1933 Act File No. 33-46190
1940 Act File No. 811-6580
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X___
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Pre-Effective Amendment No. ................ ______
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Post-Effective Amendment No. 8 ................. X___
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X___
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Amendment No. 10 ................................... X___
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SOUTHTRUST VULCAN FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
x on June 30, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph
(a) (i). 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
X filed the Notice required by that Rule on June 16, 1997; or intends to file
the Notice required by that Rule on or about ____________; or during the
most recent fiscal year did not sell any securities pursuant to Rule 24f-2
under the
Investment Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need not
file the Notice.
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of the SOUTHTRUST VULCAN
FUNDS, which consists of four portfolios: (1) Treasury Obligations Money Market
Fund; (2) Bond Fund; (3) Stock Fund; and (4) Income Fund, is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................(1-4)Cover Page.
Item 2. Synopsis......................(1-4)Expense Summary.
Item 3. Condensed Financial
Information (1-4)Financial Highlights.
Item 4. General Description of
Registrant....................(1-4)Investment Objectives and
Policies of the Funds;
Investment Activities;
Investment Limitations
Item 5. Management of the Fund........(1-4)Management of the Funds;
Dividends and Distributions;
Administratrator, Custodian and
Transfer Agent; (4)Distribution
Plan; (1-4)Brokerage
Transactions.
Item 6. Capital Stock and Other
Securities....................(1-4) Pricing of Shares; Taxes;
Description of Shares; Total
Returns and Yields.
Item 7. Purchase of Securities Being
Offered.......................(1-4)How to Purchase, Exchange
and Redeem Shares; Automatic
Investment Program; Sales
Charge; Reduced Sales Charges;
Right of Accumulation; Quantity
Discounts; Letter of Intent;
Reinvestment
Privilege; Sales Charge Waivers.
Item 8. Redemption or Repurchase......(1-4)How to Purchase, Exchange
and Redeem Shares; Exchanges of
Shares; Exchanging Shares;
Exchange-By-Telephone;
Redemption of Shares;
Redemption Fee; Automatic
Withdrawal Plan; Purchase
of Shares at Net Asset Value.
Item 9. Pending Legal Proceedings (1-4)Not applicable.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page.......................(1-4)Cover Page.
Item 11. Table of Contents................(1-4)Table of Contents.
Item 12. General Information and
History (1-4)General.
Item 13. Investment Objectives and
Policies.........................(1-4); Additional Information
on Fund Investments;
Additional Investment
Limitations.
Item 14. Management of the Fund (1-4)Trustees and Officers;
Trustees Compensation;
Legal Counsel; Miscellaneous.
Item 15. Control Persons and Principal
Holders of Securities............(1-4) Control Persons and
Principal Holders of
Securities.
Item 16. Investment Advisory and Other
Services..........................(1-4) Investment Advisory
and Other Service
Arrangements; Other
Services; Fund
Administration;
Custodian; Transfer Agent.
Item 17. Brokerage Allocation..............(1-4)Portfolio Transactions;
Brokerage Tranactions
filed in Part A.
Item 18. Capital Stock and Other
Securities........................(1-4)Additional Information
Concerning Shares.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.....................(1-4)Purchase, Exchange and
Redemption Information;
Net Asset Value; Additional
Information Concerning
Shares.
Item 20. Tax Status........................(1-4)Taxes.
Item 21. Underwriters......................(1-4)Investment Advisory and
Other Service
Arrangements.
Item 22. Calculation of Performance
Data (1-4)Performance Information.
Item 23. Financial Statements.............(1-4)The Financial Statements
for the fiscal year
ended April 30, 1997 are
incorporated herein by
reference to the Funds'
Annual Report dated April
30, 1997. (File Nos. 33-48847
and 811-07021).
[LOGO OF SOUTHTRUST VULCAN FUNDS]
PROSPECTUS DATED JUNE 30, 1997
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SOUTHTRUST VULCAN FUNDS (the "Company") is an open-end management 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,
1997 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 NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
TREASURY OBLIGATIONS BOND STOCK INCOME
MONEY MARKET FUND FUND FUND FUND
-------------------- ---- ----- ------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases
(as a percentage of offering price). None 3.50% 4.50% 3.50%
Maximum Sales Load 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% 0.33%
12b-1 Fees........................... None None None 0.00%(2)
Other Expenses (after waivers) (3)... 0.21% 0.31% 0.22% 0.59%
---- ---- ---- ----
Total Fund Operating Expenses (4).... 0.51% 0.86% 0.94% 0.92%
==== ==== ==== ====
</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) The Income Fund did not pay or accrue 12b-1 fees during the fiscal year
ended April 30, 1997. The Income Fund has no present intention of paying or
accruing the 12b-1 fee during the fiscal year ending April 30, 1997. If the
Income Fund were paying or accruing the 12b-1 fee, the Income Fund would be able
to pay up to 0.25% of its average daily net assets for the 12b-1 fee. See
"MANAGEMENT OF THE FUNDS."
(3) Other expenses of the Income Fund have been reduced to reflect the
voluntary waiver of a portion of the administrative fees. The administrator can
terminate this voluntary waiver at any time at its sole discretion.
