LOGO
TREASURY OBLIGATIONS
MONEY MARKET FUND
BOND FUND
STOCK FUND
INCOME FUND
SEMI-ANNUAL
REPORT
OCTOBER 31, 1997
<PAGE>
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report of the SouthTrust Vulcan Funds
for the six-month period ended October 31, 1997. This report begins with a
discussion by fund portfolio managers about the economy, the financial markets,
and fund strategies over the reporting period. Next, you'll find a complete list
of investments and financial statements for the funds.
The following highlights summarize the performance of each SouthTrust Vulcan
fund over the six-month reporting period.
SOUTHTRUST VULCAN TREASURY OBLIGATIONS MONEY MARKET FUND
This portfolio of U.S. Treasury money market securities paid a total of $0.03
per share in dividends over the reporting period. Total net assets in the fund
reached $479 million at the end of the reporting period.*
SOUTHTRUST VULCAN INCOME FUND
This fund's diversified portfolio of income-producing investments paid dividends
totaling $0.28 per share. In an improved bond market environment, the fund's net
asset value increased from $9.68 on the first day of the reporting period to
$9.83 on the last day of the reporting period. Through dividends and net asset
value increase, the fund achieved a total return of 4.52% (0.87% adjusted for
the fund's sales charge).** Total net assets in the fund reached $40 million at
the end of the reporting period.
SOUTHTRUST VULCAN BOND FUND
This fund's diversified portfolio of corporate and government bonds paid
dividends totaling $0.30 per share. Amid an improved bond market environment,
the fund's net asset value rose from $9.95 to $10.38. As a result, the fund
produced a strong total return of 7.41% (3.66% adjusted for the fund's sales
charge).** Total net assets in the fund surpassed the $100 million milestone at
the end of the reporting period.
SOUTHTRUST VULCAN STOCK FUND
Amid a continued strong yet highly volatile stock market environment, the fund's
diversified portfolio of high-quality stocks delivered a total return of 13.29%
(8.22% adjusted for the fund's sales charge) during the six-month reporting
period.** Contributing to the total return was $0.08 in income and a $15.81 to
$17.83 increase in net asset value. Total net assets continued to grow, reaching
$327 million at the end of the reporting period.
Thank you for putting your money to work in one or more key financial markets
through the SouthTrust Vulcan Funds. We look forward to keeping you up-to-date
on your progress.
Sincerely,
LOGO
Edward C. Gonzales
President
December 15, 1997
* Although money market funds seek to maintain a stable net asset value of
$1.00, there is no assurance that they will be able to do so. An investment
in this fund is neither insured nor guaranteed by the U.S. government.
** Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
We are proud to report that all of your SouthTrust Vulcan Funds provided
competitive returns during the previous six month and one-year reporting periods
ended October 31, 1997. The SouthTrust Vulcan Stock Fund provided a total return
of 13.3% over the past six months and 27.1% over the past year. Our high quality
short-term taxable bond fund, the SouthTrust Vulcan Income Fund, provided
returns of 4.52% and 5.83% over the past six and 12 month periods, respectively.
Our longer-maturity high quality taxable bond fund, the SouthTrust Vulcan Bond
Fund, provided returns of 7.41% and 8.64% over the six and 12 month periods,
respectively*+. Finally, our U.S. Treasury money market fund, the SouthTrust
Vulcan Treasury Obligations Money Market Fund, provided a yield of 5.03% over
the past year.**
We are experiencing what is arguably the greatest bull market of all time.
Fifteen year returns from stocks are easily the highest ever experienced. The
economic environment is ideal and gives no indication of changing anytime soon.
The term "new paradigm" or "paradigm shift" has become common in describing the
current cycle. The wealth of investment information available to the public
through television, periodicals, and the internet is unparalleled in history.
Access to top managers through mutual funds has never been easier. New types of
IRAs and the proliferation of 401(k)s have created a constant flow of money into
the market. The strong flow of money, which has mainly gone into stocks, has
repeatedly set all-time records. Unfortunately, many of the records raise
questions about the sustainability of the powerful returns of recent years. Most
stock market valuation measures, such as price-to-sales, price-to-cash flow, and
dividend yields, have met or exceeded all-time record levels. This comes at a
time when corporate profit margins are at record levels and profit margins are
under pressure in many businesses. While it is contrary to the current euphoria,
we have become increasingly cautious about risks in the stock market. At the
same time, we believe fundamentals favor bonds over stocks, especially for those
interested in an investment that should have much lower volatility than stocks.
This said, we do not believe any investor should try to time the market. A
diversified, balanced portfolio targeting an asset allocation designed to meet
an individual's goals and objectives is always the prudent course of action.
Interestingly, the fact that we have had success finding attractively valued
stocks for your Vulcan Stock Fund probably supports our view that market
outlooks should not be allowed to drive an investment portfolio. Our positive
outlook for bonds, if correct, should also work against our caution and help
boost stock prices.
* Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+ The Stock Fund's six-month and one year annualized total returns, adjusted
for the fund's sales charge, were 8.22% and 21.35%, respectively. The
five-year and since inception (May 8, 1992) annualized total returns for the
Stock Fund were 15.99% (14.93% adjusted for the fund's sales charge) and
15.23% (14.27% adjusted for the fund's sales charge), respectively. The
Income Fund's six-month and one year annualized total returns, adjusted for
the fund's sales charge, were 0.87% and 2.10%, respectively. The fund's
annualized total return since inception (January 10, 1996) was 4.67% (2.65%
adjusted for the fund's sales charge). The Bond Fund's six-month and one year
annualized total returns, adjusted for the fund's sales charge, were 3.66%
and 4.82%, respectively. The five-year and since inception (May 8, 1992)
annualized total returns for the Bond Fund were 6.58% (5.82% adjusted for the
fund's sales charge) and 7.13% (6.44% adjusted for the fund's sales charge),
respectively.
** 5.06% was the seven-day net yield as of October 31, 1997. Performance quoted
represents past performance and is not indicative of future results. Yield
will vary.
<PAGE>
- --------------------------------------------------------------------------------
Given the benefit of perfect hindsight, it is easy to understand why 1997 has so
far turned out to be such a great year for stocks and a respectable one for
bonds. At the beginning of the year, the consensus forecast of top economists
called for real Gross Domestic Product growth of 2.2% in 1997. The "Blue Chip
Economic Indicators" forecast now expects the U.S. economy to expand at a 3.6%
rate during 1997, a growth rate 60% stronger than the original estimate.
Meanwhile, strong economic growth is often thought to portend higher inflation,
yet the same group of economists that forecast 2.9% inflation at the beginning
of the year, now calls for 2.4% inflation this year. Even the current 2.4%
forecast is above the 2.2% inflation rate of the past 12 months. There is no
question that strong economic growth with low inflation has created an ideal
environment for investors. Further, we believe there is nothing to indicate that
this environment should change anytime soon.
