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Previous: SOUTHTRUST FUNDS, N-30D, 2000-06-26 |
Next: SOUTHTRUST FUNDS, 485BPOS, EX-99.DECTRUST, 2000-06-26 |
1933 Act File No. 33-46190
1940 Act File No. 811-6580
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--
X___
Pre-Effective Amendment No. .................... ______
-------- ------
Post-Effective Amendment No. 14......................
----- --
X___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X___
------
Amendment No. 16 .................................. X___
-------- ------
SOUTHTRUST FUNDS
(formerly SouthTrust Vulcan Funds)
(Exact Name of Registrant as Specified in Charter)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
X immediately upon filing pursuant to paragraph (b) on _____________ 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.
[Graphic Representation Omitted--See Appendix]
Not part of the prospectus
What is the
Bond Fund’s Goal?
|
What are the
Fund’s Main Investment Strategies?
|
What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | Fund | LBG/C | |||
|---|---|---|---|---|---|
| 1 Year | (7.54%) | (2.15%) | |||
| 5 Years | 5.71% | 7.61% | |||
| Start of Performance(1) | 5.42% | 7.01% | |||
(1)
|
The Fund’s
start of performance date was May 8, 1992.
|
What is the
Income Fund’s Goal?
|
What are the
Fund’s Main Investment Strategies?
|
What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | Fund | MLC/G 1-5 | |||
|---|---|---|---|---|---|
| 1 Year | (2.22%) | 2.19% | |||
| Start of Performance(1) | 3.54% | 5.45% | |||
(1)
|
The Fund’s
start of performance date was January 10, 1996.
|
What is the
Alabama Tax-Free Fund’s Goal?
|
What are the
Fund’s Main Investment Strategies?
|
What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | Fund | LB5YMB | |||
|---|---|---|---|---|---|
| 1 Year | (5.05%) | 0.73% | |||
| 5 Years | 3.92% | 5.71% | |||
| 10 Years | 4.27% | 6.23% | |||
*
|
The
SouthTrust Alabama Tax-Free Income Fund is the successor to
a
portfolio of a common trust fund managed by the Adviser. At the
Fund’s commencement of operations, the assets from the common
trust
fund were transferred to the Fund on August 20, 1999 in exchange
for Fund
shares. The quoted performance data includes the performance of
the common
trust fund for the periods before the Fund’s registration
statement
became effective on August 10, 1999, as adjusted to reflect the
Fund’s expenses and sales load. The common trust fund was not
registered under the 1940 Act and therefore was not subject to
certain
investment restrictions that are imposed by the 1940 Act. If the
common
trust fund had been registered under the 1940 Act, the performance
may
have been adversely affected.
|
| Bond
Fund |
Income
Fund |
Alabama
Tax-Free Income Fund |
||||
|---|---|---|---|---|---|---|
| Shareholder Fees | ||||||
| Fees Paid Directly From Your Investment | ||||||
| Maximum Sales
Charge (Load) Imposed on Purchases
(as a percentage of offering price) |
3.50% | 3.50% | 3.50% | |||
| Redemption Fee (as
a percentage of amount redeemed,
if applicable)(1) |
0.00% | 1.00% | 0.00% | |||
| Annual Fund Operating Expenses (Before Waiver)(2) | ||||||
| Expenses That
are Deducted From Fund Assets
(as percentage of average net assets) |
||||||
| Management Fee(3) | 0.60% | 0.60% | 0.60% | |||
| Distribution (12b-1) Fee(4) | None | 0.25% | 0.25% | |||
| Shareholder Services Fee(5) | 0.25% | 0.25% | 0.25% | |||
| Other Expenses(6) | 0.25% | 0.39% | 0.40% | |||
| Total Annual Fund Operating Expenses | 1.10% | 1.49% | 1.50% |
(1)
|
Applies only to
shares of the Bond Fund, Income Fund and the
Alabama
Tax-Free Income Fund purchases at net asset value (investments
in
excess of $1,000,000) which are redeemed within one year of
purchase. See
“How to Redeem and Exchange Shares”.