(4) The Total Fund Operating Expenses for Treasury Obligations Money Market
Fund, Bond Fund, Stock Fund and Income Fund would have been 0.71%, 0.91%, 0.97%,
and 1.24%, respectively, absent the voluntary waivers of portions of the
management and administrative 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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MINIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each 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 $16 $29 $ 64
Bond Fund..................................... $43 $61 $81 $137
Stock Fund.................................... $54 $74 $95 $155
Income Fund................................... $44 $63 $84 $144
</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 HISTORICAL DATA FOR THE FUND'S FISCAL YEAR ENDING APRIL 30, 1997.
SOUTHTRUST VULCAN FUNDS
FINANCIAL HIGHLIGHTS
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The following table has been audited by Arthur Andersen LLP, the Funds'
independent public accountants. Their report dated June 10, 1997 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, 1997, which may be obtained free of charge. (FOR
A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
NET
REALIZED
AND DISTRIBUTIONS
NET ASSET UNREALIZED DISTRIBUTIONS FROM NET
VALUE, NET GAIN(LOSS) TOTAL FROM FROM NET REALIZED
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT GAIN ON TOTAL
YEAR ENDED 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)
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)
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)
INCOME FUND
1996(e) $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)
</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) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Computed on an annualized basis.
(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)
SOUTHTRUST VULCAN FUNDS
FINANCIAL HIGHLIGHTS--CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSET -------------------------------------------- NET ASSETS,
VALUE, NET END OF PORTFOLIO AVERAGE
END OF TOTAL INVESTMENT EXPENSE/REIMBURSEMENT PERIOD TURNOVER COMMISSION
PERIOD RETURN(B) EXPENSES INCOME WAIVER(C) (000 OMITTED) RATE PAID
- --------- --------- -------- ---------- --------------------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 2.93% 0.39%(d) 2.93%(d) 0.36%(d) $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 $ -- --
$10.71 13.44% 0.39%(d) 6.53%(d) 0.59%(d) $ 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% --
$10.36 5.54% 0.39%(d) 1.91%(d) 0.74%(d) $ 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
$ 9.77 (0.93%) 0.85%(d) 5.30%(d) 0.05%(d) $ 78,147 61% --
$ 9.68 4.90% 0.92% 5.59% 0.32% $ 38,598 112% --
</TABLE>
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 SEC), 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
statistical 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, such as 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 described 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;
. notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;
. notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
. notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government 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.
The TREASURY MONEY FUND invests solely in direct obligations of the U.S.
Treasury (directly and through repurchase agreements).
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 Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Student Loan Marketing
Association, are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; still others, such as those of the 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
lowerrated convertible securities will exceed 5% of the value of the total
assets of the STOCK FUND at the time of purchase. The STOCK FUND and the INCOME
FUND may also invest 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 ("ADR") AND EUROPEAN DEPOSITARY RECEIPTS ("EDR").
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, the BOND FUND and the 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. The BOND FUND and the 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 the 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 Standard & Poor's
Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch"), or "Baa" by
Moody's Investors Service, Inc. ("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 the INCOME FUND may invest in fixed
rate corporate 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 the 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 INCOME FUND (and, consequently, in the case
of the BOND FUND and the 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 the INCOME FUND may purchase securities rated within the
lowest category of investment grade (i.e., "Baa" by Moody's or "BBB" by 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 an 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 the 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
passthrough 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 the 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
assetbacked 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 the 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
open-end or closed-end 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 securities eligible for direct purchase by the TREASURY
MONEY FUND. 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, unless permitted to exceed these limitations by an
exemptive order of the SEC. The Funds (other than TREASURY MONEY FUND) may
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. It should be noted that
investment companies incur certain expenses such as management fees, and
custodian and transfer agency fees, and, therefore, any investment by a Fund in
shares of other investment companies would be subject to such duplicate
expenses.
ZERO COUPON BONDS. The BOND FUND and the 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 the 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.
A Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Funds 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. A 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 SouthTrust Securities, Inc. 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 SouthTrust Securities, Inc. 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%
</TABLE>
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS % OF AS % OF DEALER ALLOWANCE
OFFERING NET AMOUNT AS % OF
STOCK FUND 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 over the next 13
months, at least $100,000 of shares in the BOND FUND or the INCOME FUND, or
$50,000 of shares in the STOCK FUND, the applicable 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% (4.50% for the STOCK FUND) 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 the Company, 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 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 the INCOME FUND, this privilege does not apply to exchanges into
the STOCK FUND until an investor has owned shares in the BOND FUND or the 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, other than retirement accounts subject to required
minimum distributions. 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.
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, 1997, the
Adviser had approximately $2.8 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 the 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.
Investment decisions for the STOCK FUND, the BOND FUND and the INCOME FUND
are made by investment teams with Jon F. Goebel serving as the lead portfolio
manager for the STOCK FUND and David J. Howell as the lead portfolio manager
for the BOND and INCOME FUNDS. Mr. Goebel has guided the STOCK FUND since
joining SouthTrust Bank, N.A. in June of 1994. Mr. Goebel is the Chief
Investment Officer of SouthTrust Asset Management Company. He is a Chartered
Financial Analyst and has a master's degree from the University of Nebraska.