ECONOMIC PERSPECTIVE
The U.S. economy has three principal drivers: government spending, business
spending, and consumer spending. With Washington under pressure to come to grips
with the budget deficit, government spending has not been a factor driving
economic growth. The economic expansion is already over six years old, which is
considerably longer than the average economic cycle, and growth in business
spending peaked some time ago. Although growth in business spending has slowed,
investments in technology have kept the absolute number strong. But, the real
driver to the economy has been the consumer. Solid gains in personal income, low
unemployment, and significant wealth creation from the long bull market in
stocks have resulted in record high consumer confidence and much stronger-than-
expected consumer spending. The real surprise has been that the much anticipated
increase in personal savings due to the aging baby boomers has yet to occur.
Saving rates are currently running at the lowest level in a decade.
Given the stronger-than-expected economy this year, one has to question why we
have not seen inflationary pressures develop. Perhaps the best explanation can
be found in the recent problems in Southeast Asia. There appears to be an excess
supply of raw materials and manufacturing capacity globally, which has made it
very difficult to raise prices in most industries. Despite the absence of
pricing flexibility, corporations in many industries have been able to keep
earnings growth high with improved productivity and financial
reengineering/restructuring. Thus, we have had low inflation and strong earnings
growth, which has created an ideal environment for stocks.
The challenge for investors is to figure out what happens next. Intuitively, the
economy should slow. The real driving force behind economic growth is the
consumer who by most comparisons looks to be financially leveraged with high
debt and low liquidity. However, given the current ideal economic environment,
it is premature to anticipate that the expected slowdown would deteriorate into
a recession. Inflation will continue to be the primary focus, as it is a key
determinant of bond prices and also plays an important role in determining what
valuation investors are willing to pay for stocks. While inflation concerns have
been highlighted by the Federal Reserve Board numerous times, it is difficult to
find any hard evidence that suggests it is becoming a real problem. In fact, the
recent difficulties in Southeast Asia should have two impacts on our economy.
First, the slowdown in growth, which is also occurring in Latin America, should
put further pressure on our economy to slow. Second,
<PAGE>
- --------------------------------------------------------------------------------
their problems raise the issue of global deflation. While deflation is not
likely in our economy, global deflationary pressures should help keep our
inflation rate low.
FIXED INCOME MARKET
Academic studies have shown that bonds try to anticipate inflation one year out.
The expected direction of inflation also helps set the premium return over
inflation (real interest rate) that investors demand from their bond holdings.
Investment returns from bonds will in the end be driven by supply and demand.
Currently, the demand for bonds has been far overshadowed by the strong returns
attracting investors to the stock market. This has resulted in individual
investors having bond exposure well below the norms of recent years and
institutions having their lowest exposure to bonds ever. Bonds appear both
underowned and attractively valued. The real interest rate on long maturity U.S.
Treasury bonds is currently about 4% above inflation, a level that looks
especially attractive if inflation is not a concern. Economists are presently
forecasting 2.6% inflation in 1998. Inflation below that level would likely
result in solid total returns from bonds. If problems arise in the stock market
that unnerve investors, money flows could be redirected toward the bond market.
These factors create what we believe is a very favorable environment for bond
investors.
STOCK MARKET
While it can be debated whether the current bull market started in 1974, 1982,
or 1990, there is no question that it is one of the longest and strongest bull
markets in history. By most measures, market valuations are at record levels.
Stock ownership by individuals is at the highest level in almost 30 years, and
institutional stock ownership is the highest ever. The consistent, strong
returns of recent years have in many cases fueled unrealistic return
expectations by individuals that defy any kind of historical analysis.
Our view of the stock market is fairly simple. It is unlikely the bull market is
over. We believe that stocks, over the long term, will continue to offer higher
returns than bonds. However, we appear to be in the late stages of a very long
and powerful bull market, where volatility has increased dramatically and is
likely to remain high. We also think the high exposure to stocks, high
valuations, and high expectations make stocks very risky. Thus, we believe that
it is particularly important for investors to be prudent in holding diversified
portfolios of bonds and stocks. Studies show that asset allocation is the single
most important decision an investor has to make. Over 90% of an investors'
return has been attributed to the asset allocation decision.* This may prove
very important in the current environment where a prudent allocation to bonds
could go a long way toward reducing an investors' risk when, not if, we
experience the next bear market.
Given our caution, it is somewhat surprising that we are not having trouble
finding attractive opportunities to keep your Vulcan Stock Fund fully invested.
Our style, as always, focuses on owning a portfolio that on average is made up
of above-average companies selling at below-average valuations.
- ---------------
* Source: Ibbotson
<PAGE>
- --------------------------------------------------------------------------------
In the current environment, we are finding a number of companies we consider to
be well above-average in management, financial strength, and growth potential
selling at market or below market valuations. We are also finding a number of
companies with improving fundamentals and strong growth potential selling at
well below market multiples. While market volatility does greatly increase risk,
it also offers opportunities to investors who can sort out stocks unfairly
penalized by a market that is very unforgiving in short-term pressures on
individual stocks. With a diligent focus on the market and our consistent search
for opportunities, we look forward to serving you over the next year.
Thank you for your continued vote of confidence.