|
(2)
|
Although not
contractually obligated to do so, the adviser, shareholder
servicing agent
and administrator waived certain amounts. These are shown below
along with
the net expenses the Fund actually paid for the fiscal year ending
April
30, 2000.
|
| Total Waiver of Fund Expenses | 0.20% | 0.80% | 0.85% | |||
| Total
Actual
Annual Fund Operating Expenses
(after waiver) |
0.90% | 0.69% | 0.65% |
(3)
|
The Adviser
voluntarily waived a portion of the management fee. The Adviser
can
terminate this voluntary waiver at any time. The management fees
paid by
the Income Fund and Alabama Tax-Free Income Fund
(after the
voluntary waivers) were 0.30% and 0.20% respectively for the year
ended
April 30, 2000.
|
(4)
|
The Income Fund
and the Alabama Tax-Free Income Fund did not pay or
accrue the
distribution (12b-1) fee during the year ended April 30, 2000. The
Income Fund and Alabama Tax-Free Income Fund have no
intention of paying or accruing the distribution (12b-1) fee
during the
year ending April 30, 2001.
|
(5)
|
The shareholder
servicing agent voluntarily waived a portion of the shareholder
services
fee. The shareholder servicing agent can terminate this voluntary
waiver
at any time. The shareholder services fees paid by the Bond
Fund,
Income Fund and Alabama Tax-Free Income Fund (after
voluntary waivers) were 0.03%, 0.04%, and 0.05% respectively for
the year
ended April 30, 2000.
|
(6)
|
The Administrator
voluntarily waived a portion of the administrative fee of the
Income
Fund. The administrator can terminate this voluntary waiver at
any
time. Total other expenses paid by the Income Fund (after
the
voluntary waiver) were 0.30% for the year ended April 30, 2000.
Other
expenses for the Bond Fund and the Income Fund are
based on
estimated expenses for the year ending April 30, 2001. Other
expenses were
0.21% and 0.36% for the Bond Fund and Income Fund,
respectively, for the year ended April 30, 2000.
|
| 1 Year | 3 Years | 5 Years | 10 Years | |||||
|---|---|---|---|---|---|---|---|---|
| Bond Fund | $458 | $687 | $ 935 | $1,643 | ||||
| Income Fund | $496 | $805 | $1,135 | $2,076 | ||||
| Alabama Tax-Free Income Fund | $497 | $807 | $1,140 | $2,078 |
Treasury
Securities
|
Agency
Securities
|
Corporate
Debt Securities
|
Mortgage
Backed Securities
|
Asset Backed
Securities
|
Zero Coupon
Securities
|
General
Obligation Bonds
|
Special
Revenue Bonds
|
Private
Activity Bonds
|
Tax Increment
Financing Bonds
|
Municipal
Notes
|
•
|
Prices of fixed
income securities rise and fall in response to changes in the
interest
rate paid by similar securities. Generally, when interest rates
rise,
prices of fixed income securities fall. However, market factors,
such as
the demand for particular fixed income securities, may cause the
price of
certain fixed income securities to fall while the prices of other
securities rise or remain unchanged.
|
•
|
Interest rate
changes have a greater effect on the price of fixed income
securities with
longer durations. Duration measures the price sensitivity of a
fixed
income security to changes in interest rates.
|
•
|
Credit risk is the
possibility that an issuer will default on a security by failing
to pay
interest or principal when due. If an issuer defaults, the Fund
will lose
money.
|
•
|
Many fixed income
securities receive credit ratings from services such as Standard
&
Poor’s and Moody’s Investors Services, Inc. These
services
assign ratings to securities by assessing the likelihood of issuer
default. Lower credit ratings correspond to higher credit risk. If
a
security has not received a rating, a Fund must rely entirely upon
the
Adviser’s credit assessment.