Prior to joining SouthTrust, Mr. Goebel served in similar capacity for North
Carolina Trust Company. Mr. Howell has led the BOND and INCOME FUND'S
management since their inceptions in May 1992 and January 1996, respectively.
Mr. Howell is a Senior Fixed-Income Portfolio Manager for SouthTrust Asset
Management Company where he has been a member of the investment team 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 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. Effective on or about July 11, 1997, SouthTrust Bank of Alabama, N.A.
will become 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. (the "Distributor"). 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 SEC Rule 12b-1 under the Investment Company Act of
1940, the 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.
The INCOME FUND'S plan is a compensation type plan. As such, the INCOME FUND
makes no payments to the Distributor except as described above. Therefore, the
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 the
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 the 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.
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
review and oversight 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 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 shortterm 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 2, 1997, Lynspen & Company of Birmingham, Alabama,
acting in various capacities for numerous accounts, was the owner of record of
473,732,744 shares (96.56%) of the TREASURY MONEY FUND; Lynspen & Company of
Birmingham, Alabama, acting in various capacities for numerous accounts, was the
owner of record of 8,921,661 shares (98.04%) of the BOND FUND; Lynspen & Company
of Birmingham, Alabama, acting in various capacities for numerous accounts, was
the owner of record of 16,438,655 shares (95.67%) of the STOCK FUND; Lynspen &
Company of Birmingham, Alabama, acting in various capacities for numerous
accounts, was the owner of record of 3,870,373 shares (97.63%) 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.
NOTES
NOTES
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Company's 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.
[LOGO OF SOUTHTRUST BANK]
Treasury Obligations
Money Market Fund
Bond Fund
Stock Fund
Income Fund
Prospectus
June 30, 1997
Table of Contents
Page
Expense Summary... 2
Financial Highlights 4
Investment Objectives and Policies
of the Fund....... 6
Investment Activities 7
How to Purchase, Exchange and
Redeem Shares..... 16
Dividends and Distributions 22
Pricing of Shares. 23
Management of the Funds 23
Taxes 27
Description of Shares 28
Total Returns and Yields 29
[LOGO OF SOUTHTRUST BANK]
Cusip 844734202
Cusip 844734301
Cusip 844734103
Cusip 844734400
3052010A (6/97)
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,
1997. 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, 1997, although not in itself a prospectus, is incorporated by
reference in its entirety into the Company's prospectus.
Statement dated June 30, 1997
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.
<PAGE>
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Table of Contents
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I
General 1
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Additional Information on Fund Investments 1
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Repurchase Agreements 1
Reverse Repurchase Agreements 1
Variable and Floating Rate Instruments 1
Money Market Instruments 2
When-Issued And Delayed Delivery Transactions 2
Mortgage-Related Securities 2
Stripped Securities 3
Warrants 3
American Depositary Receipts 3
Investment Companies 3
Lending of Portfolio Securities 3
Yields and Ratings 4
Restricted Securities 4
Additional Investment Limitations 4
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Trustees and Officers 6
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Trustees Compensation 8
Shareholder and Trustee Liability 8
Investment Advisory and Other Service Arrangements 9
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Advisory Agreement 9
Distributor's Contract 9
Other Services 9
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Fund Administration 9
Custodian 10
Transfer Agent 10
Portfolio Transactions 10
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Purchase, Exchange and Redemption Information 11
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Exchanging Securities for Fund Shares 12
Net Asset Value 12
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Treasury Money Fund 12
All Funds 13
Performance Information 13
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Yield of the Treasury Money Fund 13
Yield and Performance of the Bond Fund, Stock Fund and Income Fund 13
Economic and Market Information 15
Taxes 15
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General 16
Taxation of Certain Financial Instruments 17
Additional Information Concerning Shares 17
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Independent Public Accountants 18
- -------------------------------------------------------------------------------
Legal Counsel 18
Miscellaneous 19
- -------------------------------------------------------------------------------
Control Persons and Principal Holders of
Securities 19
Banking Laws 19
Shareholder Approvals 20
Financial Statements 20
Appendix A 21
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<PAGE>
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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.
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, unless permitted to exceed these limitations
by an exemptive order from the Securities and Exchange Commission ("SEC").
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 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.
Trustees and Officers
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The Trustees and Executive Officers of the Company, and their business
addresses, birthdates, and principal occupations during the past five years,
are:
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William O. Vann *
Box 757
Birmingham, AL 35201
Birthdate: January 28, 1942
Trustee and Chairman of the Board
Chairman and Chief Executive Officer, Young & Vann Supply Co. (since
1987); Partner, B &B Investments; Trustee and Past Chairman, The Childrens'
Hospital of Alabama.
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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.
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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.
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Peter J. Germain
Federated Investors Tower
Pittsburgh, PA 15222
Birthdate: September 3, 1959
Secretary
Senior Corporate Counsel, Federated Investors
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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).
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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.
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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.
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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 Pfeiffer 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.
<PAGE>
Trustees Compensation
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AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
Company + Company*#
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William O. Vann, $8,000
Trustee and Chairman of
the Board
Thomas L. Merrill, Sr. $7,000
Trustee
Charles G. Brown, III $7,000
Trustee
Russell W. Chambliss $8,000
Trustee
Thomas Grady $7,000
Trustee
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* Information is furnished for the fiscal year ended April 30, 1997. 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.