<PAGE>
TREASURY OBLIGATIONS MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ----------------------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--44.4%
- ---------------------------------------------------------------------------------
U.S. TREASURY BILLS--29.8%
-----------------------------------------------------------------
$ 20,000,000 1/8/1998 $ 19,813,567
-----------------------------------------------------------------
20,000,000 1/22/1998 19,770,222
-----------------------------------------------------------------
20,000,000 2/12/1998 19,713,030
-----------------------------------------------------------------
15,000,000 3/5/1998 14,738,308
-----------------------------------------------------------------
25,000,000 3/12/1998 24,541,955
-----------------------------------------------------------------
20,000,000 3/19/1998 19,612,450
-----------------------------------------------------------------
25,000,000 4/9/1998 24,444,052
----------------------------------------------------------------- ------------
Total 142,633,584
----------------------------------------------------------------- ------------
U.S. TREASURY NOTES--14.6%
-----------------------------------------------------------------
10,000,000 5.250%, 12/31/1997 9,999,692
-----------------------------------------------------------------
25,000,000 7.875%, 1/15/1998 25,119,042
-----------------------------------------------------------------
15,000,000 6.125%, 3/31/1998 15,035,705
-----------------------------------------------------------------
20,000,000 5.875%, 4/30/1998 20,036,090
----------------------------------------------------------------- ------------
Total 70,190,529
----------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 212,824,113
----------------------------------------------------------------- ------------
</TABLE>
<PAGE>
TREASURY OBLIGATIONS MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ----------------------------------------------------------------- ------------
<C> <S> <C>
(A) REPURCHASE AGREEMENTS--55.8%
- ---------------------------------------------------------------------------------
$105,000,000 Barclays de Zoete Wedd Securities, Inc., 5.650%, dated
10/31/1997, due 11/3/1997 $105,000,000
-----------------------------------------------------------------
23,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.630%, dated
10/31/1997, due 11/3/1997 23,000,000
-----------------------------------------------------------------
80,000,000 Dresdner Securities (USA), Inc., 5.650%, dated 10/31/1997, due
11/3/1997 80,000,000
-----------------------------------------------------------------
45,000,000 Lehman Brothers, Inc., 5.630%, dated 10/31/1997, due 11/3/1997 45,000,000
-----------------------------------------------------------------
14,573,000 Morgan Stanley Group, Inc., 5.530%, dated 10/31/1997, due
11/3/1997 14,573,000
----------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 267,573,000
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $480,397,113
----------------------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($479,557,107) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
STOCK FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--95.7%
- -----------------------------------------------------------------------------------
CAPITAL GOODS--8.9%
-----------------------------------------------------------------
57,500 Fluor Corp. $ 2,364,687
-----------------------------------------------------------------
83,800 General Electric Co. 5,410,338
-----------------------------------------------------------------
82,000 Honeywell, Inc. 5,581,125
-----------------------------------------------------------------
165,400 (a) Jacobs Engineering Group, Inc. 4,465,800
-----------------------------------------------------------------
144,800 (a) Litton Industries, Inc. 7,348,600
-----------------------------------------------------------------
79,100 Rockwell International Corp. 3,875,900
------------
-----------------------------------------------------------------
29,046,450
Total
------------
-----------------------------------------------------------------
CONSUMER DURABLES--1.5%
-----------------------------------------------------------------
77,000 Goodyear Tire & Rubber Co. 4,822,125
------------
-----------------------------------------------------------------
CONSUMER NON-DURABLES--8.7%
-----------------------------------------------------------------
177,650 Hanson PLC, ADR 4,530,075
-----------------------------------------------------------------
177,000 PepsiCo, Inc. 6,515,813
-----------------------------------------------------------------
161,200 Philip Morris Cos., Inc. 6,387,550
-----------------------------------------------------------------
139,700 Sara Lee Corp. 7,142,163
-----------------------------------------------------------------
127,600 UST, Inc. 3,820,025
------------
-----------------------------------------------------------------
28,395,626
Total
------------
-----------------------------------------------------------------
CONSUMER SERVICES--1.0%
-----------------------------------------------------------------
110,000 Hilton Hotels Corp. 3,389,375
------------
-----------------------------------------------------------------
ENERGY--6.8%
-----------------------------------------------------------------
51,900 Amoco Corp. 4,758,581
-----------------------------------------------------------------
128,100 Coastal Corp 7,702,012
-----------------------------------------------------------------
64,000 Mobil Corp. 4,660,000
-----------------------------------------------------------------
145,000 USX -- Marathon Group 5,183,750
------------
-----------------------------------------------------------------
22,304,343
Total
------------
-----------------------------------------------------------------
</TABLE>
<PAGE>
STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
FINANCE--16.0%
-----------------------------------------------------------------
33,500 Aetna Services, Inc. $ 2,380,594
-----------------------------------------------------------------
92,200 Bank of New York Co., Inc. 4,339,162
-----------------------------------------------------------------
46,000 Chase Manhattan Corp. 5,307,250
-----------------------------------------------------------------
79,600 Chubb Corp. 5,273,500
-----------------------------------------------------------------
165,000 Federal National Mortgage Association 7,992,187
-----------------------------------------------------------------
105,000 KeyCorp 6,424,688
-----------------------------------------------------------------
124,900 NationsBank Corp. 7,478,388
-----------------------------------------------------------------
148,250 Old Republic International Corp. 5,299,938
-----------------------------------------------------------------
96,000 Reliastar Financial Corp. 3,588,000
-----------------------------------------------------------------
116,250 SunAmerica, Inc. 4,177,734
------------
-----------------------------------------------------------------
52,261,441
Total
------------
-----------------------------------------------------------------
HEALTH CARE--12.1%
-----------------------------------------------------------------
84,000 Bristol-Myers Squibb Co. 7,371,000
-----------------------------------------------------------------
70,000 Johnson & Johnson 4,016,250
-----------------------------------------------------------------
244,000 (a) MedPartners, Inc. 6,206,750
-----------------------------------------------------------------
96,000 Merck & Co., Inc. 8,568,000
-----------------------------------------------------------------
56,226 (a) PacifiCare Health Systems, Inc., Class B 3,640,634
-----------------------------------------------------------------
58,800 Pfizer, Inc. 4,160,100
-----------------------------------------------------------------
186,240 (a) Tenet Healthcare Corp. 5,691,960
------------
-----------------------------------------------------------------
39,654,694
Total
------------
-----------------------------------------------------------------
PRODUCER MANUFACTURING--2.9%
-----------------------------------------------------------------
105,000 Crown Cork & Seal Co., Inc. 4,731,562
-----------------------------------------------------------------
290,000 Dial Corp. 4,893,750
-----------------------------------------------------------------
9,625,312
Total
------------
-----------------------------------------------------------------
RAW MATERIALS--6.1%
-----------------------------------------------------------------
105,600 International Paper Co. 4,752,000
-----------------------------------------------------------------
181,042 Millennium Chemicals, Inc. 4,254,487
-----------------------------------------------------------------
</TABLE>
<PAGE>
STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
RAW MATERIALS--CONTINUED
-----------------------------------------------------------------
102,400 Praxair, Inc. $ 4,460,800
-----------------------------------------------------------------
38,000 Union Camp Corp. 2,059,125
-----------------------------------------------------------------
145,200 (a) Wolverine Tube, Inc. 4,501,200
------------
-----------------------------------------------------------------
20,027,612
Total
------------
-----------------------------------------------------------------
RETAIL--7.7%
-----------------------------------------------------------------
117,000 Home Depot, Inc. 6,508,125
-----------------------------------------------------------------
419,000 (a) Office Depot, Inc. 8,641,875
-----------------------------------------------------------------
173,000 (a) U.S. Office Products Co. 5,406,250
-----------------------------------------------------------------
130,000 Wal-Mart Stores, Inc. 4,566,250
------------
-----------------------------------------------------------------
25,122,500
Total
------------
-----------------------------------------------------------------
TECHNOLOGY--14.0%
-----------------------------------------------------------------
200,000 First Data Corp, Class 5,787,812
-----------------------------------------------------------------
143,100 Harris Corp. 6,253,852
-----------------------------------------------------------------
99,600 Hewlett-Packard Co. 6,144,075
-----------------------------------------------------------------
71,400 Intel Corp. 5,497,800
-----------------------------------------------------------------
87,000 International Business Machines Corp. 8,531,438
-----------------------------------------------------------------
82,500 Motorola, Inc. 5,094,375
-----------------------------------------------------------------
157,200 (a) Seagate Technology, Inc. 4,264,050
-----------------------------------------------------------------
121,600 (a) Sun Microsystems, Inc. 4,164,800
------------
-----------------------------------------------------------------
45,738,202
Total
------------
-----------------------------------------------------------------
TELECOMMUNICATIONS SERVICES--6.5%
-----------------------------------------------------------------
75,000 Ameritech Corp. 4,875,000
-----------------------------------------------------------------
73,500 Bell Atlantic Corp. 5,870,812
-----------------------------------------------------------------
173,000 GTE Corp. 7,341,687
-----------------------------------------------------------------
59,800 Sprint Corp. 3,109,600
------------
-----------------------------------------------------------------
21,197,099
Total
------------
-----------------------------------------------------------------
</TABLE>
<PAGE>
STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
UTILITIES--3.5%
-----------------------------------------------------------------
111,200 Entergy Corp. $ 2,717,450
-----------------------------------------------------------------
89,600 GPU, Inc. 3,242,400
-----------------------------------------------------------------
102,600 Houston Industries, Inc. 2,231,550
-----------------------------------------------------------------
156,100 Westcoast Energy, Inc. 3,200,050
------------
-----------------------------------------------------------------
11,391,450
Total
------------
-----------------------------------------------------------------
312,976,229
TOTAL COMMON STOCKS (IDENTIFIED COST $242,119,174)
------------
-----------------------------------------------------------------
MUTUAL FUNDS--4.0%
- -----------------------------------------------------------------------------------
12,990,643 AIM Short-Term Investment Co. Prime Portfolio (AT NET ASSET 12,990,643
VALUE)
------------
-----------------------------------------------------------------
(B)REPURCHASE AGREEMENT--1.5%
- -----------------------------------------------------------------------------------
$5,000,000 Morgan Stanley Group, Inc., 5.56%, dated 10/31/1997, due 5,000,000
11/5/1997 (AT AMORTIZED COST)
------------
-----------------------------------------------------------------
$330,966,872
TOTAL INVESTMENTS (IDENTIFIED COST $260,109,817)(C)
------------
-----------------------------------------------------------------
</TABLE>
(a) Non-income producing securities.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $260,109,817.
