1933 Act File No. 33-46190
1940 Act File No. 811-6580
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. 3 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 5 X
SOUTHTRUST VULCAN FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on June 30, 1994, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
X filed the Notice required by that Rule on June 15, 1994;
or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of the
SOUTHTRUST VULCAN FUNDS, which consists of three portfolios:
(1) Treasury Obligations Money market Fund; (2) Bond Fund; and
(3) Stock Fund, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Expense Summary.
Item 3. Condensed Financial
Information Financial Highlights.
Item 4. General Description of
Registrant Cover Page; Investment
Objectives and Policies of the
Funds; Investment Activities;
Description of Shares.
Item 5. Management of the Fund Management; Investment
Objectives and Policies of the
Funds; Dividends and
Distributions; Performance.
Item 6. Capital Stock and Other
Securities Management of the Funds; How to
Purchase, Exchange and Redeem
Shares; Dividends and
Distributions; Taxes;
Description of Shares.
Item 7. Purchase of Securities Being
Offered How to Purchase, Exchange and
Redeem Shares; Pricing of
Shares.
Item 8. Redemption or Repurchase How to Purchase, Exchange and
Redeem Shares.
Item 9. Pending Legal Proceedings Not applicable.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History General; Trustees and Officers
Item 13. Investment Objectives and
Policies Additional Information on Fund
Investments; Additional
Investment Limitations;
Portfolio Transactions.
Item 14. Management of the Fund Trustees and Officers;
Miscellaneous.
Item 15. Control Persons and Principal
Holders of Securities Miscellaneous.
Item 16. Investment Advisory and Other
Services Investment Advisory and Other
Service Arrangements.
Item 17. Brokerage Allocation Portfolio Transactions.
Item 18. Capital Stock and Other
Securities Additional Information
Concerning Shares.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchase, Exchange and
Redemption Information; Net
Asset Value; Additional
Information Concerning Shares.
Item 20. Tax Status Taxes
Item 21. Underwriters Investment Advisory and Other
Administrative Arrangements.
Item 22. Calculation of Performance
Data Performance Information.
Item 23. Financial Statements Filed in Part A.
[LOGO OF SOUTHTRUST VULCAN FUNDS]
Prospectus Dated June 30, 1994
- --------------------------------------------------------------------------------
The SouthTrust Vulcan Funds (the "Company") is an open-end investment company
- -- a mutual fund-- that currently offers a selection of three investment
portfolios. Each investment portfolio ("Fund") offered by the Company and its
investment objective is described below:
. Treasury Obligations Money Market Fund -- to provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal.
. Bond Fund -- to provide a level of total return consistent with a
portfolio of high-quality debt securities (see page 4 of this
Prospectus).
. Stock Fund -- to provide long-term capital appreciation, with income a
secondary consideration.
SouthTrust Bank of Alabama, N.A., is the investment adviser (the "Adviser")
of each Fund.
Shares of the Company are not deposits or obligations of SouthTrust Bank of
Alabama, N.A., are not endorsed, insured, nor guaranteed by, nor otherwise
supported by, SouthTrust Bank of Alabama, N.A., any bank, or the Federal
Deposit Insurance Corporation (the "FDIC"), the Federal Reserve Board, or any
other government agency. Although the Treasury Obligations Money Market Fund
attempts to maintain a stable net asset value of $1.00 per share, there can be
no assurance that the Fund will be able to do so. Investments in the shares of
the Bond Fund and the Stock Fund offered by this Prospectus involve investment
risks, including the possible loss of principal.
This Prospectus contains information that a prospective investor should know
before investing. Investors are encouraged to read this Prospectus and retain
it for future reference. A Statement of Additional Information dated June 30,
1994 has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It may be obtained free of
charge by calling the Company at 1-800-239-7470.
- --------------------------------------------------------------------------------
SECURITIES OFFERED BY THIS PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
EXPENSE SUMMARY
Below is a summary of the projected expenses of each Fund for the current
fiscal year.
<TABLE>
<CAPTION>
Treasury Obligations
Money Market Fund Stock Fund Bond Fund
Shareholder Transaction Expenses -------------------- ---------- ---------
<S> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................... None 4.50% 4.00%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price)..... None None None
Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds, as
applicable)....................... None None None
Redemption Fee (as a percentage of
amount redeemed, if applicable)... None 1%* 1%*
Exchange Fee....................... None None None
</TABLE>
- --------
* Applies only to shares of the Stock Fund and the Bond Fund purchased at net
asset value which are redeemed within one year of purchase. See "How to
Purchase, Exchange, and Redeem Shares."
The following Expense Table and Example are intended to assist investors in
understanding the expenses the Funds pay and that investors bear directly or
indirectly.
<TABLE>
<CAPTION>
Treasury Obligations
Money Market Fund Stock Fund Bond Fund
-------------------- ---------- ---------
Annual Operating Expenses (as a percentage of projected
average net assets)+
<S> <C> <C> <C>
Advisory Fees After Waivers*....... 0.20% 0.13% 0.13%
12b-1 Fees......................... None None None
Other Expenses..................... 0.20% 0.52% 0.57%
---- ---- ----
Total Fund Operating Expenses After 0.40% 0.65% 0.70%
Waivers.............................. ==== ==== ====
</TABLE>
*As stated below under "Management of the Funds," the Company has agreed to
pay an advisory fee to the Adviser at an annual rate of .50% of the average
daily net assets of the Treasury Obligations Money Market Fund, .75% with
respect to the Stock Fund, and .60% with respect to the Bond Fund. Absent the
anticipated voluntary fee waivers by the Adviser; and by the Administrator for
Treasury Obligations Money Market, Total Fund Operating Expenses for the
current fiscal year are expected to be 0.73%, 1.27% and 1.17% for the Treasury
Obligations Money Market, Stock and Bond Funds, respectively.
+ The Annual Fund Operating Expenses for the Treasury Obligations Money
Market Fund, the Stock Fund and Bond Fund were 0.40%, 0.48% and 0.51%,
respectively, for the fiscal year ending April 30, 1994. Had the Adviser not
voluntarily waived its fee, the annual operating expenses would have been
0.73%, 1.17%, and 1.09%, respectively. The Annual Fund Operating Expenses in
the table above are based on expenses expected to be incurred during the fiscal
year ending April 30, 1995. During the course of this period, expenses may be
more or less than the average amount shown.
Example
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a hypothetical 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Treasury Obligations Money Market Fund........ $ 4 $13 $22 $51
Stock Fund.................................... $51 $65 $80 $122
Bond Fund..................................... $47 $61 $77 $124
</TABLE>
SouthTrust Bank or a SouthTrust Vulcan Funds Dealer may charge customer
accounts for other services provided to investors.
The amount of "Other Expenses" in the table above is based on estimated
expenses and projected assets for the current fiscal year. See "Management of
the Funds" in this Prospectus and the Statement of Additional Information for a
further description of the Funds' operating expenses.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND OPERATING
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. THE HYPOTHETICAL RETURNS IN THE
EXAMPLE REFLECT FEE WAIVERS AT THE ANTICIPATED RATES. THIS EXAMPLE IS BASED ON
ESTIMATED DATA FOR THE COMPANY'S FISCAL YEAR ENDING APRIL 30, 1995.
SouthTrust Vulcan Funds
Financial Highlights
- -------------------------------------------------------------------------------
(For a share outstanding throughout each period)
Reference is made to the Report of Independent Public Accountants on page 36.
<TABLE>
<CAPTION>
Treasury
Obligations
Money Market Fund Stock Fund Bond Fund
----------------- ---------------- ----------------
Year Ended April Year Ended Year Ended
30, April 30, April 30,
----------------- ---------------- ----------------
1994 1993* 1994 1993* 1994 1993*
- ------------------------ -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $1.00 $10.36 $10.00 $10.71 $10.00
- ------------------------
Income from investment
operations
- ------------------------
Net investment income 0.03 0.03 0.19 0.19 0.63 0.66
- ------------------------
Net realized and
unrealized gain (loss)
on
investments -- -- (0.28) 0.35 (0.58) 0.69
- ------------------------ -------- -------- ------- ------- ------- -------
Total from investment
operations 0.03 0.03 (0.09) 0.54 0.05 1.35
- ------------------------ -------- -------- ------- ------- ------- -------
Less distributions
- ------------------------
Dividends to
shareholders from net
investment income (0.03) (0.03) (0.19) (0.18) (0.65) (0.62)
- ------------------------
Dividends to
shareholders from net
realized gain on
investment transactions -- -- -- -- (0.07) (0.02)
- ------------------------ -------- -------- ------- ------- ------- -------
Total distributions (0.03) (0.03) (0.19) (0.18) (0.72) (0.64)
- ------------------------ -------- -------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $1.00 $10.08 $10.36 $10.04 $10.71
- ------------------------ -------- -------- ------- ------- ------- -------
Total Return** 2.83% 2.93% (0.90)% 5.54% 0.33% 13.44%
- ------------------------
Ratios to Average Net
Assets
- ------------------------
Expenses 0.40% 0.39%(a) 0.48% 0.39%(a) 0.51% 0.39%(a)
- ------------------------
Net investment income 2.81% 2.93%(a) 1.82% 1.91%(a) 5.97% 6.53%(a)
- ------------------------
Expense waiver/
reimbursement (b) 0.33% 0.36%(a) 0.69% 0.74%(a) 0.58% 0.59%(a)
- ------------------------
Supplemental Data
- ------------------------
Net assets, end of the
period
(000 omitted) $278,924 $194,771 $37,114 $30,935 $32,767 $25,989
- ------------------------
Portfolio turnover rate -- -- 46% 34% 6% 19%
- ------------------------
</TABLE>
* Reflects operations for the period from May 8, 1992 (date of initial
public investment) to April 30, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expenses and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
Further information about the performance of the Stock Fund and the Bond Fund
is contained in the annual report dated April 30, 1994, which can be obtained
free of charge.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Company currently offers shares in three investment portfolios -- each
with its own investment objective and investment policies. The purchase of
shares of any Fund should not be considered a complete investment program, but
an important segment of a well-diversified investment program.
Treasury Obligations Money Market Fund
The Treasury Obligations Money Market Fund's investment objective is to
provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal. In pursuing this investment
objective, the Treasury Obligations Money Market Fund (the "Treasury Money
Fund") invests solely in direct obligations of the U.S. Treasury, consisting of
Treasury bills and notes and repurchase agreements relating to direct Treasury
obligations.
All securities acquired by the Fund will have remaining maturities of
thirteen months or less (calculated in accordance with the rules of the
Securities and Exchange Commission), and the dollar-weighted average portfolio
maturity of the Fund will not exceed 90 days. Further information about the
Treasury Money Fund's investment policies is included under "Investment
Activities."
Bond Fund
The investment objective of the Bond Fund is to provide a level of total
return consistent with a portfolio of high-quality debt securities. In order to
comply with an undertaking made to certain states, the Bond Fund will pursue
this investment objective commencing on August 1, 1994. Until that date, the
Bond Fund will continue to pursue its present investment objective of providing
current income and, secondarily, capital appreciation. The Fund seeks to
achieve its objective by investing in corporate debt obligations and in U.S.
government securities, including obligations issued or guaranteed by agencies
or instrumentalities of the U.S. government. The Fund will purchase only those
securities that are considered to be at least "investment grade" (rated within
the four highest rating categories by a nationally recognized rating service
or, if unrated, are determined by the Adviser to be of comparable quality),
which may include securities having speculative characteristics. Descriptions
of each rating category are included as Appendix A to the Statement of
Additional Information. The Adviser expects that the weighted average maturity
of the Fund's portfolio securities will generally be between five and ten
years; however, the Fund's weighted average maturity of portfolio securities
may be adjusted in light of existing and anticipated market trends.
During normal market conditions, at least 65% of the Fund's total assets will
be invested in bonds. A further description of the types of obligations and the
various investment techniques used by the Bond Fund is provided under
"Investment Activities." Other securities in which the Fund may invest are U.S.
Treasury and agency obligations, commercial paper, certificates of deposit and
bankers' acceptances of domestic banks and repurchase agreements relating to
such obligations.
Stock Fund
The investment objective of the Stock Fund is to provide long-term capital
appreciation, with income a secondary consideration. The Fund seeks to achieve
its objective by investing in equity securities (i.e., common stocks),
securities convertible or exchangeable into common stocks and warrants to
purchase common stocks. The Fund's investment portfolio consists primarily of
the stocks of companies believed by the Adviser to offer the potential for
long-term growth. These companies generally are leaders in their industries and
characterized by sound management. The equity securities of such companies will
generally be dividend paying securities. The Adviser attempts to manage the
Fund's portfolio of investments to achieve total return that will generally
exceed the average return of securities included in the Standard & Poor's Daily
Price Index of 500 Common Stocks (the "S&P 500 Index"). In so doing, the
Adviser will make investment selections based on the analysis of the growth
potential of various industry sectors. The equity securities in which the Fund
will invest are traded on domestic stock exchanges or in the over-the-counter
market.
Under normal market conditions, at least 65% of the Fund's total assets will
be invested in equity securities. In addition to investing in equity
securities, the Fund is authorized to invest in high-quality, short-term fixed-
income securities. See "Investment Activities" for a description of these and
other investment practices of the Fund, including limited investments in
warrants and American Depositary Receipts.
INVESTMENT ACTIVITIES
Repurchase Agreements. Each Fund may purchase portfolio securities subject to
the seller's agreement to repurchase them at a mutually specified date and
price ("repurchase agreements"). Repurchase agreements will be entered into
only with financial institutions, such as banks and broker/dealers, that are
deemed to be creditworthy by the Adviser under guidelines approved by the
Company's Board of Trustees (the "Trustees"). The seller under a repurchase
agreement will be required to maintain the value of the securities that are
subject to the agreement and held by a Fund in an amount that exceeds the
agreed upon repurchase price. A Fund's purchase of portfolio securities
pursuant to a repurchase agreement may be considered to be the making of a loan
to the seller. Default by or bankruptcy of the seller, however, would expose a
Fund to possible loss because of adverse market action, delays in connection
with the disposition of the underlying obligations or expenses of enforcing its
rights.
Income derived by the Treasury Money Fund from repurchase agreements may not
be exempt from taxation at the state level.
Reverse Repurchase Agreements. Each Fund may borrow funds for temporary
purposes by selling portfolio securities to financial institutions, such as
banks and broker/dealers, and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risks that the market value of the securities sold by a
Fund may decline below the repurchase price and the other party to the
agreement may default, in which event there may be delays in recovering the
securities. The Fund would pay interest on amounts obtained pursuant to a
reverse repurchase agreement.
Investment Company Securities. In connection with the management of daily
cash positions, each Fund may invest in securities issued by other investment
companies that invest in short-term debt securities and that seek to maintain a
$1.00 net asset value per share (i.e., "money market funds"). Securities of
other investment companies will be acquired within limits prescribed by the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations,
among other matters, restrict investments in securities of other investment
companies to no more than 10% of the value of a Fund's total assets, with no
more than 5% invested in the securities of any one investment company. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the expenses
each Fund bears directly in connection with its own operations. The Treasury
Money Fund will invest only in money market funds which invest in securities of
the same or better quality as those in which the Treasury Money Fund may
invest.
When-Issued Securities and Delayed-Delivery Transactions. In order to secure
yields or prices deemed advantageous at the time, each Fund may purchase or
sell securities on a when-issued or a delayed-delivery basis. A Fund will not
enter into a when-issued or delayed-delivery transaction for speculative
purposes, but only in furtherance of its investment objective. In such
transactions, delivery of the securities occurs beyond the normal settlement
period, but no payment or delivery is made by, and no interest accrues to, the
Fund prior to, the actual delivery or payment by the other party to the
transaction, normally within seven days after the date of commitment to
purchase in the case of the Treasury Money Fund, and within 30 days of
commitment in the case of the other Funds. Due to fluctuations in the value of
securities purchased on a when-issued or delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
Fund. Similarly, the sale of securities for delayed-delivery can involve the
risk that the prices available in the market when delivery is made may actually
be higher than those obtained in the transaction itself.
U.S. Government Obligations. The Bond Fund and the Stock Fund may purchase
obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities. The Treasury Money Fund invests solely in direct obligations
of the U.S. Treasury. Obligations of certain agencies and instrumentalities of
the U.S. government, such as those of the Government National Mortgage
Association, are supported by the full faith and credit of the U.S. Treasury.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality issuing the obligation. No
assurance can be given that the U.S. government would provide financial support
to U.S. government-sponsored instrumentalities if it is not obligated to do so
by law.
Illiquid Securities. Each Fund may invest up to 15% (10% in the case of the
Treasury Money Fund) of the total value of its net assets in securities that
are illiquid. An illiquid security is one which may not be sold or disposed of
in the ordinary course of business within seven days at approximately the value
at which the Fund has valued it on its books. Repurchase agreements with
maturities in excess of seven days will be considered by the Funds to be
illiquid.
Variable and Floating Rate Instruments. Each Fund may purchase variable and
floating rate instruments. Variable and floating rate instruments may include
variable amount master demand notes that permit the amount of indebtedness to
vary in addition to providing for periodic adjustment in the interest rate. The
absence of an active secondary market, however, could make it difficult to
dispose of the instruments, and the Fund could suffer a loss if the issuer
defaulted or during periods that the Fund is not entitled to exercise its
demand rights. Variable and floating rate instruments held by a Fund may be
subject to the Fund's 15% (10% in the case of the Treasury Money Fund)
limitation on illiquid investments when the Fund can not demand payment of the
principal amount within seven days absent a reliable trading market.
Mortgage-Backed Securities. The Bond Fund may purchase mortgage-backed
securities that provide monthly payments of principal and interest. The average
life of mortgage-backed securities varies with the maturities of the underlying
instruments that have maximum maturities of forty years. The average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as
the result of scheduled principal payments and mortgage prepayments. The rate
of such mortgage prepayments, and hence the life of the certificates, will be
primarily a function of current market rates and current conditions in the
relevant housing markets. In calculating the weighted average maturity of the
Bond Fund, the maturity of mortgage-backed instruments will be based on
estimates of average life of the underlying mortgages. The Fund will
continuously monitor and revise, as appropriate, its calculations of the
estimated average life of mortgage-backed instruments. The relationship between
mortgage prepayment and interest rates may give some high-yielding
mortgage-related securities less potential for appreciation than conventional
bonds with comparable maturities. In addition, in periods of falling interest
rates, the rate of mortgage prepayment tends to increase. During such periods,
the reinvestment of prepayment proceeds by the Fund will generally be at lower
rates than the rates that were carried by the obligations that have been
prepaid. Because of these and other reasons, a mortgage-backed security's total
return may be difficult to predict precisely. To the extent that the Fund
purchases mortgage-related or mortgage-backed securities at a premium, mortgage
prepayments (which may be made at any time without penalty) may result in some
loss of the Fund's principal investment to the extent of the premium paid.
Presently there are several types of mortgage-backed securities issued or
guaranteed by U.S. government agencies, including guaranteed mortgage pass-
through certificates, which provide the holder with a pro rata interest in the
underlying mortgages, and collateralized mortgage obligations ("CMOs"), which
provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Issuers of CMOs
ordinarily elect to be taxed as a pass-through entity known as real estate
mortgage investment conduits. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final distribution date. The
relative payment rights of the various CMO classes may be structured in many
ways. In most cases, however, payments of principal are applied to the CMO
classes in the order of their respective stated maturities, so that no
principal payments will be made on a CMO class until all other classes having
an earlier stated maturity date are paid in full. The classes may include
accrual certificates (also known as "Z-Bonds"), which only accrue interest at a
specified rate until other specified classes have been retired and are
converted thereafter to interest-paying securities. They may also include
planned amortization classes which generally require, within certain limits,
that specified amounts of principal be applied on each payment date, and
generally exhibit less yield and market volatility than other classes. The Fund
will not purchase "residual" CMO interests, which normally exhibit the greatest
price volatility.
Government Related Obligations. The Treasury Money Fund and the Bond Fund may
purchase participations in trusts that hold U.S. Treasury and agency securities
(such as TIGRs and CATs), and also may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. government obligations.
Participations other than those issued by the U.S. Treasury are not obligations
of the U.S. government. Stripped securities are issued at a discount to their
"face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. Obligations of certain agencies and instrumentalities of
the U.S. government, such as the Government National Mortgage Association and
the Export-Import Bank of the United States, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Student Loan
Marketing Association, are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation,
are supported only by the credit of the instrumentality. No assurance can be
given that the U.S. government would provide financial support to U.S.
government-sponsored agencies or instrumentalities if it is not obligated to do
so by law. Each Fund will invest in the obligations of such agencies or
instrumentalities and in stripped securities only when the Adviser deems the
credit risk with respect thereto to be minimal.
Zero Coupon Bonds. The Bond Fund may purchase zero coupon bonds (i.e.,
discount debt obligations that do not make periodic interest payments). Zero
coupon bonds held by a Fund are subject to greater market fluctuations from
changing interest rates than debt obligations of comparable maturities that
make current distributions of interest.
Equity Securities. The Stock Fund may invest in common stocks, convertible
bonds, convertible preferred stock and warrants to purchase common stock. A
convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, the Fund seeks
the opportunity, through the conversion feature, to participate in the capital
appreciation of the common stock into which the securities are convertible,
while earning higher current income than is available from the common stock.
Although the Stock Fund may acquire convertible securities that are rated below
investment grade, the Company does not expect that investments in lower-rated
convertible securities will exceed 5% of the value of the total assets of the
Fund at the time of purchase. The Stock Fund may invest up to 5% of its total
assets at the time of purchase in warrants (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specific price valid for a specific period of time.
The prices of warrants do not necessarily correlate with the prices of the
underlying securities.
American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). The Stock Fund may invest in securities of foreign issuers in the
form of ADRs, EDRs or similar securities representing securities of foreign
issuers. These securities may not be denominated in the same currency as the
securities they represent. ADRs are receipts, typically issued by a United
States bank or trust company, evidencing ownership of the underlying foreign
securities. The depositaries issuing ADRs in which the Fund will invest will be
those sponsored by the issuers of the underlying securities. EDRs are receipts
issued by a European financial institution evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in United States
securities markets, and EDRs, in bearer form, are designed for use in the
European securities markets. Investments in foreign securities involve higher
costs than investments in U.S. securities, including higher transaction costs
as well as the imposition of additional taxes by foreign governments. In
addition, foreign investments may include additional risks associated with the
level of currency exchange rates, less complete financial information about the
issuers, less market liquidity, and political instability. Future political and
economic developments, the possible imposition of withholding taxes on interest
income, the possible seizure or nationalization of foreign holdings, the
possible establishment of exchange controls, or the adoption of other
governmental restrictions might adversely affect the payment of principal and
interest on foreign obligations.
Liquidity Management. As a temporary defensive measure, if the Adviser
determines that market conditions warrant, the Bond Fund and the Stock Fund may
each invest without limitation in U.S. government obligations, notes, zero
coupon securities and repurchase agreements relating to U.S. government
obligations. Any strategy to manage the liquidity of the Treasury Money Fund is
subject to the Fund's policy of limiting investments to direct obligations of
the U.S. Treasury and repurchase agreements relating to such obligations.
Fixed-Income Securities. The market value of fixed-income obligations in the
Treasury Money Fund and the Bond Fund (and, consequently, in the case of the
Bond Fund, the net asset value per share) can be expected to fluctuate
inversely to changes in prevailing interest rates. Investors should also
recognize that, in periods of declining interest rates, the yields of Funds
composed primarily of fixed-income securities will tend to be higher than
prevailing market rates and, in periods of rising interest rates, yields will
tend to be somewhat lower. In addition, the Bond Fund may purchase securities
rated within the lowest category of investment grade (i.e., "Baa" by Moody's
Investors Service, Inc. ("Moody's") or "BBB" by Standard & Poor's Corporation
("S&P")) and the Stock Fund may purchase securities rated below investment
grade. Securities rated in such categories may have speculative elements and
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than is the case
with higher rated bonds.
Lending of Portfolio Securities. From time to time, each of the Funds may
lend portfolio securities to brokers/dealers and other financial organizations.
Such loans will not exceed 20% of a Fund's total assets. Loans of portfolio
securities by a Fund will be collateralized by cash, letters of credit or U.S.
government securities which are maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities. The risks
in lending portfolio securities, like those associated with other extensions of
secured credit, consist of possible decline in value of collateral, possible
delays in receiving additional collateral or in the recovery of the loaned
securities or expenses of enforcing the Fund's rights. Loans will be made to
firms deemed by the Adviser to be of good standing and will not be made unless,
in the judgment of the Adviser, the consideration to be earned from such loans
would justify the risk. In order to generate additional income, each Fund may
lend portfolio securities, on a short-term or long-term basis, up to one-third
of the value of its total assets to broker/dealers, banks or other
institutional borrowers of securities.
Portfolio Transactions and Turnover
All orders for the purchase or sale of securities on behalf of a Fund are
placed by the Adviser with broker/dealers that the Adviser selects. The Company
cannot accurately predict the turnover rate for any Fund, but expects that the
annual turnover rate will generally not exceed 75% for the Bond Fund and 50%
for the Stock Fund. Short-term capital gains realized from portfolio
transactions are taxable to shareholders as ordinary income. In addition,
higher portfolio turnover rates can result in corresponding increases in
brokerage commissions and other transaction costs. The Funds will not consider
portfolio turnover rates a limiting factor in making investment decisions
consistent with their respective objectives and policies.
Investment Limitations
A Fund's investment objective and policies, except as otherwise indicated,
may be changed by the Trustees without shareholder approval. However,
shareholders will be notified in writing at least 30 days prior to any change
in the investment objective. Any such change may result in a Fund having an
investment objective different from the investment objective which the
shareholder considered appropriate at the time of investment in the Fund. No
assurance can be provided that a Fund will achieve its investment objective.
Each Fund has also adopted certain fundamental investment limitations that
may be changed only with the approval of a majority of a Fund's outstanding
shares. The following descriptions summarize several of the Funds' fundamental
investment policies, which are set forth in full in the Statement of Additional
Information.