|
•
|
Fixed income
securities generally compensate for greater credit risk by paying
interest
at a higher rate. The difference between the yield of a security
and the
yield of a U.S. Treasury security with a comparable maturity (the
spread)
measures the additional interest paid for risk. Spreads may
increase
generally in response to adverse economic or market conditions. A
security’s spread may also increase if the security’s
rating is
lowered, or the security is perceived to have an increased credit
risk. An
increase in the spread will cause the price of the security to
decline.
|
•
|
Credit risk
includes the possibility that a party to a transaction involving a
Fund
will fail to meet its obligations. This could cause a Fund to lose
the
benefit of the transaction or prevent a Fund from selling or
buying other
securities to implement its investment strategy.
|
•
|
Call risk is the
possibility that an issuer may redeem a fixed income security
before
maturity (a call) at a price below its current market price. An
increase
in the likelihood of a call may reduce the security’s
price.
|
•
|
If a fixed income
security is called, the Fund may have to reinvest the proceeds in
other
fixed income securities with lower interest rates, higher credit
risks, or
other less favorable characteristics.
|
•
|
Generally,
homeowners have the option to prepay their mortgages at any time
without
penalty. Homeowners frequently refinance high interest rate
mortgages when
mortgage rates fall. This results in the prepayment of mortgage
backed
securities with higher interest rates. Conversely, prepayments due
to
refinancings decrease when mortgage rates increase. This extends
the life
of mortgage backed securities with lower interest rates. Other
economic
factors can also lead to increases or decreases in prepayments.
Increases
in prepayments of high interest rate mortgage backed securities,
or
decreases in prepayments of lower interest rate mortgage backed
securities, may reduce their yield and price. These factors,
particularly
the relationship between interest rates and mortgage prepayments
makes the
price of mortgage backed securities more volatile than many other
types of
fixed income securities with comparable credit risks.
|
•
|
Mortgage backed
securities generally compensate for greater prepayment risk by
paying a
higher yield. The difference between the yield of a mortgage
backed
security and the yield of a U.S. Treasury security with a
comparable
maturity (the spread) measures the additional interest paid for
risk.
Spreads may increase generally in response to adverse economic or
market
conditions. A security’s spread may also increase if the
security is
perceived to have an increased prepayment risk or perceived to
have less
market demand. An increase in the spread will cause the price of
the
security to decline.
|
•
|
The Fund may have
to reinvest the proceeds of mortgage prepayments in other fixed
income
securities with lower interest rates, higher prepayment risks, or
other
less favorable characteristics.
|
•
|
Local political and
economic factors may adversely affect the value and liquidity of
municipal
securities held by Alabama Tax-Free Income Fund. The value
of
municipal securities can be affected more by supply and demand
factors or
the creditworthiness of the issuer than market interest rates.
Repayment
of municipal securities depends on the ability of the issuer or
project
backing such securities to generate taxes or revenues. Because the
Fund
invests primarily in Alabama, it may be adversely affected by the
factors
or events particular to the state.
|
•
|
The Alabama
Tax-Free Income Fund is not diversified as defined by the
Investment
Company Act of 1940. Compared to diversified funds, it may invest
a higher
percentage of its assets among fewer issuers of portfolio
securities. This
increases the Fund’s risk by magnifying the impact
(positively or
negatively) that any one issuer has on the Fund’s share price
and
performance.
|
•
|
In order to be
tax-exempt, municipal securities must meet certain legal
requirements.
Failure to meet such requirements may cause the interest received
and
distributed by the Alabama Tax-Free Income Fund to
shareholders to
be taxable.
|
•
|
Changes or proposed
changes in federal tax laws may cause the prices of municipal
securities
to fall.
|
| Purchase Amount | Sales Charge
as a Percentage of Public Offering Price |
Sales Charge
as a Percentage of Net Amount Invested |
Dealer
Allowance as a Percentage of Offering Price |
|||
|---|---|---|---|---|---|---|
| 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 million | 2.00% | 2.04% | 1.50% | |||
| $1 million or greater*. | 0.00% | 0.00% | 0.00% |
*
|
A redemption fee of
1% may be imposed on certain redemptions made within one year of
purchase.