The net unrealized appreciation of investments on a federal tax basis
amounts to $70,857,055, which is comprised of $76,776,761 appreciation and
$5,919,706 depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($327,096,140) at October 31, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
<PAGE>
BOND FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
LONG-TERM INVESTMENTS--97.3%
- ----------------------------------------------------------------------------------
CORPORATE BONDS--22.6%
- ----------------------------------------------------------------------------------
COMMERCIAL SERVICES--2.0%
--------------------------------------------------------------------
$2,000,000 Equifax, Inc., Sr. Note, 6.50%, 6/15/2003 $ 1,996,844
-------------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--2.5%
--------------------------------------------------------------------
1,500,000 Philip Morris Cos., Inc., Unsecd. Note, 7.125%, 10/1/2004 1,536,003
--------------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., Unsecd. Note, 7.125%, 12/1/1999 1,017,356
-------------------------------------------------------------------- -----------
Total 2,553,359
-------------------------------------------------------------------- -----------
FINANCE--9.9%
--------------------------------------------------------------------
2,000,000 BB&T Corp., Sub. Note, 7.25%, 6/15/2007 2,095,672
--------------------------------------------------------------------
2,500,000 Bank of New York Co., Inc., Sub. Note, 8.50%, 12/15/2004 2,789,880
--------------------------------------------------------------------
2,500,000 Ford Motor Credit Corp., Unsecd. Note, 7.75%, 10/1/1999 2,580,535
--------------------------------------------------------------------
2,500,000 Standard Credit Card Master Trust 1991-6, Class A, 7.875%, 1/7/2000 2,552,200
-------------------------------------------------------------------- -----------
Total 10,018,287
-------------------------------------------------------------------- -----------
TRANSPORTATION--1.1%
--------------------------------------------------------------------
1,000,000 Norfolk Southern Corp., Equip. Trust, Series C, 7.75%, 8/15/2006 1,095,870
-------------------------------------------------------------------- -----------
UTILITIES--7.1%
--------------------------------------------------------------------
2,000,000 Carolina Power & Light Co., 1st Mtg. Bond, 6.80%, 8/15/2007 2,025,644
--------------------------------------------------------------------
2,000,000 National Rural Utilities Cooperative Finance Corp., Sr. Note, 6.75%,
9/1/2001 2,044,454
--------------------------------------------------------------------
1,000,000 New England Telephone & Telegraph, Unsecd. Note, 6.25%, 12/15/1997 1,000,596
--------------------------------------------------------------------
2,000,000 Wisconsin Electric Power Co., Deb., 6.625%, 11/15/2006 2,036,750
-------------------------------------------------------------------- -----------
Total 7,107,444
-------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $28,552,854) 22,771,804
-------------------------------------------------------------------- -----------
</TABLE>
<PAGE>
BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
GOVERNMENT AGENCIES--12.2%
- ----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--6.6%
--------------------------------------------------------------------
$3,500,000 6.52%, 1/2/2002 $ 3,580,335
--------------------------------------------------------------------
1,641,797 8.00%, 1/1/2007 1,701,871
--------------------------------------------------------------------
1,308,662 9.50%, 2/15/2020 1,403,819
-------------------------------------------------------------------- -----------
Total 6,686,025
-------------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--5.6%
--------------------------------------------------------------------
2,085,000 7.35%, 3/22/2006 2,121,154
--------------------------------------------------------------------
2,000,000 8.50%, 2/1/2005 2,093,688
--------------------------------------------------------------------
1,331,125 10.00%, 1/1/2020 1,448,431
-------------------------------------------------------------------- -----------
Total 5,663,273
-------------------------------------------------------------------- -----------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $5,255,950) 12,349,298
-------------------------------------------------------------------- -----------
U.S. TREASURY--62.5%
- ----------------------------------------------------------------------------------
U.S. TREASURY BONDS--30.1%
--------------------------------------------------------------------
6,250,000 6.25%, 8/15/2023 6,267,581
--------------------------------------------------------------------
5,000,000 6.50%, 11/15/2026 5,210,940
--------------------------------------------------------------------
500,000 6.875%, 8/15/2025 543,281
--------------------------------------------------------------------
1,125,000 7.25%, 5/15/2004 1,210,782
--------------------------------------------------------------------
4,000,000 7.25%, 5/15/2016 4,465,004
--------------------------------------------------------------------
5,000,000 7.25%, 8/15/2022 5,632,815
--------------------------------------------------------------------
4,000,000 7.50%, 11/15/2016 4,573,752
--------------------------------------------------------------------
1,000,000 7.875%, 2/15/2021 1,199,688
--------------------------------------------------------------------
1,000,000 8.00%, 11/15/2021 1,217,188
-------------------------------------------------------------------- -----------
Total 30,321,031
-------------------------------------------------------------------- -----------
U.S. TREASURY NOTES--32.4%
--------------------------------------------------------------------
2,000,000 5.875%, 7/31/1999 2,007,502
--------------------------------------------------------------------
4,250,000 6.00%, 8/15/1999 4,276,567
--------------------------------------------------------------------
2,000,000 6.125%, 9/30/2000 2,022,502
--------------------------------------------------------------------
3,000,000 6.25%, 10/31/2001 3,054,378
--------------------------------------------------------------------
</TABLE>
<PAGE>
BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY--CONTINUED
- ----------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
--------------------------------------------------------------------
$2,000,000 6.25%, 2/15/2003 $ 2,042,502
--------------------------------------------------------------------
2,000,000 6.25%, 6/30/2002 2,039,376
--------------------------------------------------------------------
2,750,000 6.375%, 3/31/2001 2,804,142
--------------------------------------------------------------------
3,000,000 6.50%, 5/15/2005 3,111,564
--------------------------------------------------------------------
1,500,000 6.50%, 8/15/2005 1,555,782
--------------------------------------------------------------------
3,000,000 6.625%, 5/15/2007 3,160,314
--------------------------------------------------------------------
1,000,000 6.75%, 6/30/1999 1,017,813
--------------------------------------------------------------------
1,000,000 7.00%, 4/15/1999 1,019,063
--------------------------------------------------------------------
1,000,000 7.125%, 10/15/1998 1,014,688
--------------------------------------------------------------------
1,125,000 7.25%, 8/15/2004 1,212,540
--------------------------------------------------------------------
1,125,000 7.50%, 2/15/2005 1,231,876
--------------------------------------------------------------------
1,000,000 8.00%, 5/15/2001 1,071,876