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.
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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, 1997, 1996 and 1995, the
Adviser earned advisory fees totaling $2,163,019, $1,546,225 and $1,274,354,
respectively, for the Treasury Money Fund, $528,799, $491,657, and $341,359,
respectively, for the Bond Fund, and $1,750,919, $1,257,372, and $643,017,
respectively, for the Stock Fund. For the same periods, the Adviser waived
advisory fees totaling $865,208, $618,490, and $676,587, respectively, for the
Treasury Money Fund, $44,067, $40,971, and $144,939, respectively, for the Bond
Fund and $70,037, $124,311, and $315,704, respectively, for the Stock Fund. For
the fiscal year ended April 30, 1997 and the period from January 10, 1996 (date
of initial public investment) to April 30, 1996, the Adviser earned advisory
fees for the Income Fund of $248,407 and $122,936, respectively, $113,723 and
$10,245 of which was voluntarily waived, respectively.
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
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Fund Administration
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Company for a fee as described in
the prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrator." For the fiscal years ended
April 30, 1997, 1996 and 1995, the Administrator earned the following fees:
$526,824, $408,456, and $359,519, respectively, for the Treasury Money Fund,
$284,437, $222,204, and $118,687, respectively, for the Stock Fund, and
$107,564, $108,910, and $80,264, respectively, for the Bond Fund. For the fiscal
years ended April 30, 1997, 1996 and 1995, the Administrator waived
administrative fees totaling $0, $57,426 and $76,476, respectively, for the
Treasury Money Fund, $0, $52,868 and $20,240, respectively, for the Stock Fund,
and $0, $27,289 and $12,242, respectively, for the Bond Fund. For the fiscal
year ended April 30, 1997 and the period from January 10, 1996 (date of initial
public investment) to April 30, 1996, the Administrator earned fees of $100,160
and $30,501, respectively, for the Income Fund, $21,981 and $0 of which was
waived, respectively.
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 Companymaintains custody of the Company's assets
pursuant to a custodian agreement. It is anticipated that, on or about July 11,
1997, SouthTrust Bank of Alabama, N.A. will enter into a custody agreement with
the Company, and replace State Street Bank and Trust Company as the Company's
custodian. 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
ederated 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, 1997, 1996 and 1995, the Transfer Agent
earned the following fees: $52,535, $25,921, and $29,715, respectively, for the
Treasury Money Fund, $38,744, $29,503, and $35,669, respectively, for the Stock
Fund, and $34,288, $30,525, and $28,196, respectively, for the Bond Fund. For
the fiscal year ended April 30, 1997 and the period from January 10, 1996 (date
of initial public investment) to April 30, 1996, the Transfer Agent earned
$24,658 and $2,288, respectively, 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, 1997, 1996 and 1995, the Stock Fund paid $292,801, $238,955, and
$144,957, 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, 1997 and 1996, the portfolio turnover rates for the Bond Fund were 63%
and 28%, respectively, and for the Stock Fund were 27% and 39%, respectively.
For the fiscal year ended April 30, 1997 and the period from January 10, 1996
(date of initial public investment) to April 30, 1996, the portfolio turnover
rates for the Income Fund were 112% and 61%, respectively.
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, 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
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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, 1997 was 4.83%. The effective yield for the Treasury Money Fund for
the same period was 4.95%.
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, 1997 was 6.09%, and the standard yield of the
Stock Fund for the same period was 0.98%. The standard yield of the Income Fund
for the 30-day period ended April 30, 1997 was 5.53%.
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, 1997 and average annual total returns for the
period from May 8, 1992 (date of initial public investment) to April 30, 1997,
for the Bond Fund were 5.98% and 6.33%, respectively, and the Stock Fund were
19.99% and 14.00%, and Treasury Money Fund were 4.88% and 4.12%, 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 returns after the deduction of the
applicable front-end sales charges for the same period for the Bond Fund were
2.30% and 5.58%, and for the Stock Fund were 14.58% and 12.95%, respectively.
Cumulative total return reflects the Income Fund's total performance over a
specific period of time. The cumulative total returns for the Income Fund for
the fiscal year ended April 30, 1997 and for the period from January 10, 1996
(date of initial public investment) to April 30, 1997 were 4.90% and 2.98%,
respectively. The total return figures do not reflect the deduction of the
maximum front-end sales charge which may be assessed on purchases of the Income
Fund. The cumulative total returns after the deduction of the applicable
front-end sales charge for the same period for the Income Fund were 1.27% and
0.24%, respectively.
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.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by the Funds' portfolio managers and their views and analysis on
how such developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.
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.
Legal Counsel
- -------------------------------------------------------------------------------
Counsel. The law firm of Bell, Boyd & Lloyd, Chicago, Illinois, serves as
counsel to the Trustees.