See “How to Redeem and Exchange Shares.”
|
The sales charge
at purchase may be reduced or eliminated by:
|
•
|
purchasing shares
in greater quantities to reduce applicable sales
charges;
|
•
|
combining
concurrent purchases of shares by you, your spouse, and your
children
under age 21;
|
•
|
accumulating
purchases (in calculating the sales charge on an additional
purchase,
include the current value of previous share purchases still
invested in
the Fund); or
|
•
|
signing a letter of
intent to purchase a specific dollar amount of shares within 13
months
(call your SouthTrust Funds Dealer or the Fund for more
information).
|
The sales charge
will be eliminated when you purchase shares:
|
•
|
of $1 million or
more;
|
•
|
by reinvesting
redemption proceeds within 30 days of redeeming shares;
and
|
•
|
by exchanging
shares of a Fund for other SouthTrust Funds or Class A Shares in
certain
funds which are distributed by Federated Securities Corp.
(Federated
Funds).
|
•
|
Establish your
account with the Fund by submitting a completed account
application;
and
|
•
|
Send your payment
to the Fund by Federal Reserve wire or check.
|
By
Check
|
By
Wire
|
By
Telephone
|
•
|
Establish an
account with a SouthTrust Funds Dealer; and
|
•
|
Submit your
purchase order to your SouthTrust Funds Dealer before the end of
trading
on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next
calculated NAV if the SouthTrust Funds Dealer forwards the order
to the
Fund on the same day and the Fund receives payment within three
business
days. You will become the owner of shares and receive dividends
when the
Fund receives your payment. SouthTrust Funds Dealers should send
payments
according to the instructions in the sections “By Check”
or
“By Wire.”
|
By
Telephone
|
By
Mail
|
•
|
Fund name, account
number and account registration;
|
•
|
amount to be
redeemed or exchanged;
|
•
|
signatures of all
shareholders exactly as registered; and
|
•
|
if exchanging,
the Fund name, account number and account registration into
which you
are exchanging.
|
Signature
Guarantees
|
•
|
your redemption
will be sent to an address other than the address of
record;
|
•
|
your redemption
will be sent to an address of record that was changed within the
last 30
days;
|
•
|
a redemption is
payable to someone other than the shareholder(s) of record;
or
|
•
|
if exchanging
(transferring) into another fund with a different shareholder
registration.
|
•
|
an electronic
transfer to your account at a financial institution that is an ACH
member;
or
|
•
|
wire payment to
your account at a domestic commercial bank that is a Federal
Reserve
System member.
|
Redemption in
Kind
|
•
|
to allow your
purchase to clear;
|
•
|
during periods of
market volatility; or
|
•
|
when a
shareholder’s trade activity or amount adversely impacts a
Fund’s ability to manage its assets.
|
•
|
exchange shares
having a net asset value of at least $1,000;
|
•
|
ensure that the
account registrations are identical;
|
•
|
meet any minimum
initial investment requirements; and
|
•
|
receive a
prospectus for the fund into which you wish to
exchange.