-------------------------------------------------------------------- -----------
Total 32,642,485
-------------------------------------------------------------------- -----------
TOTAL U.S. TREASURY (IDENTIFIED COST $60,582,701) 62,963,516
-------------------------------------------------------------------- -----------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $94,391,505) 98,084,618
-------------------------------------------------------------------- -----------
SHORT-TERM INVESTMENT--0.9%
- ----------------------------------------------------------------------------------
MUTUAL FUNDS--0.9%
--------------------------------------------------------------------
884,763 AIM Short-Term Investment Co. Prime Portfolio (at net asset value) 884,763
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $95,276,268)(A) $98,969,381
-------------------------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $95,276,268. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,693,113 which is comprised of $3,728,429 appreciation and $35,316
depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($100,765,569) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
INCOME FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--19.2%
- ----------------------------------------------------------------------------------
BANKING--2.5%
--------------------------------------------------------------------
$1,000,000 NationsBank Corp., Sr. Note, 5.125%, 9/15/1998 $ 993,288
-------------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--3.9%
--------------------------------------------------------------------
500,000 Procter & Gamble Co., Deb., 8.70%, 8/1/2001 543,519
--------------------------------------------------------------------
1,000,000 Philip Morris Cos., Inc., Note, 7.625%, 5/15/2002 1,043,384
-------------------------------------------------------------------- -----------
Total 1,586,903
-------------------------------------------------------------------- -----------
ENERGY--2.5%
--------------------------------------------------------------------
1,000,000 Amoco Corp., Company Guarantee, 6.25%, 10/15/2004 998,787
-------------------------------------------------------------------- -----------
FINANCE--5.2%
--------------------------------------------------------------------
1,000,000 General Motors Acceptance Corp., 6.625%, 10/1/2002 1,015,704
--------------------------------------------------------------------
1,000,000 Ford Motor Credit Corp., 8.20%, 2/15/2002 1,071,914
-------------------------------------------------------------------- -----------
Total 2,087,618
-------------------------------------------------------------------- -----------
FINANCIAL SERVICES--2.6%
--------------------------------------------------------------------
1,000,000 Merrill Lynch & Co., Inc., 8.375%, 2/9/2000 1,049,233
-------------------------------------------------------------------- -----------
RETAIL--1.3%
--------------------------------------------------------------------
500,000 Dillard Department Stores, Inc., 7.375%, 6/15/1999 510,153
-------------------------------------------------------------------- -----------
TRANSPORTATION--1.2%
--------------------------------------------------------------------
500,000 Norfolk & Western Railroad Co., Equip. Trust, 8.75%, 2/1/1998 503,493
-------------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $7,510,049) 7,729,475
-------------------------------------------------------------------- -----------
U.S. TREASURY OBLIGATIONS--76.9%
- ----------------------------------------------------------------------------------
U.S. TREASURY BILL--2.4%
--------------------------------------------------------------------
1,000,000 5/28/1998 970,931
-------------------------------------------------------------------- -----------
U.S. TREASURY NOTES--74.5%
--------------------------------------------------------------------
1,000,000 8.00%, 8/15/1999 1,039,688
--------------------------------------------------------------------
1,000,000 7.75%, 2/15/2001 1,060,001
--------------------------------------------------------------------
1,000,000 7.50%, 11/15/2001 1,062,188
--------------------------------------------------------------------
</TABLE>
<PAGE>
INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
--------------------------------------------------------------------
$1,000,000 7.50%, 10/31/1999 $ 1,034,688
--------------------------------------------------------------------
1,000,000 7.25%, 5/15/2004 1,076,251
--------------------------------------------------------------------
1,000,000 7.125%, 2/29/2000 1,031,251
--------------------------------------------------------------------
1,000,000 7.125%, 10/15/1998 1,014,688
--------------------------------------------------------------------
1,000,000 7.00%, 4/15/1999 1,019,063
--------------------------------------------------------------------
1,500,000 6.875%, 3/31/2000 1,540,314
--------------------------------------------------------------------
1,500,000 6.75%, 6/30/1999 1,526,720
--------------------------------------------------------------------
1,000,000 6.625%, 4/30/2002 1,033,751
--------------------------------------------------------------------
1,000,000 6.50%, 10/15/2006 1,040,313
--------------------------------------------------------------------
1,000,000 6.50%, 5/31/2002 1,029,063
--------------------------------------------------------------------
1,500,000 6.50%, 8/31/2001 1,538,439
--------------------------------------------------------------------
2,000,000 6.375%, 3/31/2001 2,039,376
--------------------------------------------------------------------
1,500,000 6.375%, 5/15/2000 1,524,845
--------------------------------------------------------------------
2,000,000 6.375%, 1/15/2000 2,031,252
--------------------------------------------------------------------
2,000,000 6.375%, 5/15/1999 2,021,876
--------------------------------------------------------------------
3,000,000 6.375%, 1/15/1999 3,027,189
--------------------------------------------------------------------
1,000,000 6.25%, 2/15/2007 1,025,001
--------------------------------------------------------------------
1,250,000 6.25%, 8/31/2000 1,267,970
--------------------------------------------------------------------
1,000,000 6.125%, 8/15/2007 1,022,188
-------------------------------------------------------------------- -----------
Total 30,006,115
-------------------------------------------------------------------- -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $30,578,294) 30,977,046
-------------------------------------------------------------------- -----------
MUTUAL FUND SHARES--2.5%
- ----------------------------------------------------------------------------------
1,006,078 AIM Short-Term Investment Company Prime Portfolio
(AT NET ASSET VALUE) 1,006,078
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $39,094,421)(A) $39,712,599
-------------------------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $39,094,421. The
net unrealized appreciation of investments on a federal tax basis amounts to
$618,178 which is comprised of $635,026 appreciation and $16,848
depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($40,290,442) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
SOUTHTRUST VULCAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
OBLIGATIONS
MONEY MARKET BOND STOCK INCOME
FUND FUND FUND FUND
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
- -----------------------------------------------------
Investments in repurchase agreements $267,573,000 $ -- $ 5,000,000 $ --
- -----------------------------------------------------
Investments in securities 212,824,113 98,969,381 325,966,872 39,712,599
