SOUTHTRUST VULCAN FUNDS, 497, 1996-07-01

SOUTHTRUST VULCAN FUNDS
497, 1996-07-01

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[ARTED LOGO]
SOUTHTRUST
VULCAN
FUNDS

PROSPECTUS DATED JUNE 30, 1996
- -------------------------------------------------------------------------------

THE SOUTHTRUST VULCAN FUNDS (the "Company") is an open-end investment
company--a mutual fund--that currently offers a selection of four 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.

. STOCK FUND -- to provide long-term capital appreciation, with income a
secondary consideration.

. INCOME FUND -- to provide current income.

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, GUARANTEED, 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 FUNDS OFFERED BY THIS PROSPECTUS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

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,
1996 has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference into this prospectus. You may request a copy of the
Statement or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-843-8618. The
Statement, material incorporated by reference into this document, and other
information regarding the Company is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
- -------------------------------------------------------------------------------

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
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS BOND STOCK INCOME
MONEY MARKET FUND FUND FUND FUND
-------------------- ---- ----- ------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering price). None 3.50% 4.50% 3.50%
Maximum Sales Charge Imposed on
Reinvested Dividends
(as a percentage of offering price). None None None None
Contingent Deferred Sales Charge (as
a percentage of
original purchase price or
redemption proceeds, as applicable). None None None None
Redemption Fees (as a percentage of
amount redeemed, if applicable)..... None 1.00%* 1.00%* 1.00%*
Exchange Fee......................... None None None None
- --------
* Applies only to shares of the Bond Fund, the Stock Fund and the Income Fund
purchased at net asset value (investments in excess of $1,000,000) which are
redeemed within one year of purchase. See "How to Purchase, Exchange, and
Redeem Shares."

<CAPTION>
TREASURY OBLIGATIONS BOND STOCK INCOME
MONEY MARKET FUND FUND FUND FUND
-------------------- ---- ----- ------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Advisory Fees (after waivers) (1).... 0.30% 0.55% 0.72% 0.30%
12b-1 Fees........................... None None None None
Other Expenses (after waivers) (2)... 0.23% 0.32% 0.23% 0.66%
---- ---- ---- ----
Total Fund Operating Expenses (3).... 0.53% 0.87% 0.95% 0.96%
==== ==== ==== ====
</TABLE>

(1) The management fees have been reduced to reflect the voluntary waivers of
portions of the management fees by the investment adviser. The adviser can
terminate these voluntary waivers at any time at its sole discretion. The
maximum management fees for Treasury Obligations Money Market Fund, Bond Fund,
Stock Fund and Income Fund are 0.50%, 0.60%, 0.75%, and 0.60%, respectively.

(2) Other expenses have been reduced to reflect the voluntary waivers of
portions of the administrator fees. The administrator can terminate these
voluntary waivers at any time at its sole discretion.

(3) The Total Fund Operating Expenses for Bond Fund would have been 0.95%,
absent the voluntary waivers of portions of the management and administrator
fees. The Total Fund Operating Expenses in the table above are based on
expenses expected for Treasury Obligations Money Market Fund, Stock Fund, and
Income Fund during the fiscal year ending April 30, 1997. The Total Fund
Operating Expenses for Treasury Obligations Money Market Fund, Stock Fund, and
Income Fund were 0.48%, 0.87%, and 0.85%, respectively, for the period ended
April 30, 1996, and were 0.70%, 0.98% and 0.90%, respectively, absent the
voluntary waivers of portions of the management and administrator fees.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUNDS WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "MANAGEMENT OF THE FUNDS" AND "HOW TO PURCHASE, EXCHANGE AND
REDEEM SHARES" IN THE PROSPECTUS. WIRE-TRANSFERRED REDEMPTIONS MAY BE SUBJECT
TO ADDITIONAL FEES.

EXAMPLE

You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return; (2) redemption at the end of each time period and; (3) payment
of the maximum sales charge.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Treasury Obligations Money Market Fund........ $ 5 $17 $30 $ 66
Bond Fund..................................... $44 $62 $82 $138
Stock Fund.................................... $54 $74 $95 $156
Income Fund................................... $44 $65 NA NA
</TABLE>

SouthTrust Bank or a SouthTrust Vulcan Funds Dealer may charge customer
accounts for other services provided to investors.

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE TREASURY OBLIGATIONS MONEY MARKET, STOCK,
AND INCOME FUNDS' FISCAL YEARS ENDING APRIL 30, 1997. THE EXAMPLE FOR THE BOND
FUND IS BASED ON HISTORICAL DATA FROM 1996.

SOUTHTRUST VULCAN FUNDS
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

The following table has been audited by Arthur Andersen LLP, the Funds'
independent public accountants. Their report dated June 4, 1996 is included in
the Annual Report for the Funds, which is incorporated by reference. This
table should be read in conjunction with the Funds' financial statements and
notes thereto, which may be obtained free of charge from the Funds.

Further information about the performance of the Funds is contained in the
Funds' Annual Report dated April 30, 1996, which may be obtained free of
charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS
MONEY MARKET FUND BOND FUND
----------------------------------- ----------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------- ----------------------------------
1996 1995 1994 1993(A) 1996 1995 1994 1993(A)
- ------------------------ -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 9.95 $10.04 $10.71 $10.00
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.05 0.05 0.03 0.03 0.59 0.61 0.63 0.66
- ------------------------
Net realized and
unrealized gain (loss)
on investments -- -- -- -- 0.03 (0.09) (0.58) 0.69
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.05 0.05 0.03 0.03 0.62 0.52 0.05 1.35
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income (0.05) (0.05) (0.03) (0.03) (0.56) (0.61) (0.65) (0.62)
- ------------------------
Distributions from net
realized gain on
investment transactions -- -- -- -- -- -- (0.07) (0.02)
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.05) (0.05) (0.03) (0.03) (0.56) (0.61) (0.72) (0.64)
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $10.01 $ 9.95 $10.04 $10.71
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 5.26% 4.62% 2.83% 2.93% 6.78% 5.41% 0.33% 13.44%
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.48% 0.43% 0.40% 0.39%(c) 0.87% 0.75% 0.51% 0.39%(c)
- ------------------------
Net investment income 5.11% 4.56% 2.81% 2.93%(c) 6.28% 6.29% 5.97% 6.53%(c)
- ------------------------
Expense
waiver/reimbursement (d) 0.22% 0.30% 0.33% 0.36%(c) 0.08% 0.28% 0.58% 0.59%(c)
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
<CAPTION>
Net assets, end of
period
(000 omitted)
- ------------------------ $445,729 $314,200 $278,924 $194,771 $83,257 $76,409 $32,767 $25,989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio turnover -- -- -- -- 28% 48% 6% 19%
- ------------------------
</TABLE>