|
Telephone
Transactions
|
Share
Certificates
|
| Year Ended April 30, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 | 1999 | 1998 | 1997 | 1996(1) | |||||||||||||
| Net Asset Value, Beginning of Period | $ 9.78 | $ 9.81 | $ 9.68 | $ 9.77 | $ 10.00 | ||||||||||||
| Income from Investment Operations: | |||||||||||||||||
| Net investment income | 0.58 | 0.57 | 0.58 | 0.56 | 0.16 | ||||||||||||
| Net realized and unrealized gain
(loss) on
investments |
(0.37 | ) | (0.03 | ) | 0.13 | (0.09 | ) | (0.25 | ) | ||||||||
| Total from investment operations | 0.21 | 0.54 | 0.71 | 0.47 | (0.09 | ) | |||||||||||
| Less Distributions: | |||||||||||||||||
| Distributions from net investment
income |
(0.58 | ) | (0.57 | ) | (0.58 | ) | (0.56 | ) | (0.14 | ) | |||||||
| Net Asset Value, End of Period | $ 9.41 | $ 9.78 | $ 9.81 | $ 9.68 | $ 9.77 | ||||||||||||
| Total Return(2) | 2.25 | % | 5.58 | % | 7.46 | % | 4.90 | % | (0.93 | )% | |||||||
| Ratios to Average Net Assets: | |||||||||||||||||
| Expenses | 0.64 | % | 0.75 | % | 0.75 | % | 0.92 | % | 0.85 | %(3) | |||||||
| Net investment income | 6.13 | % | 5.76 | % | 5.86 | % | 5.59 | % | 5.30 | %(3) | |||||||
| Expense Waiver/Reimbursements(4) | 0.57 | % | 0.41 | % | 0.44 | % | 0.32 | % | 0.05 | %(3) | |||||||
| Supplemental Data: | |||||||||||||||||
| Net assets, end of period (000 omitted) | $64,262 | $52,446 | $39,969 | $38,598 | $78,147 | ||||||||||||
| Portfolio turnover | 85 | % | 48 | % | 112 | % | 112 | % | 61 | % | |||||||
(1)
|
Reflects operations
for the period from January 10, 1996 (date of initial public
investment)
to April 30, 1996.
|
(2)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(3)
|
Computed on an
annualized basis.
|
(4)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Year Ended April 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 | 1999 | 1998 | 1997 | 1996 | |||||||||||
| Net Asset Value, Beginning of Period | $ 10.24 | $ 10.40 | $ 9.95 | $ 10.01 | $ 9.95 | ||||||||||
| Income from Investment Operations: | |||||||||||||||
| Net investment income | 0.58 | 0.55 | 0.60 | 0.61 | 0.59 | ||||||||||
| Net realized and unrealized gain (loss)
on investments |
(0.57 | ) | 0.02 | 0.45 | (0.03 | ) | 0.03 | ||||||||
| Total from investment operations | 0.01 | 0.57 | 1.05 | 0.58 | 0.62 | ||||||||||
| Less Distributions: | |||||||||||||||
| Distributions from net investment
income |
(0.58 | ) | (0.56 | ) | (0.60 | ) | (0.64 | ) | (0.56 | ) | |||||
| Distributions from net realized gain
on investments |
— | (0.18 | ) | — | — | — | |||||||||
| Total distributions | (0.58 | ) | (0.74 | ) | (0.60 | ) | (0.64 | ) | (0.56 | ) | |||||
| Net Asset Value, End of Period | $ 9.67 | $ 10.24 | $ 10.40 | $ 9.95 | $ 10.01 | ||||||||||
| Total Return(1) | 0.15 | % | 5.54 | % | 10.80 | % | 5.98 | % | 6.78 | % | |||||
| Ratios to Average Net Assets: | |||||||||||||||
| Expenses | 0.84 | % | 0.84 | % | 0.84 | % | 0.86 | % | 0.87 | % | |||||
| Net investment income | 5.88 | % | 5.26 | % | 5.88 | % | 6.18 | % | 6.28 | % | |||||
| Expenses Waiver/
Reimbursements(2) |
0.22 | % | — | 0.01 | % | 0.05 | % | 0.08 | % | ||||||
| Supplemental Data: | |||||||||||||||
| Net assets, end of period (000
omitted) |
$113,381 | $129,897 | $114,650 | $91,185 | $83,257 | ||||||||||
| Portfolio turnover | 76 | % | 119 | % | 107 | % | 63 | % | 28 | % | |||||
(1)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(2)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Period Ended
April 30, |
|||
|---|---|---|---|
| 2000(1) | |||
| Net Asset Value, Beginning of Period | $ 10.00 | ||
| Income from Investment Operations: | |||
| Net investment income | 0.29 | ||
| Net realized and unrealized loss on investments | (0.14 | ) | |
| Total from investment operations | 0.15 | ||
| Less Distributions: | |||
| Distributions from net investment income | (0.28 | ) | |
| Net Asset Value, End of Period | $ 9.87 | ||
| Total Return(2) | 1.47 | % | |
| Ratios to Average Net Assets: | |||
| Expenses | 0.65 | %(3) | |
| Net investment income | 4.17 | %(3) | |
| Expenses Waiver/Reimbursements(4) | 0.60 | %(3) | |
| Supplemental Data: | |||
| Net assets, end of period (000 omitted) | $52,766 | ||
| Portfolio turnover | 33 | % | |
(1)
|
Reflects operations
for the period from August 20, 1999 (date of initial public
investment) to
April 30, 2000.