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Total investments in securities, at value $480,397,113 $ 98,969,381 $330,966,872 $39,712,599
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Cash 648 -- -- --
- -----------------------------------------------------
Income receivable 880,302 1,832,115 467,419 657,664
- -----------------------------------------------------
Receivable for investments sold 39,935,906 -- -- --
- -----------------------------------------------------
Receivable for shares sold -- -- 137,929 --
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Total assets 521,213,969 100,801,496 331,572,220 40,370,263
- ----------------------------------------------------- ------------ ----------- ----------- ----------
LIABILITIES:
- -----------------------------------------------------
Payable for investments purchased 39,540,444 -- 4,340,652 --
- -----------------------------------------------------
Payable for shares redeemed -- -- -- --
- -----------------------------------------------------
Payable to bank -- -- 43,816 54,329
- -----------------------------------------------------
Income distribution payable 2,038,323 -- -- --
- -----------------------------------------------------
Accrued expenses 78,095 35,927 91,612 25,492
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Total liabilities 41,656,862 35,927 4,476,080 79,821
- ----------------------------------------------------- ------------ ----------- ----------- ----------
NET ASSETS CONSIST OF:
- -----------------------------------------------------
Paid-in capital 479,557,107 97,089,943 218,716,396 41,389,482
- -----------------------------------------------------
Net unrealized appreciation (depreciation) of
investments -- 3,693,113 70,857,055 618,178
- -----------------------------------------------------
Accumulated net realized gain (loss) on investments -- (100,333) 37,366,105 (1,770,324)
- -----------------------------------------------------
Undistributed net investment income -- 82,846 156,584 53,106
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Total Net Assets $479,557,107 $100,765,569 $327,096,140 $40,290,442
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Shares outstanding 479,557,107 9,711,138 18,343,433 4,097,083
- ----------------------------------------------------- ------------ ----------- ----------- ----------
NET ASSET VALUE PER SHARE:
(Net Assets / Shares Outstanding) $ 1.00 $ 10.38 $ 17.83 $ 9.83
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Offering Price Per Share(a) -- 10.76(b) 18.67(c) $ 10.19(b)
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Redemption Proceeds Per Share(a) $ -- $ 10.28(d) $ 17.65(d) $ 9.73(d)
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Investments, at identified cost 480,397,113 95,276,268 260,109,817 $39,094,422
- ----------------------------------------------------- ------------ ----------- ----------- ----------
Investments, at tax cost 480,397,113 95,276,268 260,109,817 $39,094,422
- ----------------------------------------------------- ------------ ----------- ----------- ----------
</TABLE>
(a) See "How to Purchase, Exchange and Redeem Shares" in the Prospectus.
(b) Computation of offering price: 100/96.5 of net asset value.
(c) Computation of offering price: 100/95.5 of net asset value.
(d) Computation of redemption proceeds: 99/100 of net asset value.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
SOUTHTRUST VULCAN FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
OBLIGATIONS
MONEY MARKET BOND STOCK INCOME
FUND FUND FUND FUND
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------
Dividends $ -- $ -- $ 2,506,090 $ --
- --------------------------------------------------------
Interest 13,317,215 3,132,812 493,315 1,276,592
- -------------------------------------------------------- ----------- -------- ---------- --------
Total income 13,317,215 3,132,812 2,999,405 1,276,592
- -------------------------------------------------------- ----------- -------- ---------- --------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee 1,204,853 284,008 1,184,793 116,873
- --------------------------------------------------------
Administrative personnel and services fee 278,531 54,717 182,590 50,410
- --------------------------------------------------------
Custodian fees 29,456 5,599 18,846 4,091
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 13,307 16,567 30,875 16,367
- --------------------------------------------------------
Directors'/Trustees' fees 7,121 1,765 5,459 533
- --------------------------------------------------------
Auditing fees 4,819 5,565 5,349 3,700
- --------------------------------------------------------
Legal fees 5,970 473 4,989 727
- --------------------------------------------------------
Portfolio accounting fees 43,573 22,477 52,012 24,651
- --------------------------------------------------------
Share registration costs 15,932 7,662 10,137 10,045
- --------------------------------------------------------
Printing and postage 7,229 5,721 8,649 5,994
- --------------------------------------------------------
Insurance premiums 3,039 2,137 3,299 1,949
- --------------------------------------------------------
Miscellaneous 3,039 1,778 6,599 2,336
- -------------------------------------------------------- ----------- -------- ---------- --------
Total expenses 1,616,869 408,469 1,513,597 237,676
- -------------------------------------------------------- ----------- -------- ---------- --------
Waivers--
- --------------------------------------------------------
Waiver of investment advisory fee (464,138) (5,747) (10,794) (58,436)
- --------------------------------------------------------
Waiver of administrative personnel and services fee -- -- -- (27,891)
- -------------------------------------------------------- --------- ---------- -------- --------
Total waivers (464,138) (5,747) (10,794) (86,327)
- -------------------------------------------------------- --------- ---------- -------- --------
Net expenses 1,152,731 402,722 1,502,803 151,349
- -------------------------------------------------------- --------- ---------- -------- --------
Net investment income 12,164,484 2,730,090 1,496,602 1,125,243
- -------------------------------------------------------- ----------- -------- ---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------
Net realized gain (loss) on investments -- 901,078 23,674,204 15,810
- --------------------------------------------------------
Change in unrealized appreciation of investments -- 3,124,160 10,332,328 566,817
- -------------------------------------------------------- ----------- -------- ---------- --------
Net realized and unrealized gain on investments -- 4,025,238 34,006,532 582,627
- -------------------------------------------------------- ----------- -------- ---------- --------
Change in net assets resulting from operations $12,164,484 $6,755,328 $35,503,134 $1,707,870
- -------------------------------------------------------- ----------- -------- ---------- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
SOUTHTRUST VULCAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS
MONEY MARKET FUND
-----------------------------------
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997
- ------------------------------------------------------------------ ---------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 12,164,484 $ 20,659,697
- ------------------------------------------------------------------
Net realized gain (loss) on investments -- --
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments -- --
- ------------------------------------------------------------------ -------------- ---------------