(a) Reflects operations for the period from May 8, 1992 (date of initial
public investment) to April 30, 1993.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(See Notes which are an integral part of the Financial Statements)

SOUTHTRUST VULCAN FUNDS
FINANCIAL HIGHLIGHTS--CONTINUED
- -------------------------------------------------------------------------------

Further information about the performance of the Funds is contained in the
Funds' Annual Report dated April 30, 1996, which may be obtained free of
charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
STOCK FUND INCOME FUND
------------------------------------- ----------------------
YEAR ENDED APRIL 30, PERIOD ENDED APRIL 30,
------------------------------------- ----------------------
1996 1995 1994 1993(A) 1996(E)
- ------------------------ -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.51 $ 10.08 $ 10.36 $ 10.00 $10.00
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.23 0.20 0.19 0.19 0.16
- ------------------------
Net realized and
unrealized gain (loss)
on investments 3.33 1.43 (0.28) 0.35 (0.25)
- ------------------------ ------- ------- ------- ------- ------
Total from investment
operations 3.56 1.63 (0.09) 0.54 (0.09)
- ------------------------ ------- ------- ------- ------- ------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income (0.23) (0.20) (0.19) (0.18) (0.14)
- ------------------------
Distributions from net
realized gain on
investment transactions (0.44) -- -- -- --
- ------------------------ ------- ------- ------- ------- ------
Total distributions (0.67) (0.20) (0.19) (0.18) (0.14)
- ------------------------ ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD $ 14.40 $ 11.51 $ 10.08 $ 10.36 $ 9.77
- ------------------------ ------- ------- ------- ------- ------
TOTAL RETURN (B) 31.51% 16.36% (0.90%) 5.54% (0.93%)
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.87% 0.74% 0.48% 0.39%(c) 0.85%(c)
- ------------------------
Net investment income 1.75% 1.95% 1.82% 1.91%(c) 5.30%(c)
- ------------------------
Expense
waiver/reimbursement (d) 0.11% 0.39% 0.69% 0.74%(c) 0.05%(c)
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
<CAPTION>
Net assets, end of
period (000 omitted)
- ------------------------ $204,421 $138,281 $37,114 $30,935 $78,147
Average commission rate
paid
- ------------------------ $ 0.0747 $ -- $ -- $ -- $ --
<S> <C> <C> <C> <C> <C>
Portfolio turnover 39% 57% 46% 34% 61%
- ------------------------
</TABLE>

(a) Reflects operations for the period from May 8, 1992 (date of initial
public investment) to April 30, 1993.

(e) Reflects operations for the period from January 10, 1996 (date of initial
public investment) to April 30, 1996.
(See Notes which are an integral part of the Financial Statements)

INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS

The Company currently offers shares in four 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. While there is
no assurance that the Funds will achieve their investment objectives, they
endeavor to do so by following the investment policies described in this
prospectus, and further, in the case of the TREASURY OBLIGATIONS MONEY MARKET
FUND, by complying with the diversification and other requirements of Rule 2a-
7 under the Investment Company Act of 1940 which regulates money market mutual
funds.

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 collateralized by 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. 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 organization ("NRSRO") 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, repurchase agreements
collateralized by such obligations, and asset-backed securities, such as
obligations collateralized by mortgages or other intangible assets. The prices
of fixed income securities fluctuate inversely to the direction of interest
rates.

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 tend to be leaders in their
industries and characterized by sound management. The equity securities of
such companies often pay dividends. The Adviser attempts to manage the Fund's
portfolio of investments to achieve total return relative to that provided by
the average return of securities included in the Standard & Poor's Daily Price
Index of 500 Common Stocks (the "S&P 500 Index") and other professionally-
managed domestic large capitalization stock portfolios. 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.

INCOME FUND

The investment objective of INCOME FUND is to provide current income. As a
secondary, non-fundamental objective, the Fund will attempt to minimize
principal volatility.

The Fund pursues its investment objective by investing in a diversified
portfolio comprised primarily of income-producing securities. Income-producing
securities may include: U.S. government securities (as defined below);
corporate debt obligations, which may include bonds, notes, and debentures;
convertible securities; asset-backed and mortgage-backed securities,
collateralized mortgage obligations and adjustable rate mortgage securities;
commercial paper, bank instruments, money market instruments, and zero coupon
securities. Under normal market and economic conditions, the Fund will invest
at least 65% of its assets in such securities. In an effort to minimize
principal volatility, the Fund will maintain a dollar-weighted average
maturity of five years or less. The Fund may also invest in certain equity
securities, including common stock, preferred stock, and convertible
securities. The prices of fixed income securities fluctuate inversely to the
direction of interest rates.

INVESTMENT ACTIVITIES

U.S. GOVERNMENT OBLIGATIONS. The BOND FUND, STOCK FUND and INCOME FUND may
purchase obligations issued or guaranteed by the U.S. government or its
agencies and instrumentalities. These securities include, but are not limited
to:
. direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation; Federal National Mortgage
Association; Government National Mortgage Association; and Student Loan
Marketing Association.

The TREASURY MONEY FUND invests solely in direct obligations of the U.S.
Treasury (directly and through repurchase agreements). Some obligations issued
or guaranteed by agencies or instrumentalities of the U.S. government, such as
Government National Mortgage Association ("Ginnie Mae") participation
certificates, are backed 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 assurances can be given that the U.S. government
will provide financial support to other agencies or instrumentalities, since
it is not obligated to do so. These instrumentalities are supported by:

. the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

. discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

. the credit of the agency or instrumentality.

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 Ginnie Mae 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 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.

EQUITY SECURITIES. The STOCK FUND may invest in common stocks, convertible
bonds, convertible preferred stock and warrants to purchase common stock. The
INCOME FUND may invest in common stocks, preferred stocks, and convertible
securities, including convertible bonds and convertible preferred stocks. 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 STOCK 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.

CONVERTIBLE SECURITIES. The STOCK FUND and INCOME FUND may invest in
convertible securities. Convertible securities are securities which may be
exchanged or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible bonds, convertible
preferred stock or debentures, units consisting of "usable" bonds or a
combination of the features of several of these securities.

The investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different investment
objectives.