|
(2)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(3)
|
Computed on an
annualized basis.
|
(4)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Not FDIC Insured | No Bank Guarantee | May Lose Value |
Not part of the prospectus
Investment Adviser:SouthTrust Bank
Distributor:Federated Securities Corp.
Cusip 844734202
Cusip 844734400
Cusip 844734608
G00859-04 (6/00)
STATEMENT OF ADDITIONAL INFORMATION
SOUTHTRUST BOND FUND
SOUTHTRUST INCOME FUND
SOUTHTRUST ALABAMA TAX-FREE INCOME FUND
PORTFOLIOS OF SOUTHTRUST FUNDS
<R>
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for SouthTrust Bond Fund, SouthTrust
Income Fund, and SouthTrust Alabama Tax-Free Income Fund dated June 30, 2000.
This SAI incorporates by reference the Funds' Annual Report. Obtain the
prospectus or the Annual Reports without charge by calling 1-800-843-8618.
June 30, 2000
CONTENTS
How are the Funds Organized?
2
Securities in Which the Funds Invest
2
What do Shares Cost?
15
How are the Funds Sold?
16
Exchanging Securities for Shares
17
Subaccounting Services
17
Redemption Fee
17
Redemption in Kind
17
Massachusetts Partnership Law
18
Account and Share Information
18
Tax Information
19
Who Manages and Provides Services
to the Funds?19
How Does the Funds Measure
Performance? 22
Financial Information
25
Investment Ratings
25
Addresses Back
Cover
CUSIP 844734202
CUSIP 844734400
CUSIP 844734608
G00859-07 (6/00)
</R>
HOW ARE THE FUNDS ORGANIZED?
The SouthTrust Bond Fund and SouthTrust Income Fund are diversified portfolios
of SouthTrust Funds (Company). The Alabama Tax-Free Income Fund is a
non-diversified portfolio of the Company. The Company is an open-end management
investment company that was established as a Massachusetts business trust under
the laws of the Commonwealth of Massachusetts on March 4, 1992. The Company may
offer separate series of shares representing interests in separate portfolios of
securities.. On June 30, 1998, the name of the Company changed from "Vulcan
Funds" to "SouthTrust Vulcan Funds." Effective July 22, 1998, the name of the
Company changed from "SouthTrust Vulcan Funds" to "SouthTrust Funds."
The Board of Trustees has established five diversified and one non-diversified
investment portfolios. This SAI relates to SouthTrust SouthTrust Bond Fund,
SouthTrust Income Fund, and SouthTrust Alabama Tax-Free Income Fund. The Funds'
investment adviser is SouthTrust Bank.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Funds may invest in the following
securities for any purpose that is consistent with its investment objective.
Following is a table that indicates which types of securities are a:
P =Principal investment of the Funds;
A = Acceptable (but not principal) investment of the Funds; or
N = Not an acceptable investment of the Funds.