No Fund may:
(1) purchase securities, except U.S. government securities, if more than 5%
of its total assets will be invested in the securities of any one
issuer, except that up to 25% of the Bond Fund's or the Stock Fund's
total assets may be invested without regard to this 5% limitation;
(2) subject to the foregoing 25% exception, purchase more than 10% of the
outstanding voting securities of any issuer;
(3) invest 25% or more of its total assets in one or more issuers
conducting their principal business activities in the same industry;
and
(4) borrow money except for temporary purposes in amounts up to one-third
of the value of its total assets at the time of such borrowing.
Whenever borrowings exceed 5% of a Fund's total assets, the Fund will
not make any additional investments.
These investment limitations are applied at the time investment securities
are purchased.
HOW TO PURCHASE, EXCHANGE AND REDEEM SHARES
Purchase of Shares -- General
Federated Securities Corp. (the "Distributor") has established several
procedures for purchasing shares of the Company. Shares may be purchased
through SouthTrust Bank of Alabama, N.A., or its affiliated and correspondent
banks ("SouthTrust"), or Fund shares may be purchased through a broker/dealer
that has entered into a sales agreement with the Distributor (a "SouthTrust
Vulcan Funds Dealer"). SouthTrust or a SouthTrust Vulcan Funds Dealer will be
responsible for transmitting purchase and redemption orders directly to the
Distributor in a timely manner. Orders may be placed by contacting the Fund at
1-800-239-7470. Texas residents should purchase shares through Federated
Securities Corp. at 1-800-356-2805. Purchases will be effected at the net asset
value next determined after the purchase order is received in proper form by
the transfer agent and the custodian has federal funds available immediately to
it. SouthTrust (or a SouthTrust Vulcan Funds Dealer) will normally be the
holder of record of Fund shares and will reflect a customer's beneficial
ownership of shares in the customer's account statements. Investors wishing to
purchase shares of any Fund should contact their SouthTrust account
representative or a SouthTrust Vulcan Funds Dealer.
The minimum initial investment in each Fund is $1,000. The minimum subsequent
investment is $50. With respect to investments made in the Funds through a
sweep program, initial investment minimums may be modified under the relevant
account agreement. Purchases may be effected on business days when the Adviser,
Distributor, and the custodian are open for business. The Company reserves the
right to reject any purchase order. Account applications may be obtained by
calling the Fund at 1-800-239-7470. SouthTrust or a SouthTrust Vulcan Funds
Dealer may set different minimums for its customers.
Purchase of Shares -- The Treasury Money Fund
Shares of the Treasury Money Fund are sold without a sales charge or
redemption fee. Purchase orders for shares of the Treasury Money Fund must be
received by the Distributor no later than 12:00 noon (Eastern time) on any
business day. Orders received before 12:00 noon (Eastern time) will be executed
at 12:00 noon; however, if federal funds for such orders are not received by
4:00 p.m. (Eastern time), the order will be canceled with notice to the
institution placing the order. Orders received in proper form after 12:00 noon
(Eastern time) will be executed on the next business day.
Purchase of Shares -- Bond Fund and Stock Fund
Shares of the Bond Fund and the Stock Fund are purchased at the net asset
value per share plus any applicable sales charge (the "Public Offering Price")
next determined on the day the purchase order is received. Net asset value is
determined at the close of regular trading hours of the New York Stock Exchange
(currently 4:00 p.m. Eastern time). Immediately available funds in payment of
the purchase price must be received by the Funds' custodian no later than 4:00
p.m. (Eastern time) by the fifth business day following receipt of the order.
If federal funds are not received by such date, the order will be canceled and
notice thereof will be given, and the institution placing the order will be
responsible for any loss to the Funds or their shareholders. Payment for orders
which are not received or accepted will be returned after prompt inquiry to the
sending institution.
Automatic Investment Program ("AIP"). Once an account has been opened in a
Fund, shareholders may add to their investment on a monthly basis in a minimum
amount of $50. Under the AIP, funds may be automatically withdrawn from the
shareholder's checking account, via Automated Clearing House ("ACH")
processing, through the shareholder's financial institution. Such funds are
invested in shares at the net asset value next determined plus any applicable
sales charges on the day an order is effected by the transfer agent. An
investor may apply for participation in the AIP through SouthTrust or a
SouthTrust Vulcan Funds Dealer servicing his or her SouthTrust Vulcan account
and by completing the supplementary AIP authorization form. In order to
participate in the AIP, the investor must determine that his or her financial
institution is an ACH participant and will clear and process ACH transactions.
The AIP may be modified or terminated by a shareholder on 30-days' written
notice to SouthTrust, a SouthTrust Vulcan Funds Dealer, or by the Fund at any
time.
Sales Charge
The Public Offering Price of shares of the Bond Fund or the Stock Fund equals
the Fund's net asset value per share plus any applicable sales charge. No sales
charge will be assessed on the reinvestment of distributions. The following
tables illustrate the applicable front-end sales charge at various investment
levels.
<TABLE>
<CAPTION>
Sales Dealer
Charge Concession
Bond Fund ------ ----------
<S> <C> <C>
$0 but less than $100,000................................. 4.00% 3.50%
$100,000 but less than $250,000........................... 3.00% 2.50%
$250,000 but less than $500,000........................... 2.50% 2.00%
$500,000 but less than $1,000,000......................... 2.00% 1.50%
$1,000,000 or more........................................ 0* 0%
<CAPTION>
Sales Dealer
Charge Concession
Stock Fund ------ ----------
<S> <C> <C>
$0 but less than $50,000.................................. 4.50% 4.00%
$50,000 but less than $100,000............................ 4.00% 3.50%
$100,000 but less than $250,000........................... 3.25% 2.75%
$250,000 but less than $500,000........................... 2.75% 2.25%
$500,000 but less than $1,000,000......................... 1.75% 1.25%
$1,000,000 or more........................................ 0* 0%
</TABLE>
- --------
* A redemption fee of 1% may be imposed on certain redemptions made within one
year of purchase. See "Redemption of Shares" -- "Redemption Fee."
The Distributor will pay the appropriate dealer concession to SouthTrust
Vulcan Fund Dealers. Upon notice, the Distributor may also elect to reallow a
higher percentage of the sales charge stated above to selected brokers and
dealers for all sales made during a particular period. From time to time, the
Distributor will conduct sales programs and contests that compensate SouthTrust
Vulcan Funds Dealers with cash or non-cash items, such as payments of certain
expenses of qualified SouthTrust Vulcan Funds Dealers and their spouses to
attend informational meetings about the Bond or Stock Funds or other special
events at recreational facilities, or items of material value. In some
instances, these incentives will be made available only to SouthTrust Vulcan
Funds Dealers who have sold or may sell significant amounts of shares. The cost
of such compensation is borne by the Distributor and is not borne by the Bond
Fund or Stock Fund.
Reduced Sales Charges
The sales charge on purchases of the Bond Fund and the Stock Fund may be
reduced through the following:
. right of accumulation;
. quantity discounts;
.letter of intent; and
.reinvestment privilege.
Right of Accumulation. Under the Right of Accumulation, the current value of
an investor's existing shares in the Bond Fund or the Stock Fund may be
combined with the amount of the investor's current purchases in determining the
applicable sales charge. In order to receive the cumulative quantity reduction,
previous purchases of Fund shares must be called to the attention of the Fund
at the time of the current purchase.
Quantity Discounts. As shown on the prior page, larger purchases reduce the
sales charge paid. The Company will combine purchases made on the same day by
the investor, spouse and any children under age 21 when calculating the sales
charge.
Letter of Intent. An investor may qualify for a reduced sales charge
immediately by signing a non-binding Letter of Intent stating the investor's
intention to invest during the next 13 months a specified amount which, if made
at one time, would qualify for a reduced sales charge. Any redemptions made
during the 13-month period will be subtracted from the amount of purchases in
determining whether the terms of the Letter of Intent have been met. During the
term of a Letter of Intent, the Company's transfer agent will hold Fund shares
representing 5% of the specified amount in escrow for payment of a higher sales
load if the full amount specified in the Letter of Intent is not purchased. The
escrowed shares will be released when the full amount specified has been
purchased and an adjustment will be made to reflect any reduced sales charge
applicable to shares purchased during the 90 day period prior to submission of
the Letter of Intent. If the full amount specified is not purchased within the
13-month period, the investor will be required to pay an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge the investor would have had to pay on his or her aggregate
purchases if the total of such purchases had been made at a single time. If
such remittance is not received within 20 days after such request is made, the
Fund's transfer agent, pursuant to the terms of the Letter of Intent, will
redeem a sufficient number of shares held in escrow to realize the difference.
Reinvestment Privilege. Upon redemption of Fund shares, a shareholder has a
one-time right, to be exercised within 30 days, to reinvest the redemption
proceeds without any sales charge at the next determined net asset value after
receipt of the purchase order. The shareholder must notify in writing
SouthTrust or his or her SouthTrust Vulcan Funds Dealer of the reinvestment in
order to eliminate a sales charge.
Miscellaneous. Reduced sales charges may be modified or terminated at any
time and are subject to confirmation of an investor's holdings. For more
information about reduced sales charges, an investor should contact his or her
SouthTrust account representative, a SouthTrust Vulcan Funds Dealer or the
Fund.
Sales Charge Waivers. The following classes of investors may purchase shares
of the Bond Fund and the Stock Fund with no sales charge in the manner
described below: (1) officers, trustees, directors, employees and retired
employees of SouthTrust Corporation and its affiliates, and employees of the
transfer agent, Distributor or an authorized SouthTrust Vulcan Funds Dealer
(and spouses and children of the foregoing); (2) investors for whom SouthTrust
Corporation or one of its affiliates acts in a fiduciary, advisory, custodial,
agency or similar capacity (this does not include self-directed Individual
Retirement Accounts' transactions executed by SouthTrust Securities, Inc.); and
(3) investors who purchase shares of the Bond Fund or the Stock Fund through a
401(k) plan or a 403(b) plan which by its terms permits purchases of shares.
Exchanges of Shares
The exchange privilege enables shareholders to exchange shares of a Fund for
shares in another Fund offered by the Company. Shareholders may also exchange
shares of a Fund for Class A Shares (or Liberty Shares, as the case may be) in
certain funds within the Liberty Family of Funds ("Liberty Funds"), which funds
are distributed by Federated Securities Corp. The Liberty Funds with net asset
value exchange privileges with the Company are:
.American Leaders Fund, Inc.;
.Fund for U.S. Government Securities, Inc.;
.International Bond Fund;
.International Equity Fund;
.Liberty Equity Income Fund, Inc.;
.Liberty Municipal Securities Fund, Inc.;
.Liberty Utility Fund, Inc.; and
.Tax-Free Instruments Trust.
Exchanging Shares. Shareholders who have purchased shares of the Bond Fund or
the Stock Fund (a "load Fund") (including shares acquired through a
reinvestment of a dividend or distribution on such shares) may exchange those
shares for shares of another load Fund or a Liberty Fund identified previously
without paying an additional exchange or sales charge, except that, in the case
of the Bond Fund, this privilege does not apply to exchanges into the Stock
Fund until an investor has owned shares in the Bond Fund for 90 days. The 90-
day holding period does not apply to exchanges in which the investor obtained
Bond Fund shares through a prior exchange of shares of the Stock Fund. When
shares of the Treasury Money Fund are exchanged for shares of a load Fund or a
Liberty Fund, the applicable sales charge (if any) will be assessed. However,
shareholders exchanging shares of the Treasury Money Fund which were received
in a previous exchange involving shares on which a load was paid will not be
required to pay an additional sales charge upon notification of the
reinvestment of the equivalent investment into a load Fund.
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 Fund or Liberty Fund into
which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value. Written
exchange instructions may require a signature guarantee (see "Redemption of
Shares"). Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized. The exchange privilege may be terminated at any
time upon 60 days' written notice to shareholders. A shareholder may obtain
further information on the exchange privilege by consulting the shareholder's
SouthTrust account representative, a SouthTrust Vulcan Funds Dealer, or the
Distributor.
Exchange-by-Telephone. An investor may telephone an exchange request by
calling the investor's SouthTrust account representative or SouthTrust Vulcan
Funds Dealer which is responsible for transmitting such exchange request to the
Distributor. Shares may be exchanged by telephone only between fund accounts
having identical shareholder registrations. Telephone exchange instructions may
be recorded.
An investor may have difficulty in making exchanges by telephone through a
SouthTrust account representative or SouthTrust Vulcan Funds Dealer during
times of drastic economic or market changes. If a shareholder cannot contact
the shareholder's SouthTrust account representative or SouthTrust Vulcan Funds
Dealer by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail.
An investor should be aware that a transaction initiated by telephone and
reasonably believed to be genuine by the above-named parties may subject the
investor to the risk of loss if such transaction is subsequently found not to
be genuine. If reasonable procedures are not followed by the Funds, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the transfer agent by the SouthTrust account representative or a
SouthTrust Vulcan Funds Dealer before an exchange request can be processed.
Redemption of Shares
An investor may redeem Fund shares in accordance with instructions and
limitations relating to the customer's account at SouthTrust or the investor's
SouthTrust Vulcan Funds Dealer. These procedures will vary in accordance with
the type of account, and a shareholder should contact the account
representative to redeem shares. A SouthTrust account representative or a
SouthTrust Vulcan Funds Dealer is responsible for transmitting redemption
orders promptly to the Fund.
No charge for wiring redemption payments is imposed by the Company, although
SouthTrust or a SouthTrust Vulcan Funds Dealer may charge customer accounts for
services provided in connection with the redemption of shares. Information
relating to such redemption services and charges, if any, may be obtained by
customers from their account representative. Except for certain redemptions
made within one year from the date of purchase, redemption orders are effected
at the net asset value per share next determined after receipt of the order by
the Distributor. See "Redemption Fee" below for a discussion of circumstances
in which a redemption fee may be assessed on redemptions.
With respect to the Bond Fund and the Stock Fund, redemption proceeds are
normally remitted in federal funds to the redeeming institution within five
business days following receipt of the order.
With respect to the Treasury Money Fund, if a redemption order is received by
the Distributor on a business day before 12:00 noon (Eastern time), payment is
normally wired the same day in federal funds. Payment for redemption orders
received between 12:00 noon (Eastern time) and 4:00 p.m. (Eastern time) is
normally wired on the next business day. The Fund reserves the right to wire
redemption proceeds within five business days after receiving the redemption
order if, in the judgment of the Adviser, an earlier payment could adversely
impact the Fund.
A written redemption request must identify the account number and be
accompanied by share certificates, if any have been issued, properly endorsed
for transfer. A signature guarantee is required with respect to written
redemption requests. If shares to be redeemed have a value of $5,000 or more,
the signature(s) must be guaranteed by an "eligible guarantor institution" as
that term is defined under Rule 17Ad-15 under the Securities Exchange Act of
1934. Such institutions may include domestic banks, savings and loan
institutions, credit unions, brokers, dealers, securities exchanges and
associations and clearing agencies, which are approved by the transfer agent.
Additional documentation may be required if the redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator.
Redemption Fee
In order to discourage short-term investments in the Bond Fund and the Stock
Fund, the Company charges a redemption fee in connection with redemptions of
shares held for less than one year which were purchased at net asset value
(investments in excess of $1,000,000). The charge is 1% of the lesser of the
value of the shares redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares. In determining if a
charge applies and the amount of any such charge, the first shares redeemed are
those purchased with reinvested dividends and capital gain distributions,
followed by others held the longest. The redemption fee is not assessed on (i)
exchanges (except if shares acquired by exchange were then redeemed within 12
months of the initial purchase); (ii) redemptions made in connection with
distributions from qualified retirement plans, 403(b) plans or IRAs due to
death, disability or attainment of age 59 1/2; (iii) redemptions resulting from
the tax-free return of excess contributions to IRAs or employee benefit plans;
and (iv) redemptions through certain automatic withdrawals. The 1% redemption
fee is not a deferred sales charge but is rather a means to offset the
additional costs associated with short-term investments in the Funds.
Automatic Withdrawal Plan ("AWP"). An AWP may be established by a new or
existing shareholder of any Fund if the value of the shareholder's account
(valued at the net asset value at the time of the establishment of the AWP)
equals $10,000 or more. Shareholders who elect to establish an AWP may receive
a monthly, quarterly, semi-annual, or annual payment in a stated amount of not
less than $50. Fund shares will be redeemed as necessary to meet withdrawal
payments. Withdrawals may reduce principal and eventually deplete the
shareholder's account. If a shareholder desires to establish an AWP after
opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30-days' written notice to SouthTrust, a
SouthTrust Vulcan Funds Dealer, or by the Fund at any time.
Purchase of Shares at Net Asset Value. From time to time, the Distributor may
offer special concessions to enable investors to purchase shares of a load Fund
offered by the Company at net asset value, without payment of a sales charge.
To qualify for a net asset value purchase, the investor must pay for such
purchase with proceeds from the redemption of shares of a non-affiliated mutual
fund on which a sales charge was paid. A qualifying purchase of shares must
occur within 30 days of the prior redemption and must be evidenced by a
confirmation of the redemption transaction. At the time of purchase, SouthTrust
or a SouthTrust Vulcan Funds Dealer must notify the Distributor that the
purchase qualifies for a purchase at net asset value. Proceeds from the
redemption of shares on which no sales charges or commissions were paid do not
qualify for a purchase at net asset value.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income of the Treasury Money Fund are declared
daily and paid monthly. All dividends are paid in cash. Shareholders may elect
to have their dividends reinvested in additional shares of a Fund at the net
asset value of such shares on the payment date. Such election, or any
revocation thereof, must be communicated in writing by SouthTrust or a
SouthTrust Vulcan Funds Dealer on behalf of its customer to the transfer agent
and will become effective with respect to dividends paid after its receipt. The
crediting and payment of dividends will be in accordance with the procedures
governing the shareholder's account at SouthTrust or the SouthTrust Vulcan
Funds Dealer. Shareholders whose purchase orders are received and executed by
12:00 noon (Eastern time) receive dividends for that day. On the other hand,
shareholders whose redemption orders have been received by 12:00 noon (Eastern
time) will not receive dividends for that day, while shareholders whose
redemption orders have been received after 12:00 noon (Eastern time) will
receive that day's dividends. The Fund does not expect to realize net long-term
capital gains.
Dividends from net investment income are declared and paid monthly by the
Bond Fund. Dividends from net investment income are declared and paid quarterly
by the Stock Fund. Each Fund's net realized capital gains (including net short-
term capital gains) are distributed at least annually.
Each Fund's expenses are deducted from the total income of the Fund before
dividends are declared and paid. These expenses include, but are not limited
to, fees paid to the Adviser and the administrator, custodian and transfer
agent; fees and expenses of officers and Trustees; taxes; interest; legal and
auditing fees; brokerage fees and commissions; certain fees and expenses in
registering and qualifying each Fund and its shares for distribution under
federal and state securities laws; expenses of preparing prospectuses and
statements of additional information and of printing and distributing
prospectuses and statements of additional information to existing shareholders;
the expense of reports to shareholders, shareholders' meetings, and proxy
solicitations; fidelity bond and trustees' and officers' liability insurance
premiums; and the expense of using independent pricing services and other
expenses which are not assumed by the administrator. Any general expenses of
the Company that are not readily identifiable as belonging to a particular Fund
will be allocated among all Funds by or under the direction of the Trustees in
a manner the Trustees determine to be fair and equitable. The Adviser,
administrator, custodian and transfer agent may voluntarily waive all or a
portion of their fees from time to time.
PRICING OF SHARES
The net asset value of shares in the Bond Fund and the Stock Fund for
purposes of pricing purchase and redemption orders is determined once daily as
of the close of regular trading hours on the New York Stock Exchange or 4:00
p.m. (Eastern time) on days the New York Stock Exchange is closed. The net
asset value of shares of the Treasury Money Fund is determined and the shares
are priced twice daily as of 12:00 noon (Eastern time) and as of the time the
Bond Fund and the Stock Fund are priced. Net asset value and pricing are
determined on each day the New York Stock Exchange and the Federal Reserve Bank
of Philadelphia ("FRB") are open for trading. Currently, the days on which the
New York Stock Exchange and/or the FRB are closed (other than weekends) are:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Columbus Day (observed),
Veterans' Day, Thanksgiving Day, and Christmas Day. Each Fund's net asset value
is calculated by adding the value of all securities and other assets of the
Fund, subtracting its liabilities and dividing the result by the number of
outstanding shares.
With respect to the Bond Fund and the Stock Fund, securities which are traded
on a recognized stock exchange are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the
last sale price on the national securities market. Securities traded only on
over-the-counter markets are valued on the basis of closing over-the-counter
bid prices. Securities for which there were no transactions are valued at the
average of the current bid and asked prices. Restricted securities, securities
for which market quotations are not readily available, and other assets are
valued at fair value by the Adviser under the supervision of the Trustees. Debt
securities with remaining maturities of 60 days or less at the time of purchase
are valued on an amortized cost basis (unless the Trustees determine that such
basis does not represent fair value at the time). Under this method, such
securities are valued initially at cost on the date of purchase. Thereafter,
absent unusual circumstances, the Funds assume a constant proportionate
amortization of any discount or premium until maturity of the security. With
respect to the Treasury Money Fund, portfolio securities are valued on an
amortized cost basis in an effort to maintain a net asset value of $1.00 per
share.
MANAGEMENT OF THE FUNDS
Board of Trustees
The Company is managed under the direction of the Board of Trustees. The
Statement of Additional Information contains background information and the
name of each Trustee.
Investment Adviser
SouthTrust Bank of Alabama, N.A., a national banking association, serves as
the investment adviser for each of the Funds. The Adviser, headquartered in
Birmingham, Alabama, is a wholly-owned subsidiary of SouthTrust Corporation, a
publicly-held bank holding company. The Adviser and SouthTrust Corporation have
their principal offices at 420 North 20th Street, Birmingham, Alabama 35203.
The Adviser's experience includes the management of various collective and
common investment funds and the provision of investment management services to
banks and thrift institutions, corporate and profit-sharing trusts, municipal
and state retirement funds, and individual investors. As of June 1, 1994, the
Adviser had approximately $1.245 billion in assets under management. The
Adviser has not previously served as investment adviser to a mutual fund.
Subject to the supervision of the Trustees, the Adviser provides overall
investment management for each Fund, provides research and credit analysis, is
responsible for all purchases and sales of portfolio securities, maintains
books and records with respect to each Fund's securities transactions and
provides periodic and special reports to the Trustees as requested.
For the advisory services provided and expenses assumed by it, the Adviser is
entitled to receive a fee from each Fund, computed daily and payable monthly,
at an annual rate of .50% of the average daily net assets of the Treasury Money
Fund, .60% with respect to the Bond Fund, and .75% with respect to the Stock
Fund. Although the fee rate to be paid to the Adviser by the Stock Fund is
higher than that paid by most other investment companies, it is comparable to
the fee rate paid to advisers of many other investment companies having
investment objectives and policies similar to those of the Stock Fund.
Robert E. Hardin is the Stock Fund's portfolio manager, and has managed the
Fund since its inception on May 8, 1992. Mr. Hardin is a Chartered Financial
Planner, and is a Vice President and Senior Portfolio Manager in the Trust
Investment Division of SouthTrust Bank of Alabama, N.A. Mr. Hardin has been
employed by SouthTrust Bank of Alabama, N.A. since 1986. Mr. Hardin has a
bachelor's degree from the University of South Alabama. David J. Howell is the
Bond Fund's portfolio manager, and has managed the Fund since its inception on
May 8, 1992. Mr. Howell is a Senior Trust Investment Officer and Portfolio
Manager in the Trust Investment Division of SouthTrust Bank of Alabama, N.A.
Mr. Howell has been employed by SouthTrust Bank of Alabama, N.A. since 1987.
Mr. Howell has a bachelor's degree from the University of North Alabama.
As part of its regular banking operations, SouthTrust Bank of Alabama, N.A.
may make loans to public companies. Thus, it may be possible, from time to
time, for the Funds to hold or acquire the securities of issuers which are also
lending clients of SouthTrust Bank of Alabama, N.A. The lending relationship
will not be a factor in the selection of securities.
Administrator, Custodian, and Transfer Agent
Federated Administrative Services, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, a subsidiary of Federated Investors, provides the
Funds with certain administrative personnel and services necessary to operate
the Funds, such as legal and accounting services. The administrator provides
these at an annual rate as specified below:
<TABLE>
<CAPTION>
Maximum Average Daily Net Assets
Administrative Fee of the Company
------------------ -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. The administrator may voluntary waive a portion of its fee.
State Street Bank and Trust Company ("State Street"), whose principal office
is located in Boston, Massachusetts, serves as the custodian of the Company's
assets. State Street has served as the Company's custodian since November 5,
1993. The Company's prior custodian was Provident National Bank.
Federated Services Company is transfer agent and dividend disbursing agent
for the Company. It also provides certain accounting and recordkeeping services
with respect to each Fund's portfolio investments. The transfer agent, which is
a subsidiary of Federated Investors, has the same address as the administrator
and Distributor.
Distributor
Shares of each Fund are sold on a continuous basis for the Company by
Federated Securities Corp. It is a Pennsylvania corporation organized on
November 14, 1969, and is the distributor for a number of investment companies.
The Distributor, which is a subsidiary of Federated Investors, has the same
address as the administrator and transfer agent.
TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Such qualification relieves a Fund of liability for federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that a Fund distribute to its shareholders
an amount equal to at least 90% of its investment company income (if any) net
of certain deductions for such year. In general, a Fund's investment company
income will be its taxable income (including dividends, interest, and short-
term capital gains) subject to certain adjustments and excluding the excess of
any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. Each Fund intends to distribute
substantially all of its investment company income each taxable year. Such
distributions will be taxable as ordinary income to the Fund's
shareholders who are not currently exempt from federal income taxes, whether
such income is received in cash or reinvested in additional shares. (Federal
income taxes for distributions to an IRA or qualified retirement plan are
deferred under the Code.) The dividends received deduction for corporations
will apply to such distributions by the Stock Fund to the extent of the total
qualifying dividends received by the distributing Fund from domestic
corporations for the taxable year.