Convertible bonds and convertible preferred stocks are fixed income
securities that generally retain the investment characteristics of fixed
income securities until they have been converted but also react to movements
in the underlying equity securities. The holder is entitled to receive the
fixed income of a bond or the dividend preference of a preferred stock until
the holder elects to exercise the conversion privilege. Usable bonds are
corporate bonds that can be used in whole or in part, customarily at full face
value, in lieu of cash to purchase the issuer's common stock. When owned as
part of a unit along with warrants, which are options to buy the common stock,
they function as convertible bonds, except that the warrants generally will
expire before the bond's maturity. Convertible securities are senior to equity
securities, and therefore have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than nonconvertible securities of similar
quality. The Funds will exchange or convert the convertible securities held in
its portfolio into shares of the underlying common stocks when, in the
Adviser's opinion, the investment characteristics of the underlying common
shares will assist the Funds in achieving their investment objectives.
Otherwise, the Funds will hold or trade the convertible securities. In
selecting convertible securities for the Funds, the Adviser evaluates the
investment characteristics of the convertible security as a fixed income
instrument, and the investment potential of the underlying equity security for
capital appreciation. In evaluating these matters with respect to a particular
convertible security, the Adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to other
investment alternatives, trends in the determinants of the issuer's profits,
and the issuer's management capability and practices. INCOME FUND will invest
in convertible securities rated, at the time of purchase, investment grade by
a NRSRO, or, if unrated, of comparable quality as determined by the Adviser.

CORPORATE DEBT OBLIGATIONS. The BOND FUND and INCOME FUND may invest in
corporate debt obligations, including bonds, notes and debentures, which may
have fixed or floating rates of interest and which
are rated, at the time of purchase, investment grade by a NRSRO, or, if
unrated, are of comparable quality as determined by the Adviser. If a
security's rating is reduced below the required minimum after a Fund has
purchased it, the Fund is not required to sell the security, but may consider
doing so. Bonds rated "BBB" by S&P or Fitch, or "Baa" by Moody's, are
considered medium-grade obligations and are regarded as having an adequate
capacity to pay interest and repay principal, and have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds.

FIXED RATE OBLIGATIONS. The BOND FUND and INCOME FUND may invest in fixed
rate securities, including fixed rate securities with short-term
characteristics. Fixed rate securities with short-term characteristics are
long-term debt obligations but are treated in the market as having short
maturities because call features of the securities may make them callable
within a short period of time. A fixed rate security with short-term
characteristics would include a fixed income security priced close to call
or redemption price or a fixed income security approaching maturity, where
the expectation of call or redemption is high.

Fixed rate securities exhibit more price volatility during times of rising
or falling interest rates than securities with floating rates of interest.
This is because floating rate securities, as described below, behave like
short-term instruments in that the rate of interest they pay is subject to
periodic adjustments based on a designated interest rate index. Fixed rate
securities pay a fixed rate of interest and are more sensitive to
fluctuating interest rates. In periods of rising interest rates the value
of a fixed rate security is likely to fall. Fixed rate securities with
short-term characteristics are not subject to the same price volatility as
fixed rate securities without such characteristics. Therefore, they behave
more like floating rate securities with respect to price volatility.

The market value of fixed-income obligations in the Funds can be expected
to fluctuate inversely to changes in prevailing interest rates. Investors
should 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.

FLOATING RATE OBLIGATIONS. The BOND FUND and INCOME FUND may invest in
floating rate debt obligations, including increasing rate securities.
Floating rate securities are generally offered an initial interest rate
which is at or above prevailing market rates. The interest rate paid on
these securities is then reset periodically (commonly every 90 days to an
increment over some predetermined interest rate index). Commonly utilized
indices include the three-month Treasury bill rate, the 180-day Treasury
bill rate, the one-month or three-month London Interbank Offered Rate
(LIBOR), the prime rate of a bank, the commercial paper rates, or the
longer-term rates on U.S. Treasury securities.

FIXED-INCOME SECURITIES. The market value of fixed-income obligations in the
TREASURY MONEY FUND, BOND FUND, and the INCOME FUND (and, consequently, in the
case of the BOND FUND and INCOME 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 and
INCOME 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 Ratings Group ("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.

MORTGAGE-BACKED SECURITIES. The BOND FUND and INCOME FUND may purchase
mortgage-backed securities that provide monthly payments of principal and
interest. These Funds will invest in mortgage-backed securities which are
rated at the time of purchase, investment grade by a nationally recognized
statistical ratings organization ("NRSRO"), or, if unrated, are of comparable
quality as determined by the Adviser. 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 and INCOME FUND, the maturity of mortgage-backed instruments will be
based on estimates of average life of the underlying mortgages. The Funds will
continuously monitor and revise, as appropriate, its calculations of the
estimated average life of mortgage-backed instruments. The relationship
between mortgage prepayments 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 prepayments tends to increase. During such
periods, the reinvestment of prepayment proceeds by the Funds 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 a 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 a real estate
mortgage investment conduit. 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
Funds will not purchase "residual" CMO interests, which normally exhibit the
greatest price volatility.

Risks of Mortgage-Backed Securities. Mortgage-backed and asset-backed
securities (described below) generally pay back principal and interest over
the life of the security. At the time a Fund reinvests the payments and any
unscheduled prepayments of principal received, it may receive a rate of
interest which is actually lower than the rate of interest paid on these
securities ("prepayment risks"). Mortgage-backed and asset-backed
securities are subject to higher prepayment risks than most other types of
debt instruments
with prepayment risks because the underlying mortgage loans or the
collateral supporting asset-backed securities may be prepaid without
penalty or premium. Prepayment risks on mortgage-backed securities tend to
increase during periods of declining mortgage interest rates because many
borrowers refinance their mortgages to take advantage of the more favorable
rates. Prepayments on mortgage-backed securities are also affected by other
factors, such as the frequency with which people sell their homes or elect
to make unscheduled payments on their mortgages. Although asset-backed
securities generally are less likely to experience substantial prepayments
than are mortgage-backed securities, certain factors that affect the rate
of prepayments on mortgage-backed securities also affect the rate of
prepayments on asset-backed securities.

While mortgage-backed securities generally entail less risk of a decline
during periods of rapidly rising interest rates, mortgage-backed securities
may also have less potential for capital appreciation than other similar
investments (e.g., investments with comparable maturities) because as
interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, mortgage-backed securities are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may
result in some loss of a holder's principal investment to the extent of the
premium paid. Conversely, if mortgage-backed securities are purchased at a
discount, both a scheduled payment of principal and an unscheduled
prepayment of principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.

ASSET-BACKED SECURITIES. The BOND FUND and INCOME FUND may invest in asset-
backed securities which have structural characteristics similar to mortgage-
backed securities but have underlying assets that are not mortgage loans or
interests in mortgage loans. Asset-backed securities are created by the
grouping of certain private loans, receivables, and other lender assets into
pools. These securities differ from other forms of debt securities, which
normally provide periodic payment of interest in fixed amounts with principal
paid at maturity or specified call dates. Asset-backed securities, however,
provide periodic payments which generally consist of both interest and
principal payments. The estimated life of an asset-backed security and the
average maturity of a portfolio including such assets vary with the prepayment
experience with respect to the underlying debt instruments. The credit
characteristics of asset-backed securities also differ in a number of respects
from those of traditional debt securities. The credit quality of most asset-
backed securities depends primarily upon the credit quality of the assets
underlying such securities, how well the entity issuing the securities is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit support provided to such
securities.