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<PAGE>
Miscellaneous
- ------------------------------------------------------------------------------
Control Persons and Principal Holders of Securities
As of June 2, 1997, 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 96.56% Money Market
Fund 2554
Birmingham, Alabama
35290
Bond Fund Lynspen &
Company 98.04%
P.O. Box 2554
Birmingham, Alabama 35290
Stock Fund Lynspen &
Company 95.67%
P.O. Box 2554
Birmingham, Alabama 35290
Income Fund Lynspen &
Company 97.63%
P.O. Box 2554
Birmingham, Alabama
35290
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, 1997, are
incorporated herein by reference to the Annual Report of the Fund dated April
30, 1997 (File Nos. 33-46190 and 811-6580). A copy of the report may be obtained
without charge by contacting the Fund.
<PAGE>
Appendix A
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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.
Cusip 844734202
Cusip 844734301
Cusip 844734103
Cusip 844734400
3052010B (6/97)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (Incorporated by reference to the
Annual Report of the Registrant dated
April 30, 1997 pursuant to Rule 411
under the Securities Act of 1933.)
(File Nos. 33-46190 and 811-6580).
(b) Exhibits:
(1) (i) Conformed copy of Master Trust Agreement
of the Registrant; (1) (ii) Conformed copy
of Amendment No. 1 to Master Trust
Agreement; (2) (iii) Conformed copy of
Amendment No. 4 to Master Trust Agreement;
(7) (iv) Conformed copy of Amendment No.2 to
the Master Trust Agreement; (9) (v)
Conformed copy of Amendment No.3 to the
Master Trust Agreement; (9) (vi) Conformed
copy of Amendment No.6 to the Master Trust
Agreement; (9)
(2) Copy of By-Laws of the Registrant; (1)
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant; (7)
(5) (i) Conformed copy of copy of Investment
Advisory Contract of the Registrant; (3)
(ii) Conformed copy of Amendment to Investment
Advisory Contract dated September 1, 1995;
(8)
(6) (i) Conformed copy of Distributor's Contract
of the Registrant; (5)
(ii) Conformed copy of Exhibit D to
Distributor's Contract; (9)
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant; (5)
+ Exhibits are filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed on March 5, 1992 (File
Nos. 33-46190 and 811-6580).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 1, 1992 (File
Nos. 33-46190 and 811-6580).
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 filed on November 27, 1992 (File Nos.
33-46190 and
811-6580).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 filed on June 24, 1994 (File Nos.
33-46190 and 811-6580).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on September 29, 1995
(File Nos. 33-46190 and 811-6580).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 filed on October 13, 1995 (File Nos.
33-46190 and 811-6580).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 filed on June 27, 1996 (File Nos. 33-46190 and 811-6580).
<PAGE>
(9) (i) Conformed copy of Administrative Services Agreement of
Registrant; (5)
(ii) Conformed copy of Amendment No.1 to Administrative
Services Agreement of
Registrant; (6)
(iii) Conformed copy of Fund Accounting and Shareholder
Recordkeeping Agreement of
Registrant; (5)
(iv) Conformed copy of Electronic Communications and
Recordkeeping Agreement; (6)
(v) Conformed copy of Amendment No. 1 to Schedule A, Fund
Accounting and Shareholder
Recordkeeping Agreement; +
(vi) Conformed copy of Amendment No. 1 to Schedule C, Fund
Accounting and Shareholder
Recordkeeping Agreement; +
(10) Conformed copy of Opinion and Consent of Counsel as to legality
of shares being registered
(2);
(11) Conformed consent of Independent Public Auditors; +
(12) Not applicable;
(13) Conformed copy of Purchase Agreement of the Registrant; (3)
(14) Not applicable;
(15) (i) Copy of 12b-1 Agreement and copy of Exhibit A
to the Agreement dated September 1, 1995; (8)
(ii) Copy of Rule 12b-1 Plan; (8)
(iii) Conformed copy of Exhibit A to the 12b-1 Plan dated
September 1, 1995; (9)
(16) Copy of Schedule for Computation of Fund Performance; (9)
(17) Copy of Financial Data Schedules; +
(18) Not applicable;
(19) Conformed copy of Power of Attorney. +
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
+ Exhibits are filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on May 1, 1992 (File
Nos. 33-46190 and 811-6580).
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 filed on November 27, 1992 (File Nos.
33-46190 and
811-6580).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 filed on June 24, 1994 (File Nos.
33-46190 and 811-6580).
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 filed on June 23, 1995 (File Nos.
33-46190 and 811-6580).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 filed on October 13, 1995 (File Nos.
33-46190 and 811-6580).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 filed on June 27, 1996 (File Nos. 33-46190 and 811-6580).
<PAGE>
Item 26. Number of Holders of Securities:
Title of Class
Shares of beneficial interest Number of Record Holders
(no par value) as of June 2, 1997
Treasury Obligations
Money Market Fund 28
Bond Fund 31
Stock Fund 103
Income Fund 8
Item 27. Indemnification: (3)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the Investment
Adviser, see the section entitled "Management of the Funds" in
Part A.
To reach any of the following Officers and Directors of the
Investment Adviser, call SouthTrust Bank of Alabama, N.A.
<TABLE>
<CAPTION>
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
Name the Adviser the Past Two Years
<S> <C> <C>
Julian W. Banton Director, Chairman, Banking.
President, and Chief
Executive Officer
Gene Bartow Director Athletic Director,
University of
Alabama at
Birmingham.