Substantially all of each of the Bond Fund and the Stock Fund's net realized
long-term capital gains, if any, will be distributed at least annually to such
Fund's shareholders. The Funds will generally have no tax liability with
respect to such gains, and the distributions will be taxable to such
shareholders who are not currently exempt from federal income taxes as long-
term capital gains, regardless of how long the shareholders have held such Fund
shares and whether such gains are received in cash or reinvested in additional
shares. The Treasury Money Fund does not expect to realize long-term capital
gains, and therefore, does not expect to distribute any capital gain dividends.
Dividends declared in October, November, or December of any year payable to
shareholders of record on a specified date in such months will be deemed to
have been received by shareholders and paid by a Fund on December 31 of such
year if such dividends are actually paid during January of the following year.
Before purchasing shares in the Bond Fund or the Stock Fund, the impact of
dividends or distributions which are expected to be declared or have been
declared, but not paid, should be carefully considered. Any dividend or
distribution declared shortly after a purchase of such shares prior to the
record date will have the effect of reducing the per share net asset value by
the per share amount of the dividend or distribution. All or a portion of such
dividend or distribution, although in effect a return of capital, may be
subject to tax.
A taxable gain or loss may be realized by a holder of shares of the Bond Fund
or the Stock Fund upon the redemption or transfer of such Fund shares,
depending upon the tax basis of such shares and their price at the time of
redemption or transfer.
Distributions of net investment income may be taxable to shareholders as
dividend income under state or local law even though a substantial portion of
such distributions may be derived from interest on U.S. government obligations,
which, if realized directly, would be exempt from such income taxes.
Shareholders should consult their tax advisers concerning the application of
state and local taxes.
The Treasury Money Fund is structured to provide shareholders, to the extent
permissible by federal and state law, with income that is exempt or excluded
from taxation at the state and local level. Many states, by statute, judicial
decision or administrative action, have taken the position that dividends of a
regulated investment company, such as the Treasury Money Fund, that are
attributable to interest on direct U.S. Treasury obligations, are the
functional equivalent of interest from such obligations and are, therefore,
exempt from state and local taxes. Shareholders should consult their own tax
adviser about the status of distributions from the Fund in their own state.
Shareholders of the Treasury Money Fund will be informed of the percentage of
income distributed by the Fund which is attributable to U.S. government
obligations.
On an annual basis, the Company will send written notices to record owners of
shares regarding the federal tax status of distributions made by each Fund.
Since this is not an exhaustive discussion of applicable tax consequences,
investors may wish to contact their tax advisers concerning investments in the
Funds.
DESCRIPTION OF SHARES
The Company was organized as a Massachusetts business trust on March 4, 1992,
and is registered under the 1940 Act as an open-end management investment
company. Effective June 30, 1993, the Company changed its name from "Vulcan
Funds' to "SouthTrust Vulcan Funds.' The Master Trust Agreement authorizes the
Trustees to classify and reclassify any unissued shares into one or more
classes of shares. Pursuant to such authority, the Trustees have authorized the
issuance of an unlimited number of shares of beneficial interest in the
Company, representing interests in the Treasury Obligations Money Market Fund,
the Bond Fund and the Stock Fund, respectively, each of which is classified as
a diversified investment company under the 1940 Act.
Each share of a Fund has a par value of $.001, represents an equal
proportionate interest in the particular Fund involved and is entitled to such
dividends and distributions earned on such Fund's assets as are declared in the
discretion of the Trustees.
The Company's shareholders are entitled to one vote for each full share held
and proportionate fractional votes for fractional shares held, and will vote in
the aggregate and not by Fund, except where otherwise required by law or when
the Trustees determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund. Under Massachusetts law and
the Company's Master Trust Agreement, the Company is not required and does not
currently intend to hold annual meetings of shareholders for the election of
Trustees except as required under the 1940 Act. The Trustees are required to
call a meeting of shareholders upon the written request of at least 10% of the
Company's outstanding shares. In addition, to the extent required by law, the
Company will assist in shareholder communications in connection with such a
meeting. For a further discussion of the voting rights of shareholders, see
"Additional Information Concerning Shares" in the Statement of Additional
Information. As of May 31, 1994, Lynspen & Company of Birmingham, Alabama,
acting in various capacities for numerous accounts, was the owner of record of
205,575,807 shares (85.31%) of the SouthTrust Vulcan Treasury Obligations Money
Market Fund; Lynspen & Company of Birmingham, Alabama, acting in various
capacities for numerous accounts, was the owner of record of 2,674,956 shares
(81.86%) of the SouthTrust Vulcan Bond Fund; Lynspen & Company of Birmingham,
Alabama, acting in various capacities for numerous accounts, was the owner of
record of 2,662,091 shares (71.90%) of the SouthTrust Vulcan Stock Fund, and
therefore, may, for certain purposes, be deemed to control the Funds and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TOTAL RETURNS AND YIELDS
Total Return. From time to time the Bond Fund and the Stock Fund may
advertise their average annual total return over various periods of time. Such
total return figures show the average percentage change in value of an
investment in a Fund from the beginning date of the measuring period to the end
of the measuring period. These figures reflect changes in the price of the
Fund's shares and assume that any income dividends and/or capital gain
distributions made by the Fund during the period were reinvested in shares of
the Fund. When considering average total return figures for periods longer than
one year, it is important to note that the relevant Fund's average annual total
return for any one year in the period might have been greater or less than the
average for the entire period. The Bond Fund and the Stock Fund may also use
aggregate total return figures for various periods representing the cumulative
share prices and assuming reinvestment of dividends and distributions.
Aggregate total returns may be shown by means of schedules, charts or graphs
and may indicate sub-totals of the various components of total return (i.e.,
change in value of initial investment, income dividends and capital gains
distributions).
Yield. From time to time, the Bond Fund may quote a 30-day yield in
advertisements or in communications to shareholders. The yield of a Fund refers
to the income generated by an investment in the Fund over a 30-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
the 30-day period is assumed to be earned and reinvested at a constant rate and
compounded semi-annually. The annualized income is then shown as a percentage
of the investment.
The Treasury Money Fund may advertise its yield and effective yield. Both
yield figures are based on historical earnings and are not intended to indicate
future performance. Yield refers to the income generated by an investment in
the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then annualized. That is, the amount of income
generated by the investment during the week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment.
Effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of
this assumed reinvestment.
Quotations of yield and total return of each Fund represent a Fund's past
performance and should not be considered as representative of future results.
Any account fees charged by SouthTrust or a SouthTrust Vulcan Funds Dealer will
not be included in the Fund's calculations of yield and total return. Such
fees, if any, will reduce the investor's net return on an investment. The
methods used to compute each performance quotation are described in more detail
in the Statement of Additional Information.
SouthTrust Vulcan Treasury Obligations
Money Market Fund
Portfolio of Investments
April 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
----------- -------------------------------------------------- ------------
<C> <S> <C>
U.S. Treasury Bills--55.1%
- -------------------------------------------------------------------------------
$15,000,000 5/12/94 $ 14,985,173
--------------------------------------------------
20,000,000 6/2/94 19,939,822
--------------------------------------------------
10,000,000 6/9/94 9,965,388
--------------------------------------------------
10,000,000 6/16/94 9,958,856
--------------------------------------------------
15,000,000 7/7/94 14,908,713
--------------------------------------------------
10,000,000 7/21/94 9,921,475
--------------------------------------------------
15,000,000 7/28/94 14,885,050
--------------------------------------------------
15,000,000 8/4/94 14,873,333
--------------------------------------------------
5,000,000 8/11/94 4,952,117
--------------------------------------------------
5,000,000 8/25/94 4,941,919
--------------------------------------------------
10,000,000 9/1/94 9,874,096
--------------------------------------------------
10,000,000 9/15/94 9,856,531
--------------------------------------------------
10,000,000 9/22/94 9,848,100
--------------------------------------------------
5,000,000 10/6/94 4,913,428
-------------------------------------------------- ------------
Total U.S. Treasury Bills 153,824,001
-------------------------------------------------- ------------
*Repurchase Agreements--45.1%
- -------------------------------------------------------------------------------
30,000,000 First Boston Corp., 3.50%, dated 4/29/94, due
5/2/94 30,000,000
--------------------------------------------------
50,000,000 Kidder, Peabody & Co., Inc., 3.55%, dated 4/29/94,
due 5/2/94 50,000,000
--------------------------------------------------
45,807,000 Sanwa-BGK Securities Co., 3.40%, dated 4/29/94,
due 5/2/94 45,807,000
-------------------------------------------------- ------------
Total Repurchase Agreements (Note 2B) 125,807,000
-------------------------------------------------- ------------
Total Investments, at amortized cost (Note 2A) $279,631,001+
-------------------------------------------------- ------------
</TABLE>
+ Also represents cost for federal tax purposes.
* The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($278,924,255) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Stock Fund
Portfolio of Investments
April 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ---------------------------------------------------- -----------
<C> <S> <C>
Short-Term Investments--1.3%
- ---------------------------------------------------------------------------
Mutual Fund Shares
----------------------------------------------------
496,588 Federated Short-Term U.S. Government Securities Fund
(at net asset value) (Note 2A) $ 496,588
---------------------------------------------------- -----------
Common Stocks--98.8%
- ---------------------------------------------------------------------------
Business Equipment & Services--3.2%
----------------------------------------------------
16,900 Automatic Data Processing 870,350
----------------------------------------------------
5,200 Dun & Bradstreet Corp. 305,500
---------------------------------------------------- -----------
Total 1,175,850
---------------------------------------------------- -----------
Capital Goods--9.2%
----------------------------------------------------
3,500 Caterpillar, Inc. 384,562
----------------------------------------------------
11,900 Emerson Electric Co. 693,175
----------------------------------------------------
3,600 General Electric Co. 342,450
----------------------------------------------------
17,800 Illinois Tool Works, Inc. 736,475
----------------------------------------------------
5,100 PACCAR, Inc. 272,850
----------------------------------------------------
30,000 Pall Corp. 510,000
----------------------------------------------------
12,600 Rockwell International Corp. 491,400
---------------------------------------------------- -----------
Total 3,430,912
---------------------------------------------------- -----------
Consumer Durables--6.2%
----------------------------------------------------
18,400 Chrysler Corp. 880,900
----------------------------------------------------
28,300 Echlin, Inc. 735,800
----------------------------------------------------
12,000 Whirlpool Corp. 702,000
---------------------------------------------------- -----------
Total 2,318,700
---------------------------------------------------- -----------
Consumer Non-Durables--12.3%
----------------------------------------------------
24,700 Coca-Cola Co. 1,028,138
----------------------------------------------------
8,200 General Mills, Inc. 423,325
----------------------------------------------------
16,000 International Flavors & Fragrances, Inc. 584,000
----------------------------------------------------
23,200 Procter & Gamble Co. 1,319,500
----------------------------------------------------
</TABLE>
SouthTrust Vulcan Stock Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ------------------------------------- -----------
<C> <S> <C>
Common Stocks--continued
- ------------------------------------------------------------
20,200 Sara Lee Corp. $ 419,150
-------------------------------------
28,400 UST, Inc. 791,650
------------------------------------- -----------
Total 4,565,763
------------------------------------- -----------
Consumer Services--7.5%
-------------------------------------
14,900 Block, H&R, Inc. 633,250
-------------------------------------
26,300 Disney, Walt Co. 1,114,462
-------------------------------------
25,100 Reader's Digest Associates, Inc. 1,041,650
------------------------------------- -----------
Total 2,789,362
------------------------------------- -----------
Energy--13.2%
-------------------------------------
10,900 Amoco Corp. 611,763
-------------------------------------
3,900 Atlantic Richfield Co. 371,962
-------------------------------------
11,400 Chevron Corp. 1,014,600
-------------------------------------
19,100 Exxon Corp. 1,200,913
-------------------------------------
15,500 Mobil Corp. 1,212,875
-------------------------------------
8,800 Schlumberger, Ltd. 484,000
------------------------------------- -----------
Total 4,896,113
------------------------------------- -----------
Financial Services--6.2%
-------------------------------------
12,400 American International Group 1,057,100
-------------------------------------
4,600 Federal National Mortgage Association 382,950
-------------------------------------
4,900 Marsh & McLennan Co. 414,050
-------------------------------------
20,600 Marshall & Isley Corp. 427,450
------------------------------------- -----------
Total 2,281,550
------------------------------------- -----------
Health Care--2.9%
-------------------------------------
14,500 Merck & Company, Inc. 429,563
-------------------------------------
11,100 Pfizer, Inc. 654,900
------------------------------------- -----------
Total 1,084,463
------------------------------------- -----------
Multi-Industry--3.4%
-------------------------------------
18,200 Minnesota Mining & Manufacturing Co. 889,525
-------------------------------------
7,000 Tenneco, Inc. 358,750
------------------------------------- -----------
Total 1,248,275
------------------------------------- -----------
</TABLE>
SouthTrust Vulcan Stock Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ------------------------------------- -----------
<C> <S> <C>
Common Stocks--continued
- ---------------------------------------------------------------
Raw Materials--7.2%
-------------------------------------
17,400 Air Products & Chemicals, Inc. $ 752,550
-------------------------------------
14,100 Rohm & Haas 807,225
-------------------------------------
25,700 Sherwin Williams Co. 809,550
-------------------------------------
11,400 Union Carbide Corp. 300,675
------------------------------------- -----------
Total 2,670,000
------------------------------------- -----------
Retail--9.2%
-------------------------------------
11,500 Dillard Department Stores 385,250
-------------------------------------
30,200 Home Depot, Inc. 1,268,400
-------------------------------------
14,700 Toys R Us 508,988(a)
-------------------------------------
50,200 Wal-Mart Stores 1,267,550
------------------------------------- -----------
Total 3,430,188
------------------------------------- -----------
Shelter, Forest Product & Paper--1.5%
-------------------------------------
24,600 Shaw Industries 538,125
------------------------------------- -----------
Technology--13.7%
-------------------------------------
18,100 AT&T Corp. 925,362
-------------------------------------
6,900 Hewlett Packard Co. 553,725
-------------------------------------
19,500 Intel Corp. 1,189,500
-------------------------------------
26,600 MCI Communications 608,475
-------------------------------------
11,200 Microsoft Corp. 1,036,000(a)
-------------------------------------
12,000 Motorola, Inc. 535,500
-------------------------------------
13,200 Novell, Inc. 242,550(a)
------------------------------------- -----------
Total 5,091,112
------------------------------------- -----------
Transportation--1.7%
-------------------------------------
9,800 Norfolk Southern Corp. 625,975
------------------------------------- -----------
</TABLE>
SouthTrust Vulcan Stock Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ------------------------------------------------------- -----------
<C> <S> <C>
Common Stocks--continued
- -------------------------------------------------------------------------------
Utilities--1.4%
-------------------------------------------------------
12,800 Consolidated Natural Gas $ 504,000
------------------------------------------------------- -----------
Total Common Stocks (identified cost, $36,748,410) 36,650,388
------------------------------------------------------- -----------
Total Investments (identified cost, $37,244,998) (Note
2A) $37,146,976+
------------------------------------------------------- -----------
</TABLE>
(a)Non-income producing.
+ The cost of investments for federal tax purposes amounts to $37,247,466. The
net unrealized depreciation on a federal tax basis amounts to $100,490,
which is comprised of $1,527,993 appreciation and $1,628,483 depreciation at
April 30, 1994.
Note:The categories of investments are shown as a percentage of net assets
($37,114,072) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Bond Fund
Portfolio of Investments
April 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
---------- ------------------------------------------------------ ----------
<C> <S> <C>
Short-Term Investments--0.1%
- -------------------------------------------------------------------------------
Mutual Fund Shares
- -------------------------------------------------------------------------------
26,813 Federated Short-Term U.S. Government Securities Fund
(at net asset value) (Note 2A) $ 26,813
------------------------------------------------------ ----------
Long-Term Investments--98.1%
- -------------------------------------------------------------------------------
Corporate Bonds--20.4%
- -------------------------------------------------------------------------------
Banking--4.2%
------------------------------------------------------
$ 500,000 State Street Boston Corp., 5.95%, 9/15/2003 446,690
------------------------------------------------------
1,000,000 Wachovia Corp., 6.375%, 4/15/2003 921,640
------------------------------------------------------ ----------
Total 1,368,330
------------------------------------------------------ ----------
Finance--3.0%
------------------------------------------------------
765,000 Associates Corp. of North America, 5.25%, 3/30/2000 691,552
------------------------------------------------------
275,000 International Lease Financing Corp., 5.75%, 1/15/96 274,343
------------------------------------------------------ ----------
Total 965,895
------------------------------------------------------ ----------
Electrical--3.6%
------------------------------------------------------
1,300,000 Motorola, Inc., 6.50%, 3/1/2008 1,186,874
------------------------------------------------------ ----------
Oil & Oil Finance--2.7%
------------------------------------------------------
900,000 Amoco CDA Pete Co., 6.75%, 2/15/2005 870,966
------------------------------------------------------ ----------
Retail--1.9%
------------------------------------------------------
750,000 Wal-Mart Stores, Inc., 6.75%, 10/15/2023 642,518
------------------------------------------------------ ----------
Telephones--3.0%
------------------------------------------------------
1,000,000 New England Telephone & Telegraph Co., 6.25%, 12/15/97 997,300
------------------------------------------------------ ----------
Utilities--2.0%
------------------------------------------------------
700,000 Baltimore Gas & Electric Co., 5.50%, 7/15/2000 645,043
------------------------------------------------------ ----------
Total Corporate Bonds 6,676,926
------------------------------------------------------ ----------
</TABLE>
SouthTrust Vulcan Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
---------- -------------------------------------------- -----------
<C> <S> <C>
Long-Term Investments--continued
- ----------------------------------------------------------------------
Federal National Mortgage Association--3.6%
- ----------------------------------------------------------------------
$ 200,000 6.50%, 10/25/2012 $ 199,976
--------------------------------------------
1,000,000 7.50%, 7/25/2020 990,450
-------------------------------------------- -----------
Total Federal National Mortgage Association 1,190,426
-------------------------------------------- -----------
Government National Mortgage Association--3.4%
- ----------------------------------------------------------------------
1,371,047 8.00%, 5/15/2022 1,108,656
-------------------------------------------- -----------
U.S. Treasury Bonds--12.5%
- ----------------------------------------------------------------------
1,500,000 7.25%, 5/15/2016 1,466,355
--------------------------------------------
1,000,000 7.875%, 12/15/2021 1,046,960
--------------------------------------------
1,000,000 8.00%, 11/15/2021 1,064,680
--------------------------------------------
600,000 6.25%, 8/15/2023 522,864
-------------------------------------------- -----------
Total U.S. Treasury Bonds 4,100,859
-------------------------------------------- -----------
U.S. Treasury Notes--40.5%
- ----------------------------------------------------------------------
550,000 8.625%, 8/15/94 556,974
--------------------------------------------
500,000 6.00%, 11/15/94 503,650
--------------------------------------------
1,000,000 7.75%, 2/15/95 1,021,200
--------------------------------------------
1,000,000 7.50%, 1/31/96 1,036,920
--------------------------------------------
400,000 4.625%, 2/15/96 392,976
--------------------------------------------
800,000 8.00%, 10/15/96 836,600
--------------------------------------------
1,000,000 6.50%, 11/30/96 1,011,260
--------------------------------------------
500,000 6.75%, 2/28/97 507,960
--------------------------------------------
1,000,000 5.50%, 7/31/97 978,390
--------------------------------------------
1,000,000 8.125%, 2/15/98 1,057,230
--------------------------------------------
1,000,000 7.125%, 10/15/98 1,021,500
--------------------------------------------
1,000,000 7.00%, 4/15/99 1,014,650
--------------------------------------------
1,000,000 8.00%, 8/15/99 1,058,440
--------------------------------------------
1,000,000 8.00%, 5/15/2001 1,061,140
--------------------------------------------
1,000,000 7.50%, 11/15/2001 1,034,650
--------------------------------------------
200,000 6.25%, 2/15/2003 189,794
-------------------------------------------- -----------
Total U.S. Treasury Notes 13,283,334
-------------------------------------------- -----------
</TABLE>
SouthTrust Vulcan Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
---------- ------------------------------------------------- -----------
<C> <S> <C>
U.S. Treasury STRIPs--17.7%
- ----------------------------------------------------------------------------
$1,100,000 0.00%, 2/15/96 $ 996,622
-------------------------------------------------
1,160,000 0.00%, 2/15/97 977,938
-------------------------------------------------
1,205,000 0.00%, 5/15/97 1,001,018
-------------------------------------------------
1,315,000 0.00%, 8/15/98 992,457
-------------------------------------------------
1,310,000 0.00%, 5/15/99 936,531
-------------------------------------------------
1,800,000 0.00%, 2/15/2004 889,470
------------------------------------------------- -----------
Total U.S. Treasury Strip 5,794,036
------------------------------------------------- -----------
Total Long-Term Obligations (identified cost,
$32,923,514) 32,154,237
------------------------------------------------- -----------
Total Investments (identified cost, $32,950,327)
(Note 2A) $32,181,050+
------------------------------------------------- -----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $32,950,327. The
net unrealized depreciation on a federal tax basis amounts to $769,277,
which is comprised of $259,621 appreciation and $1,028,898 depreciation at
April 30, 1994.
Note:The categories of investments are shown as a percentage of net assets
($32,767,393) at April 30, 1994.
The following abbreviation is used in this portfolio:
STRIPs--Separate Trading of Registered Interest and Principal of Securities
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Funds
Statement of Assets and Liabilities
April 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Obligations Stock Bond
Money Market Fund Fund Fund
-------------------- ----------- -----------
<S> <C> <C> <C>
Assets:
- -----------------------------
Investments in repurchase
agreements $125,807,000 $ -- $ --
- -----------------------------
Investments, in securities 153,824,001 37,146,976 32,181,050
- ----------------------------- ------------ ----------- -----------
Total investments, at
amortized cost and value 279,631,001 37,146,976 32,181,050
(Notes 2A & 2B) ------------ ----------- -----------
- -----------------------------
Cash 330 -- --
- -----------------------------
Receivable for Fund shares
sold -- 7,642 164,498
- -----------------------------
Interest receivable 24,347 1,166 433,332
- -----------------------------
Receivable for investments
sold -- 235,412 --
- -----------------------------
Dividends receivable -- 56,380 --
- -----------------------------
Prepaid/deferred expenses 63,825 22,038 20,679
(Note 2F) ------------ ----------- -----------
- -----------------------------
Total assets 279,719,503 37,469,614 32,799,559
- ----------------------------- ------------ ----------- -----------
Liabilities:
- -----------------------------
Payable for Fund shares
repurchased -- 91,332 5,780
- -----------------------------
Dividends payable 714,832 -- --
- -----------------------------
Payable for investments
purchased -- 240,713 --
- -----------------------------
Payable to portfolio
accounting agent (Note 4) 23,012 13,548 15,557
- -----------------------------
Payable to transfer and
dividend disbursing agent
(Note 4) 3,810 2,270 2,320
- -----------------------------
Accrued expenses 53,594 7,679 8,509
- ----------------------------- ------------ ----------- -----------
Total liabilities 795,248 355,542 32,166
- ----------------------------- ------------ ----------- -----------
Total net assets $278,924,255 $37,114,072 $32,767,393
- ----------------------------- ------------ ----------- -----------
Net Assets Consist of:
- -----------------------------
Paid-in capital $ -- $37,443,567 $33,504,956
- -----------------------------
Net unrealized appreciation
(depreciation) of investments -- (98,022) (769,277)
- -----------------------------
Accumulated undistributed net
realized gain (loss) on
investments -- (246,559) 99
- -----------------------------
Undistributed net investment -- 15,086 31,615
income ------------ ----------- -----------
- -----------------------------
Total net assets $278,924,255 $37,114,072 $32,767,393
- ----------------------------- ------------ ----------- -----------
Shares Outstanding 278,924,255 3,680,863 3,264,957
- ----------------------------- ------------ ----------- -----------
Net Asset Value, Per Share:
(Net Assets/Shares $ 1.00 $ 10.08 $ 10.04
outstanding) ------------ ----------- -----------
- -----------------------------
Offering Price Per Share:*** $ -- $ 10.55* $ 10.46**
- ----------------------------- ------------ ----------- -----------
Proceeds on Redemption Per $ -- $ 9.98+ $ 9.94++
Share:+++ ------------ ----------- -----------
- -----------------------------
Investments, at identified $ -- $37,244,998 $32,950,327
cost ------------ ----------- -----------
- -----------------------------
Investments, at identified $ -- $37,247,466 $ --
tax cost ------------ ----------- -----------
- -----------------------------
</TABLE>
* Computation of offering price: 100/95.5 of net asset value.
** Computation of offering price: 100/96 of net asset value.
*** See "How to Purchase, Exchange, and Redeem Shares" in the prospectus.
+ Computation of proceeds on redemption 99/100 of $10.08.
++ Computation of proceeds on redemption 99/100 of $10.04.