Change in net assets resulting from operations 12,164,484 20,659,697
- ------------------------------------------------------------------ -------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Distributions from net investment income (12,164,484) (20,659,697)
- ------------------------------------------------------------------
Distributions from net realized gain on investment transactions -- --
- ------------------------------------------------------------------ -------------- ---------------
Change in net assets from distributions to shareholders (12,164,484) (20,659,697)
- ------------------------------------------------------------------ -------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 473,407,200 1,208,046,850
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 478,403 629,753
- ------------------------------------------------------------------
Cost of shares redeemed (518,790,565) (1,129,943,491)
- ------------------------------------------------------------------ -------------- ---------------
Change in net assets resulting from share transactions (44,904,962) 78,733,112
- ------------------------------------------------------------------ -------------- ---------------
Change in net assets (44,904,962) 78,733,112
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 524,462,069 445,728,957
- ------------------------------------------------------------------ -------------- ---------------
End of period $ 479,557,107 $ 524,462,069
- ------------------------------------------------------------------ -------------- ---------------
Undistributed net investment income included in net assets at the
end of the period $ -- $ --
- ------------------------------------------------------------------ -------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND FUND STOCK FUND INCOME FUND
- ---------------------------------- ---------------------------------- ----------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
(UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED (UNAUDITED) YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997 OCTOBER 31, 1997 APRIL 30, 1997 OCTOBER 31, 1997 APRIL 30, 1997
- ---------------- -------------- ---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
$ 2,730,090 $ 5,442,465 $ 1,496,602 $ 3,102,284 $ 1,125,243 $ 2,315,970
901,078 (15,674) 23,674,204 19,606,552 15,810 (1,685,387)
3,124,160 (288,699) 10,332,328 20,216,321 566,817 1,220,369
- -------------- ------------- -------------- ------------- ------------- -------------
6,755,328 5,138,092 35,503,134 42,925,157 1,707,870 1,850,952
- -------------- ------------- -------------- ------------- ------------- -------------
(2,758,341) (5,678,876) (1,432,012) (3,209,583) (1,116,220) (2,329,572)
-- -- -- (17,630,011) -- --
- -------------- ------------- -------------- ------------- ------------- -------------
(2,758,341) (5,678,876) (1,432,012) (20,839,594) (1,116,220) (2,329,572)
- -------------- ------------- -------------- ------------- ------------- -------------
14,104,250 32,302,907 37,092,177 58,030,705 5,061,998 10,063,184
12,839 28,092 1,264,260 16,925,121 -- --
(8,533,080) (23,862,729) (17,996,145) (28,797,907) (3,960,808) (49,133,533)
- -------------- ------------- -------------- ------------- ------------- -------------
5,584,009 8,468,270 20,360,292 46,157,919 1,101,190 (39,070,349)
- -------------- ------------- -------------- ------------- ------------- -------------
9,580,996 7,927,486 54,431,414 68,243,482 1,692,840 (39,548,969)
91,184,573 83,257,087 272,664,726 204,421,244 38,597,602 78,146,571
- -------------- ------------- -------------- ------------- ------------- -------------
$100,765,569 $ 91,184,573 $327,096,140 $272,664,726 $ 40,290,442 $ 38,597,602
- -------------- ------------- -------------- ------------- ------------- -------------
$ 82,846 $ 111,097 $ 156,584 $ 91,994 $ 53,106 $ 44,083
- -------------- ------------- -------------- ------------- ------------- -------------
</TABLE>
<PAGE>
SOUTHTRUST VULCAN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS FROM NET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT GAIN ON TOTAL
APRIL 30, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TREASURY OBLIGATIONS MONEY MARKET FUND
1993(a) $ 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1994 $ 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1996 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 $ 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1998(b) $ 1.00 0.03 -- 0.03 (0.03) -- (0.03)
BOND FUND
1993(a) $ 10.00 0.66 0.69 1.35 (0.62) (0.02) (0.64)
1994 $ 10.71 0.63 (0.58) 0.05 (0.65) (0.07) (0.72)
1995 $ 10.04 0.61 (0.09) 0.52 (0.61) -- (0.61)
1996 $ 9.95 0.59 0.03 0.62 (0.56) -- (0.56)
1997 $ 10.01 0.61 (0.03) 0.58 (0.64) -- (0.64)
1998(b) $ 9.95 0.30 0.43 0.73 (0.30) -- (0.30)
STOCK FUND
1993(a) $ 10.00 0.19 0.35 0.54 (0.18) -- (0.18)
1994 $ 10.36 0.19 (0.28) (0.09) (0.19) -- (0.19)
1995 $ 10.08 0.20 1.43 1.63 (0.20) -- (0.20)
1996 $ 11.51 0.23 3.33 3.56 (0.23) (0.44) (0.67)
1997 $ 14.40 0.20 2.59 2.79 (0.21) (1.17) (1.38)
1998(b) $ 15.81 0.08 2.02 2.10 (0.08) -- (0.08)
INCOME FUND
1996(f) $ 10.00 0.16 (0.25) (0.09) (0.14) -- (0.14)
1997 $ 9.77 0.56 (0.09) 0.47 (0.56) -- (0.56)
1998(b) $ 9.68 0.28 0.15 0.43 (0.28) -- (0.28)
</TABLE>
(a) Reflects operations for the period from May 8, 1992 (date of initial public
investment) to April 30, 1993.
(b) Six months ended October 31, 1997 (unaudited).
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Computed on an annualized basis.
(f) Reflects operations for the period from January 10, 1996 (date of initial
public investment) to April 30, 1996.
(g) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------
NET ASSET NET NET ASSETS, PORTFOLIO AVERAGE
VALUE, TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER COMMISSION
END OF PERIOD RETURN(C) EXPENSES INCOME REIMBURSEMENT(D) (000 OMITTED) RATE RATE PAID(G)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 2.93% 0.39%(e) 2.93%(e) 0.36%(e) $ 194,771 -- --
$ 1.00 2.83% 0.40% 2.81% 0.33% $ 278,924 -- --
$ 1.00 4.62% 0.43% 4.56% 0.30% $ 314,200 -- --
$ 1.00 5.26% 0.48% 5.11% 0.22% $ 445,729 -- --
$ 1.00 4.88% 0.51% 4.78% 0.20% $ 524,462 -- --
$ 1.00 2.56% 0.48%(e) 5.05%(e) 0.19%(e) $ 479,557 -- --
$ 10.71 13.44% 0.39%(e) 6.53%(e) 0.59%(e) $ 25,989 19% --
$ 10.04 0.33% 0.51% 5.97% 0.58% $ 32,767 6% --
$ 9.95 5.41% 0.75% 6.29% 0.28% $ 76,409 48% --
$ 10.01 6.78% 0.87% 6.28% 0.08% $ 83,257 28% --
$ 9.95 5.98% 0.86% 6.18% 0.05% $ 91,185 63% --
$ 10.38 7.41% 0.85%(e) 5.77%(e) 0.01%(e) $ 100,766 59% --
$ 10.36 5.54% 0.39%(e) 1.91%(e) 0.74%(e) $ 30,935 34% --
$ 10.08 (0.90%) 0.48% 1.82% 0.69% $ 37,114 46% --
$ 11.51 16.36% 0.74% 1.95% 0.39% $ 138,281 57% --
$ 14.40 31.51% 0.87% 1.75% 0.11% $ 204,421 39% $0.0747
$ 15.81 19.99% 0.94% 1.33% 0.03% $ 272,665 27% $0.0747
$ 17.83 13.29% 0.95%(e) 0.95%(e) 0.01%(e) $ 327,096 33% $0.0587
$ 9.77 (0.93%) 0.85%(e) 5.30%(e) 0.05%(e) $ 78,147 61% --
$ 9.68 4.90% 0.92% 5.59% 0.32% $ 38,598 112% --
$ 9.83 4.52% 0.78%(e) 5.78%(e) 0.44%(e) $ 40,290 66% --
</TABLE>
<PAGE>
SOUTHTRUST VULCAN FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
SouthTrust Vulcan Funds (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Company consists of four portfolios (individually
referred to as the "Fund", or collectively as the "Funds") which are presented
herein:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
PORTFOLIO NAME
- ---------------------------------------------------------------------------------------------
Treasury Obligations Money To provide as high a level of current
Market Fund ("Treasury Obligations") interest income as is consistent with
maintaining liquidity and stability of
principal.