ALABAMA TAX
SECURITIES BOND FUND INCOME FREE INCOME
FUND FUND
Equity Securities N A N
Common Stocks N A N
Preferred Stocks A A N
Warrants N A N
Fixed Income Securities P P A
Treasury Securities P P A
Agency Securities P P N
Corporate Debt Obligations 1 P P N
Commercial Paper A A N
Demand Instruments A A N
Taxable Municipal Bonds A A N
Mortgage-Backed Securities 2 P P N
Collateralized Mortgage Obligations P P N
(CMOs)
Sequential CMOs P P N
PACs, TACs and Companion Classes P P N
IOs and POs A A N
Floaters and Inverse Floaters A A N
Z Classes and Residual Classes A A N
Asset Backed Securities P P N
Zero Coupon Securities A A N
Bank Instruments A A A
Credit Enhancement A A A
Convertible Securities 3 A A N
Tax Exempt Securities N N P
General Obligation Bonds N N P
Special Revenue Bonds N N P
Private Activity Bonds N N A
Tax Increment Financing Bonds N N A
Municipal Notes N N A
Variable Rate Demand Instruments A A A
Foreign Securities A A N
Depositary Receipts A A N
Foreign Government Securities A A N
Derivative Contracts A A A
Special Transactions A A A
Repurchase Agreements A A A
Reverse Repurchase Agreements A A N
Delayed Delivery Transactions A A N
To Be Announced Securities A A N
Securities Lending 4 A A A
Asset Coverage A A A
Investing in Securities of Other A A A Investment Companies Illiquid Securities
A A A 1. THE BOND FUND AND INCOME FUND MAY INVEST IN CORPORATE DEBT OBLIGATIONS
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. 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.
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2. THE BOND FUND AND INCOME FUND WILL INVEST IN MORTGAGE BACKED SECURITIES WHICH
ARE RATED, AT THE TIME OF PURCHASE, INVESTMENT GRADE BY AN NRSRO, OR IF UNRATED,
OF COMPARABLE QUALITY AS DETERMINED BY THE ADVISER.
3. THE BOND FUND AND INCOME FUND WILL INVEST IN CONVERTIBLE SECURITIES WHICH ARE
RATED, AT THE TIME OF PURCHASE, INVESTMENT GRADE BY AN NRSRO, OR IF UNRATED, OF
COMPARABLE QUALITY AS DETERMINED BY THE ADVISER.
4. 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.
SECURITIES DESCRIPTIONS AND TECHNIQUES
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. A Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the INCOME FUND
invests. The BOND FUND may invest in preferred stocks.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock.
WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Funds
invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low
as treasury securities.
The Funds treat mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does
not reduce the interest rate and prepayment risks of these mortgage backed
securities.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Funds may also purchase interests in bank
loans to companies. The credit risks of corporate debt securities vary widely
among issuers.
In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated)
securities. This means that the issuer might not make payments on
subordinated securities while continuing to make payments on senior
securities. In addition, in the event of bankruptcy, holders of senior
securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the market
and credit risks as compared to other debt securities of the same issuer.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must
repay upon demand. Other demand instruments require a third party, such as
a dealer or bank, to repurchase the security for its face value upon
demand. The Funds treat demand instruments as short-term securities, even
though their stated maturity may extend beyond one year.
TAXABLE MUNICIPAL SECURITIES
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Funds may invest in taxable municipal securities.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class.
The degree of increased or decreased prepayment risks depends upon the structure
of the CMOs. However, the actual returns on any type of mortgage backed security
depend upon the performance of the underlying pool of mortgages, which no one
can predict and will vary among pools.
SEQUENTIAL CMOS
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all principal
payments after the first class is paid off. This process repeats for each
sequential class of CMO. As a result, each class of sequential pay CMOs
reduces the prepayment risks of subsequent classes.
PACS, TACS AND COMPANION CLASSES
More sophisticated CMOs include planned amortization classes (PACs)
and targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive principal
payments and prepayments in excess of the specified rate. In addition,
PACs will receive the companion classes' share of principal payments, if
necessary, to cover a shortfall in the prepayment rate. This helps PACs
and TACs to control prepayment risks by increasing the risks to their
companion classes.
IOS AND POS
CMOs may allocate interest payments to one class (Interest Only or
IOs) and principal payments to another class (Principal Only or POs). POs
increase in value when prepayment rates increase. In contrast, IOs
decrease in value when prepayments increase, because the underlying
mortgages generate less interest payments. However, IOs tend to increase
in value when interest rates rise (and prepayments decrease), making IOs a
useful hedge against interest rate risks.