+++ No redemption fees were imposed on redemptions of Stock and Bond Fund
shares prior to April 30, 1994. See "How to Purchase, Exchange, and Redeem
Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Funds
Statement of Operations
Year ended April 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Obligations Stock Bond
Money Market Fund Fund Fund
-------------------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
- -------------------------------
Interest income $8,083,346 $ 17,436 $ 1,913,909
- -------------------------------
Dividend income -- 805,266 --
- ------------------------------- ---------- ----------- -----------
Total income (Note 2C) 8,083,346 822,702 1,913,909
- ------------------------------- ---------- ----------- -----------
Expenses--
- -------------------------------
Investment advisory fee (Note
4) 1,258,348 268,510 177,577
- -------------------------------
Trustees' fees 4,087 980 272
- -------------------------------
Administrative personnel and
services fees (Note 4) 364,908 51,805 50,000
- -------------------------------
Custodian fees 30,581 13,223 9,690
- -------------------------------
Transfer and dividend
disbursing agent fees (Note 4) 9,968 15,809 13,857
- -------------------------------
Portfolio accounting services
(Note 4) 57,832 28,438 31,684
- -------------------------------
Registration fees 53,870 15,609 15,515
- -------------------------------
Auditing fees 9,876 5,550 6,750
- -------------------------------
Legal fees 22,435 3,265 3,238
- -------------------------------
Printing and postage 2,096 10,588 9,672
- -------------------------------
Insurance premiums 9,184 2,957 2,634
- -------------------------------
Miscellaneous 10,257 2,827 2,182
- ------------------------------- ---------- ----------- -----------
Total expenses 1,833,442 419,561 323,071
- ------------------------------- ---------- ----------- -----------
Deduct--
- -------------------------------
Waiver of investment advisory
fee (Note 4) 755,008 221,969 139,101
- -------------------------------
Waiver of administrative
personnel and services fees 71,756 25,591 32,836
(Note 4) ---------- ----------- -----------
- -------------------------------
Net expenses 1,006,678 172,001 151,134
- ------------------------------- ---------- ----------- -----------
Net investment income 7,076,668 650,701 1,762,775
- ------------------------------- ---------- ----------- -----------
Realized and Unrealized
Gain/(Loss) on Investments:
- -------------------------------
Net realized gain (loss) on
investments (identified cost
basis) -- 173,268 23,027
- -------------------------------
Net change in unrealized
appreciation (depreciation) on -- (1,304,643) (1,952,481)
investments ---------- ----------- -----------
- -------------------------------
Net realized and unrealized -- (1,131,375) (1,929,454)
gain on investments ---------- ----------- -----------
- -------------------------------
Change in net assets $7,076,668 $ (480,674) $ (166,679)
resulting from operations ---------- ----------- -----------
- -------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Funds
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Obligations Stock Bond
Money Market Fund Fund Fund
---------------------------- ------------------------ ------------------------
Year Ended April 30, Year Ended April 30, Year Ended April 30,
---------------------------- ------------------------ ------------------------
1994 1993* 1994 1993* 1994 1993*
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
- ------------------------
Operations--
- ------------------------
Net investment income $ 7,076,668 $ 6,702,969 $ 650,701 $ 482,999 $ 1,762,775 $ 1,391,277
- ------------------------
Net realized gain (loss)
on investments -- -- 173,268 (419,827) 23,027 193,851
- ------------------------
Net change in unrealized
appreciation
(depreciation) on
investments -- -- (1,304,643) 1,206,621 (1,952,481) 1,183,204
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
resulting from
operations 7,076,668 6,702,969 (480,674) 1,269,793 (166,679) 2,768,332
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Distributions to
Shareholders
(Note 2C)--
- ------------------------
Dividends to
shareholders from net
investment income (7,076,668) (6,702,969) (654,641) (463,973) (1,818,557) (1,303,880)
- ------------------------
Distributions to
shareholders from net
realized gain on
investment transactions -- -- -- -- (184,224) (32,555)
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from distributions to
shareholders (7,076,668) (6,702,969) (654,641) (463,973) (2,002,781) (1,336,435)
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Fund Share (Principal)
Transactions (Note 3)--
- ------------------------
Net proceeds from sale
of shares 560,051,555 660,872,816 11,512,558 30,835,352 11,400,885 24,851,326
- ------------------------
Net asset value of
shares issued to
shareholders electing to
receive payment of
dividends in Fund shares 24,997 115,587 93,861 31,471 118,424 40,604
- ------------------------
Cost of shares redeemed (475,923,119) (466,217,581) (4,291,790) (737,885) (2,571,009) (335,274)
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from Fund share
transactions 84,153,433 194,770,822 7,314,629 30,128,938 8,948,300 24,556,656
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Change in net assets 84,153,433 194,770,822 6,179,314 30,934,758 6,778,840 25,988,553
- ------------------------
Net Assets:
- ------------------------
Beginning of period 194,770,822 -- 30,934,758 -- 25,988,553 --
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
End of period 278,924,255 194,770,822 37,114,072 30,934,758 32,767,393 25,988,553
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
Undistributed net
investment income
included in net assets
at end of period $ -- $ -- $ 15,086 $ 19,026 $ 31,615 $ 87,397
- ------------------------ ------------- ------------- ----------- ----------- ----------- -----------
</TABLE>
*For the period from April 29, 1992 (start of business) to April 30, 1993.
(See Notes which are an integral part of the Financial Statements)
SouthTrust Vulcan Funds
Combined Notes to Financial Statements
April 30, 1994
- -------------------------------------------------------------------------------
(1) Organization
SouthTrust Vulcan Funds (the "Company") (formerly, the "Vulcan Funds") is
registered under the Investment Company Act of 1940, as amended, as an open-
end, management investment company. The Company consists of three diversified
portfolios (individually referred to as a "Fund" and collectively as, the
"Funds"): Treasury Obligations Money Market Fund, Bond Fund, and Stock Fund.
The assets of each are segregated and a shareholder's interest is limited to
the portfolio in which shares are held.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles
(GAAP).
A. Investment Valuations--Listed equity securities, corporate bond and other
fixed income securities are valued at the last sales price reported on na-
tional securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
U.S. government obligations are generally valued at the mean between the
over-the-counter bid and asked prices as furnished by an independent
pricing service. Corporate bonds (and other fixed-income securities and
asset-backed securities) are valued at the last sale price on national
securities exchanges on that day, if available. Otherwise, corporate bonds
(and other fixed-income securities and asset-backed securities) and short-
term obligations are valued at the prices provided by an independent
pricing service.
Investments in other regulated investment companies are valued at net asset
value.
The Treasury Obligations Money Market Fund's use of the amortized cost
method to value its portfolio securities is in accordance with Rule 2a-7
under the Investment Company Act of 1940.
B. Repurchase Agreements--It is the policy of the Funds to require the custo-
dian bank to take possession, to have legally segregated in the Federal Re-
serve Book Entry System or to have segregated within the custodian's bank's
vault, all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Funds to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure the value at least equals the principal
amount of the repurchase agreement, including accrued interest.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees (the "Trustees"). Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Funds could receive less than the repurchase
price on the sale of collateral securities.
- -------------------------------------------------------------------------------
C. Investment Income, Expenses, and Distributions--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended ("the Code").
D. Federal Taxes--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their taxable income. Accord-
ingly, no provisions for federal tax are necessary. At April 30, 1994, the
Stock Fund, for federal tax purposes, had a capital loss carryforward of
$156,224 which will reduce the Fund's taxable income arising from a future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will ex-
pire in 2001 ($112,348) and 2002 ($43,876). Additionally, net capital
losses of $87,867 attributable to security transactions incurred after Oc-
tober 31, 1993, are treated as arising on May 1, 1994, the first day of the
Fund's next taxable year.
E. When-Issued and Delayed-Delivery Transactions--The Funds may engage in
when-issued or delayed-delivery transactions. A 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 securi-
ties purchased. Securities purchased on a when-issued or delayed-delivery
basis are marked to market daily and begin earning interest on the settle-
ment date.
F. Deferred Expenses--The costs incurred by the Funds with respect to regis-
tration of their shares in their first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being amor-
tized using the straight-line method over a period of five years from the
Funds' commencement date.
G. Other--Investment transactions are accounted for on the trade date.
(3) Shares of Beneficial Interest
The Master Trust Agreement permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (par value of $0.001).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year ended April 30,
----------------------------------------------------------------------
1994 1993*
---------------------------------- ----------------------------------
Treasury Treasury
Obligations Obligations
Money Market Stock Bond Money Market Stock Bond
Fund Fund Fund Fund Fund Fund
- ----------------------- ------------ --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 560,051,555 1,160,044 1,125,524 660,872,816 3,053,039 2,454,460
- -----------------------
Shares issued to
shareholders in payment
of dividends declared 24,997 8,999 11,129 115,587 3,003 3,838
- -----------------------
Shares redeemed (475,923,119) (474,016) (298,375) (466,217,581) (70,206) (31,619)
- ----------------------- ------------ --------- --------- ------------ --------- ---------
Net change resulting
from Fund share 84,153,433 695,027 838,278 194,770,822 2,985,836 2,426,679
transactions ------------ --------- --------- ------------ --------- ---------
- -----------------------
</TABLE>
*For the period from April 29, 1992 (start of business) to April 30, 1993.
(4) Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee--SouthTrust Bank of Alabama, N.A., the Company's
investment adviser ("Adviser"), receives for its services an annual investment
advisory fee equal to 0.50 of 1% of the Treasury Obligations Money Market Fund
average daily net assets; 0.75 of 1% of the Stock Fund's average daily net
assets; and 0.60 of 1% of the Bond Fund's average daily net assets,
respectively. Adviser may voluntarily choose to waive a portion of its fee.
Adviser can modify or terminate this voluntarily waiver at any time at its sole
discretion.
Administration Fee--Federated Administrative Services ("FAS") provides the
Company with certain administrative personnel and services. The FAS fee is
based on the level of average aggregate net assets of the Funds for the period.
FAS may voluntarily choose to waive a portion of its fee.
Transfer Agent and Dividend Disbursing Agent, Accounting, and Custody Fees--
Federated Services Company ("FServ") serves as transfer agent and dividend
disbursing agent for the Company. The FServ fee is based on the size, type, and
number of accounts and transactions made by shareholders.
FServ also maintains the Company's accounting records. The fee is based on the
level of each Fund's average net assets for the period, plus out-of-pocket
expenses.
Organizational Expenses--Organizational expenses were borne initially by Advis-
er. The Company has agreed to reimburse the Adviser for the organizational ex-
penses borne by the Adviser during the five-year period following the date the
Funds' first became effective. For the year ended April 30, 1994, the following
amounts were paid to the Adviser pursuant to this agreement:
<TABLE>
<CAPTION>
Organizational Organizational
Fund Expenses Expenses Paid
- -------------------------------------- -------------- --------------
<S> <C> <C>
Treasury Obligations Money Market Fund $25,255 $4,978
- --------------------------------------
Stock Fund 5,959 1,248
- --------------------------------------
Bond Fund 5,579 1,116
- --------------------------------------
</TABLE>
During the year ended April 30, 1994, the Stock Fund and Bond Fund engaged in
purchase and sale transactions with other affiliated funds pursuant to Rule
17a-7 of the Investment Company Act of 1940 amounting to $4,163,473 and
$3,666,884, respectively, and $8,338,664 and $8,311,850, respectively. These
purchases and sales were conducted on an arm's length basis and transacted for
cash consideration only, at independent current market prices and without
brokerage commissions, fees or other remuneration.
Certain of the Officers of the Company are Officers and Trustees or Directors
of FAS and FServ.
(5) Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
fiscal year ended April 30, 1994, were as follows:
<TABLE>
<CAPTION>
Stock Fund Bond Fund
- ----------- ----------- -----------
<S> <C> <C>
Purchases-- $23,488,622 $10,475,391
- ----------- ----------- -----------
Sales-- $16,132,826 $ 1,719,044
- ----------- ----------- -----------
</TABLE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of SOUTHTRUST VULCAN FUNDS
We have audited the accompanying statements of assets and liabilities of the
SouthTrust Vulcan Funds, a Massachusetts business trust (comprising,
respectively, the Treasury Obligations Money Market, the Stock, and the Bond
Portfolios), as of April 30, 1994, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the SouthTrust Vulcan Funds as of
April 30, 1994, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
June 3, 1994
[LOGO OF SOUTHTRUST VULCAN FUNDS]
Account Application
- --------------------------------------------------------------------------------
Please make a photocopy of this application for your records and mail the
original to:
Mutual Funds Department
SouthTrust Investment Services, Inc.
420 North 20th Street
Birmingham, Alabama 35282-8930
1-800-239-7470
[_] New Account
[_] Additional Investment
[_] Change of Account
Information*
--------
* Additional Documents May Be Required.
1. ACCOUNT INFORMATION (Please Print or Type)
Current SouthTrust Vulcan Funds Account Number (if any) ____________________
Account Name __________________________________________ Date of Birth
Social Security or Taxpayer ID _____________________________________________
[_] Joint Tenant Name
[_] Minor Name
Mailing Address ____________________________________________________________
Permanent Residence if Different (P.O. Box is not sufficient) ______________
----------------------------------------------------------------------------
Home Phone ( )_____________________ Office Phone ( )__________________
Please contact me at: [_] Home [_] Office [_] Other ( )______________
2. PERSONAL INFORMATION
Employed By _________________________ Joint Tenant Employed By____________
Business Address ____________________ Business Address____________________
_____________________________________ ____________________________________
Citizenship (Check One): Citizenship (Check One):
[_] Resident Alien [_] Non-Resident [_] Resident Alien [_] Non-Resident
Alien Alien
[_] U.S. [_] Other (Please Specify) _ [_] U.S.[_] Other (Please Specify) _
If spouse or minor child is an investor in SouthTrust Vulcan Funds, please
indicate account number(s) _________________________________________________
____________________________________________________________________________
3. ACCOUNT INSTRUCTIONS (Please Print or Type)
Type of Registration (Check One)
[_] Individual[_] Custodian for Minor [_] Corporation*[_] Estate
[_] Joint Tenants with [_] Partnership [_] Trust* [_] Other (Specify)* __
Right of Survivorship
--------
*Additional Forms Required
4. FUND SELECTION
The minimum initial investment in any Fund is $1,000.
Treasury Obligations Money Market Fund $ ______
Stock Fund$ ____________________________________
Bond Fund$ _____________________________________
5. PAYMENT/REDEMPTION INSTRUCTIONS
For Purchases:
[_] I will pay by check (payable to SouthTrust Vulcan Funds)
[_] Charge my account (see below)
Name of Bank ________________________ ABA Number__________________________
Bank Location _______________________ Account Number______________________
For Redemptions:
When Fund shares are redeemed [_] Mail proceeds [_] Credit my
brokerage account
Location ____________________________ Account Number______________________
6. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS (Check one. If not checked,
Option A will be assigned.)
[_] A. All dividends and capital gains reinvested in the same Fund.
[_] B. All dividends and capital gains paid in cash.
[_] C. All dividends paid in cash; capital gains reinvested in the same Fund.
Sign both 7 and 8 below.
7. TELEPHONE EXCHANGE AUTHORIZATION
To transfer entire or partial investment from Portfolio(s) to Portfolio(s)
or from a Portfolio to another investment company described in the
Prospectus.
Exchange of Shares: To complete your exchange purchase from your existing
account into any of the Portfolio(s) or other investment companies
described in the Prospectus.
I (We) hereby authorize SouthTrust Vulcan Funds and any affiliated
broker/dealer to act upon instructions received by telephone to have shares
redeemed from my (our) account(s) in the designated Portfolio(s) and the
proceeds reinvested in shares of one or more of the designated Portfolio(s)
comprising SouthTrust Vulcan Funds (the "Funds") or other investment
company whose Prospectus(es) I (we) have read. If an exchange involves an
initial investment in a Portfolio, the account registration will
automatically carry the same registration as set forth above.
Signature ___________________________ Date________________________________
Signature ___________________________ Date________________________________
8. SIGNATURE AND CERTIFICATIONS (Check those that apply.)
By signing this Application, I (we) hereby certify under penalties of
perjury that the information on this Application is complete and correct
and that:
[_] The Taxpayer I.D. Number or Social Security Number is that of the
registered owner(s).
[_] If no Taxpayer I.D. Number or Social Security Number has been provided
above, I (we) have applied, or intend to apply to the Internal Revenue
Service or the Social Security Administration for a Taxpayer I.D. Number
or Social Security Number, and I (we) understand that if I (we) do not
provide this number within 30 days of the date of this Application,
Federated Services Company is required to withhold 31% of all reportable
payments thereafter made to me (us) until I (we) provide this number.
(Please provide this number on Form W-9. You may request the Form by
calling the Fund at the number at the bottom of this Application.)
[_] If this box is checked, I am (we are) subject to backup withholding
under the provisions of Section 3406(a)(1) of the Internal Revenue Code.
I (We) represent that I am (we are) of legal age and capacity and have
read the Funds' Prospectus and agree to its terms.
Any undersigned who is an individual investor represents that he/she is of
legal age in the state of residence; all other investors represent and
warrant that they are duly authorized to sign this Application and to
purchase or redeem shares. All investors hereby affirm receipt of the
Prospectus and affirm the above Taxpayer certification. (Please sign below
exactly as printed in Registration Information.)
Individuals Corporations, Partnerships, Trusts
and Others
Date ________________________________ Date________________________________
Signature of Taxpayer whose Social Signature and Title
Security Number appears in Section 1.
_____________________________________X ____________________________________X
Joint Registrant (if any) Signature and Title
_____________________________________X ____________________________________X
9. LETTER OF INTENT -- Optional (not applicable to purchases of Treasury
Obligations Money Fund)
I understand through accumulated investments I can reduce my sales charges.
I plan to invest over a 13-month period in shares of one or more of the
Portfolios in SouthTrust Vulcan Funds an aggregate amount of at least:
[_] $50,000[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000 (and above)
(Stock Fund only)
If the amount indicated is not invested within 13 months, reduced sales
charges do not apply. Any redemptions made during the 13-month period will
be subtracted from the amount of purchases in determining whether the terms
of the Letter of Intent have been met.
10. RIGHT OF ACCUMULATION
Optional (Attach a separate sheet if necessary)
[_] I own shares of more than one Portfolio in SouthTrust Vulcan Funds,
which may entitle me to a reduced sales charge. My shareholder account
numbers are:
______________________ ______________________ ______________________
[_] The registration of some of my shares differs. Their account numbers
are:
______________________ ______________________ ______________________
11. AUTOMATIC INVESTMENT PROGRAM/AUTOMATIC WITHDRAWAL PLAN
[_] Please send me an application so I may participate in either the
Automatic Investment Program or the Automatic Withdrawal Plan. If you
have any questions about this Application or any of the Funds' services,
please feel free to call Monday to Friday 1-800-239-7470.
12. DEALER INFORMATION
For dealer use only.
We authorize the Mutual Funds Dept. of SouthTrust Investment Services,
Inc. to act as our agent for this account and agree to notify the Mutual
Funds Dept. of SouthTrust Investment Services, Inc. of purchases made
under a Letter of Intent or Right of Accumulation. We guarantee the
signatures in Section 5.
__________________________________ _____________________________________
Dealer name (as it appears on Address of office servicing Account
Selling Group Agreement)
__________________________________ _____________________________________
Address of home office City State Zip
__________________________________ _____________________________________
City State Zip Registered representative's name and
# (exactly as it appears on firm's
__________________________________ registration)
Authorized signature of dealer
_____________________________________
Registered representative's phone #
13. ACCOUNT REGISTRATION INFORMATION
If this account has more than one shareholder, all singular references in
this application refer to all shareholders. In case of two or more
shareholders, the account will be registered "Joint Tenants with Rights of
Survivorship" unless otherwise specified.
For Uniform Transfers to Minors Act or Uniform Gifts to Minors Act
accounts, use the name of the adult custodian on the shareholder line and
the name of the child on the co-shareholder line. Use the child's Social
Security number. If your account is a self-directed IRA or other retirement
plan or trust account, please indicate the type of account in the lines
provided in Section 1 for "Corporations, Trusts, Partnerships, etc." If you
want SouthTrust Bank to serve as trustee of your plan, please use the
appropriate application available from your securities dealer.
[This Page Intentionally Left Blank]
[This Page Intentionally Left Blank]
[This Page Intentionally Left Blank]
No person has been authorized to
give any information or to make
any representations not contained [LOGO OF SOUTHTRUST INVESTMENTS]
in this Prospectus, or in the
Company's Statement of
Additional Information
incorporated herein by TREASURY OBLIGATIONS
reference, in connection with MONEY MARKET FUND
the offering made by this -----------------
Prospectus and, if given or
made, such information or BOND FUND
representations must not be ---------
relied upon as having been
authorized by the Company or its STOCK FUND
Distributor. The Prospectus does ----------
not constitute an offering by
the company or by the Distributor
in any jurisdiction in which such
offering may not lawfully be made.
Table of Contents
Page
Expense Summary 2
Financial Highlights 3
Investment Objectives and 4
Policies of the Funds
Investment Activities 5
How to Purchase, Exchange 10
and Redeem Shares
Dividends and Distributions 15
Pricing of Shares 16
Management of the Funds 17
Taxes 18
Description of Shares 20 PROSPECTUS
JUNE 30, 1994
Total Returns and 20
Yields
Financial Statements 22
Report of Independent 36
Public Accountants
Investment Adviser:
[LOGO OF SOUTHTRUST BANK] [LOGO OF SOUTHTRUST VULCAN FUNDS]
of Alabama, N.A.
3052010A (6/94)
No person has been authorized to
give any information or to make
any representations not contained [LOGO OF SOUTHTRUST ESTATE
in this Prospectus, or in the AND TRUST SERVICES]
Company's Statement of
Additional Information
incorporated herein by TREASURY OBLIGATIONS
reference, in connection with MONEY MARKET FUND
the offering made by this -----------------
Prospectus and, if given or
made, such information or BOND FUND
representations must not be ---------
relied upon as having been
authorized by the Company or its STOCK FUND
Distributor. The Prospectus does ----------
not constitute an offering by
the company or by the Distributor
in any jurisdiction in which such
offering may not lawfully be made.
Table of Contents
Page
Expense Summary 2
Financial Highlights 3
Investment Objectives and 4
Policies of the Funds
Investment Activities 5
How to Purchase, Exchange 10
and Redeem Shares
Dividends and Distributions 15
Pricing of Shares 16
Management of the Funds 16
Taxes 18
Description of Shares 20
Total Returns and Yields 20 PROSPECTUS
JUNE 30, 1994
Financial Statements 22
Report of Independent 36
Public Accountants
Investment Adviser:
[LOGO OF SOUTHTRUST BANK] [LOGO OF SOUTHTRUST VULCAN FUNDS]
of Alabama, N.A.
4040404A (6/94)
Treasury Obligations Money Market Fund Bond Fund Stock Fund
(Investment Portfolios of SouthTrust Vulcan Funds)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to three series of shares representing interests in
three investment portfolios (the "Funds") of SouthTrust Vulcan Funds (the
"Company") (formerly named the "Vulcan Funds"): the Treasury Obligations Money
Market Fund, the Bond Fund and the Stock Fund. This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with
the Company's Prospectus dated June 30, 1994. A copy of the Prospectus may be
obtained without charge by calling the Company at 1-800-239-7470. This
Statement of Additional Information dated June 30, 1994, although not in itself
a Prospectus, is incorporated by reference in its entirety into the Company's
Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General.................................................................... 1
Additional Information on Fund Investments................................. 1
Additional Investment Limitations.......................................... 5
Trustees and Officers...................................................... 7
Investment Advisory and Other Service Arrangements......................... 8
Portfolio Transactions..................................................... 10
Purchase, Exchange and Redemption Information.............................. 11
Net Asset Value............................................................ 12
Performance Information.................................................... 13
Taxes...................................................................... 15
Additional Information Concerning Shares................................... 17
Independent Public Accountants............................................. 18
Miscellaneous.............................................................. 18
Appendix A................................................................. A-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Distributor. The Prospectus does
not constitute an offering by the Company or by the Distributor in any
jurisdiction in which such offering may not lawfully be made.
GENERAL
The Company is an open-end, management investment company currently
offering shares in three diversified investment portfolios. The Company was
organized on March 4, 1992. On June 30, 1993, the name of the Company changed
from "Vulcan Funds" to "SouthTrust Vulcan Funds."
As stated in the Prospectus, the investment adviser (the "Adviser") of
each Fund is SouthTrust Bank of Alabama, N.A. Capitalized terms used herein and
not otherwise defined have the same meanings as are given to them in the
Prospectus.
ADDITIONAL INFORMATION ON FUND INVESTMENTS
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Funds. A description
of applicable credit ratings is set forth in Appendix A hereto.
Repurchase Agreements. Each Fund may enter into repurchase agreements
with financial institutions, such as banks and non-bank dealers of U.S.
government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers. The Adviser will continuously monitor the
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject thereto at not less than the repurchase price. The
repurchase price under the repurchase agreements generally equals the price
paid by a Fund plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on the securities underlying the
repurchase agreement). With respect to the Treasury Obligations Money Market
Fund, the securities held subject to repurchase agreements may have stated
maturities in excess of thirteen months, provided the repurchase agreement
itself matures in one year or less.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund pursuant to a Fund's agreement to repurchase
the securities at an agreed upon price, date and rate of interest. Such
agreements are considered to be borrowings under the Investment Company Act of
1940, as amended (the "1940 Act"), and may be entered into only for temporary
or emergency purposes. While a reverse repurchase agreement is outstanding, a
Fund will maintain in a segregated account cash, U.S. government securities or
other liquid high-grade debt securities of an amount at least equal to the
market value of the securities, plus accrued interest, subject to the
agreement.
Variable and Floating Rate Instruments. Debt instruments may be
structured to have variable or floating interest rates. Variable and floating
rate obligations purchased by the Treasury Obligations Money Market Fund may
have stated maturities in excess of the Fund's maturity limitation if the Fund
can demand payment of the principal of the instrument at least once every
thirteen months on not more than thirty days' notice (this demand feature is
not required if the instrument is guaranteed by the U.S. government or an
agency thereof). These instruments may include variable amount master demand
notes that permit the amount of indebtedness to vary in addition to providing
for periodic adjustments in the interest rates. The Adviser will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such instruments and, if the instrument is subject to a demand
feature, will continuously monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument
is equivalent to the quality standards applicable to a Fund, the issuer's
obligation to pay the principal of the instrument will be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
The Treasury Obligations Money Market Fund will invest in variable and floating
rate instruments only when the Adviser deems the investment to involve minimal
credit risk.
In determining weighted average portfolio maturity of the Funds, an
instrument will usually be deemed to have a maturity equal to the longer of the
period remaining until the next interest rate adjustment or the time the Fund
involved can recover payment of principal as specified in the instrument.
Variable rate U.S. government obligations held by the Funds, however, will be
deemed to have maturities equal to the period remaining until the next interest
rate adjustment.
The absence of an active secondary market for certain variable and
floating rate notes could make it difficult to dispose of the instruments, and
a Fund could suffer a loss if the issuer defaulted or during periods that a
Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by a Fund will be subject to
the Fund's 15% (10% in the case of the Treasury Obligations Money Market Fund)
limitation on illiquid investments when the Fund may not demand payment of the
principal amount within seven days absent a reliable trading market.