Thomas E. Bradford, Jr. Director Chairman and Chief
Executive
Officer,
Bradford & Company.
Ronald G. Bruno Director Chairman, President and Chief
Executive
Officer, Bruno's
Inc.
H.M. Burt, Jr. Director Chairman and Chief
Executive Officer
Southern Tool Inc.
David J. Cooper Director President,
Cooper/T. Smith
Corporation
- -------------------------------
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 filed on November 27, 1992 (File Nos. 33-46190 and 811-
6580).
<PAGE>
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
Name the Adviser the Past Two Years
Sallie C. Creel Director Owner/Operator
Alabama Car
Rental.
James C. Harrison Director President and Chief
Executive
Officer,
Protective and
Industrial
Insurance Company
Chris H. Horgen Director Chairman and Chief
Executive Officer,
Nichols Research
Corporation
Dr. Judy M. Merritt Director President,
Jefferson State
College
William E. Smith, Jr. Director Chairman and Chief
Executive
Officer,
Royal Cup, Inc.
R. Neal Travis Director President, South
Central Bell
Telephone Company
Tom Coley Executive Vice Banking
President
Retail Division
Fred C. Crum, Jr. Executive Vice Banking
President
Corporate Division
E. Frank Schmidt Executive Vice Banking
President Alabama Markets
Charles M. Murrell Executive Vice
President SouthTrust Banking
Data Services
R. Glenn Eubanks Executive Vice Banking
President
Commercial Division
William C. Patterson Executive Vice Banking
President
Credit Division
<PAGE>
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
Name the Adviser the Past Two Years
William E. Pearson, Jr. Executive Vice Banking
President
Administration/
Finance Division
Dick White Executive Vice Banking
President
Asset Management
</TABLE>
Item 29. Principal Underwriters:
(a) 111 Corcoran Funds; Arrow Funds; Automated Government Money Trust;
BayFunds; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Biltmore Funds; The Biltmore
Municipal Funds; The Monitor Funds; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; Wesmark Funds; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
<S> <C> <C>
Richard B. Fisher Director, Chairman, Chief -- Federated Investors Tower
Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President and
Federated Investors Tower President, Federated, Treasurer
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary, --
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Matthew S. Propelka Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
</TABLE>
<PAGE>
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company P.O. Box 8600
("Transfer Agent and Dividend Disbursing Boston MA 02266-8600
Agent and Portfolio Recordkeeper ")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
SouthTrust Bank of Alabama, N.A. 420 North 20th Street
("Adviser") Birmingham, AL 35203
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, SOUTHTRUST VULCAN FUNDS,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
24th day of June, 1997.
SOUTHTRUST VULCAN FUNDS
BY: /s/Peter J. Germain
Peter J. Germain, Secretary
Attorney in Fact for William O. Vann
June 24, 1997
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
By: /s/Peter J. Germain
Peter J. Germain Attorney In Fact June 24, 1997
SECRETARY For the Persons
Listed Below
NAME TITLE
William O. Vann* Trustee and Chairman
of the Board
Charles G. Brown, III * Trustee
Russell W. Chambliss * Trustee
Edward C. Gonzales* President (Principal Executive Officer) and
Treasurer
(Principal Financial and
Accounting Officer)
Thomas L. Merrill, Sr. * Vice Chairman and
Trustee
Thomas Grady * Trustee
</TABLE>
* By Power of Attorney
Exhibit (11) under Form N-1A
Exhibit 23 under Item 601/Reg. SK
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
Post-Effective Amendment No. 8 to Form N-1A Registration Statement of SouthTrust
Vulcan Funds of our report dated June 10, 1997, on the financial statements of
SouthTrust Vulcan Funds (consisting of the Treasury Obligations Money Market,
the Stock, the Bond and the Income Portfolios), included in or made a part of
this registration statement.
By: /s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
June 24, 1997
Exhibit 9(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT NO. 1 TO SCHEDULE A
FUND ACCOUNTING AND SHAREHOLDER RECORDKEEPING AGREEMENT
This Amendment No. 1 to Schedule A of the Fund Accounting and
Shareholder Recordkeeping Agreement is made and entered into as of April 1, 1994
by and between the SouthTrust Vulcan Funds (the "Trust"), a Massachusetts
business trust, and Federated Administrative Services, assignee of Federated
Services Company ("Services"), a Delaware business trust.
WHEREAS, the Trust and Services entered into a Fund Accounting and
Shareholder Recordkeeping Agreement dated April 2, 1993 (the "Agreement"); and
WHEREAS, the Trust and Services have agreed to amend the Agreement in
certain respects;
NOW THEREFORE, the parties intending to be legally bound agree as
follows:
1. Schedule A to the Agreement is amended by deleting the
Schedule A in its entirety and replacing it with the
following:
SCHEDULE A
Fund Accounting
Fee Schedule
Annual Fees for Portfolio Record Keeping/Fund Accounting Services
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
<PAGE>
WITNESS the due execution hereof this November 1, 1996.