The BOND FUND and INCOME FUND may invest in asset-backed securities which
include, but are not limited to, interests in pools of receivables, such as
motor vehicle installment purchase obligations and credit card receivables.
These securities may be in the form of pass-through instruments or asset-
backed bonds. The securities are issued by non-governmental entities and carry
no direct or indirect government guarantee.

Risks of Asset-Backed Securities. Asset-backed securities present certain
risks that are not presented by mortgage-backed securities. Primarily,
these securities do not have the benefit of the same security interest in
the related collateral. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Most issuers of asset-backed securities backed by motor vehicle installment
purchase obligations permit the servicer of such receivables to retain
possession of the underlying obligations. If the servicer sells these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of
the related asset-backed securities. Furthermore, if a vehicle is
registered in one state and is then reregistered because the owner and
obligor moves to another state, such reregistration could defeat the
original security interest in the vehicle in certain cases. In addition,
because of the large number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the holders of
asset-backed securities backed by automobile receivables may not have a
proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.

ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through mortgage
securities representing interests in adjustable rather than fixed interest
rate mortgages. The ARMS in which INCOME FUND invests are issued by Ginnie
Mae, Federal National Mortgage Association ("Fannie Mae"), or the Federal Home
Loan Mortgage Association ("Freddie Mac"), and are actively traded. The
underlying mortgages which collateralize ARMS issued by Ginnie Mae are fully
guaranteed by the Federal Housing Administration or Veterans Administration,
while those collateralizing ARMS issued by Fannie Mae or Freddie Mac are
typically conventional residential mortgages conforming to strict underwriting
size and maturity constraints.

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.

INVESTMENT COMPANY SECURITIES. The Funds may invest in the securities of
other investment companies. The TREASURY MONEY FUND will invest only in money
market funds that seek to maintain a $1.00 net asset value per share and that
invest in short-term debt securities of the same or better quality as those in
which the TREASURY MONEY FUND may invest. The Funds will limit their
investment in other investment companies to not more than 3% of the total
outstanding voting stock of any investment company, will invest no more than
5% of its total assets in any one investment company, and will invest no more
than 10% of its total assets in investment companies in general. The Funds
(other than TREASURY MONEY FUND) will purchase securities of closed-end
investment companies only in open market transactions involving only customary
brokers' commissions. However, these limitations are not applicable if
securities are acquired in a merger, consolidation, reorganization, or
acquisition of assets. While it is a policy to waive advisory fees on Fund
assets invested in securities of other open-end investment companies, it
should be noted that investment companies incur certain expenses such as
custodian and transfer agency fees, and, therefore, any investment by the Fund
in shares of other investment companies would be subject to such duplicate
expenses.

ZERO COUPON BONDS. The BOND FUND and INCOME 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. To maintain its
qualification as a regulated investment company and avoid liability of federal
income taxes, the BOND FUND and INCOME FUND will be required to distribute
income accrued from zero coupon securities which it owns, and may have to sell
portfolio securities (perhaps at disadvantageous times) in order to generate
cash to satisfy these distribution requirements.

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, could
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.

TEMPORARY INVESTMENTS. As a temporary defensive measure or for liquidity
management, if the Adviser determines that market conditions warrant, the BOND
FUND, STOCK FUND and INCOME FUND may each invest without limitation in U.S.
government obligations, notes, zero coupon securities and repurchase
agreements collateralized by 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 collateralized by such obligations.

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. 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 in order to generate additional income.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Funds may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, the Fund may pay more/less than the
market value of the securities on the settlement date.

The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter in transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the sale
of such commitments.

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.

DERIVATIVE CONTRACTS AND SECURITIES. The term "derivative" has traditionally
been applied to certain contracts (including futures, forward, option and swap
contracts) that "derive" their value from changes in the value of an
underlying security, currency, commodity or index. Certain types of securities
that incorporate the performance characteristics of these contracts are also
referred to as "derivatives." The term has also been applied to securities
"derived" from the cash flows from underlying securities, mortgages or other
obligations.

Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response
of certain derivative contracts and securities to market changes may differ
from traditional investments, such as stock and bonds, derivatives do not
necessarily present greater market risks than traditional investments. The
Funds will only use derivative contracts for the purposes disclosed in the
applicable prospectus sections above. To the extent that the Funds invests in
securities that could be characterized as derivatives, such as mortgage-backed
securities and asset-backed securities, it will only do so in a manner
consistent with its investment objective, policies and limitations.

PORTFOLIO TURNOVER

The Company cannot accurately predict the turnover rate for any Fund, but
expects that the annual turnover rate may, but generally will not exceed 75%
for either the BOND FUND or the STOCK FUND and 100% for INCOME 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 an 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, STOCK FUND'S or
INCOME 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 Fund shares. 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
1-800-843-8618. 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. 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. Additional account
applications may be obtained by calling the Fund at 1-800-843-8618. 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, STOCK FUND AND INCOME FUND

Shares of the BOND FUND, STOCK FUND and the INCOME 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 third 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 Funds at any
time.

SALES CHARGE

The Public Offering Price of shares of the BOND FUND, STOCK FUND or the
INCOME 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 CHARGE
SALES CHARGE AS % OF DEALER ALLOWANCE
BOND FUND AND AS % OF NET AMOUNT AS % OF
INCOME FUND OFFERING PRICE INVESTED OFFERING PRICE
------------- --------------- ------------ ----------------
<S> <C> <C> <C>
$0 but less than $100,000.... 3.50% 3.63% 3.00%
$100,000 but less than
$250,000..................... 3.00% 3.09% 2.50%
$250,000 but less than
$500,000..................... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000................... 2.00% 2.04% 1.50%
$1,000,000 or more........... 0%* 0% 0%
<CAPTION>
SALES CHARGE
SALES CHARGE AS % OF DEALER ALLOWANCE
AS % OF NET AMOUNT AS % OF
STOCK FUND OFFERING PRICE INVESTED OFFERING PRICE
---------- --------------- ------------ ----------------
<S> <C> <C> <C>
$0 but less than $50,000..... 4.50% 4.71% 4.00%
$50,000 but less than
$100,000..................... 4.00% 4.17% 3.50%
$100,000 but less than
$250,000..................... 3.25% 3.36% 2.75%
$250,000 but less than
$500,000..................... 2.75% 2.83% 2.25%
$500,000 but less than
$1,000,000................... 1.75% 1.78% 1.25%
$1,000,000 or more........... 0%* 0.00% 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 FUND, STOCK FUND or
INCOME FUND 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, STOCK FUND or INCOME FUND.