When-Issued Purchases and Forward Commitments (Delayed-Delivery). When-
issued purchases and forward commitments (delayed-delivery) are commitments by
a Fund to purchase or sell particular securities with payment and delivery to
occur at a future date (normally within seven days in the case of the Treasury
Obligations Money Market Fund and within thirty days in the case of the Bond
Fund and the Stock Fund). These transactions permit a Fund to lock-in a price
or yield on a security, regardless of future changes in interest rates.
When a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Fund will set aside cash or liquid portfolio securities
equal to the amount of the commitment in a separate account. Normally, the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to place additional
assets in the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitments. It may be expected that
the market value of the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because a Fund's liquidity and ability to manage its
portfolio might be affected when it sets aside cash or portfolio securities to
cover such purchase commitments, the Adviser expects that its commitments to
purchase when-issued securities and forward commitments will not exceed 25% of
the value of a Fund's total assets absent unusual market conditions.
A Fund will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, a Fund may dispose of or renegotiate a commitment after it
is entered into, and may sell securities it has committed to purchase before
those securities are delivered to the Fund on the settlement date. In these
cases the Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions,
it relies on the other party to consummate the trade. Failure of such party to
do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
a Fund starting on the day the Fund agrees to purchase the securities. The Fund
does not earn interest on the securities it has committed to purchase until
they are paid for and delivered on the settlement date.
Mortgage-Related Securities. There are a number of important differences
among the agencies and instrumentalities of the U.S. government that issue
mortgage-related securities and among the securities that they issue. Mortgage-
related securities guaranteed by the Government National Mortgage Association
("GNMA") include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes"), which are guaranteed as to the timely payment of principal and interest
by GNMA and such guarantee is backed by the full faith and credit of the United
States. GNMA is a wholly-owned U.S. government corporation within the
Department of Housing and Urban Development. Ginnie Maes certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the United States, but are supported by the right of the issuer to
borrow from the U.S. Treasury. FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of the principal and interest by FNMA. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC")
include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs"
or "PCs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by the Federal Home
Loan Banks. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder
to timely payment of interest, which is guaranteed by the FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
Stripped Securities. The Treasury Obligations Money Market Fund and the
Bond Fund may acquire U.S. government obligations and their unmatured interest
coupons that have been separated ("stripped") by their holder, typically a
custodian bank or investment brokerage firm. Having separated the interest
coupons from the underlying principal of the U.S. government obligations, the
holder will resell the stripped securities in custodial receipt programs with a
number of different names, including "Treasury Income Growth Receipts"
("TIGRs") and "Certificate of Accrual on Treasury Securities" ("CATS"). The
stripped coupons are sold separately from the underlying principal, which is
usually 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 interest (cash) payments. 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
ostensibly owned by the bearer or holder), in trust on behalf of the owners.
Counsel to the underwriters of these certificates or other evidences of
ownership of U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be deemed the beneficial
holders of the underlying U.S. government obligations for federal tax and
securities purposes. The Company is not aware of any binding legislative,
judicial or administrative authority on this issue.
Warrants. The Stock Fund may purchase warrants, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. The purchase of warrants involves the risk that a
Fund could lose the purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's expiration. Also, the
purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price, of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. The Stock Fund will not
invest more than 5% of its total assets, taken at market value, in warrants, or
more than 2% of its total assets, taken at market value, in warrants not listed
on the New York or American Stock Exchanges. Warrants acquired in units or
attached to other securities are not subject to this restriction.
American Depositary Receipts. American Depositary Receipts ("ADRs") are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities. Certain such institutions
issuing ADRs may not be sponsored by the issuer. A non-sponsored depositary may
not provide the same shareholder information that a sponsored depository is
required to provide under its contractual arrangements with the issuer.
Investment Companies. The Funds currently intend to limit investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5%
of the value of a Fund's total assets will be invested in the securities of any
one investment company; (ii) not more than 10% of the value of a Fund's total
assets will be invested in the aggregate in securities of investment companies
as a group; and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by a Fund or by the Company as a whole.
The phrase "Money Market Funds" as used in the Prospectus with respect to a
Fund's investment in other investment companies means money market funds in
compliance with Rule 2a-7 under the 1940 Act.
Lending of Portfolio Securities
Each Fund may lend securities from its portfolio to brokers, dealers and
other financial organizations. Such loans, if and when made, may not exceed 20%
of the Fund's total assets, taken at value. Each Fund may not lend its
portfolio securities to the Adviser or its affiliates without specific
authorization from the Securities and Exchange Commission (the "SEC"). Loans of
portfolio securities by a Fund will be collateralized by cash, letters of
credit or securities issued or guaranteed by the U.S. government or its
agencies which are maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. From time to time, a Fund
may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party, which is
unaffiliated with the Fund or with the Adviser, and which is acting as a
"finder."
In lending its portfolio securities, a Fund can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when government securities are used
as collateral. Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must be met
whenever portfolio securities are loaned: (a) the Fund must receive at least
100% cash collateral or equivalent securities from the borrower; (b) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (c) the Fund must be able
to terminate the loan at any time; (d) the Fund must receive reasonable
interest on the loan, as well as an amount equivalent to any dividends,
interest or other distributions on the loaned securities, and any increase in
market value; (e) the Fund may pay only reasonable custodian fees in connection
with the loan; and (f) voting rights on the loaned securities may pass to the
borrower; however, if a material event adversely affecting the investment
occurs, the Trustees must terminate the loan and regain the right to vote the
securities. The risks in lending portfolio securities, like those associated
with other extensions of secured credit, consist of: possible declines in value
of collateral, possible delays in receiving additional collateral or in the
recovery of loaned securities or expenses of enforcing the Funds' rights. Loans
will be made to firms deemed by the Adviser to be of good standing and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans would justify the risk.
Yields and Ratings. The yields on certain obligations, including the
money market instruments in which each Fund may invest (such as commercial
paper and bank obligations), are dependent on a variety of factors, including
general money market conditions, conditions in the particular market for the
obligation, the financial condition of the issuer, the size of the offering,
the maturity of the obligation and the ratings of the issue. The ratings of
Standard & Poor's Corporation, Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co., and other nationally recognized statistical rating
organizations ("NRSROs") represent their respective opinions as to the quality
of the obligations they undertake to rate. Ratings, however, are general and
are not absolute standards of quality. Consequently, obligations with the same
rating, maturity and interest rate may have different market prices.
With respect to the Treasury Obligations Money Market Fund, all
securities (other than U.S. government securities) must be rated (generally, by
at least two NRSROs) within the two highest rating categories assigned to
short-term debt securities. In addition, the Treasury Obligations Money Market
Fund will not invest more than 5% of its total assets in securities rated in
the second highest rating category by such NRSROs and will not invest more than
1% of its total assets in the securities of any one such issuer. Unrated and
certain single rated securities (other than U.S. government securities) may be
purchased by the Treasury Obligations Money Market Fund, but are subject to a
determination by the Adviser, in accordance with procedures established by the
Trustees, that the unrated securities are of comparable quality to the
appropriate rated securities.
Other. It is possible that unregistered securities purchased by a Fund in
reliance upon Rule 144A under the Securities Act of 1933 could have the effect
of increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a period, uninterested in purchasing these
securities. To comply with restrictions of certain states, the Funds will limit
their investments in restricted securities to no more than 5% of their
respective total assets. (If state requirements change, this restriction may be
revised without shareholder notification.)
ADDITIONAL INVESTMENT LIMITATIONS
In addition to the fundamental investment limitations disclosed in the
Prospectus, each Fund is subject to the investment limitations enumerated in
this sub-section which may be changed with respect to a particular Fund only by
a vote of the holders of a majority of such Fund's outstanding shares as
defined under "Miscellaneous--Shareholder Approvals".
No Fund may:
1. Purchase or sell real estate, except that each Fund may purchase
securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
2. Acquire any other investment company or investment company
security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise
permitted by the 1940 Act.
3. Act as an underwriter of securities, except to the extent that
it may be deemed an underwriter within the meaning of the
Securities Act of 1933 on disposition of securities acquired
subject to legal or contractual restrictions on resale.
4. Write or sell put options, call options, straddles, spreads, or
any combination thereof, except for transactions in options on
securities, securities indices, futures contracts, options on
futures contracts and transactions in securities on a when-
issued or forward commitment basis, and except that a non-money
market fund may enter into forward foreign currency contracts
and options thereon in accordance with its investment objectives
and policies.
5. Purchase securities of companies for the purpose of exercising
control.
6. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment
limitation shall not apply to a Fund's transactions in futures
contracts and related options, a Fund's sale of securities short
against the box or a Fund's transactions in securities on a
when-issued or forward commitment basis, and (b) a Fund may
obtain short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities.
7. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that each
Fund may, to the extent appropriate to its investment policies,
purchase publicly traded securities of companies engaging in
whole or in part in such activities, may enter into futures
contracts and related options, and may engage in transactions in
securities on a when-issued or forward commitment basis, and
except that a non-money market fund may enter into forward
foreign currency contracts and options thereon in accordance
with its investment objectives and policies.
8. Make loans, except that each Fund may purchase and hold debt
instruments (whether such instruments are part of a public
offering or privately negotiated), may lend portfolio securities
and enter into repurchase agreements in accordance with its
investment objective and policies.
In addition, the investment limitations listed below are summarized in
the Prospectus and are set forth below in their entirety.
No Fund may:
1. Purchase securities of any one issuer other than securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or certificates of deposit for any such securities
if more than 5% of the value of the Fund's total assets, taken at
current value, would be invested in the securities of such issuer, or
more than 10% of the issuer's outstanding voting securities would be
owned by the Fund or the Company, except that up to 25% of the value
of the Fund's total assets, taken at current value, may be invested
without regard to these limitations provided, however, that the
Treasury Obligations Money Market Fund may in no event invest more
than 5% of its total assets in the securities of any one issuer. For
purposes of this limitation, a security is considered to be issued by
the entity (or entities) whose assets and revenues back the security.
A guarantee of a security is not deemed to be a security issued by
the guarantor when the value of all securities issued and guaranteed
by the guarantor, and owned by the Fund, does not exceed 10% of the
value of the Fund's total assets.
2. Borrow money or issue senior securities except that each Fund may
borrow from banks and enter into reverse repurchase agreements
for temporary purposes in amounts up to one-third of the value of
its total assets at the time of such borrowing; or mortgage,
pledge or hypothecate any assets, except in connection with any
such borrowing and then in amounts not in excess of one-third of
the value of the Fund's total assets at the time of such
borrowing. No Fund will purchase securities while its aggregate
borrowings including reverse repurchase agreements and borrowing
from banks in excess of 5% of its total assets are outstanding.
Securities held in escrow or separate accounts in connection with
a Fund's investment practices are not deemed to be pledged for
purposes of this limitation.
3. Purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be
invested in the securities of one or more issuers conducting
their principal business activities in the same industry and, in
the case of the Treasury Obligations Money Market Fund, in
securities the interest upon which is paid from revenues of
similar types of projects, provided that (a) there is no
limitation with respect to (i) instruments that are issued (as
defined in Investment Limitation No. 1 above) or guaranteed by
the United States, any state, territory or possession of the
United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political
subdivisions and (ii) repurchase agreements secured by the
instruments described in clause (i); (b) wholly-owned finance
companies will be considered to be in the industries of their
parents if their activities are primarily related to financing
the activities of the parents; and (c) utilities will be divided
according to their services (for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered
a separate industry).
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in the
value of a Fund's investments will not constitute a violation of such
limitation, except that any borrowing by a Fund that exceeds the fundamental
investment limitations stated above must be reduced to meet such limitations
within the period required by the 1940 Act (currently three days). Otherwise, a
Fund may continue to hold a security even though it causes the Fund to exceed a
percentage limitation because of fluctuation in the value of the Fund's assets.
In order to permit the sale of shares in certain states, the Company may
make commitments more restrictive than the investment policies and limitations
described above. To comply with restrictions of certain states, the Funds will
not: invest more than 5% of the value of their respective total assets in
portfolio instruments of unseasoned issuers, including their predecessors, that
have been in operation for less than three years; invest in real estate limited
partnerships; and (in the case of the Equity Fund) invest more than 5% of its
total assets in equity securities of issuers which are not readily marketable.
(If state requirements change, these restrictions may be revised without
shareholder notification.)
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Company, and their business
addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
Positions Principal Occupations
Name and Address with Company During Past Five Years
------------------------ -------------------- --------------------------------
<C> <C> <S>
*William O. Vann Trustee and Chairman Director and Chairman of the
Box 757 of the Board Board, Young & Vann Supply Co.
Birmingham, AL 35201 (since 1987); Partner B&B
Investments; Trustee and Past
Chairman, The Childrens'
Hospital
of Alabama.
Edward C. Gonzales President and Vice President, Treasurer, and
Federated Investors Treasurer Trustee, Federated Investors;
Tower Vice President and Treasurer,
Pittsburgh, PA 15222 Federated Advisers, Federated
Management, and Federated
Research; Executive Vice
President, Treasurer, and
Director, Federated Securities
Corp.; Trustee, Federated
Services Company; Chairman,
Treasurer, and Director,
Federated Administrative
Services; Trustee or Director
and President and Treasurer of
other funds distributed
by Federated Securities Corp.
Margaret D. Tessaro Vice President and Vice President, Federated
Federated Investors Assistant Treasurer Administrative Services; Vice
Tower President and Assistant
Pittsburgh, PA 15222 Treasurer of other funds
distributed by Federated
Securities Corp.
Peter J. Germain Secretary Corporate Counsel, Federated
Federated Investors Investors.
Tower
Pittsburgh, PA 15222
Thomas L. Merrill, Sr. Trustee and Chief Executive Officer, Vice
210 Inverness Center Dr. Vice President Chairman and Director, Altec
P.O. Box 10264 Industries, Inc; Director,
Birmingham, AL 35242 Walker Companies; formerly,
President, Altec Industries,
Inc. (1990-1993)
and Chairman, Vantage Consulting
(until 1989).
Charles G. Brown, III Trustee President, Tubular Products
P.O. Box 170100 Company (since 1985); Managing
Birmingham, AL 35217 Partner, Red Hollow Partnership;
Director, Back Home Digital
Music; Director, Wire
Association International.
Russell W. Chambliss Trustee President (since 1989),
Mason Corporation Executive Vice President (1988),
P.O. Box 59226 and Vice President of Sales and
Birmingham, AL 35259 Marketing (1984-1988), Mason
Corporation.
D. Riley Stuart Trustee Chairman and Chief Executive
P.O. Box 1028 Officer, Brice Building Company,
Birmingham, AL 35201 Inc.
</TABLE>
* This Trustee is deemed to be an "interested person" of the Company as defined
in the Investment Company Act of 1940, as amended.
The Company pays each Trustee $1,000 per year, plus $1,000 for each board
meeting attended by the Trustee. The Trustees are also reimbursed for expenses
incurred by them in connection with their duties as Trustees. No Officer,
Director or employee of the Adviser or the Distributor currently receives any
compensation from the Company. As of the date of this Statement of Additional
Information, the Trustees and Officers of the Company, as a group, owned less
than 1% of the outstanding shares of any Fund.
Shareholder and Trustee Liability. Under Massachusetts law, shareholders
of a business trust may, under certain circumstances, be held personally liable
as partners for the obligations of the trust. However, the Company's Master
Trust Agreement provides that shareholders shall not be subject to any personal
liability in connection with the assets of the Company for the acts or
obligations of the Company, and that every note, bond, contract, order, or
other undertaking made by the Company shall contain a provision to the effect
that the shareholders are not personally liable thereunder. The Master Trust
Agreement provides for indemnification out of the trust property of any
shareholder held personally liable solely by reason of the investor being or
having been a shareholder and not because of the shareholder's acts or
omissions or some other reason. The Master Trust Agreement also provides that
the Company shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Company, and shall satisfy any
judgment thereon. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Company itself would be unable to meet its obligations.
The Master Trust Agreement further provides that all persons having any
claim against the Trustees or the Company shall look solely to the trust
property for payment; that no Trustee of the Company shall be personally liable
for or on account of any contract, debt, tort, claim, damage, judgment, or
decree arising out of or connected with the administration or preservation of
the trust property or the conduct of any business of the Company; and that no
Trustee shall be personally liable to any person for any action or failure to
act except by reason of the Trustee's own bad faith, willful misfeasance, gross
negligence or reckless disregard of the Trustee's duties as a Trustee. With the
exception stated, the Master Trust Agreement provides that a trustee is
entitled to be indemnified against all liabilities and expenses reasonably
incurred by the Trustee in connection with the defense or disposition of any
proceeding in which the Trustee may be involved or with which the Trustee may
be threatened by reason of being or having been a Trustee, and that the Company
will indemnify Officers of the Company to the same extent that Trustees are
entitled to indemnification.
INVESTMENT ADVISORY AND OTHER SERVICE ARRANGEMENTS
Advisory Agreement. The advisory services provided by the Adviser
pursuant to an advisory agreement (the "Advisory Agreement") between it and the
Company, as well as the fees payable by the Company to the Adviser for such
services, are described in the Prospectus. For the year ended April 30, 1994,
and the period ended April 30, 1993, the Adviser earned advisory fees totaling
$1,258,348 and $1,143,708, respectively, for the Treasury Obligations Money
Market Fund, $177,577 and $127,934, respectively, for the Bond Fund and
$268,510 and $189,545, respectively, for the Stock Fund. For the same periods
the Adviser waived advisory fees totaling $755,008 and $709,924, respectively,
for the Treasury Obligations Money Market Fund, $139,101 and $117,308,
respectively, for the Bond Fund and $221,969 and $177,040, respectively, for
the Stock Fund.
If the total expenses borne by any Fund in any fiscal year exceed the
expense limitations imposed by applicable state securities regulations, the
Adviser will bear the amount of such excess to the extent required by such
regulations in proportion to the fees otherwise payable to it with respect to
such Fund for such year. Such amount borne will be limited to the amount of the
fees paid to it for the applicable period with respect to the Fund involved. As
of the date of this Statement of Additional Information, the most restrictive
expense limitation applicable to the Company limits its aggregate annual
expenses, including management and advisory fees but excluding interest, taxes,
brokerage commissions, and certain other expenses, to 2 1/2% of the first $30
million of its average net assets, 2% of the next $70 million, and 1 1/2% of
its remaining average net assets.
The Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Company
in connection with the performance of the Advisory Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
Adviser's part in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.
The Advisory Agreement is terminable with respect to a Fund by vote of
the Trustees, or by the holders of a majority of the outstanding voting
securities of the Fund, at any time without penalty, on 60 days' written notice
to the Adviser. The Adviser may also terminate its advisory relationship with
respect to a Fund on 60 days' written notice to the Company, and the Advisory
Agreement terminates automatically in the event of its assignment.
Because of the internal controls maintained by SouthTrust Bank of
Alabama, N.A. to restrict the flow of non-public information, the Funds'
investments are typically made without any knowledge of SouthTrust Bank of
Alabama, N.A. or its affiliates' lending relationships with an issuer.
Distributor's Contract. The Company has entered into a Distributor's
Contract under which the Distributor, as agent, sells shares of each Fund on a
continuous basis. The Distributor has agreed to use appropriate efforts to
solicit orders for the purchase of shares of each Fund, although it is not
obligated to sell any particular amount of shares.
Administrative Services Agreement. Federated Administrative Services (the
"Administrator"), which is a subsidiary of Federated Investors, provides
administrative personnel and services to the Company for the fees set forth in
the Prospectus. For the year ended April 30, 1994, and for the period from
April 1, 1993 to April 30, 1993, the Administrator earned the following fees:
$364,908 and $25,320, respectively, for the Treasury Obligations Money Market
Fund, $51,805 and $3,725, respectively, for the Stock Fund, and $50,000 and
$3,175, respectively, for the Bond Fund. For the year ended April 30, 1994, the
Administrator waived administrative fees totaling $71,756 for the Treasury
Obligations Money Market Fund, $25,591 for the Stock Fund, and $32,836 for the
Bond Fund.
The Administrative Services Agreement provides that the Administrator
shall not be liable under the Agreement except for its willful misfeasance, bad
faith or gross negligence in the performance of its duties or from the reckless
disregard by it of its duties and obligations thereunder.
Custodian and Transfer Agency Agreements. State Street Bank and Trust
Company (the "Custodian") whose principal office is located in Boston,
Massachusetts, maintains custody of the Company's assets pursuant to a
custodian agreement (the "Custodian Agreement"). Under the Custodian Agreement,
the Custodian (i) maintains a separate account in the name of each Fund; (ii)
holds and transfers portfolio securities on account of each Fund; (iii) accepts
receipts and makes disbursements of money on behalf of each Fund; (iv) collects
and receives all income and other payments and distributions on account of each
Fund's securities; and (v) makes periodic reports to the Trustees concerning
each Fund's operations. The Custodian is authorized to select one or more
domestic banks or trust companies to serve as sub-custodian on behalf of the
Company, provided that, with respect to sub-custodians, the Custodian remains
responsible for the performance of all its duties under the Custodian Agreement
and holds the Company harmless from the acts and omissions of any sub-
custodian.
Federated Services Company (the "Transfer Agent"), a subsidiary of
Federated Investors, serves as the transfer and dividend disbursing agent for
the Company pursuant to a Fund Accounting and Shareholder Recordkeeping
Agreement (the "Fund Recordkeeping Agreement"). For the year ended April 30,
1994, and for the period from April 1, 1993 to April 30, 1993, the Transfer
Agent earned the following fees: $9,968 and $2,882, respectively, for the
Treasury Obligations Money Market Fund, $15,809 and $4,250, respectively, for
the Stock Fund, and $13,857 and $3,649, respectively, for the Bond Fund.
Prior Service Providers. For the period from May 8, 1992 (date of initial
public investment) through April 1, 1993, the Company's former administrators,
Provident Financial Processing Corporation and The Boston Company Advisors,
Inc., and the Company's former transfer agent, Provident Financial Processing
Corporation, earned the following fees (exclusive of out-of-pocket expenses)
and voluntarily waived the indicated portion of the accrued fees:
<TABLE>
<CAPTION>
Administrative
Administrative Fees Voluntarily Transfer Agent
Fees Earned Waived Fees Earned
-------------- ---------------- --------------
<S> <C> <C> <C>
Treasury Obligations Money $289,174 $116,624 $29,884
Market Fund
Stock Fund 30,819 9,236 15,742
Bond Fund 28,750 7,148 15,634
</TABLE>
Effective April 1, 1993, Federated Administrative Services became the
Administrator, and Federated Services Company became the Transfer Agent.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trustees, the Adviser makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for each Fund. Portfolio transactions of each Fund are
placed with those securities brokers and dealers that the Adviser believes will
provide the best value in transaction and research services for the Fund,
either in a particular transaction or over a period of time. Although some
transactions involve only brokerage services, many involve research services as
well.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. For the year ended April
30, 1994 and for the period ended April 30, 1993, the Stock Fund paid $59,787
and $46,283, respectively, in commissions on brokerage transactions.
Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Adviser will
normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable prices and
execution are available elsewhere. The cost of securities purchased from
underwriters includes an underwriting commission or concession, and the prices
at which securities are purchased from and sold to dealers include a dealer's
mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Funds will engage in this practice, however, only when the Adviser believes
such practice to be in the Funds' best interests.
Since the Treasury Obligations Money Market Fund will invest only in
short-term debt instruments, its annual portfolio turnover rate will be
relatively high, but brokerage commissions are normally not paid on money
market instruments, and portfolio turnover is not expected to have a material
effect on the Fund's net investment income. The portfolio turnover rate of a
Fund is calculated by dividing the lesser of a Fund's annual sales or purchases
of portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were thirteen months or less for the
Treasury Obligations Money Market Fund or one year or less for the Bond Fund
and the Stock Fund) by the monthly average value of the securities held by the
Fund during the year. The Bond Fund and the Stock Fund may engage in short-term
trading to achieve their investment objectives. Portfolio turnover may vary
greatly from year to year as well as within a particular year. For the year
ended April 30, 1994, and the period ended April 30, 1993, the portfolio
turnover rate for the Bond Fund was 6% and 19%, respectively, and for the Stock
Fund was 46% and 34%, respectively.
In its Advisory Agreement, the Adviser agrees to select broker/dealers in
accordance with guidelines established by the Trustees from time to time and in
accordance with applicable law. In assessing the terms available for any
transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker/dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In addition, the Advisory Agreement authorizes the
Adviser, subject to the prior approval of the Trustees, to cause the Funds to
pay a broker/dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker/dealer for
effecting the same transaction, provided that the Adviser determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker/dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Adviser to the Funds. Such brokerage and research services might consist of
reports and statistics on specific companies or industries, general summaries
of groups of bonds and their comparative earnings and yields, or broad
overviews of the securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Adviser and does not
reduce the advisory fees payable to the Adviser by the Funds. It is possible
that certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company. A Fund may
obtain an agreement from a broker to pay to a third-party vendor of goods or
services to the Fund a portion of the commissions paid by the Fund to that
broker.
Portfolio securities will not be purchased from or sold to the Adviser,
the Distributor or any affiliated person (as defined in the 1940 Act) of the
foregoing entities except to the extent permitted by an exemptive order issued
by the SEC or by applicable law (including Rule 17e-1 under the 1940 Act).
Investment decisions for each Fund and for other investment accounts
managed by the Adviser are made independently of each other in light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts and executed on the same day. In such cases,
transactions in the same securities for multiple accounts are allocated as to
amount in a manner deemed equitable to each such account. While in some cases
this practice could have a detrimental effect on the price or value of the
security as far as a Fund is concerned, in other cases it is believed to be
beneficial to a Fund. To the extent permitted by law, the Adviser may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other investment companies or accounts in executing transactions.
A Fund will not purchase securities during the existence of any
underwriting or selling group relating to such securities of which the Adviser
or any affiliated person (as defined in the 1940 Act) thereof is a member,
except pursuant to procedures adopted by the Trustees in accordance with Rule
10f-3 under the 1940 Act.