- ---------------------------------------------------------------------------------------------
Bond Fund ("Bond") To provide a level of total return consistent
with a portfolio of high-quality debt
securities.
- ---------------------------------------------------------------------------------------------
Stock Fund ("Stock") To provide
long-term capital appreciation,
with income a secondary
consideration.
- ---------------------------------------------------------------------------------------------
Income Fund ("Income") To provide current income.
- ---------------------------------------------------------------------------------------------
</TABLE>
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Listed corporate bonds, other fixed income
and asset-backed securities, and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked
price as furnished by an independent pricing service. Listed equity
securities are valued at the last sale price reported on a national
securities exchange. For Treasury Obligations, the use of the amortized
cost method to value its portfolio securities is in accordance with Rule
2a-7 under the Act. For fluctuating net asset value Funds within the
Company, short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities purchased with
remaining maturi-
<PAGE>
SOUTHTRUST VULCAN FUNDS
- --------------------------------------------------------------------------------
ties of sixty days or less may be valued at amortized cost, which
approximates fair market value. Investments in other open-end regulated
investment companies are valued at net asset value.
REPURCHASE AGREEMENTS--It is the policy of the Company to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Company to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Company will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Company's adviser to be creditworthy pursuant to the guidelines
and/or standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Company
could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Company's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
At April 30, 1997, the Company, for federal tax purposes, had a capital
loss carryforward, as noted below, which will reduce the Funds' taxable
income arising from future net realized gain on investments, if any, to the
extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Funds of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR
---------------------------------- TOTAL TAX LOSS
FUND 2003 2004 2005 CARRYFORWARD
--------------------------------------- -------- -------- ---------- -------------------
<S> <C> <C> <C> <C>
Bond Fund $225,282 $734,054 -- $ 959,336
---------------------------------------
Income Fund -- -- $1,561,092 $ 1,561,092
---------------------------------------
</TABLE>
<PAGE>
SOUTHTRUST VULCAN FUNDS
- --------------------------------------------------------------------------------
Additionally, net capital losses, as noted below, attributable to security
transactions incurred after October 31, 1996 are treated as arising on May
1, 1997, the first day of the Funds' next taxable year.
<TABLE>
<CAPTION>
FUND TOTAL TAX LOSS PUSHFORWARD
-------------------------------------------------------------- ----------------------------
<S> <C>
Bond Fund $ 24,118
--------------------------------------------------------------
Income Fund $225,042
--------------------------------------------------------------
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Company may engage in
when-issued or delayed delivery transactions. The Company records
when-issued securities on the trade date and maintains security positions
such that sufficient liquid assets will be available to make payment for
the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Master Trust Agreement permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (par value of $0.001).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS BOND
------------------------------------ ------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997 OCTOBER 31, 1997 APRIL 30, 1997
- -------------------------------- ----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 473,407,200 1,208,046,850 1,387,699 3,223,005
- --------------------------------
Shares issued to shareholders in
payment of distributions
declared 478,403 629,753 1,263 2,805
- --------------------------------
Shares redeemed (518,790,565) (1,129,943,491) (843,840) (2,374,300)
- -------------------------------- --------------- --------------- -------------- -------------
Net change resulting from
share transactions (44,904,962) 78,733,112 545,122 851,510
- -------------------------------- --------------- --------------- -------------- -------------
</TABLE>
<PAGE>
SOUTHTRUST VULCAN FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK INCOME
------------------------------------ ------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997 OCTOBER 31, 1997 APRIL 30, 1997
- -------------------------------- ----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 2,055,291 3,804,196 517,424 1,031,600
- --------------------------------
Shares issued to shareholders in
payment of distributions
declared 69,526 1,120,754 -- --
- --------------------------------
Shares redeemed (1,025,610) (1,875,843) (405,815) (5,045,822)
- -------------------------------- ------------- ----------- ------------- -------------
Net change resulting from
share transactions 1,099,207 3,049,107 111,609 (4,014,222)
- -------------------------------- ------------- ----------- ------------- -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--SouthTrust Bank, N.A., the Company's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to the percentage of each Fund's average daily net assets as shown below.
The Adviser may voluntarily choose to waive all or a portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
<TABLE>
<CAPTION>
ANNUAL
FUND RATE
- ----------------------------------------------------------------------------------- -------
<S> <C>
Treasury Obligations 0.50%
- -----------------------------------------------------------------------------------
Bond 0.60%
- -----------------------------------------------------------------------------------
Stock 0.75%
- -----------------------------------------------------------------------------------
Income 0.60%
- -----------------------------------------------------------------------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Company with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Company for the
period. FAS may voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Funds.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Company's accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
<PAGE>
SOUTHTRUST VULCAN FUNDS
- --------------------------------------------------------------------------------
GENERAL--Certain of the Officers of the Company are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Bond $ 61,110,117 $54,696,624
- ------------------------------------------------------------------ ------------ -----------
Stock $117,678,828 $95,802,439
- ------------------------------------------------------------------ ------------ -----------
Income $ 24,999,190 $23,897,901
- ------------------------------------------------------------------ ------------ -----------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
Charles G. Brown, III William O. Vann
Russell W. Chambliss Chairman
Thomas M. Grady Edward C. Gonzales
Thomas L. Merrill, Sr. President and Treasurer
William O. Vann C. Christine Thomson
Vice President and Assistant Treasurer
Peter J. Germain
Secretary
C. Todd Gibson
Assistant Secretary
</TABLE>
MUTUAL FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS, ARE NOT GUARANTEED BY ANY
BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN MUTUAL FUNDS INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. ALTHOUGH MONEY MARKET FUNDS SEEK TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE IS NO ASSURANCE THAT
THEY WILL BE ABLE TO DO SO.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Company's prospectus, which contains facts
concerning the Funds' objectives and policies, management fees, expenses and
other information.
<PAGE>
<TABLE>
<S> <C>
Cusip 844734202
Cusip 844734301
Investment Adviser:
Cusip 844734103
LOGO
Cusip 844734400
National Association 3110408 (12/97)
</TABLE>