Attest: SOUTHTRUST VULCAN FUNDS
/s/ Peter J. Germain By:/s/ C. Christine Thomson
Secretary Vice President
Attest: FEDERATED ADMINISTRATIVE SERVICES
(assignee of Federated Services Company)
/s/ Thomas J. Ward By:/s/ Douglas L. Hein
Secretary Senior Vice President
Exhibit 9(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT NO. 1 TO SCHEDULE C
FUND ACCOUNTING AND SHAREHOLDER RECORDKEEPING AGREEMENT
This Amendment No. 1 to Schedule C of Fund Accounting and Shareholder
Recordkeeping Agreement is made and entered into as of April 1, 1994 by and
between the SouthTrust Vulcan Funds (the "Trust"), a Massachusetts business
trust, and Federated Administrative Services, assignee of Federated Services
Company ("Services"), a Delaware business trust.
WHEREAS, the Trust and Services entered into a Fund Accounting and
Shareholder Recordkeeping Agreement dated April 2, 1993 (the "Agreement"); and
WHEREAS, the Trust and Services have agreed to amend the Agreement in
certain respects;
NOW THEREFORE, the parties intending to be legally bound agree as
follows:
1. Schedule C to the Agreement is amended by deleting the Schedule C and
replacing it with the following:
SCHEDULE C
Fees and Expenses
Fund Accounting and Shareholder Recordkeeping Agreement
<TABLE>
<CAPTION>
<S> <C>
I. Transfer Agency Services
Base Fee* (Annual fee per fund, class or other subdivision) $24,000
Account Fee* (Annual account charge)
(includes system access and funds control and reconcilement
Daily dividend fund $16.00
Monthly dividend fund $10.00
Quarterly dividend fund $10.00
Contingent Deferred Sales Charge (Additionally) $ 5.00
(monthly and quarterly funds only)
Closed Accounts* $ 1.20
(annual)
Termination Fee (One time charge) $20,000
II. Shareholder Services
Other Account Fees* (Services or features not covered above)
Account Activity Processing $ 3.50
(includes account establishment, transaction and maintenance processing)
Account Servicing $ 4.50
(includes shareholder servicing and correspondence)
* All fees are annualized and will be prorated on a monthly basis for billing purposes. Out-of-pocket
expenses are not covered by these fees.
</TABLE>
<PAGE>
WITNESS the due execution hereof this November 1, 1996.
Attest: SOUTHTRUST VULCAN FUNDS
/s/ Peter J. Germain By:/s/ C. Christine Thomson
Secretary Vice President
Attest: FEDERATED SHAREHOLDER
SERVICES COMPANY
(formerly Federated Services Company)
/s/ Thomas J. Ward By:/s/ R. Jeffrey Niss
Secretary President
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of SOUTHTRUST VULCAN FUNDS and
the Deputy General Counsel of Federated Services Company, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and stead, in
any and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means
of the Securities and Exchange Commission's electronic disclosure system known
as EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ William O. Vann Chairman and Trustee July 24, 1996
- -----------------------------
William O. Vann
/s/ Edward C. Gonzales President and Treasurer July 24, 1996
Edward C. Gonzales (Chief Executive Officer,
rincipal Financial and
Accounting Officer)
/s/ Thomas L. Merrill, Sr. Trustee and Vice Chairman July 24, 1996
- -----------------------------
Thomas L. Merrill, Sr.
/s/ Charles G. Brown, III Trustee July 24, 1996
- -----------------------------
Charles G. Brown, III
/s/ Russell W. Chambliss Trustee July 24, 1996
- -----------------------------
Russell W. Chambliss
<PAGE>
SIGNATURES TITLE DATE
/s/ Thomas Grady Trustee July 24, 1996
Thomas Grady
Sworn to and subscribed before me this 24th day of July, 1996
/s/ Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Sept. 16, 1996
Member, Pennsylvania Association of Notaries
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> The SouthTrust Vulcan Funds
Vulcan Treasury Obligations Money Market Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 524,216,000
<INVESTMENTS-AT-VALUE> 524,216,000
<RECEIVABLES> 2,345,589
<ASSETS-OTHER> 939
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 526,562,528
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,100,459
<TOTAL-LIABILITIES> 2,100,459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 524,462,069
<SHARES-COMMON-STOCK> 524,462,069
<SHARES-COMMON-PRIOR> 445,728,957
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 524,462,069
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,874,042
<OTHER-INCOME> 0
<EXPENSES-NET> 2,214,345
<NET-INVESTMENT-INCOME> 20,659,697
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20,659,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,659,697
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,208,046,850
<NUMBER-OF-SHARES-REDEEMED> 1,129,943,491
<SHARES-REINVESTED> 629,753
<NET-CHANGE-IN-ASSETS> 78,733,112
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,163,019
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,079,553
<AVERAGE-NET-ASSETS> 432,603,968
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> SouthTrust Vulcan Funds
SouthTrust Vulcan Bond Fund
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 88,516,382
<INVESTMENTS-AT-VALUE> 89,085,335
<RECEIVABLES> 5,203,056
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,288,391
<PAYABLE-FOR-SECURITIES> 3,020,988
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,830
<TOTAL-LIABILITIES> 3,103,818
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 91,505,934