PURCHASE, EXCHANGE AND REDEMPTION INFORMATION
The Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of a
Fund's shares by making payment in whole or in part in securities chosen by the
Company and valued in the same way as they would be valued for purposes of
computing a Fund's net asset value. If payment is made in securities, a
shareholder may incur transaction costs in converting the securities into cash.
The Company intends to elect, however, to be governed by Rule 18f-1 under the
1940 Act so that a Fund is obligated to redeem its shares solely in cash up to
the lesser of $250,000 or 1% of its net asset value during any 90-day period
for any one shareholder of a Fund.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
The Company may suspend redemption rights or postpone redemption payments
(as well as suspend the recordation of the transfer of shares) for such periods
as are permitted under the 1940 Act. The Company may also redeem shares
involuntarily or make payment for redemption in securities or other property if
it appears appropriate to do so in light of the Company's responsibilities
under the 1940 Act.
The Company may redeem shares involuntarily as described below under "Net
Asset Value" to reimburse a Fund for any loss sustained by reason of the
failure of a shareholder to make full payment for shares purchased by the
shareholder, or to collect any charge relating to a transaction effected for
the benefit of a shareholder, which is applicable to shares of a Fund as
provided, from time to time, in the Prospectus. In addition, due to the high
cost of maintaining accounts with low balances, the Company may redeem shares
in any account, except retirement plans, and pay the proceeds to the
shareholder, if the account balance falls below the required minimum account
balance due to shareholder redemptions. Before shares are redeemed to close an
account, a shareholder will be notified in writing and allowed 30 days to
purchase additional shares to meet the minimum balance.
Shareholders may exchange all or part of their shares in the Company as
described in the Prospectus. Any rights an investor may have to reduce (or have
waived) the sales load applicable to an exchange, as may be provided in the
Prospectus, will apply in connection with any such exchange.
By use of the exchange privilege, the investor authorizes SouthTrust, the
investor's SouthTrust Vulcan Funds Dealer, or the Distributor to act on
telephonic instructions from any person representing himself or herself to be
the investor and reasonably believed by SouthTrust, a SouthTrust Vulcan Funds
Dealer or the Distributor to be genuine. The Transfer Agent must be notified of
the investor's prior ownership of Fund shares and account number. The Transfer
Agent records of such instructions are binding. The exchange privilege may be
modified or terminated at any time upon 60 days written notice to shareholders.
Exchanging Securities for Fund Shares. Each Fund may accept securities in
exchange for Fund shares. Each Fund will allow such exchanges only upon the
prior approval of the Fund and a determination by the Fund and the Adviser that
the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies
of the respective Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The market value of
any securities exchanged in an initial investment, plus any cash, must be at
least equal to the minimum investment in the respective Fund.
Securities accepted by a Fund will be valued in the same manner as the
Fund values its assets. The basis of the exchange will depend on the net asset
value of Fund shares on the day the securities are valued. One share of the
Fund will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription, or
other rights attached to the securities become the property of the respective
Fund, along with the securities.
If an exchange is permitted, it will be treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities exchanged
for Fund shares, a gain or loss may be realized by the investor.
NET ASSET VALUE
Treasury Obligations Money Market Fund. The value of the portfolio
securities of the Treasury Obligations Money Market Fund is calculated using
the amortized cost method of valuation. Under this method the market value of
an instrument is approximated by amortizing the difference between the
acquisition cost and value at maturity of the instrument on a straight-line
basis over the remaining life of the instrument. The effect of changes in the
market value of a security as a result of fluctuating interest rates is not
taken into account. The market value of debt securities usually reflects yields
generally available on securities of similar quality. When such yields decline,
market values can be expected to increase, and when yields increase, market
values can be expected to decline.
As indicated, the amortized cost method of valuation may result in the
value of a security being higher or lower than its market price, the price a
Fund would receive if the security were sold prior to maturity. The Trustees
have established procedures for the purpose of maintaining a constant net asset
value of $1.00 per share for the Treasury Obligations Money Market Fund, which
include a review of the extent of any deviation of net asset value per share,
based on available market quotations, from the $1.00 amortized cost per share.
Should that deviation exceed 1/2 of 1% for the Fund, the Trustees will promptly
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
redeeming shares in kind, selling portfolio securities prior to maturity,
reducing or withholding dividends, shortening the average portfolio maturity,
reducing the number of outstanding shares without monetary consideration, and
utilizing a net asset value per share as determined by using available market
quotations.
The Treasury Obligations Money Market Fund will maintain a dollar-
weighted average portfolio maturity of 90 days or less, will not purchase any
instrument with a deemed maturity under Rule 2a-7 of the 1940 Act greater than
thirteen months, and will limit portfolio investments to those instruments that
the Adviser determines present minimal credit risks pursuant to guidelines
adopted by the Trustees. There can be no assurance that a constant net asset
value will be maintained for the Fund.
All Funds. In determining the approximate market value of portfolio
investments, the Company may employ outside organizations, which may use a
matrix or formula method that takes into consideration market indices,
matrices, yield curves and other specific adjustments. This may result in the
securities being valued at a price different from the price that would have
been determined had the matrix or formula method not been used. All cash,
receivables, and current payables are carried on the Company's books at their
face value. Other assets, if any, are valued at fair value as determined in
good faith under the supervision of the Trustees.
PERFORMANCE INFORMATION
Yield of the Treasury Obligations Money Market Fund. The Treasury
Obligations Money Market Fund's current and effective yields are computed using
standardized methods required by the SEC. The annualized yield is computed by:
(a) determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of
the account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1. Based on the foregoing computations,
the annualized yield for the Treasury Obligations Money Market Fund for the
seven-day period ended April 30, 1994 and 1993 was 3.17% and 2.72%,
respectively. The effective yields of the Fund for the same periods were 3.21%
and 2.76%, respectively.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields of each Fund will fluctuate, they cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each Fund's investment
policies, including the types of investments made, lengths of maturities of the
portfolio securities, and whether there are any special account charges which
may reduce the effective yield.
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. For
example, a Fund's yield may be compared to the Donoghue's Money Fund Average,
which is an average compiled by Donoghue's MONEY FUND REPORT of Holliston, MA
01746, a widely recognized independent publication that monitors the
performance of money market funds, or to the data prepared by Lipper Analytical
Services, Inc., a widely recognized independent service that monitors the
performance of mutual funds.
Yield and Performance of the Bond Fund and the Stock Fund
For the Bond Fund and the Stock Fund, the 30-day (or one month) standard
yield described in the Prospectus is calculated in accordance with the method
prescribed by the SEC for mutual funds:
(a-b) 6
Y = 2 [ ( -----) + 1) - 1]
(cd)
Where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = maximum offering price per share on the last day of the period.
For the purpose of determining interest earned on debt obligations
purchased by a Fund (variable "a" in the formula), each Fund computes the yield
to maturity of such instrument based on the market value of the obligation
(including actual accrued interest) at the close of business on the last
business day of each month, or, with respect to obligations purchased during
the month, the purchase price (plus actual accrued interest). Such yield is
then divided by 360 and the quotient is multiplied by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. It is assumed in the above calculation that
each month contains 30 days. The maturity of a debt obligation with a call
provision is deemed to be the next call date on which the obligation reasonably
may be expected to be called or, if none, the maturity date. For the purpose of
computing yield on equity securities held by a Fund, dividend income is
recognized by accruing 1/360 of the dividend rate of the security for each day
that the security is held by the Fund. With respect to mortgage or other
receivables-backed debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
value of such debt obligations. Expenses accrued for the period (variable "b"
in the formula) include all recurring fees charged by a Fund to all shareholder
accounts in proportion to the length of the base period and the Fund's mean (or
median) account size. Undeclared earned income will be subtracted from the
offering price per share (variable "d" in the formula).
Based on the foregoing calculation, the standard yields of the Bond Fund
and the Stock Fund for the 30-day period ended April 30, 1994 and April 30,
1993 were 5.58% and 5.00%, respectively, and 1.69% and 1.60%, respectively.
Each Fund that advertises its "average annual total return" computes such
return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
(ERV)1/n
T = ------ - 1
P
Where:
T = average annual total return;
ERV = ending redeemable value of shares held at the end of the
period;
P = hypothetical initial investment of $1,000; and
n = number of years.
Each Fund that advertises its "aggregate total return" computes such
returns by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
(ERV)
Aggregate Total Return = --- - 1
P
The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
share existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
Based on the foregoing calculation, the aggregate total returns for the
year ended April 30, 1994 and for the period from May 8, 1992 (date of initial
public investment) to April 30, 1993, for the Bond Fund and the Stock Fund were
0.33% and 13.44%, respectively, and (0.90)% and 5.54%, respectively. The total
return figures above do not reflect the deduction of the maximum 4.00% and
4.50% front-end sales charges which may be assessed purchases of the Bond Fund
and Stock Fund, respectively. The aggregate total return including the
deduction of the applicable front-end sales charges for the same period for the
Bond Fund and Stock Fund were (4.67)% and 7.86%, respectively, and (6.32)% and
(0.17%), respectively.
In reports or other communications to shareholders or in advertising
material, the Bond Fund or the Stock Fund may compare its performance with that
of other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc., CDA Technologies, Inc., or similar independent services, which
monitor the performance of mutual funds or with other appropriate indices of
investment securities. In addition, certain indices may be used to illustrate
historic performance of select asset classes. These may include, among others,
the Lehman Brothers Index of Baa-rated Corporate Bonds, the T-Bill Index, and
the "Stocks, Bonds and Inflation Index" published annually by Ibbotson
Associates. The performance information may also include evaluations of the
Funds published by ranking services and financial publications that are
nationally recognized, such as Business Week, Forbes, Fortune, Institutional
Investor, Money and The Wall Street Journal.
In addition to providing performance information that demonstrates the
actual yield or returns of a particular Fund over a particular period of time,
a Fund may provide certain other information demonstrating hypothetical
investment returns. Such information may include, but is not limited to,
illustrating the compounding effects of a dividend in a dividend reinvestment
plan or certain benefits of tax-free investing.
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Funds and their shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference
to their own tax situations.
General. Each Fund will elect to be taxed separately as a regulated
investment company under Part I of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, each Fund is
exempt from federal income tax on its net investment income and realized
capital gains which it distributes to shareholders, provided that it
distributes an amount equal to the sum of (a) at least 90% of its investment
company taxable income (as that term is defined in the Code determined without
regard to the deduction for dividends paid), if any, for the year, and (b) at
least 90% of its net tax-exempt income, if any, for the year (the "Distribution
Requirement") and satisfies certain other requirements of the Code
that are described below. Distributions of investment company taxable income
and net tax-exempt income made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year will
satisfy the Distribution Requirement.
In addition, to satisfy the Distribution Requirement, each Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock or securities or foreign
currencies, or from other income derived with respect to its business of
investing in such stock, securities, or currencies (the "Income Requirement")
and derive less than 30% of its gross income from the sale or other disposition
of securities and certain other investments held for less than three months
(the "Short-Short Gain Test"). Interest (including original issue discount and,
in the case of debt securities bearing taxable interest income, "accrued market
discount") received by a Fund at maturity or on disposition of a security held
for less than three months will not be treated as gross income derived from the
sale or other disposition of such security for purposes of the Short-Short Gain
Test. However, any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In addition to the foregoing requirements, at the close of each quarter
of its taxable year, at least 50% of the value of each Fund's assets must
consist of cash and cash items, U.S. government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold more than 10% of
the outstanding voting securities of such issuer) and no more than 25% of the
value of each Fund's total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other regulated
investment companies), or in two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses.
Distributions of net investment income received by a Fund from
investments in debt securities and any net realized short-term capital gains
distributed by a Fund will be taxable to shareholders as ordinary income and
will not be eligible for the dividends received deduction for corporations.
Each Fund intends to distribute to shareholders any excess of net long-
term capital gain over net short-term capital loss ("net capital gain") for
each taxable year. Such gain is distributed as a capital gain dividend and is
taxable to shareholders as long-term capital gain, regardless of the length of
time the shareholder has held the shares, whether such gain was recognized by
the Fund prior to the date on which a shareholder acquired shares of the Fund
and whether the distribution was paid in cash or reinvested in shares.
In the case of corporate shareholders, distributions (other than capital
gain dividends) of a Fund for any taxable year generally qualify for the
dividends received deduction to the extent of the gross amount of "qualifying
dividends" received by such Fund for the year. Generally, a dividend will be
treated as a "qualifying dividend" if it has been received from a domestic
corporation.
The marginal tax rate on ordinary income for taxpayers filing joint
returns is 36% of taxable income in excess of $140,000 ($115,000 for taxpayers
filing individual returns) and 39.6% of taxable income in excess of $250,000
for taxpayers filing either individual or joint returns. Different taxable
income thresholds apply in the cases of married persons filing separately,
heads of household and trusts. Capital gains are subject to a 28% maximum
stated rate. The maximum marginal corporate income tax rate is 35% for taxable
income (including net capital gains) in excess of $10,000,000.
If for any taxable year any Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders. In
such event, all distributions (whether or not derived from exempt-interest
income) would be taxable as ordinary income to the extent of such Fund's
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction in the case of corporate shareholders.
Shareholders will be advised annually as to the federal income tax
consequences of distributions made by the Funds each year.
The Code imposes a non-deductible 4% excise tax on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income
(excess of capital gains over capital losses). Each Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
The Company will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or 31% of the gross
proceeds realized upon a redemption paid to any shareholder (i) who has
provided either an incorrect tax identification number or no number at all;
(ii) who is subject to backup withholding by the Internal Revenue Service for
failure to report the receipt of taxable interest or dividend income properly;
or (iii) who has failed to certify to the Company that he or she is not subject
to backup withholding or that he or she is an "exempt recipient."
The foregoing general discussion of federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or
in which it is otherwise deemed to be conducting business, each Fund may be
subject to the tax laws of such states or localities.
Taxation of Certain Financial Instruments
Special rules govern the federal income tax treatment of financial
instruments that may be held by some of the Funds. These rules may have a
particular impact on the amount of income or gain that the Funds must
distribute to their respective shareholders to comply with the Distribution
Requirement, on the income or gain qualifying under the Income Requirement and
on their ability to comply with the Short-Short Gain Test described above.
Federal income tax law requires the holder of a zero coupon security to
recognize income with respect to the security on an annual basis even though
there is no cash flow until maturity. To maintain its qualification as a
regulated investment company and avoid liability of federal income taxes, the
Bond Fund or the Stock Fund will be required to distribute income accrued
annually with respect to 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.
ADDITIONAL INFORMATION CONCERNING SHARES
The Company is a Massachusetts business trust. Under the Company's Master
Trust Agreement, the beneficial interests in the Company may be divided into an
unlimited number of full and fractional transferable shares. The Master Trust
Agreement authorizes the Company's Trustees to classify or reclassify any
unissued shares of the Company into one or more Funds by setting or changing,
in any one or more respects, their respective designations, preferences,
conversion or other rights, voting powers, restrictions, limitations,
qualifications and terms and conditions of redemption. Pursuant to such
authority, the Trustees have authorized the issuance of three Funds of shares
representing interests in the Treasury Obligations Money Market Fund, the Bond
Fund and the Stock Fund.
In the event of a liquidation or dissolution of the Company or an
individual Fund, shareholders of a particular Fund would be entitled to receive
the assets available for distribution belonging to such Fund, and a
proportionate distribution, based upon the relative net asset values of the
Company's respective Funds, of any general assets not belonging to any
particular Fund which are available for distribution. Shareholders of a Fund
are entitled to participate in the net distributable assets of the particular
Fund involved on liquidation, based on the number of shares of the Fund that
are held by each shareholder.
The issuance of shares is recorded on the books of the Funds and share
certificates generally will not be issued.
Shareholders of the Company will vote together in the aggregate and not
separately by Fund except as otherwise required by law or when the Trustees
determine that the matter to be voted upon affects only the interests of the
shareholders of a particular Fund. Rule 18f-2 (the "Rule") under the 1940 Act
provides that any matter required to be submitted to the holders of the
outstanding voting securities of an investment company such as the Company
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Fund affected by the
matter. A Fund is not affected by a matter unless it is clear that the
interests of each investment portfolio in the matter are substantially
identical or that the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if approved by a majority of the
outstanding shares of such investment portfolio. However, the Rule also
provides that the ratification of the appointment of independent accountants,
the approval of principal underwriting contracts and the election of trustees
may be effectively acted upon by shareholders of the Company voting together in
the aggregate without regard to a particular investment portfolio.
Shares of the Company have noncumulative voting rights and, accordingly,
the holders of more than 50% of the Company's outstanding shares (irrespective
of investment portfolio) may elect all of the Trustees. Shares have no
preemptive rights and only such conversion and exchange rights as the Trustees
may grant in their discretion. When issued for payment as described in the
Prospectus, shares will be fully paid and non-assessable by the Company.
Shareholder meetings, including meetings held to elect Trustees, will not
be held unless and until such time as required by law. At that time, the
Trustees then in office will call a shareholders' meeting to elect Trustees.
Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. The Master Trust Agreement provides that meetings
of the shareholders of the Company shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares
entitled to vote.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements in the Prospectus have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their report,
with respect thereto, and are included therein in reliance upon the authority
of said firm as experts in giving said report.
MISCELLANEOUS
Counsel. Legal counsel to the Company is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania. The law firm of Bell, Boyd & Lloyd,
Chicago, Illinois, serves as counsel to the Trustees.
Control Persons and Principal Holders of Securities. As of May 31, 1994,
SouthTrust Bank of Alabama, N.A., SouthTrust Tower, 420 North 20th Street,
Birmingham, Alabama 35203, through its nominee, Lynspen & Company, held of
record substantially all of the outstanding shares of the Treasury Obligations
Money Market Fund, as agent, custodian or trustee for its customers. As of such
date, the following persons were beneficial owners of 5% or more of the
outstanding shares of a Fund because they possessed voting or investment power
with respect to such shares:
<TABLE>
<CAPTION>
Percent of
Total Shares
Name of Fund Name and Address Outstanding
- ------------- ----------------- -------------
<S> <C> <C>
Treasury Obligations Lynspen & Company 99%
Money Market Fund P.O. Box 2554
Birmingham, Alabama 35290
Bond Fund Lynspen & Company 96%
P.O. Box 2554
Birmingham, Alabama 35290
Stock Fund Lynspen & Company 85%
P.O. Box 2554
Birmingham, Alabama 35290
BHC Securities, Inc. 11%
Philadelphia, Pennsylvania 19103
</TABLE>
Banking Laws. Banking laws and regulations currently 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 underwriting securities, but such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, administrator, 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 customers. The Adviser and the Custodian are
subject to such banking laws and regulations.
The Adviser and the Custodian believe they may perform the services for
the Company contemplated by their respective agreements with the Company
without violation of applicable banking laws or regulations. It should be
noted, however, that there have been no cases deciding whether bank and non-
bank subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either federal or state statutes and regulations relating to
permissible activities of banks and their subsidiaries or affiliates, as well
as future judicial or administrative decisions or interpretations of current
and future statutes and regulations, could prevent these companies from
continuing to perform such service for the Company.
Should future legislative, judicial, or administrative action prohibit or
restrict the activities of such companies in connection with the provision of
services on behalf of the Company, the Company might be required to alter
materially or discontinue its arrangements with such companies and change its
method of operations. It is not anticipated, however, that any change in the
Company's method of operations would affect the net asset value per share of
any Fund or result in a financial loss to any customer.
Shareholder Approvals. As used in this Statement of Additional
Information and in the Prospectus, a "majority of the outstanding shares" of a
Fund or investment portfolio means the lesser of (a) 67% of the shares of the
particular Fund or portfolio represented at a meeting at which the holders of
more than 50% of the outstanding shares of such Fund or portfolio are present
in person or by proxy, or (b) more than 50% of the outstanding shares of such
Fund or portfolio.
APPENDIX A
Description of Bond Ratings
The following summarizes the highest four ratings used by Standard &
Poor's Corporation ("S&P") for corporate and municipal debt:
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 AAA issues only in a small degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
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 for debt
in higher rated categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
The following summarizes the highest four ratings used by Moody's
Investors Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa--Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds that 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 that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa--Bonds that are rated Baa are considered 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.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated 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
bond ranks in the lower end of its generic rating category.
The following summarizes the highest four ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for bonds:
AAA--Debt rated AAA is of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA--Debt rated AA is of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A--Bonds that are rated A have protection factors which are average
but adequate. However risk factors are more variable and greater in
periods of economic stress.
BBB--Bonds that are rated BBB have below average protection factors
but are still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major categories.
The following summarizes the ratings used by IBCA Limited and IBCA Inc.
("IBCA") for bonds:
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial, such that adverse changes in business,
economic or financial conditions are unlikely to increase investment
risk significantly.
IBCA also assigns a rating to certain international and U.S. banks.
An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support
should it experience difficulties. In its assessment of a bank, IBCA
uses a dual rating system comprised of Legal Ratings and Individual
Ratings. In addition, IBCA assigns banks Long and Short-Term Ratings
as used in the corporate ratings discussed above. Legal Ratings,
which range in gradation from 1 through 5, address the question of
whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are
considered by IBCA to be a prime factor in its assessment of credit
risk. Individual Ratings, which range in gradations from A through E,
represent IBCA's assessment of a bank's economic merits and address
the question of how the bank would be viewed if it were entirely
independent and could not rely on support from state authorities or
its owners.
The following summarizes the two highest ratings used by Moody's for
short-term notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high
quality with margins of protection ample although not as large as in
the preceding group.
The three highest rating categories of D&P for short-term debt are Duff
1, Duff 2, and Duff 3. D&P employs three designations, Duff 1+, Duff 1 and Duff
1-, within the highest rating category. Duff 1+ indicates highest certainty of
timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations." Duff
1 indicates very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small. Duff 2 indicates good certainty of timely
payment. Liquidity factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access to capital
markets is good. Risk factors are small. Duff 3 indicates satisfactory
liquidity and other protection factors qualify issue as to investment grade.
Risk factors are larger and subject to more variation. Nevertheless, timely
payment is expected.
D&P uses the fixed-income ratings described above under "Description of
Bond Ratings" for tax-exempt notes and other shortterm obligations.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted in A-1+. Capacity for
timely payment on commercial paper rated A-2 is satisfactory but the relative
degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 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.
The highest rating of D&P for commercial paper is Duff 1. D&P employs
three designations, Duff 1 plus, Duff 1 and Duff 1 minus, within the highest
rating category. Duff 1 plus indicates highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or ready access
to alternative sources of funds, is judged to be "outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations". Duff 1 indicates
very high certainty of timely payment. Liquidity factors are excellent and
supported by strong fundamental protection factors. Risk factors are considered
to be minor. Duff 1 minus indicates high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
3052010B (6/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (filed in Part A)
(b) Exhibits:
(1) (i) Copy of Master Trust Agreement of
the Registrant (1);
(ii) Amendment No. 1 to Master Trust
Agreement (2);
(2) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant (2);
(5) Copy of Investment Advisory Contract of the
Registrant (3);
(6) Conformed copy of Distributor's Contract
of the Registrant;+
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant;+
(9) (i) Conformed copy of Administrative
Service Agreement of Registrant;+
(ii) Conformed copy of Fund Accounting
and Shareholder Recordkeeping
Agreement of Registrant;+
(10) Copy of Opinion and Consent of Counsel
as to legality of shares being
registered (2);
(11) Conformed copy of Consent of Independent
Accountants;+
(12) Not applicable;
(13) Copy of Purchase Agreement of the
Registrant (3);
(14) Not applicable;
(15) Not applicable;
(16) Not applicable;
(17) Power of Attorney (4);
(18) Conformed copy of Opinion and Consent of
Counsel as to Availability of
Rule 485(b);+
+The Exhibits are being filed electronically herewith.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed on March
5, 1992 (File No. 33-46190).
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed on May 1, 1992
(File No. 33-46190).
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 filed on November 27, 1992 (File
No. 46190).
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 filed on June 24, 1993. Post-
Effective Amendment No. 2 was inadvertently designated as
Pre-Effective Amendment No. 2 (File No. 46190).
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
Item 26. Number of Holders of Securities:
Title of Class
Shares of beneficial interest Number of Record Holders
(no par value) as of
May 31, 1994
Treasury Obligations
Money Market Fund 30
Bond Fund 69
Stock Fund 339
Item 27. Indemnification: (3)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the
Investment Adviser,
see the section entitled "Management of the Funds" in
Part A.
To reach any of the following Officers and Directors of
the
Investment Adviser, call SouthTrust Bank of Alabama,
N.A.
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
Name the Adviser the Past Two Years
Julian W. Banton Director, Chairman, Banking.
President, and Chief
Executive Officer
Gene Bartow Director Athletic Director,
University of
Alabama at
Birmingham.
Thomas E. Bradford, Jr. Director Chairman and Chief
Executive Officer,
Bradford & Company.
Dr. Merrill N. Bradley Director Surgeon (Retired)
Ronald G. Bruno Director Chairman, President
and Chief Executive
Officer, Bruno's Inc.
Sallie C. Creel Director Owner/Operator Alabama
Car Rental.
Paul E. Harris Director President and Chief
Executive Officer,
Protective Industrial
Insurance Company
W. Carl Jernigan Director Chairman and Chief
Executive Officer,
Jay Electric
Rex J. Lysinger Director Chairman and Chief
Executive Officer,
Energen Corporation
Dr. Judy M. Merritt Director President, Jefferson
State College
Emmet O'Neal, III Director Vice Chairman and Chief
Operating Officer,
O'Neal Steel Inc
Van L. Richey Director President and Chief
Executive Officer,
American Cast Iron Pipe
William E. Smith, Jr. Director Chairman and Chief
Executive Officer,
Royal Cup, Inc.