REDUCED SALES CHARGES

The sales charge on purchases of the BOND FUND, STOCK FUND and INCOME 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 BOND FUND, STOCK FUND and INCOME 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. If a shareholder intends to purchase at least $100,000 of
shares in the BOND FUND over the next 13 months, the sales charge may be
reduced by signing a Letter of Intent to that effect. This Letter of Intent
includes a provision for a sales charge adjustment depending on the amount
actually purchased within the 13-month period and a provision for the
custodian to hold 3.50% of the total amount intended to be purchased in escrow
(in shares) until such purchase is completed.

If a shareholder intends to purchase at least $50,000 shares in the STOCK
FUND over the next 13 months, the sales charge may be reduced by signing a
Letter of Intent to that effect. This Letter of Intent includes a provision
for a sales charge adjustment depending on the amount actually purchased
within a 13-month period and a provision for the custodian to hold up to 4.50%
of the total amount intended to be purchased in escrow (in shares) until such
purchase is completed.

The shares held in escrow will be released at the fulfillment of the Letter
of Intent or at the end of the 13-month period, whichever comes first. If the
amount specified in the Letter of Intent is not purchased, an appropriate
number of escrowed shares may be redeemed in order to realize the difference
in the sales charge.

This Letter of Intent will not obligate the shareholder to purchase shares,
but if the shareholder does, each purchase during the period will be at the
sales charge applicable to the total amount intended to be purchased. At the
time a Letter of Intent is established, current balances in accounts in any
Fund, excluding money market accounts, will be aggregated to provide a
purchase credit towards fulfillment of the Letter of Intent. Prior trade
prices will not be adjusted.

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, STOCK FUND and INCOME 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.); (3) investors who purchase shares of the BOND FUND, STOCK
FUND or INCOME FUND through a 401(k) plan or a 403(b) plan which by its terms
permits purchases of shares; (4) employees who purchase Fund shares through a
payroll deduction plan sponsored by their employers.

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 in certain funds which funds are
distributed by Federated Securities Corp. (the "Federated Funds"). The
Federated funds with net asset value exchange privileges with the Company are:

.Federated International Income Fund;

.Federated International Equity Fund;

.Federated Equity Income Fund, Inc.;

.Federated High Income Bond Fund, Inc.;

.Federated Municipal Securities Fund, Inc.;

.Federated Utility Fund, Inc.; and

.Tax-Free Instruments Trust.

EXCHANGING SHARES. Shareholders who have purchased shares of the BOND FUND,
STOCK FUND or INCOME 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 one of
the Fund's listed above without paying an additional exchange or sales charge
except that, in the case of the BOND FUND and INCOME FUND, this privilege does
not apply to exchanges into the STOCK FUND until an investor has owned shares
in the BOND FUND or INCOME FUND for 90 days. The 90-day holding period does
not apply to exchanges in which the investor obtained BOND FUND or INCOME 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 Federated
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
Federated 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, STOCK FUND and INCOME 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.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by 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 associations, 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, STOCK FUND
and INCOME 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 with 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. Dividends from net investment income are declared and
paid quarterly by the STOCK FUND. Dividends from net investment income of the
BOND FUND and INCOME FUND are declared and paid monthly. All dividends are
paid in cash. Each Fund's net realized capital gains (including net short-term
capital gains) are distributed at least annually. 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 Funds do not expect to
realize net long-term capital gains.

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

On Monday through Friday, the net asset value of the BOND FUND, STOCK FUND
and INCOME FUND is determined once daily at the close of trading on the New
York Stock Exchange, usually 4:00 p.m. (Eastern time), and the net asset value
of the TREASURY MONEY FUND is determined twice daily at 12:00 noon and 4:00
p.m. (Eastern time), except on: (i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no shares are tendered
for redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The
Funds' 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, STOCK FUND and INCOME 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
May 30, 1996, the Adviser had approximately $7.2 billion in assets under
management. The Adviser has served as investment adviser since the Company's
inception on March 4, 1992.

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 INCOME 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.

Effective May 1, 1995, all investment decisions for the STOCK FUND and
INCOME FUND are made by an investment group. 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.

The Company, the Adviser and the Distributor have adopted strict codes of
ethics governing the conduct of all employees who manage the Funds and their
portfolio securities. These codes recognize that such persons owe a fiduciary
duty to the Funds' shareholders and must place the interests of shareholders
ahead of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or being
considered for purchase or sale, by the Fund; prohibit purchasing securities
in initial public offerings; and prohibit taking profits on securities held
for less than sixty days (Company's code only). The Adviser's code permits
access persons to purchase and sell securities without preclearance provided
that such securities are so widely traded that they are only remotely
potentially harmful to the Funds and such transactions are unlikely to affect
the market for such security. Violations of the codes are subject to review by
the Board of Trustees, and could result in severe penalties.

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% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$50,000 for the TREASURY MONEY FUND, STOCK FUND and BOND FUND. The
administrative fee received during any fiscal year with respect to INCOME FUND
shall be at least $100,000. 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.

Federated Shareholder Services Company, is transfer agent and dividend
disbursing agent for the Company. It also provides certain accounting and
recordkeeping services with respect to the 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 may offer certain items of nominal value from time
to time to any shareholder or investor in connection with the sale of Fund
shares. The Distributor, which is a subsidiary of Federated Investors, has the
same address as the administrator and transfer agent.

DISTRIBUTION PLAN (INCOME FUND ONLY). Under a distribution plan (the "Plan")
adopted in accordance with Securities and Exchange Commission ("SEC") Rule
12b-1 under the Investment Company Act of 1940, INCOME FUND will pay to the
Distributor an amount computed at an annual rate of up to 0.25% of the average
daily net asset value of the shares to finance any activity which is
principally intended to result in the sale of shares subject to the Plan. The
Distributor may select Financial Institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide sales support services as agent for their clients or customers.
Certain trust clients of the Company, including ERISA plans, will not be
affected by the Plan because the Plan will not be activated unless and until a
second, "Trust" class of shares of the INCOME FUND (which would not have a
Rule 12b-1 plan) is created and such trust clients' investments in the INCOME
FUND are converted to such Trust class.

INCOME FUND'S plan is a compensation type plan. As such, INCOME FUND makes
no payments to the Distributor except as described above. Therefore, INCOME
FUND does not pay for unreimbursed expenses of the Distributor, including
amounts expended by the Distributor in excess of amounts received by it from
INCOME FUND, interest, carrying or other financing charges in connection with
excess amounts expended, or the Distributor's overhead expenses. However, the
Distributor may be able to recover such amount or may earn a profit from
future payments made by INCOME FUND under the Plan.