<SHARES-COMMON-STOCK> 9,166,016
<SHARES-COMMON-PRIOR> 7,677,650
<ACCUMULATED-NII-CURRENT> 111,097
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,001,411)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 568,953
<NET-ASSETS> 91,184,573
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,198,029
<OTHER-INCOME> 0
<EXPENSES-NET> 755,564
<NET-INVESTMENT-INCOME> 5,442,465
<REALIZED-GAINS-CURRENT> (15,674)
<APPREC-INCREASE-CURRENT> (288,699)
<NET-CHANGE-FROM-OPS> 5,138,092
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,678,876
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,223,005
<NUMBER-OF-SHARES-REDEEMED> 2,374,300
<SHARES-REINVESTED> 2,805
<NET-CHANGE-IN-ASSETS> 7,927,486
<ACCUMULATED-NII-PRIOR> 75,532
<ACCUMULATED-GAINS-PRIOR> (1,069,035)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 528,799
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 779,631
<AVERAGE-NET-ASSETS> 88,200,667
<PER-SHARE-NAV-BEGIN> 10.010
<PER-SHARE-NII> 0.610
<PER-SHARE-GAIN-APPREC> (0.030)
<PER-SHARE-DIVIDEND> 0.640
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.950
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> SouthTrust Vulcan Funds
Vulcan Stock Funds
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 211,945,887
<INVESTMENTS-AT-VALUE> 272,470,614
<RECEIVABLES> 365,341
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 272,835,955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 171,229
<TOTAL-LIABILITIES> 171,229
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,356,104
<SHARES-COMMON-STOCK> 17,244,227
<SHARES-COMMON-PRIOR> 14,195,120
<ACCUMULATED-NII-CURRENT> 91,994
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,691,901
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 60,524,727
<NET-ASSETS> 272,664,726
<DIVIDEND-INCOME> 3,957,093
<INTEREST-INCOME> 1,332,363
<OTHER-INCOME> 0
<EXPENSES-NET> 2,187,172
<NET-INVESTMENT-INCOME> 3,102,284
<REALIZED-GAINS-CURRENT> 19,606,552
<APPREC-INCREASE-CURRENT> 20,216,321
<NET-CHANGE-FROM-OPS> 42,925,157
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,209,583
<DISTRIBUTIONS-OF-GAINS> 17,630,011
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,804,196
<NUMBER-OF-SHARES-REDEEMED> 1,875,843
<SHARES-REINVESTED> 1,120,754
<NET-CHANGE-IN-ASSETS> 68,243,482
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 11,715,360
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,750,919
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,257,209
<AVERAGE-NET-ASSETS> 233,395,461
<PER-SHARE-NAV-BEGIN> 14.400
<PER-SHARE-NII> 0.200
<PER-SHARE-GAIN-APPREC> 2.590
<PER-SHARE-DIVIDEND> 0.210
<PER-SHARE-DISTRIBUTIONS> 1.170
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.810
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> SouthTrust Vulcan Funds
SouthTrust Vulcan Income Fund
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Apr-30-1997
<PERIOD-END> Apr-30-1997
<INVESTMENTS-AT-COST> 38,122,850
<INVESTMENTS-AT-VALUE> 38,174,211
<RECEIVABLES> 622,161
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,796,372
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 198,770
<TOTAL-LIABILITIES> 198,770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,288,292
<SHARES-COMMON-STOCK> 3,985,474
<SHARES-COMMON-PRIOR> 7,999,696
<ACCUMULATED-NII-CURRENT> 44,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,786,134)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,361
<NET-ASSETS> 38,597,602
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,694,807
<OTHER-INCOME> 0
<EXPENSES-NET> 378,837
<NET-INVESTMENT-INCOME> 2,315,970
<REALIZED-GAINS-CURRENT> (1,685,387)
<APPREC-INCREASE-CURRENT> 1,220,369
<NET-CHANGE-FROM-OPS> 1,850,952
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,329,572
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,031,600
<NUMBER-OF-SHARES-REDEEMED> 5,045,822
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (39,548,969)
<ACCUMULATED-NII-PRIOR> 47,172
<ACCUMULATED-GAINS-PRIOR> (90,234)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 248,407
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514,541
<AVERAGE-NET-ASSETS> 43,681,822
<PER-SHARE-NAV-BEGIN> 9.770
<PER-SHARE-NII> 0.560
<PER-SHARE-GAIN-APPREC> (0.090)
<PER-SHARE-DIVIDEND> 0.560
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.680
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
SOUTHTRUST VULCAN FUNDS
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900
June 24, 1997
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: SOUTHTRUST VULCAN FUNDS (the "Trust")
1933 Act File No. 33-46190
1940 Act File No. 811-6580
Dear Sir or Madam:
Post-Effective Amendment No. 8 under the Securities Act of 1933 and
Amendment No. 10 under the Investment Company Act of 1940 to the Registration
Statement of the above-referenced Trust is hereby electronically transmitted.
This filing has been electronically redlined to indicate the changes from the
Trust's currently effective Registration Statement.
This Trust is marketed through banks, savings associations or credit
unions.
As indicated on the facing page of the Amendment, the Registrant has
specified that it is to become effective June 30, 1997 pursuant to paragraph (b)
of Rule 485 under the Securities Act of 1933.
If you have any questions regarding this filing, please call me at
(412) 288-8157.
Very truly yours,
/s/ Mark R. Thompson
Mark R. Thompson
Compliance Analyst
Enclosures