R. Neal Travis Director President, South Central
Bell Telephone
Company
J. Mike Battle Executive Vice Banking; Formerly
President Executive Vice
Retail Division President,
Pacific Southwest Bank
Fred C. Crum, Jr. Executive Vice Banking
President
Corporate Division
R. Glenn Eubanks Executive Vice Banking
President
Commercial Division
William C. Patterson Executive Vice Banking
President
Credit Division
William E. Pearson, Jr. Executive Vice Banking
President
Administration/
Finance Division
C. Perry Relfe Executive Vice Banking
President
Trust and Financial
Services Division
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor
for shares of the Registrant, also acts as
principal underwriter for the following open-end
investment companies: Alexander Hamilton Funds;
American Leaders Fund, Inc.; Annuity Management
Series; Automated Cash Management Trust; Automated
Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; The Boulevard
Funds; California Municipal Cash Trust; Cambridge
Series Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority
Funds; First Union Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fountain Square Funds;
Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash
Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; The Monitor
Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Signet Select Funds; SouthTrust
Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark
Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury
Obligations; Vision Fiduciary Funds, Inc.; Vision
Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment
company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief --
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President
and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice
Federated Investors Tower President, and Assistant
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss 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
H. Joseph Kennedy 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
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. 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
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV 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
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
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ 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
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:
Registrant Federated Investors Tower
Federated Services Company Pittsburgh, PA 15222-3779
("Transfer Agent, Dividend Disbursing
Agent, and Portfolio Recordkeeper")
Federated Administrative Services
("Administrator")
SouthTrust Bank of Alabama, N.A. 420 North 20th Street
("Adviser") Birmingham, AL 35203
State Street Bank and Trust Company P.O. Box 8602
("Custodian") Boston, MA 02266-8206
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant,
SOUTHTRUST VULCAN 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, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 24th day of
June, 1994.
SOUTHTRUST VULCAN FUNDS
BY: /s/Mark A. Sheehan
Mark A. Sheehan, Assistant Secretary
Attorney in Fact for John F. Donahue
June 24, 1994
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/Mark A. Sheehan
Mark A. Sheehan Attorney In Fact June 24, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
William O. Vann* Chairman and Trustee
Edward C. Gonzales* President (Principal
Executive Officer) and
Treasurer (Principal
Financial and Accounting
Officer)
Thomas L. Merrill, Sr* Trustee and
Vice President
Charles G. Brown, III* Trustee
Russell W. Chambliss* Trustee
D. Reily Stuart* Trustee
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
ARTHUR ANDERSEN & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
use in Post-Effective Amendment No. 3 to Form N-1A
Registration Statement of SouthTrust Vulcan Funds of our
report dated June 3, 1994, on the financial statements of
SouthTrust Vulcan Funds (consisting of Bond Fund, Stock Fund
and Treasury Obligations Money Market Fund), included in or
made a part of this registration statement.
By: ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania,
June 22, 1994
Exhibit 18 under Form N-1A
Exhibit 99 under Item 601/Reg.S-K
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTONPITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR.__________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS
HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
June 14, 1994
SouthTrust Vulcan Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to SouthTrust Vulcan Funds ("Trust") we have
reviewed Post-effective Amendment No. 3 to the Trust's
Registration Statement to be filed with the Securities and
Exchange Commission under the Securities Act of 1933 (File
No. 33-46190). The subject Post-effective Amendment will be
filed pursuant to Paragraph (b) of Rule 485 and become
effective pursuant to said Rule on June 30, 1994.
Our review also included an examination of other
relevant portions of the amended 1933 Act Registration
Statement of the Trust and such other documents and records
deemed appropriate. On the basis of this review we are of
the opinion that Post-effective Amendment No. 3 does not
contain disclosures which would render it ineligible to
become effective pursuant to Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation
letter as a part of the Trust's Registration Statement filed
with the Securities and Exchange Commission under the
Securities Act of 1933 and as part of any application or
registration statement filed under the Securities Laws of
the States of the United States.
Very truly yours,
Houston, Houston & Donnelly
By: Thomas J. Donnelly
TJD:smg
Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
VULCAN FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 2nd day of April, 1993, by and between VULCAN FUNDS
(the "Trust"), a Massachusetts business trust, and FEDERATED SECURITIES CORP.
("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the "Funds")
consisting of one or more classes (the "Classes") of shares (the "Shares"), as
described and set forth on one or more exhibits to this Agreement, at the
current offering price thereof as described and set forth in the current
Prospectuses of the Trust. FSC hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and accept such
compensation from the Trust, if any, as set forth in the applicable exhibit to
this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Trust to give
any information or to make any representation relative to any Shares other
than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in any
supplemental information to said Prospectuses or SAIs approved by the Trust.
FSC agrees that any other information or representations other than those
specified above which it or any dealer or other person who purchases Shares
through FSC may make in connection with the offer or sale of Shares, shall be
made entirely without liability on the part of the Trust. No person or
dealer, other than FSC, is authorized to act as agent for the Trust for any
purpose. FSC agrees that in offering or selling Shares as agent of the Trust,
it will, in all respects, duly conform to all applicable state and federal
laws, rules and regulations, and the rules and regulations of the National
Association of Securities Dealers, Inc., including its Rules of Fair Practice.
FSC will submit to the Trust copies of all sales literature before using the
same and will not use such sales literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any subsequent
Classes added pursuant to an exhibit during the initial term of this Agreement
for one year from the date set forth above, and thereafter for successive
periods of one year if such continuance is approved at least annually by the
Trustees of the Trust including a majority of the members of the Board of
Trustees of the Trust who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of any Distribution
Plan relating to the Trust or in any related documents to such Plan
("Disinterested Trustees") cast in person at a meeting called for that
purpose. If a Class is added after the first annual approval by the Trustees
as described above, this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in effect until the next
annual approval of this Agreement by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty (60)
days' written notice to any other party to this Agreement. This Agreement may
be terminated with regard to a particular Fund or Class by FSC on sixty (60)
days' written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other person,
persons, corporation or corporations as it shall determine in order to assist
it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Trust 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 by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested Trustees
of the Trust cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC
within the meaning of Section 15 of the Securities Act of 1933 and Section 20
of the Securities Act of 1934, as amended, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectuses or SAIs (as from time to time amended and supplemented) or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Trust about FSC by or on behalf of
FSC expressly for use in the Registration Statement, any Prospectuses and SAIs
or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Trust pursuant to
the foregoing paragraph, FSC shall promptly notify the Trust in writing of the
institution of such action and the Trust shall assume the defense of such
action, including the employment of counsel selected by the Trust and payment
of expenses. FSC or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing by the Trust
in connection with the defense of such action or the Trust shall not have
employed counsel to have charge of the defense of such action, in any of which
events such fees and expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall not be liable for
any settlement of any such claim of action effected without its written
consent. The Trust agrees promptly to notify FSC of the commencement of any
litigation or proceedings against the Trust or any of its officers or Trustees
or controlling persons in connection with the issue and sale of Shares or in
connection with the Registration Statement, Prospectuses, or SAI's.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration Statement and
each other person, if any, who controls the Trust within the meaning of
Section 15 of the Securities Act of 1933, but only with respect to statements
or omissions, if any, made in the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Trust about FSC by or on behalf
of FSC expressly for use in the Registration Statement or any Prospectus, SAI,
or any amendment or supplement thereof. In case any action shall be brought
against the Trust or any other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof, and
with respect to which indemnity may be sought against FSC, FSC shall have the
rights and duties given to the Trust, and the Trust and each other person so
indemnified shall have the rights and duties given to FSC by the provisions of
subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties of such person
under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for Trustees, officers,
FSC and controlling persons of the Trust by the Trust pursuant to this
Agreement, the Trust is aware of the position of the Securities and Exchange
Commission as set forth in the Investment Company Act Release No. IC-11330.
Therefore, the Trust undertakes that in addition to complying with the
applicable provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was brought,
that an indemnification payment pursuant to this Agreement will not be made
unless in the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum of non-
party Disinterested Trustees, or (ii) by independent legal counsel for the
Trust in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless disregard of
duties. The Trust further undertakes that advancement of expenses incurred in
the defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an officer,
Trustee, FSC or controlling person of the Trust pursuant to this Agreement
will not be made absent the fulfillment of at least one of the following
conditions: (i) the indemnitee provides security for his undertaking; (ii) the
Trust is insured against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of non-party Disinterested Trustees or
independent legal counsel in a written opinion makes a factual determination
that there is reason to believe the indemnitee will be entitled to
indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust of the Trust and agrees
that the obligations assumed by the Trust and any Fund or Class of the Trust
pursuant to this agreement shall be limited in any case to the relevant Fund
or Class and its assets and FSC shall not seek satisfaction of any such
obligation from the shareholders of the Trust, the Trustees, officers,
employees or agents of the Trust, or any of them. In addition, in connection
with the discharge and satisfaction of any claim made by FSC against the
Trust, for whatever reasons, involving more than one Fund or Class, the Trust
shall have the exclusive right to determine the appropriate allocations of
liability for any such claim between or among the Funds or Classes.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of shares
may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
VULCAN FUNDS
Vulcan Treasury Obligations Money Market Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated April 2, 1993 between Vulcan Funds and Federated Securities
Corp., Vulcan Funds executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof, first set forth in
this Exhibit.
Witness the due execution hereof this 2nd day of April, 1993.
ATTEST: VULCAN FUNDS
/s/Peter J. Germain By:/s/Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John W. McGonigle
Secretary President
(SEAL)
Exhibit B
to the
Distributor's Contract
VULCAN FUNDS
Vulcan Bond Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated April 2, 1993 between Vulcan Funds and Federated Securities
Corp., Vulcan Funds executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof, first set forth in
this Exhibit.
Witness the due execution hereof this 2nd day of April, 1993.
ATTEST: VULCAN FUNDS
/s/Peter J. Germain By:/s/Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John W. McGonigle
Secretary President
(SEAL)
Exhibit C
to the
Distributor's Contract
VULCAN FUNDS
Vulcan Stock Fund
In consideration of the mutual covenants set forth in the Distributor's
Contract dated April 2, 1993 between Vulcan Funds and Federated Securities
Corp., Vulcan Funds executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof, first set forth in
this Exhibit.
Witness the due execution hereof this 2nd day of April, 1993.
ATTEST: VULCAN FUNDS
/s/Peter J. Germain By:/s/Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John W. McGonigle
Secretary President
(SEAL)
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
SOUTHTRUST VULCAN FUNDS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 1
2.1 Holding Securities 1
2.2 Delivery of Securities 2
2.3 Registration of Securities 4
2.4 Bank Accounts 4
2.5 Payments for Shares 5
2.6 Availability of Federal Funds 5
2.7 Collection of Income 5
2.8 Payment of Fund Moneys 6
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 7
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 7
2.11 Appointment of Agents 7
2.12 Deposit of Fund Assets in Securities System 7
2.13 Segregated Account 8
2.14 Joint Repurchase Agreements 9
2.15 Ownership Certificates for Tax Purposes 9
2.16 Proxies 9
2.17 Communications Relating to Fund Portfolio Securities 9
2.18 Proper Instructions 10
2.19 Actions Permitted Without Express Authority 10
2.20 Evidence of Authority 10
2.21 Reserved 11
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 11
4. Records 11
5. Opinion of Funds' Independent Public Accountants 11
6. Reports to Trust by Independent Public Accountants 12
7. Compensation of Custodian 12
8. Responsibility of Custodian 12
9. Effective Period, Termination and Amendment 14
10. Successor Custodian 14
(i)
11. Interpretive and Additional Provisions 15
12. Massachusetts Law to Apply 15
13. Notices 15
14. Counterparts 15
15. Limitations of Liability 16
(ii)
CUSTODIAN CONTRACT
This Contract between SOUTHTRUST VULCAN FUNDS (the
"Trust"), a Massachusetts business trust, on behalf of the
portfolios (hereinafter collectively called the "Funds," and
individually referred to as, a "Fund") of the Trust, organized
and existing under the laws of The Commonwealth of
Massachusetts, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110 (hereinafter
called the "Custodian"),
WITNESSETH: That in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree
as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of
the assets of each of the Funds of the Trust. Except as
otherwise expressly provided herein, the securities and other
assets of each of the Funds shall be segregated from the assets
of each of the other Funds and from all other persons and
entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of
income, payments of principal or capital distributions received
by them with respect to all securities owned by the Funds from
time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest of the Funds as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of the Funds held or received by
the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning
of Section 2.18 hereof), the Custodian shall from time to time
employ one or more sub-custodians upon the terms specified in
the Proper Instructions, provided that the Custodian shall have
no more or less responsibility or liability to the Trust or any
of the Funds on account of any actions or omissions of any sub-
custodian so employed than any such sub-custodian has to the
Custodian.
2. Duties of the Custodian With Respect to Property of the
Funds Held by the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Fund all non-
cash property, including all securities owned by each
Fund, other than securities which are maintained pursuant
to Section 2.12 hereof in a clearing agency which acts as
a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System", or
securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14
hereof. The Custodian shall maintain records of all
receipts, deliveries and locations of such securities,
together with a current inventory thereof, and shall
conduct periodic physical inspections of certificates
representing stocks, bonds and other securities held by it
under this Contract in such manner as the Custodian shall
determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section
2.11 hereof, and with respect to securities held by any
sub-custodian appointed pursuant to Section 1 hereof, the
Custodian may rely upon certificates from such agent as to
the holdings of such agent and from such sub-custodian as
to the holdings of such sub-custodian, it being understood
that such reliance in no way relieves the Custodian of its
responsibilities under this Contract. The Custodian will
promptly report to the Trust the results of such
inspections, indicating any shortages or discrepancies
uncovered thereby, and take appropriate action to remedy
any such shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Fund held by the Custodian
or in a Securities System account of the Custodian only
upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the
parties, and only in the following cases:
(1) Upon sale of such securities for the account of a
Fund and receipt of payment therefor;
(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Trust;
(3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.12 hereof;
(4) To the depository agent in connection with tender
or other similar offers for portfolio securities of a
Fund, in accordance with the provisions of Section
2.17 hereof;
(5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
(6) To the issuer thereof, or its agent, for transfer
into the name of a Fund or into the name of any
nominee or nominees of the Custodian or into the name
or nominee name of any agent appointed pursuant to
Section 2.11 hereof or into the name or nominee name
of any sub-custodian appointed pursuant to Section 1
hereof; or for exchange for a different number of
bonds, 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;
(7) Upon the sale of such securities for the account of
a Fund, to the broker or its clearing agent, against
a receipt, for examination in accordance with "street
delivery custom"; provided that in any such case, the
Custodian shall have no responsibility or liability
for any loss arising from the delivery of such
securities prior to receiving payment for such
securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care
imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of
reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities
and cash, if any, are to be delivered to the
Custodian;
(9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of
portfolio securities of a Fund, but only against
receipt of adequate collateral in the form of (a)
cash, in an amount specified by the Trust, (b)
certificated securities of a description specified by
the Trust, registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or
(c) securities of a description specified by the
Trust, transferred through a Securities System in
accordance with Section 2.12 hereof;
(11) For delivery as security in connection with any
borrowings requiring a pledge of assets by a Fund,
but only against receipt of amounts borrowed, except
that in cases where additional collateral is required
to secure a borrowing already made, further
securities may be released for the purpose;
(12) For delivery in accordance with the provisions of
any agreement among the Trust or a Fund, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and a member of the National
Association of Securities Dealers, Inc. ("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 for a
Fund;
(13) For delivery in accordance with the provisions of
any agreement among the Trust or 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 transaction for a
Fund;
(14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for a Fund, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, in
satisfaction of requests by holders of Shares for
repurchase or redemption; and
(15) For any other proper corporate purpose, but only
upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board of
Trustees (the "Board") of the Trust on behalf of a
Fund signed by an officer of the Trust and certified
by its Secretary or an Assistant Secretary,
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.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of a particular Fund or in the name
of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to
the Fund, unless the Trust has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed
pursuant to Section 2.11 hereof or in the name or nominee
name of any sub-custodian appointed pursuant to Section 1
hereof. All securities accepted by the Custodian on
behalf of a Fund under the terms of this Contract shall be
in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each
Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the
account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds
pursuant to Section 2.14 of this Contract or by a
particular Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940, as amended (the "1940 Act"). Funds held by
the Custodian for a Fund may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the 1940
Act and that each such bank or trust company and the funds
to be deposited with each such bank or trust company shall
be approved by vote of a majority of the Board of the
Trust. Such funds shall be deposited by the Custodian in
its capacity as Custodian for the Fund and shall be
withdrawable by the Custodian only in that capacity. If
requested by the Trust, the Custodian shall furnish the
Trust, not later than twenty (20) days after the last
business day of each month, an internal reconciliation of
the closing balance as of that day in all accounts
described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such
arrangements with the Transfer Agent of each Fund, as will
enable the Custodian to receive the cash consideration due
to each Fund and will deposit into each Fund's account
such payments as are received from the Transfer Agent.
The Custodian will provide timely notification to the
Trust and the Transfer Agent of any receipt by it of
payments for Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall
make federal funds available to the Funds as of specified
times agreed upon from time to time by the Trust and the
Custodian in the amount of checks, clearing house funds,
and other non-federal funds received in payment for Shares
of the Funds which are deposited into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all
income and other payments with respect to registered
securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely
basis all income and other payments with respect to
bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as
collected, to each Fund's custodian account. Without
limiting the generality of the foregoing, the
Custodian shall detach and present for payment all
coupons and other income items requiring presentation
as and when they become due and shall collect
interest when due on securities held hereunder. The
collection of income due the Funds on securities
loaned pursuant to the provisions of Section 2.2(10)
hereof shall be the responsibility of the Trust. The
Custodian will have no duty or responsibility in
connection therewith, other than to provide the Trust
with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery
to the Custodian of the income to which each Fund is
properly entitled.
(2) The Custodian shall promptly notify the Trust
whenever income due on securities is not collected in
due course and will provide the Trust with monthly
reports of the status of past due income unless the
parties otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay
out moneys of each Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or
options on futures contracts for the account of a Fund
but only (a) against the delivery of such securities,
or evidence of title to futures contracts, to the
Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and
has been designated by the Custodian as its agent for
this purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, (b)
in the case of a purchase effected through a
Securities System, in accordance with the conditions
set forth in Section 2.12 hereof, or (c) in the case
of repurchase agreements entered into between the
Funds and any other party, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase for the
account of the Fund of securities owned by the
Custodian along with written evidence of the agreement
by the Custodian to repurchase such securities from
the Fund;
(2) In connection with conversion, exchange or surrender
of securities owned by a Fund as set forth in Section
2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund
issued by the Trust as set forth in Section 2.10
hereof;
(4) For the payment of any expense or liability incurred
by a Fund, including but not limited to, the following
payments for the account of the Fund: interest;
taxes; management, accounting, transfer agent and
legal fees; and operating expenses of the Fund,
whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund
declared pursuant to the governing documents of the
Trust;
(6) For payment of the amount of dividends received in
respect of securities sold short; or
(7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is
to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for
purchase of securities for the account of a Fund is made
by the Custodian in advance of receipt of the securities
purchased, in the absence of specific written instructions
from the Trust to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to
the same extent as if the securities had been received by
the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a
Fund. From such funds as may be available for the purpose
of repurchasing or redeeming Shares of a Fund, but subject
to the limitations of the Master Trust Agreement and any
applicable votes of the Board of the Trust pursuant
thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment
to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase
of their shares, including without limitation, through
bank drafts, automated clearinghouse facilities, or by
other means. In connection with the redemption or
repurchase of Shares of the Funds, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the 1940 Act and any applicable state law
or regulation, to act as a custodian, as its agent to
carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however,
that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.
2.12 Deposit of Fund Assets in Securities System. The
Custodian may deposit and/or maintain securities owned by
the Funds in a clearing agency registered with the
Securities and Exchange Commission (the "SEC") under
Section 17A of the Exchange Act, which acts as a
securities depository, or in a Securities System in
accordance with applicable Federal Reserve Board and SEC
rules and regulations, if any, and subject to the
following provisions:
(1) The Custodian may keep securities of each Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian
in the Securities System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to
securities of the Funds which are maintained in a
Securities System shall identify by book-entry those
securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for
the account of each Fund upon (i) receipt of advice
from the Securities System that such securities have
been transferred to the 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.
The Custodian shall transfer securities sold for the
account of a Fund upon (i) receipt of advice from the
Securities System that payment for such securities has
been transferred to the 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.
Copies of all advices from the Securities System of
transfers of securities for the account of a Fund
shall identify the Fund, be maintained for the Fund by
the Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the
account of a Fund in the form of a written advice or
notice and shall furnish to the Trust copies of daily
transaction sheets reflecting each day's transactions
in the Securities System for the account of a Fund;
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in
the Securities System;
(5) The Custodian shall have received the initial
certificate, required by Section 9 hereof;
(6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to a Fund resulting from
use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may
have against the Securities System; at the election of
the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim
against the Securities System or any other person
which the Custodian may have as a consequence of any
such loss or damage if and to the extent that a Fund
has not been made whole for any such loss or damage;
and
(7) The authorization contained in this Section 2.12
shall not relieve the Custodian from using reasonable
care and diligence in making use of any Securities
System.
2.13 Segregated Account. The Custodian shall upon receipt
of Proper Instructions 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 an account
by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under
the Exchange 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 for a Fund, (ii) for the purpose of
segregating cash or government securities in connection
with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased
or sold for a Fund, (iii) for the purpose of compliance by
the Trust or a Fund with the procedures required by any
release or releases of the SEC relating to the maintenance
of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in
the case of this clause (iv), upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution
of the Board signed by an officer of the Trust and
certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain
any assets of a Fund and any affiliated funds which are
subject to joint repurchase transactions in an account
established solely for such transactions for the Fund and
its affiliated funds. For purposes of this Section 2.14,
"affiliated funds" shall include all investment companies
and their portfolios for which subsidiaries or affiliates
of Federated Investors serve as investment advisers,
distributors or administrators in accordance with
applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1
hereof shall be deemed to be waived with respect to such
assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of a Fund held by it and in
connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed
by the registered holder of such securities, if the
securities are registered otherwise than in the name of a
Fund or a nominee of a Fund, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices
relating to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of
calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity
of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities
being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Trust all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires
to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Trust shall
notify the Custodian in writing at least three business
days prior to the date on which the Custodian is to take
such action. However, the Custodian shall nevertheless
exercise its best efforts to take such action in the event
that notification is received three business days or less
prior to the date on which action is required.
2.18 Proper Instructions. Proper Instructions as used
throughout this Section 2 means a writing signed or
initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type
of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Custodian reasonably
believes them to have been given by a person previously
authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and
(b) the Trust promptly causes such oral instructions to be
confirmed in writing. Upon receipt of a certificate of
the Secretary or an Assistant Secretary as to the
authorization by the Board of the Trust accompanied by a
detailed description of procedures approved by the Board,
Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices
provided that the Board and the Custodian are satisfied
that such procedures afford adequate safeguards for a
Fund's assets.
2.19 Actions Permitted Without Express Authority. The
Custodian may, in its discretion, without express
authority from the Trust:
(1) Make payments to itself or others for minor expenses
of handling securities or other similar items relating
to its duties under this Contract, provided that all
such payments shall be accounted for to the Trust in
such form that such payments may be allocated to the
affected Fund;
(2) Surrender securities in temporary form for securities
in definitive form;
(3) Endorse for collection, in the name of a Fund,
checks, drafts and other negotiable instruments; and
(4) In general, attend to all non-discretionary details
in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of each Fund except as
otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly
executed on behalf of a Fund. The Custodian may receive
and accept a certified copy of a vote of the Board of the
Trust as conclusive evidence (a) of the authority of any
person to act in accordance with such vote or (b) of any
determination of or any action by the Board pursuant to
the Master Trust Agreement as described in such vote, and
such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
2.21 Reserved.
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
the Trust to keep the books of account of each Fund and/or
compute the net asset value per share of the outstanding Shares
of each Fund or, if directed in writing to do so by the Trust,
shall itself keep such books of account and/or compute such net
asset value per share. If so directed, the Custodian shall
also calculate daily the net income of a Fund as described in
the Fund's currently effective prospectus and Statement of
Additional Information ("Prospectus") and shall advise the
Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Trust to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components.
The calculations of the net asset value per share and the daily
income of a Fund shall be made at the time or times described
from time to time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract
in such manner as will meet the obligations of the Trust and
the Funds under the 1940 Act, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, and
specifically including identified cost records used for tax
purposes. All such records shall be the property of the Trust
and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of
the SEC. In the event of termination of this Contract, the
Custodian will deliver all such records to the Trust, to a
successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a
tabulation of securities owned by a Fund and held by the
Custodian and shall, when requested to do so by the Trust and
for such compensation as shall be agreed upon between the Trust
and the Custodian, include certificate numbers in such
tabulations.
5. Opinion of Funds' Independent Public Accountants.
The Custodian shall take all reasonable action, as the
Trust may from time to time request, to obtain from year to
year favorable opinions from each Fund's independent public
accountants with respect to its activities hereunder in
connection with the preparation of the Fund's registration
statement, periodic reports, or any other reports to the SEC
and with respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants.
The Custodian shall provide the Trust, at such times as
the Trust may reasonably require, with reports by independent
public accountants for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian for the Fund under this Contract; such reports shall
be of sufficient scope and in sufficient detail, as may
reasonably be required by the Trust, to provide reasonable
assurance that any material inadequacies would be disclosed by
such examination and, if there are no such inadequacies, the
reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Trust and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable
care in carrying out the provisions of this Contract; provided,
however, that the Custodian shall be held to any higher
standard of care which would be imposed upon the Custodian by
any applicable law or regulation if such above stated standard
of reasonable care was not part of this Contract. The
Custodian shall be entitled to rely on and may act upon advice
of counsel (who may be counsel for the Trust) on all matters,
and shall be without liability for any action reasonably taken
or omitted pursuant to such advice, provided that such action
is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from
the assets of the Fund involved in the issue at hand and be
without liability for any action taken or thing done by it in
carrying out the terms and provisions of this Contract in
accordance with the above standards.
In order that the indemnification provisions contained in
this Section 8 shall apply, however, it is understood that if
in any case the Trust may be asked to indemnify or save the
Custodian harmless, the Trust shall be fully and promptly
advised of all pertinent facts concerning the situation in
question, and it is further understood that the Custodian will
use all reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects, it
will so notify the Custodian and thereupon the Trust shall take
over complete defense of the claim, and the Custodian shall in
such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Section. The
Custodian shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to
indemnify the Custodian except with the Trust's prior written
consent.
Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check shall
be in accordance with a separate Agreement entered into between
the Custodian and the Trust.
If the Trust requires the Custodian to take any action
with respect to securities, which action involves the payment
of money or which action may, in the reasonable opinion of the
Custodian, result in the Custodian or its nominee assigned to a
Fund being liable for the payment of money or incurring
liability of some other form, the Custodian may request the
Trust, as a prerequisite to requiring the Custodian to take
such action, to provide indemnity to the Custodian in an amount
and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof,
the Trust agrees to indemnify and hold harmless the Custodian
and its nominee from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
(referred to herein as authorized charges) incurred or assessed
against it or its nominee in connection with the performance of
this Contract, except such as may arise from it or its
nominee's own failure to act in accordance with the standard of
reasonable care or any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation
if such above-stated standard of reasonable care were not part
of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for
the benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day,
the Trust hereby grants to the Custodian a security interest in
and pledges to the Custodian securities held for the Fund by
the Custodian, in an amount not to exceed 10 percent of the
Fund's gross assets, the specific securities to be designated
in writing from time to time by the Trust or the Fund's
investment adviser. Should the Trust fail to make such
designation, or should it instruct the Custodian to make
advances exceeding the percentage amount set forth above and
should the Custodian do so, the Trust hereby agrees that the
Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the
Trust instructing their purchase shall be considered the
requisite description and designation of the property so
pledged for purposes of the requirements of the Uniform
Commercial Code. Should the Trust fail to cause a Fund to
repay promptly any authorized charges or advances of cash or
securities, subject to the provision of the second paragraph of
this Section 8 regarding indemnification, the Custodian shall
be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or
mailing; provided however, that the Custodian shall not act
under Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary
that the Board of the Trust has approved the initial use of a
particular Securities System as required in each case by Rule
17f-4 under the 1940 Act; provided further, however, that the
Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations,
or any provision of the Master Trust Agreement, and further
provided, that the Trust may, at any time, by action of its
Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by
the appropriate banking regulatory agency or upon the happening
of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board
of the Trust, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly
endorsed and in the form for transfer, all securities then held
by it hereunder for each Fund and shall transfer to separate
accounts of the successor custodian all of each Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of the Trust, deliver at the office
of the Custodian and transfer such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board shall have
been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is
a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all
securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and
all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor
custodian all of each Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to
failure of the Trust to procure the certified copy of the vote
referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession
of such securities, funds and other properties and the
provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and
effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the
Custodian and the Trust may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may, in their joint opinion, be consistent
with the general tenor of this Contract. Any such interpretive
or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Master Trust Agreement. No interpretive or additional
provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices
and other writings delivered or mailed postage prepaid to the
Trust at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, or to the Custodian at 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the Trust or
the Custodian may hereafter specify, shall be deemed to have
been properly delivered or given hereunder to the respective
address.
14. Counterparts.
This Contract may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation
of liability as set forth in Article VI of the Master Trust
Agreement and agrees that the obligations and liabilities
assumed by the Trust and any Fund pursuant to this Contract,
including, without limitation, any obligation or liability to
indemnify the Custodian pursuant to Section 8 hereof, shall be
limited in any case to the relevant Fund and its assets and
that the Custodian shall not seek satisfaction of any such
obligation from the shareholders of the relevant Fund, from any
other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition,
in connection with the discharge and satisfaction of any claim
made by the Custodian against the Trust, for whatever reasons,
involving more than one Fund, the Trust shall have the
exclusive right to determine the appropriate allocations of
liability for any such claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
as of the 5th day of November, 1993.
ATTEST: SOUTHTRUST VULCAN FUNDS
/s/Mark A. Sheehan By /s/Margaret P. Demski
Assistant Secretary Vice President
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/James E. Collins By /s/Ronald E. Logue
Assistant Secretary Executive Vice President
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg S-K
VULCAN FUNDS
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 2nd day of
April, 1993, between Vulcan Funds, a Massachusetts business trust (herein
called the "Trust"), and Federated Administrative Services, a Delaware
business trust (herein called ("FAS").
WHEREAS, the Trust is a Massachusetts business trust, consisting of one
or more portfolios (individually a "Fund" and collectively the "Funds"),
which operates as an open-end management investment company and is so
registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain FAS as its Administrator to provide
it with administrative services, and FAS is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Trust hereby appoints FAS as
Administrator of the Fund on the terms and conditions set forth in this
agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in
consideration of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Trust's Board of Trustees, FAS will provide
facilities, equipment, and personnel to carry out the following
administrative services for operation of the business and affairs of the
Trust and each of its Funds:
(a) prepare, file, and maintain the Trust's governing documents,
including the Declaration of Trust (which has already been
prepared and filed), the By-laws and minutes of meetings of
Trustees, committees of the Board of Trustees, and shareholders,
and prepare certain materials for such meetings;
(b) prepare and file with the Securities and Exchange Commission and
the appropriate state securities authorities the registration
statements for the Trust and the Trust's shares and all amendments
thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents, all as
may be necessary to enable the Fund to make a continuous offering
of its shares or to comply with the Investment Company Act and
rules thereunder;
(c) prepare, negotiate, and administer contracts on behalf of the Trust
with, among others, the Trust's investment adviser, distributor,
custodian, and transfer agent;
(d) supervise the Trust's custodian in the maintenance of the
Trust's general ledger and in the preparation of the Trust's
financial statements, including oversight of expense accruals and
payments, of the determination of the net asset value of the
Trust, and of the declaration and payment of dividends and other
distributions to shareholders;
(e) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) perform internal audit examinations in accordance with a charter
to be adopted by FAS and the Trust;
(j) assist with the design, development, and operation of the Fund;
(k) provide individuals reasonably acceptable to the Trust's Board of
Trustees for nomination, appointment, or election as officers of
the Trust, who will be responsible for the management of certain
of the Trust's affairs as determined by the Fund's Board of
Trustees; and
(l) consult with the Trust and its Board of Trustees on matters
concerning the Trust and its affairs.
The foregoing, along with any additional services that FAS shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred
to as "Administrative Services." Administrative Services shall not include
any duties, functions, or services to be performed for the Trust by the
Trust's investment adviser, distributor, custodian, or transfer agent
pursuant to their agreements with the Trust.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Trust, including
the compensation of FAS employees who serve as Trustees or Officers of the
Trust. The Trust shall be responsible for all other expenses incurred by
FAS on behalf of the Fund, including without limitation postage and courier
expenses, printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent auditors, insurance premiums,
fees payable to trustees who are not FAS employees, and trade association
dues.
4. Compensation. For the Administrative Services provided, the
Trust hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee,
payable daily by each Fund on the basis of the average daily net assets of
the Trust at a rate specified below:
Maximum Administrative Average Daily Net Assets
Fee of the Trust
.15% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during any
year of this contract be less than, or be paid at a rate less than would
aggregate, $50,000 per portfolio for the Treasury Obligations Money Market
Fund, Bond Fund, and Stock Fund, and $100,000 per Fund for any Fund
established after the date of this agreement. In addition, the foregoing
minimum annual fees per Fund will be increased by $25,000 for each
additional class added to any existing or new portfolio.
5. Responsibility of Administrator.
(a) FAS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties
under this Agreement. FAS shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Any person, even though also an officer, director, partner,
employee or agent of FAS, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any
business of the Trust (other than services or business in
connection with the duties of FAS hereunder) to be rendering
such services to or acting solely for the Trust and not as an
officer, director, partner, employee or agent or one under
the control or direction of FAS even though paid by FAS.
(b) FAS shall be kept indemnified by the Trust and be without
liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the
above standards. In order that the indemnification
provisions contained in this Section 5 shall apply, however,
it is understood that if in any case the Trust may be asked
to indemnify or save FAS harmless, the Trust shall be fully
and promptly advised of all pertinent facts concerning the
situation in questions, and it is further understood that FAS
will use all reasonable care to identify and notify the Trust
promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Trust. The Trust shall have the
option to defend FAS against any claim which may be the
subject of this indemnification. In the event that the Trust
so elects it will so notify FAS and thereupon the Trust shall
take over complete defense of the claim, and FAS shall in
such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Section.
FAS shall in no case confess any claim or make any compromise
in any case in which the Trust will be asked to indemnify FAS
except with the Trust's written consent.
(c) FAS agrees to indemnify and hold harmless the Trust, each of
its Trustees and each of its officers against any loss,
liability, damages, claim or expense (including the
reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense (and reasonable
counsel fees incurred in connection therewith) arising by
reason of any action taken or thing done by FAS in performing
Administrative Services if resulting from FAS's willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. In case any
action shall be brought against the Trust or any other person
so indemnified based on the foregoing as described in this
subsection (c), and with respect to which indemnity may be
sought against FAS, FAS shall have the rights and duties
given to the Trust, and the Trust and each other person so
indemnified shall have the rights and duties given to FAS by
the provisions of subsection (b) above.
6. Duration and Termination.
(a) The initial term of this Agreement shall commence on the date
hereof, and extend for a period of five years with respect to
all Funds in existence on the date of this Agreement.
(b) Thereafter, this Agreement shall be automatically renewed
each year for an additional term of one year, unless notice
of termination has been delivered by either party to the
other no less than one year before the beginning of any such
additional term.
(c) Notwithstanding the foregoing, this Agreement may be
terminated at any time by either party in the event of a
material breach by the other party involving gross
negligence, willful misfeasance, bad faith, or a reckless
disregard of its obligations and duties under this Agreement
and such breach shall have remained unremedied for sixty days
or more after receipt of written specification thereof and
there has been a final determination by an arbitrator,
selected and acting pursuant to the rules of the American
Arbitration Association, that a breach, as specified herein,
has occurred and remained unremedied for sixty days or more
after notice. Any such termination shall not affect the
rights and obligations of the parties under Section 7 hereof.
(d) Upon the termination of this Agreement, the Trust shall pay
to FAS such compensation as may be payable prior to the
effective date of such termination. In the event that the
Trust designates a successor to any of FAS's obligations
hereunder, FAS shall, at the expense and direction of the
Trust, transfer to such successor all relevant books, records
and other data, including information in machine readable
form, established or maintained by FAS under the foregoing
provisions.
7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which an enforcement of the change, waiver, discharge
or termination is sought.
8. Limitations of Liability of Trustees, Officers, Employees, Agents
and Shareholders of the Fund. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust and agrees
that the obligations assumed by the Fund pursuant to this Agreement shall be
limited in any case to the Fund and its assets and that FAS shall not seek
satisfaction of any such obligations from the shareholders of the Fund, the
Trustees, officers, employees or agents of the Fund, or any of them. In
addition, in connection with the discharge and satisfaction of any claim
made by FAS against the Trust, for whatever reasons, involving more that one
Fund or Class, the Trust shall have the exclusive right to determine the
appropriate allocations of liability for any such claim between or among the
Funds or Classes.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by
the Trustees of FAS and signed by an authorized officer of FAS, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of the Trust as
provided in the Declaration of Trust.
10. Notices. Notices of any kind to be given to the Trust hereunder by
FAS shall be in writing and shall be duly given if delivered to the Fund and
to its investment adviser at the following address: 420 North 20th Street,
Birmingham, Alabama 35203, Attention: Trust and Financial Services
Division. Notices of any kind to be given to FAS hereunder by the Fund
shall be in writing and shall be duly given if delivered to FAS at Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. Subject to the provisions of
Section 5, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and shall
be governed by Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the Investment Company Act
of 1940 or any rule or regulation promulgated by the Securities and Exchange
Commission thereunder.
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.
Vulcan Funds
By /s/Edward C. Gonzales
President
Attest:/s/Peter J. Germain
Secretary
Federated Administrative Services
By /s/James J. Dolan
President
Attest:/s/John W. McGonigle
Secretary
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FUND ACCOUNTING
AND
SHAREHOLDER RECORDKEEPING AGREEMENT
AGREEMENT made as of the 2nd day of April, 1993, by and between VULCAN
FUNDS, a Massachusetts business trust, having its principal office and
place of business at Federated Investors Tower, Pittsburgh, PA 15222-3779
(the "Trust"), on behalf of the portfolios (individually referred to herein
as a "Fund" and collectively as "Funds") of the Trust, and FEDERATED
SERVICES COMPANY, a Delaware business trust having its principal office and
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of beneficial interest
("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the
Company is willing to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of its duties and
responsibilities hereunder with another agent (the "Agent");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds for the period and on the terms set forth
in this Agreement. The Company accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as
provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of
Trustees ("Board"), the Company will assist the Trust with regard to
portfolio accounting for the Trust and the Funds, and/or the Classes, and
in connection therewith undertakes to do the following specific services;
A. Valuing the assets of the Funds and determining the net asset
value per share of the outstanding Shares of the Funds and the Classes, at
the time and in the manner from time to time determined by the Board of the
Trust and as set forth in the prospectus and Statement of Additional
Information ("Prospectus");
B. Calculating the net income of the Funds, if any;
C. Calculating capital gains or losses for the Funds from sale or
disposition of assets, if any;
D. Maintaining the general ledger and other accounts, books and
financial records of the Trust, including for each Fund and Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder in
connection with the services provided by the Company;
E. Preserving for the periods prescribed by Rule 31a-2 under the 1940
Act the records to be maintained by Rule 31a-1 under said Act in connection
with the services provided by the Company. The Company further agrees that
all such records which it maintains for the Trust are the property of the
Trust and further agrees to surrender promptly to the Trust such records
upon the Trust's request.
F. At the request of the Trust, drafting various reports or other
financial documents required by federal, state and other applicable laws
and regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the fees set
forth on Fee Schedule A, annexed hereto and incorporated herein. Such fees
do not include out-of-pocket disbursements of the Company, on behalf of the
Funds, for which the Company shall be entitled to bill separately. Out-of-
pocket disbursements shall include, but shall not be limited to, the items
specified in Schedule B, annexed hereto and incorporated herein, which
Schedule may be modified by the Company upon not less than thirty days'
prior written notice to the Trust.
B. The Company shall not be required to pay any of the following
expenses incurred by the Trust, the Funds, or the Classes: custodial
expenses; membership dues in the Investment Company Institute or any
similar organization; transfer agency expenses (except as provided in
Section Two of this Agreement); investment advisory expenses; costs of
printing and mailing stock certificates, Prospectuses, reports and notices;
administrative expenses; interest on borrowed money; brokerage commissions;
taxes and fees payable to Federal, state and other governmental agencies;
fees of Trustees of the Trust; outside auditing expenses; outside legal
expenses; or other expenses not specified in this Article 3 which may be
properly payable by the Trust.
C. The Company will invoice the Funds as soon as practicable after
the end of each calendar month, and said invoices will be detailed in
accordance with Schedule A and Schedule B. The Trust will promptly pay to
the Company the amount of such invoice.
D. Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A a revised Schedule A dated and signed by a
duly authorized officer of the Trust and a duly authorized officer of the
Company.
E. The fee for the period from the effective date of application of
this Agreement with respect to a Fund or a Class to the end of the initial
month shall be prorated according to the proportion that such period bears
to the full month period. Upon any termination of this Agreement before
the end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period. For
purposes of determining fees payable to the Company, the value of the
Fund's net assets shall be computed at the time and in the manner specified
in the Fund's Prospectus.
F. The Company in its sole discretion may from time to time employ or
associate with itself such person or persons as the Company may believe to
be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are
employed by both the Company and the Trust. The compensation of such
person or persons shall be paid by the Company and no obligation shall be
incurred on behalf of the Trust, the Funds, or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Company to act as, and the Company
agrees to act as, transfer agent for each Fund's Shares, dividend
disbursing agent, and agent in connection with any accumulation, open-
account or similar plans provided to the shareholders of any Fund
("Shareholders"), including without limitation any periodic investment plan
or periodic withdrawal program.
Proper Instructions as used throughout Section Two of this Agreement
means a writing signed or initialed by one or more person or persons as the
Board shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved. Oral
instructions will be considered Proper Instructions if the Company
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect to
the transaction involved. The Trust and the Company shall cause all oral
instructions to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Trust and the Company are satisfied that such
procedures afford adequate safeguards for a Fund's assets. Proper
Instructions may only be amended in writing.
Article 5. Duties of the Company.
The Company agrees that it will perform the following services in
accordance with Proper Instructions as may be provided from time to time by
the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the safekeeping custodian of the
relevant Fund, (the "Custodian"). The Company shall notify the
Trust and the Custodian on a daily basis of the total amount of
orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of shares and hold such shares in the
appropriate Shareholder accounts.
(3) If a Shareholder or its agent requests a certificate, the
Company, as Transfer Agent, shall countersign and mail by first
class mail, a certificate to the Shareholder at his address as
set forth on the transfer books of the Fund, subject to any
Proper Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase
of Shares of the Fund is returned unpaid for any reason, the
Company shall debit the Share account of the Shareholder by the
number of Shares that had been credited to his account upon
receipt of the check or other order, promptly mail a debit
advice to the Shareholder, and notify the Trust of its action.
In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of
any dividends paid with respect to such Shares, the Company
will receive reimbursement of such excess from the Fund or its
distributor.
B. Distribution
(1) Upon notification by the Trust of the declaration of any
distribution to shareholders, the Company shall act as Dividend
Disbursing Agent for the Fund in accordance with the provisions
of its governing document and the then current Prospectus of
the Fund and as such shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional
Shares by virtue of any such distribution or dividend,
appropriate credits shall be made to the Shareholder's account
and certificates delivered where requested; and
(2) The Company shall maintain records of account for each Fund
and advise the Trust and its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Trust on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, the Company
shall pay over or cause to be paid over in the appropriate
manner such monies as instructed by the redeeming Shareholders,
pursuant to procedures described in the then current Prospectus
of the Fund.
(3) If any such certificate or request for redemption does not
comply with the procedures for redemption approved by the
Trust, the Company shall promptly notify the Shareholder of
such fact, together with the reason therefor, and shall effect
such redemption at the price applicable to the date and time of
receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Trust.
(6) For purposes of this Agreement, a shareholder account that
holds no shares shall be referred to as a closed account. The
Company may cancel any closed account in which there has been
no transaction for more than one year and that thereupon shall
cease to be a closed account.
D. Recordkeeping
(1) The Company shall record the issuance of shares of the Fund
and maintain pursuant to applicable rules of the Securities and
Exchange Commission ("SEC") a record of the total number of
shares of the Fund which are authorized, based upon data
provided to it by the Trust, and issued and outstanding. The
Company shall also provide the Trust on a regular basis or upon
reasonable request with the total number of Shares which are
authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such
shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which functions shall be the sole
responsibility of the Trust.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust to include a record for each Shareholder's account of the
following:
(a) Name, address and tax identifying number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholdings in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Fund, and such
records may be inspected by the Trust at reasonable times. The
Company may, at its option at any time, and shall forthwith
upon the Trust's demand, turn over to the Trust and cease to
retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which
are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the
Trust, such records and documents will be retained by the
Company for six years from the year of creation, during the
first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Trust or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Trust periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Trust
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file
with the Internal Revenue Service and appropriate state
agencies, and, if required, mail to Shareholders, such notices
for reporting dividends and distributions paid as are required
to be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, mailing
Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to back-
up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) provide a system which will enable the Trust to monitor
the total number of Shares of each Fund sold in each state
("blue sky reporting"). The Trust shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each
Fund's state blue sky registration status is limited solely
to the recording of the initial classification of
transactions or accounts with regard to blue sky compliance
and the reporting of such transactions and accounts to the
Trust as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Trust in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies; and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust assumes full responsibility for the preparation, contents
and distribution of each Prospectus of the Fund and for complying
with all applicable requirements of the Securities Act of 1933, as
amended, the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply
upon request of the Company. Such blank Share certificates shall
be properly signed, manually or by facsimile, if authorized by the
Trust and shall bear the seal of the Trust or facsimile thereof;
and notwithstanding the death, resignation or removal of any
officer of the Trust authorized to sign certificates, the Company
may continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by the
Trust.
C. Distributions
The Trust shall promptly inform the Company of the declaration of
any dividend or distribution on account of any Fund's shares.
Article 7. Fees and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust agrees to pay the Company an annual
maintenance fee for each Shareholder account as set out in the fee
schedule, Schedule C, attached hereto. Such fees may be changed
from time to time subject to mutual written agreement between the
Trust and the Company. Pursuant to information in the Trust
Prospectus or other information or instructions from the Trust, the
Company may sub-divide any Fund into Classes or other sub-
components for recordkeeping purposes. The Company will charge the
Fund the fees set forth on Schedule C for each such Class or sub-
component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust agrees
to reimburse the Company for out-of-pocket expenses or advances
incurred by the Company on behalf of the Funds for the items set
out in Schedule D attached hereto. In addition, any other
expenses incurred by the Company at the request or with the consent
of the Trust, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall issue billing notices with respect to fees and
reimbursable expenses on a timely basis, generally within 15 days
following the end of the month in which the fees and expenses have
been incurred. The Trust agrees to pay all fees and reimbursable
expenses within 30 days following the receipt of the respective
billing notices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the
written consent of the other party.
(1) This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) Boston
Financial Data Services, Inc., a Massachusetts Trust ("BFDS"),
which is duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"), or
(B) a BFDS subsidiary duly registered as a transfer agent
pursuant to Section 17A(c)(1), or (C) a BFDS affiliate;
provided, however, that the Company shall be as fully
responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
(3) The Company shall upon instruction from the Trust subcontract
for the performance hereof with an Agent, other than BFDS as
described in (2) above, which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) or any succeeding statutes;
provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the
Agent.
SECTION THREE: General Provisions.
Article 9. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following documents:
(1) A copy of the Declaration of Trust and By-Laws of the Trust and
all amendments thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share
certificates of the Funds in the forms approved by the Board of
the Trust with a certificate of the Secretary of the Trust as
to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each fund.
B. The Trust will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's Shares;
(2) Each Registration Statement filed with the SEC and
amendments thereof and orders relating thereto in effect with
respect to the sale of Shares of any Fund;
(3) A certified copy of each amendment to the governing
document and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Fund Accountant and
Shareholder Recordkeeper;
(5) Specimens of all new Share certificates representing Shares
of any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of any Fund.
Article 10. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in
good standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State
of Delaware.
(3) It is empowered under applicable laws and by its charter
and by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law
requirements and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(2) It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this Agreement.
(3) All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
(4) The Trust is an open-end investment company registered under
the 1940 Act.
(5) A registration statement under the Securities Act of 1933 will
be effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all
Shares of each Fund being offered for sale.
Article 11. Standard of Care/Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Agreement; provided, however
that the Company shall be held to any higher standard of care which
would be imposed upon the Company by any applicable law or
regulation even though such stated standard of care was not part of
this Agreement.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust shall
indemnify and hold the Company harmless against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(1) The Trust's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Trust's lack of good
faith, negligence or willful misconduct or which arise out of
the breach of any representation or warranty of the Trust
hereunder.
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Trust, its shareholders or investors regarding the purchase,
redemption or transfer of shares and shareholder account
information, or
(b) have been prepared and/or maintained by the Trust or
its affiliates or any other person or firm on behalf of the
Trust.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the Trust.
(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by this
Article 11.B. from liability for any act or omission resulting from
the Company's lack of good faith, negligence, willful misconduct,
or failure to meet the standard of care set forth in Article 11.A.,
above.
C. Indemnification by the Company
The Company shall indemnify and hold the Trust and each Fund
harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to any action or failure or omission to act
by the Company as a result of the Company's lack of good faith,
negligence, willful misconduct, or failure to meet the standard of
care set forth in Article 11.A above or any material breach of any
representation or warranty of the Company hereunder.
D. Reliance
At any time the Company may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed
by the Company under this Agreement, and the Company and its agents
or subcontractors shall not be liable and shall be indemnified by
the appropriate Fund for any action reasonably taken or omitted by
it in reliance upon such instructions or upon the opinion of such
counsel provided such action is not in violation of applicable
Federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Trust, and
the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
E. Notification
In order that the indemnification provisions contained in this
Article 11 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior
written consent.
Article 12. Termination of Agreement.
This Agreement may be terminated by either party upon sixty (60) days
written notice to the other. Should the Trust exercise its rights to
terminate, all out-of-pocket expenses associated with the movement of
records and materials will be borne by the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination.
Article 13. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 14. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable Federal or state
regulations or any provision of the Declaration of Trust. No interpretive
or additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Agreement.
Article 15. Governing Law. Massachusetts Law to Apply
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 16. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust in care of Trust
and Financial Services Division, SouthTrust Bank of Alabama, N.A., 420
North 20th Street, Birmingham, Alabama 35203, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
Article 17. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 18. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust and signed by an authorized officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Trust, but bind only the relevant
Fund or Class and its assets as provided in the Declaration of Trust.
In addition, in connection with the discharge and satisfaction of any
claim made by the Company against the Trust, for whatever reasons,
involving more than one Fund or Class, the Trust shall have the exclusive
right to determine the appropriate allocations of liability for any such
claim between or among the Funds or Classes.
Article 19. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by
the Trustees of the Company and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have
been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or shareholders of the Company, but bind only the trust
property of the Trust as provided in the Declaration of Trust.
Article 20. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by
the specific written consent of the other party.
Article 21. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 22. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to such
successor agent at the office of the Company all properties of the Trust
held by it hereunder. If no such successor agent shall be appointed, the
Company shall at its office upon receipt of Proper Instructions deliver
such properties in accordance with such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act of 1940, as amended, of its
own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank
or trust company shall be the successor of the Company under this
Agreement.
The property of the Trust to be delivered to any successor shall
include the accounting and shareholder records in machine readable form.
Article 23. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Trust as a result of
work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.
Article 24. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to
a successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party.
Article 25. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
'IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first above
written.
ATTEST: VULCAN FUNDS
/s/Mark A. Sheehan By: /s/Joseph S. Machi
Assistant Secretary Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/Joseph M. Huber By: /s/Ronald L. Cavanagh
Assistant Secretary Vice President