The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings association) from being an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed
to prohibit depository institutions from acting in the capacities described
above or should Congress relax current restrictions on depository
institutions, the Company's Trustees will consider appropriate changes in the
services.

State securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register ads dealers pursuant to certain states' laws.

ADMINISTRATIVE ARRANGEMENTS
With respect to each Fund, the Distributor may select brokers, dealers and
administrators (including depository or other institutions such as commercial
banks and savings associations) to provide distribution and/or administrative
services for which they will receive fees from the Distributor based upon
shares owned by their
clients or customers. These administrative services include distributing
prospectuses and other information, providing account assistance, and
communicating or facilitating purchases and redemptions of the Funds' shares.
The fees are calculated as a percentage of the average aggregate net asset
value of shareholder accounts held during the period for which the brokers,
dealers, and administrators provide services. Any fees paid for these services
by the Distributor will be reimbursed by the Adviser and not the Funds.

BROKERAGE TRANSACTIONS

With respect to the TREASURY MONEY FUND, BOND FUND and INCOME FUND when
selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Adviser will generally use those
who are recognized dealers in specific portfolio instruments, except when a
better price and execution of the order can be obtained elsewhere. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to guidelines established by the Trustees. The Adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Funds or to the Adviser and may include:
advice as to the advisability of investing in securities; security analysis
and reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided by
brokers and dealers may be used by the Adviser or its affiliates in advising
the Funds and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses. The Adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer brokerage
and research services to execute securities transactions. They determine in
good faith that commissions charged by such persons are reasonable in
relationship to the value of the brokerage and research services provided.

Although investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Funds may make may also be made by those other accounts. When the Funds
and one or more other accounts managed by the Adviser are prepared to invest
in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Funds or the size of the position obtained
or disposed of by the Funds. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Funds.

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments on behalf of the STOCK FUND, the Adviser looks for
prompt execution of the order at a favorable price. In working with dealers,
the Adviser will generally use those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the order
can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling shares of the Fund and other funds distributed by Federated
Securities Corp. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Board of Trustees.

TAXES

Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, (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, STOCK FUND and INCOME 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 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, STOCK FUND or INCOME 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, STOCK FUND or INCOME 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. States that impose an income tax
have, by statute, judicial decision or administrative action, 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 should 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 MONEY FUND,
the BOND FUND, the STOCK FUND and the INCOME 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 June 3, 1996, Lynspen & Company of Birmingham, Alabama,
acting in various capacities for numerous accounts, was the owner of record of
332,154,585 shares (96.64%) of the TREASURY MONEY FUND; Lynspen & Company of
Birmingham, Alabama, acting in various capacities for numerous accounts, was
the owner of record of 8,293,273 shares (98.83%) of the BOND FUND; Lynspen &
Company of Birmingham, Alabama, acting in various capacities for numerous
accounts, was the owner of record of 13,771,657 shares (96.74%) of the STOCK
FUND; Lynspen & Company of Birmingham, Alabama, acting in various capacities
for numerous accounts, was the owner of record of 4,511,434 shares (99.96%) of
the INCOME 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, STOCK FUND and INCOME 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, STOCK FUND and INCOME 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 and INCOME 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
VULCANFUNDS
[LOGO] Account Application
- --------------------------------------------------------------------------------

Please make a photocopy of this application for your records and mail the
original to:

Mutual Funds Department SouthTrust Securities, Inc. 112 North 20th
Street Birmingham, Alabama 35290 1-800-843-8618
[ ] 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

Occupation Joint Tenant's Occupation
-------------------------- ----------

Employed By Joint Tenant Employed By
------------------------- ------------

Business Address Business Address
==================== ====================

[ ] Please check here if you are associated with or employed by a member of
-
the NASD.

Citizen (Check One): Citizen (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 the Fund is $1,000.

TREASURY OBLIGATIONS MONEY MARKET FUND $
----------------
STOCK FUND $
----------------
BOND FUND $
----------------
INCOME 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 bank
- -
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
--------------------------- --------------------------------

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 any applicable IRS
backup withholding 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. THE UNDERSIGNED
UNDERSTANDS THAT SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF
SOUTHTRUST BANK OF ALABAMA, N.A. (NOR ANY OF ITS AFFILIATES), ARE NOT
ENDORSED OR GUARANTEED BY THE BANK, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENT AGENCY. THE UNDERSIGNED ALSO UNDERSTANDS THAT INVESTMENT
IN MUTUAL FUNDS INVOLVES RISK (INCLUDING POSSIBLE LOSS OF PRINCIPAL), THAT
THE INVESTMENT IS SUBJECT TO RISK WHICH MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND THAT WHEN THE INVESTMENT IS SOLD, SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. It is further agreed that
neither the Funds, the transfer agent, Federated Services Company, nor any
of their affiliates will be responsible for the authenticity of any
instructions given and shall be fully indemnified as to, and held harmless
from, any and all direct and indirect liabilities, losses, or costs
resulting from acting upon such instructions. (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)

A separate application must be completed if you are interested in applying
for a letter of intent.

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 1-800-843-8618.

12. DEALER INFORMATION

For dealer use only.

We authorize the Mutual Funds Dept. of SouthTrust Securities, Inc. to act
as our agent for this account and agree to notify the Mutual Funds Dept.
of SouthTrust Securities, 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.

Federated Securities Corp., Distributor

No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the CompanyOs Statement
of Additional Information incorporated herein by reference, in connection with
the offering made by this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or its 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 Policies
of the Fund 5
Investment Activities 6
How to Purchase, Exchange and
Redeem Shares 15
Dividends and Distributions 21
Pricing of Shares 22
Management of the Funds 22
Taxes 25
Description of Shares 27
Total Returns and Yields 27

[ARTED LOGO]

SOUTHTRUST
Bank
of Alabama, N.A.

3052010A (6/96)

[ARTED LOGO]

SOUTHTRUST
VULCAN
FUNDS

Treasury Obligations
Money Market Fund
Bond Fund
Stock Fund
Income Fund

Prospectus
June 30, 1996
TREASURY MONEY FUND
BOND FUND
STOCK FUND
INCOME FUND
(INVESTMENT PORTFOLIOS OF SOUTHTRUST VULCAN FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to four series of shares representing interests
in four investment portfolios (the "Funds") of SouthTrust Vulcan Funds
(the "Company"): the Treasury Obligations Money Market Fund (the
``Treasury Money Fund'), the Bond Fund, the Stock Fund and the Income
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, 1996. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-843-8618. This Statement of Additional
Information dated June 30, 1996, although not in itself a prospectus,
is incorporated by reference in its entirety into the Company's
prospectus.

