions.
Custodian will, upon receipt of Trust's response within the required deadline,
affect such action for receipt or payment for the Trust. For those responses
received after the deadline, Custodian will affect such action for receipt or
payment, subject to the limitations of the agent(s) affecting such actions.
Custodian will promptly notify Trust for put options only if the notice is
received by first class mail from the agent. The Trust will provide or cause to
be provided to Custodian with all relevant information contained in the
prospectus for any security which has unique put/option provisions and provide
Custodian with specific tender instructions at least ten business day prior to
the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Trust, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for the purchase of Securities for a fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the dale of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with the customs
and practices prevailing among brokers and dealers in such Securities on the
date of execution of this Agreement, or in accordance with such lesser customs,
if any, as may be approved by the Trust in Written Instructions or by resolution
of the Trust's Executive Committee or Board of Trustees, to deliver such
Securities prior to actual receipt of final payment therefor. In any such case,
the Trust shall bear the risk that final payment for such Securities may not be
made or that such Securities may be returned or otherwise held or disposed of by
or through the person to whom they were delivered, and the Custodian shall have
no liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii) income from
cash, Securities or other assets of the Trust. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of the Trust's transactions on behalf of a Fund in its Custody
Account. Any such advance shall be repayable immediately upon demand made by the
Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and
a member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by the Trust with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss, damage,
cost, expense, liability or claim arises from negligence, bad faith or willful
misconduct on its part or on the part of any sub-custodian appointed pursuant to
Section 3.3 above. The Custodian shall be entitled to rely on and may act upon
advice of counsel on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Trust is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Trust's charter documents or
by-laws, or its investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually received cash or collect on such
instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4. Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Trust is such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the Trust to
keep the books of account of the Trust and/or compute the value of the assets of
the Trust. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall not be less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in Book-Entry System or Securities Depository) and cash then owned by the Trust
and held by the Custodian as custodian, and (b) transfer any Securities held in
a book-Entry System or Securities Depository to an account of or for the benefit
of the Trust at the successor custodian, provided that the Trust shall have paid
to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust company all Securities of the
Trust held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash then owned by the Trust
and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Trust and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time
to time by the Trust and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of Massachusetts,
under a Declaration of Trust, to which reference is hereby made, a copy of which
is on file at the office of the Secretary of State of Massachusetts as required
by law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of the Trust entered into in the name of the Trust or on behalf
thereof by any of the Trustees, officers, employees or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons dealing with
any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
<PAGE>
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the receipt at the address set forth after its name herein
below:
To the Trust:
111 Corcoran Funds
c/o Central Carolina Bank
P.O. Box 51489
Durham, NC 27717
Attn: Les Edwards
Telephone: (919) 683-7570
Facsimile: (919) 683-7190
To the Custodian
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn.: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 Reference to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no amendments
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
Attest: 111 CORCORAN FUNDS
/s/ C. Grant Anderson By:/s/ Edward C. Gonzales
C. Grant Anderson Edward C. Gonzales
Assistant Secretary President and Treasurer
Attest: THE FIFTH THIRD BANK
/s/ illegible signature By:/s/ Tracie D. Hoffman
Tracie D. Hoffman
Vice President
<PAGE>
NAME CHANGED TO CCB BOND FUND - EFFECTIVE MAY 13, 1998 NAME CHANGED TO CCB
EQUITY FUND - EFFECTIVE MAY 13, 1998
NAME CHANGED TO CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND - EFFECTIVE MAY 13,
1998
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
Name of Fund Date:
111 Corcoran Bond Fund September 12, 1996
111 Corcoran Equity Fund September 12, 1996
111 Corcoran North Carolina Municipal Securities Fund September 12, 1996
<PAGE>
NAME CHANGED TO CCB BOND FUND - EFFECTIVE MAY 13, 1998
NAME CHANGED TO CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND - EFFECTIVE MAY 13,
1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized
by the Trust to Administer each Custody Account.
111 CORCORAN FUNDS
111 Corcoran Bond Fund
111 Corcoran North Carolina Municipal Securities Fund
James S. Agnew /s/ James S. Agnew
Gracie Lawrence /s/ Gracie Lawrence
<PAGE>
NAME CHANGED TO CCB BOND FUND - EFFECTIVE MAY 13, 1998
NAME CHANGED TO CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND - EFFECTIVE MAY 13,
1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized
by the Trust to Administer each Custody Account.
111 CORCORAN FUNDS
111 Corcoran Bond Fund
111 Corcoran North Carolina Municipal Securities Fund
L.W. Edwards, Jr. /s/ L. W. Edwards, Jr.
<PAGE>
NAME CHANGED TO CCB BOND FUND - EFFECTIVE MAY 13, 1998 NAME CHANGED TO CCB
EQUITY FUND - EFFECTIVE MAY 13, 1998
NAME CHANGED TO CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND - EFFECTIVE MAY 13,
1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized
by the Trust to Administer each Custody Account.
111 CORCORAN FUNDS
111 Corcoran Bond Fund
111 Corcoran Equity Fund
111 Corcoran North Carolina Municipal Securities Fund
Melissa A. Harrison /s/ Melissa A. Harrison
<PAGE>
NAME CHANGED TO CCB BOND FUND - EFFECTIVE MAY 13, 1998
NAME CHANGED TO CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND - EFFECTIVE MAY 13,
1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized
by the Trust to Administer each Custody Account.