TABLE OF CONTENTS
PAGE
General...............................................................
......................................................................
.........................................1
Additional Information on Fund
Investments...........................................................
..................................................1
Additional Investment
Limitations...........................................................
....................................................................4
Trustees and
Officers..............................................................
......................................................................
...................6
Investment Advisory and Other Service
Arrangements..........................................................
...................................9
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...........................................................
......................................................................
.17
Miscellaneous.........................................................
......................................................................
....................................17
Appendix
A.....................................................................
......................................................................
...........................A-1

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 four 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 MONEY 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, (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 MONEY FUND may have
stated maturities in excess of a Fund's maturity limitation if a 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
MONEY 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 MONEY FUND)
limitation on illiquid investments when a Fund may not demand payment of
the principal amount within seven days absent a reliable trading market.

MONEY MARKET INSTRUMENTS. The Funds (other than TREASURY MONEY
FUND) may invest in certain money market instruments such as:
o instruments of domestic and foreign banks and savings associations
if they have capital, surplus, and undivided profits of over
$100,000,000 or if the principal amount of the instrument is
federally insured;

o commercial paper rated, at the time of purchase, not less than A-1
by Standard & Poor's Ratings Group (`S&P''), Prime-1 by Moody's
Investor Services, Inc. (`Moody's'') or F-1 by Fitch Investor
Service, Inc. (`Fitch''), and unrated commercial paper that is
deemed by the Fund's investment adviser to be of comparable quality
to securities having such ratings;
o time and savings deposits whose accounts are insured by the Bank
Insurance Fund (`BIF'') which is administered by the Federal Deposit
Insurance Corporation (`FDIC'') or in institutions whose accounts
are insured by the Savings Association Insurance Fund (`SAIF''),
which is also administered by the FDIC, including certificates of
deposit issued by and other time deposits in foreign branches of
BIF-insured banks; or
o bankers' acceptances.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. These
transactions are made to secure what is considered to be an advantageous
price or yield for the Funds. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of the
Funds sufficient to make payment for the securities to be purchased are
segregated on the Funds' records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Funds do not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more than 25% of the total value of its assets.
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 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 MONEY 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 banking 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 and INCOME 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 Funds 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.

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 S&P, Moody's, 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 MONEY 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 MONEY 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 MONEY 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.
RESTRICTED SECURITIES. 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 MONEY 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 MONEY
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 or, in
the case of the INCOME FUND, municipal leases; and, in the case of the
STOCK FUND invest more than 5% of its total assets in equity securities
of issuers which are not readily marketable. The INCOME FUND will not
invest in commodities futures contracts; nor invest more than 5% of its
net assets in warrants. No more than 2% of INCOME FUND's net assets, to
be included within the overall 5% limit on investments in warrants may be
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange. 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, birthdates, and principal occupations during the past
five years, are:

William O. Vann *
Box 757
Birmingham, AL 35201
Birthdate: January 28, 1942
Trustee and Chairman of the Board
President and Chief Executive Officer, Young & Vann Supply Co. (since
1987); Partner, B &B Investments; Trustee and Past Chairman, The
Childrens' Hospital of Alabama.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder Services Company;
Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds distributed by Federated
Securities Corp.

C. Christine Thomson
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: September 1, 1957
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of other funds distributed by Federated Securities
Corp.

Peter J. Germain
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: September 3, 1959
Secretary
Senior Corporate Counsel, Federated Investors

Thomas L. Merrill, Sr. *
210 Inverness Center Dr.
P.O. Box 10264
Birmingham, AL 35242
Birthdate: October 27, 1925
Trustee
Vice Chairman and Director, Altec Industries, Inc.; Director, Walker
Companies; formerly, President and Chief Executive Officer, Altec
Industries, Inc. (1990-1993) and Chairman, Vantage Consulting (until
1989).

Charles G. Brown, III
P.O. Box 170100
Birmingham, AL 35217
Birthdate: November 27, 1953
Trustee
President, Tubular Products Company (since 1985); Managing Partner, Red
Hollow Partnership.

Russell W. Chambliss
Mason Corporation
P.O. Box 59226
Birmingham, AL 35259
Birthdate: December 26, 1951
Trustee
President (since 1989), Executive Vice President (1988), and Vice
President of Sales and Marketing (1984-1988), Mason Corporation.

Thomas Grady
P.O. Box 2
Kannapolis, North Carolina 28082-0002
Birthdate: July 25, 1941
Trustee
Partner of the law firm of Williams, Boger, Grady, Davis and Tuttle, P.A.
, Chairman of the Board of Pfieffer University, Member of Cannon
Foundation.

* This Trustee is deemed to be an "interested person" of the Company
as defined in the Investment Company Act of 1940.
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.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
COMPANY + COMPANY*#

WILLIAM O. VANN, $3,000
Trustee and Chairman of

The Board

THOMAS L. MERRILL, SR. $7,000
Trustee
CHARLES G. BROWN, III $7,000
Trustee
RUSSELL W. CHAMBLISS $7,000
Trustee
D. RILEY STUART $5,500
Trustee (Resigned)+
THOMAS GRADY+
Trustee $1,500

* Information is furnished for the fiscal year ended April 30, 1996. The
Company is the only investment company in the Fund Complex.
# The aggregate compensation is provided for the Company which is
comprised of four portfolios.
+ D. Riley Stuart resigned from his Trustee position March 1, 1996.
Thomas Grady was elected as a Trustee effective March 6, 1996.
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
fiscal years ended April 30, 1996, 1995 and 1994, the Adviser earned
advisory fees totaling $1,546,225, $1,274,354, and $1,258,348,
respectively, for the TREASURY MONEY FUND, $491,657, $341,359, and
$177,577, respectively, for the BOND FUND, and $1,257,372, $643,017, and
$268,510, respectively, for the STOCK FUND. For the same periods, the
Adviser waived advisory fees totaling $618,490, $676,587, and $755,008,
respectively, for the TREASURY MONEY FUND, $40,971, $144,939, and
$139,101, respectively, for the BOND FUND and $124,311, $315,704, and
$221,969, respectively, for the STOCK FUND. For the period from January
10, 1996 (date of initial public investment) to April 30, 1996, the
Adviser earned advisory fees for INCOME FUND of $122,936, $10,245 of
which was voluntarily waived.
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.

OTHER SERVICES
FUND ADMINISTRATION. Federated Administrative Services (the
"Administrator"), a subsidiary of Federated Investors, provides
administrative personnel and services to the Company for a fee as
described in the prospectus. For the fiscal years ended April 30, 1996,
1995 and 1994, the Administrator earned the following fees: $408,456,
$359,519, and $364,908, respectively, for the TREASURY MONEY FUND, $
222,204, $118,687, and $51,805, respectively, for the STOCK FUND, and
$108,910, $80,264, and $50,000, respectively, for the BOND FUND. For the
fiscal years ended April 30, 1996, 1995 and 1994, the Administrator
waived administrative fees totaling $57,426, $76,476 and $71,756,
respectively, for the TREASURY MONEY FUND, $52,868, $20,240 and $25,591,
respectively, for the STOCK FUND, and $27,289, $12,242 and $32,836,
respectively, for the BOND FUND. For the period from January 10, 1996
(date of initial public investment) to April 30, 1996, the Administrator
earned fees of $30,501 for INCOME 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. State Street Bank and Trust Company (the
"Custodian") 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.
TRANSFER AGENT. Federated Services Company (the "Transfer
Agent"),through its registered transfer agent, Federated Shareholder
Services Company, maintains all necessary shareholder records. For its
services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders. For the fiscal
years ended April 30, 1996, 1995 and 1994, the Transfer Agent earned the
following fees: $25,921, $29,715, and $9,968, respectively, for the
TREASURY MONEY FUND, $29,503, $35,669, and $15,809, respectively, for the
STOCK FUND, and $30,525, $28,196, and $13,857, respectively, for the BOND
FUND. For the period from January 10, 1996 (date of initial public
investment) to April 30, 1996, the Transfer Agent earned $2,288 for the
INCOME FUND.
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 fiscal years ended April 30, 1996, 1995 and 1994, the STOCK FUND
paid $238,955, $144,957, and $59,787, 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 MONEY 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 MONEY FUND or one year or less for the
BOND FUND, STOCK FUND and INCOME FUND) by the monthly average value of
the securities held by the Fund during the year. The BOND FUND, STOCK
FUND and INCOME 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 fiscal years ended
April 30, 1996 and 1995, the portfolio turnover rate for the BOND FUND
was 28% and 48%, respectively, and for the STOCK FUND were 39% and 57%,
respectively. For the period from January 10, 1996 (date of initial
public investment) to April 30, 1996, the portfolio turnover rate for the
INCOME FUND was 61%.
With respect to the STOCK FUND the Adviser may select brokers
and dealers who offer brokerage and research services. These services may
be furnished directly to the Fund or to the Adviser and may include:
advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the adviser or
its affiliates in advising the Fund and other accounts. To the extent
that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith

that commissions charged by such persons are reasonable in relationship
to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made
independently from those of the other accounts managed by the Adviser,
investments of the type the Fund may make may also be made by those other
accounts. When the Fund and one or more other accounts managed by the
Adviser are prepared to invest in, or desire to dispose of, the same
security, available investments or opportunities for sales will be
allocated in a manner believed by the Adviser to be equitable to each. In
some cases, this procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained or disposed of
by the Fund. In other cases, however, it is believed that coordination
and the ability to participate in volume transactions will be to the
benefit of the Fund.
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 charge 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 MONEY FUND. The value of the portfolio securities of
the TREASURY MONEY 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 MONEY 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 MONEY 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 MONEY FUND. The TREASURY MONEY 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 MONEY FUND for the seven-day period ended April 30, 1996
was 4.68%. The effective yield for the TREASURY MONEY FUND for the same
period was 4.79%.
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, STOCK FUND AND INCOME FUND
For the BOND FUND, STOCK FUND and INCOME 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:
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 yield of the
BOND FUND for the 30-day period ended April 30, 1996 was 5.61%, and the
standard yield of the STOCK FUND for the same period was 1.55%. The
standard yield of the INCOME FUND for the 30-day period ended April
30,1996 was 5.17%.
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:

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:
Aggregate Total Return = (ERV) - 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 fiscal year ended April 30, 1996 and average annual total returns
for the period from May 8, 1992 (date of initial public investment) to
April 30, 1996, for the BOND FUND were 6.78% and 6.42%, respectively, and
the STOCK FUND were 31.51% and 12.55%, and Treasury Money Market Fund
were 5.26% and 3.93%, respectively. The total return figures above do not
reflect the deduction of the maximum front-end sales charges which may be
assessed on purchases of the BOND FUND and STOCK FUND, respectively. The

aggregate total return after the deduction of the applicable front-end
sales charges for the same period for the BOND FUND were 3.05% and 5.48%,
and for the STOCK FUND were 26.88% and 11.55%, respectively.
Cumulative total return reflects the INCOME FUND's total
performance over a specific period of time. The cumulative total return
for the INCOME FUND for the period from January 10, 1996 (date of initial
public investment) to April 30, 1996 was (0.93%). This total return
figure does not reflect the deduction of the maximum front-end sales
charge which may be assessed on purchases of the INCOME FUND. The
cumulative total return after the deduction of the applicable front-end
sales charge for the same period for the INCOME FUND was (4.37%)% These
total return figures are representative of only 4 months of activity
since the date of initial public investment.
In reports or other communications to shareholders or in
advertising material, the BOND FUND, STOCK FUND or INCOME 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 has elected to be taxed separately as a
regulated investment company under Part I of Subchapter M of the Internal
Revenue Code of 1986, (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. For purposes of
its policies and limitations, the Fund considers certificates of deposit
and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be `cash items''.
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, STOCK FUND or INCOME 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 four series of shares
representing interests in the TREASURY MONEY FUND, the BOND FUND, the
STOCK FUND and the INCOME 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
Arthur Andersen LLP, are the independent public accountants for
the Funds.
MISCELLANEOUS
COUNSEL. The law firm of Bell, Boyd & Lloyd, Chicago, Illinois,
serves as counsel to the Trustees.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. As of June
3, 1996, 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 MONEY 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:
PERCENT
OF
TOTAL
SHARES
NAME OF FUND NAME AND ADDRESS
OUTSTANDING

TREASURY OBLIGATIONS Lynspen & Company 96.64%
MONEY MARKET FUND P.O. Box 2554
Birmingham, Alabama 35290
BOND FUND Lynspen & Company 98.83%
P.O. Box 2554
Birmingham, Alabama 35290
STOCK FUND Lynspen & Company 96.74%
P.O. Box 2554
Birmingham, Alabama 35290
INCOME FUND Lynspen & Company
P.O. Box 2554
Birmingham, Alabama 35290 99.96%

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 nonbank 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.
FINANCIAL STATEMENTS. The financial statements for the fiscal
year ended April 30, 1996, are incorporated herein by reference to the
Annual Report of the Fund dated April 30, 1996 (File Nos. 33-46190 and
811-6580). A copy of the report may be obtained without charge by
contacting the Fund.

APPENDIX A
DESCRIPTION OF BOND RATINGS
The following summarizes the highest four ratings used by Standard &
Poor's Ratings Group ("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.
BB--Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The BB rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB rating.

B--Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal payments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied BB or BBB rating.
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.
Ba--Bonds which are Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
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 short-term
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.

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