111 CORCORAN FUNDS
111 Corcoran Bond Fund
111 Corcoran North Carolina Municipal Securities Fund
Robert P. Langell /s/ Robert P. Langell.
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
111 CORCORAN FUNDS AND THE FIFTH THIRD BANK
FIFTH THIRD BANK
MUTUAL FUND CUSTODY FEE SCHEDULE
PER UNIT
FEE
I BASIC PER ACCOUNT FEE
Annual Asset Based Fees
Under $25 Million 1 bp
$25 - $100 Million .75 bp
$100 - $200 Million .5 bp
Over $200 Million .25 bp
Minimum $2,400.00
II SECURITY TRANSACTION FEES
DTC/Fed Eligible $9.00
Physical 25.00
Amortized Securities 25.00
Options 25.00
Mutual Funds 15.00
Foreign - Euroclear & Cedel 50.00
Foreign - Other TBD
III SYSTEMS
Automated Securities Workstation
$200.00 Initial Setup $150.00
Mainframe-To-Mainframe
$200.00 Initial Setup 150.00
ACCESS Single Account 50.00
Multiple Accounts 100.00
IV MISCELLANEOUS FEES
Principal & Interest Collection (on amortized securities) $5.00
Per additional issue for repo collateral 5.00
Voluntary Corporate Actions 25.00
Wire Transfers (In/Out) 7.00
Check Requests 6.00
Automated Asset Reconciliation 25.00
Escrow Receipt 5.00
Special Services - per hr. Fee 75.00
Overnight Packages 8.00
Other TBD
EXHIBIT 9(III) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
AMENDMENT NO. 1
TO
ADMINISTRATIVE SERVICES AGREEMENT
111 CORCORAN FUNDS
This Amendment No. 1 ("Amendment No. 1") to Administrative Services
Agreement ("Agreement") dated November 22, 1993 between 111 Corcoran Funds, a
Massachusetts business trust (the "Fund"), and Federated Administrative
Services, a Pennsylvania corporation ("FAS"), is entered into as of this 23rd
day of August, 1996.
WHEREAS, pursuant to the Agreement, the Fund has retained FAS as its
Administrator during the period set forth in the Agreement; and
WHEREAS, the parties wish to extend the term of the Agreement in the manner
set forth herein;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree that Section 6(a) of the Agreement is hereby
amended to read in its entirety as follows:
"(a) the initial term of this Agreement shall commence on the date hereof,
and extend until May 1, 2000.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
111 Corcoran Funds
By: /s/ Joseph S. Machi
Vice President
Attest: /s/ C. Grant Anderson
Assistant Secretary
Federated Administrative
Services
By: /s/ John W. McGonigle
Chairman
Attest: /s/ S. Elliott Cohan
Assistant Secretary
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
Post-Effective Amendment No. 12 to Form N-1A Registration Statement of CCB Funds
(formerly 111 Corcoran Funds) of our report dated July 9, 1998, on the financial
statements of North Carolina Municipal Securities Fund, Equity Fund, and Bond
Fund as of May 31, 1998, included in or made part of this registration
statement.
By: /s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
July 20, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> 111 Corcoran Funds
111 Corcoran Bond Fund
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> May-31-1998
<PERIOD-END> May-31-1998
<INVESTMENTS-AT-COST> 84,696,925
<INVESTMENTS-AT-VALUE> 86,262,284
<RECEIVABLES> 782,314
<ASSETS-OTHER> 97
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 87,044,695
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 408,438
<TOTAL-LIABILITIES> 2,408,438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,603,642
<SHARES-COMMON-STOCK> 8,294,391
<SHARES-COMMON-PRIOR> 8,648,341
<ACCUMULATED-NII-CURRENT> 183,024
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,715,768)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,565,359
<NET-ASSETS> 84,636,257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,810,075
<OTHER-INCOME> 0
<EXPENSES-NET> 265,665
<NET-INVESTMENT-INCOME> 5,544,410
<REALIZED-GAINS-CURRENT> 331,506
<APPREC-INCREASE-CURRENT> 1,919,242
<NET-CHANGE-FROM-OPS> 7,795,158
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,361,386
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,160,087
<NUMBER-OF-SHARES-REDEEMED>1,539,772
<SHARES-REINVESTED> 25,735
<NET-CHANGE-IN-ASSETS> (1,115,361)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,047,274
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR>0
<GROSS-ADVISORY-FEES> 635,044
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 900,709
<AVERAGE-NET-ASSETS> 84,699,605
<PER-SHARE-NAV-BEGIN> 9.920
<PER-SHARE-NII> 0.660
<PER-SHARE-GAIN-APPREC> 0.260
<PER-SHARE-DIVIDEND> 0.640
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.200
<EXPENSE-RATIO> 0.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> 111 Corcoran Fund
111 Corcoran North Carolina
Municipal Securities Fund
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<TABLE> <S> <C>
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<NUMBER> 03
<NAME> 111 Corcoran Funds
111 Corcoran Equity Fund
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