FLOATERS AND INVERSE FLOATERS
Another variant allocates interest payments between two classes of
CMOs. One class (Floaters) receives a share of interest payments based
upon a market index such as LIBOR. The other class (Inverse Floaters)
receives any remaining interest payments from the underlying mortgages.
Floater classes receive more interest (and Inverse Floater classes receive
correspondingly less interest) as interest rates rise. This shifts
prepayment and interest rate risks from the Floater to the Inverse Floater
class, reducing the price volatility of the Floater class and increasing
the price volatility of the Inverse Floater class.
Z CLASSES AND RESIDUAL CLASSES
CMOs must allocate all payments received from the underlying
mortgages to some class. To capture any unallocated payments, CMOs
generally have an accrual (Z) class. Z classes do not receive any payments
from the underlying mortgages until all other CMO classes have been paid
off. Once this happens, holders of Z class CMOs receive all payments and
prepayments. Similarly, REMICs have residual interests that receive any
mortgage payments not allocated to another REMIC class.
The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. However, the actual returns on any type of mortgage
backed security depend upon the performance of the underlying pool of
mortgages, which no one can predict and will vary among pools.
ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks. Like CMOs, asset backed securities may be structured like Floaters,
Inverse Floaters, IOs and POs.
ZERO COUPON SECURITIES
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in-kind or PIK securities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks.
Bank instruments include bank accounts, time deposits, certificates
of deposit and banker's acceptances. Yankee instruments are
denominated in U.S. dollars and issued by U.S. branches of
foreign banks. Eurodollar instruments are denominated in U.S.
dollars and issued by non-U.S. branches of U.S. or foreign banks.
CREDIT ENHANCEMENT
All of the Funds may purchase securities backed by credit enhancement. Credit
enhancement consists of an arrangement in which a company agrees to pay amounts
due on a fixed income security if the issuer defaults. In some cases the company
providing credit enhancement makes all payments directly to the security holders
and receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason, the
Adviser usually evaluates the credit risk of a fixed income security based
solely upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that the BOND FUND and INCOME
FUND have the option to exchange for equity securities at a specified conversion
price. The option allows a Fund to realize additional returns if the market
price of the equity securities exceeds the conversion price. For example, a Fund
may hold fixed income securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the shares
of common stock reached $12, the Fund could realize an additional $2 per share
by converting its fixed income securities.
Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit a
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.
The Funds treat convertible securities as both fixed income and equity
securities for purposes of their investment policies and limitations, because of
their unique characteristics.
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
GENERAL OBLIGATION BONDS
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes sufficient
to pay principal and interest on the bonds. However, the issuer's authority
to impose additional taxes may be limited by its charter or state law.
SPECIAL REVENUE BONDS
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls, or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge the
tolls to repay the bonds. Therefore, a shortfall in the tolls normally would
result in a default on the bonds.
PRIVATE ACTIVITY BONDS
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The bonds
would be payable solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan normally
would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The ALABAMA TAX-FREE FUND may invest
in bonds subject to AMT.
TAX INCREMENT FINANCING BONDS
Tax increment financing (TIF) bonds are payable from increases in taxes or
other revenues attributable to projects financed by the bonds. For example, a
municipality may issue TIF bonds to redevelop a commercial area. The TIF bonds
would be payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and related
tax collections, failed to increase as anticipated.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
MUNICIPAL BOND INSURANCE
The ALABAMA TAX-FREE FUND may purchase municipal securities covered by insurance
which guarantees the timely payment of principal at maturity and interest on
such securities ("Policy" or "Policies"). These insured municipal securities are
either (1) covered by an insurance policy applicable to a particular security,
whether obtained by the issuer of the security or by a third party
("Issuer-Obtained Insurance") or (2) insured under master insurance policies
issued by municipal bond insurers, which may by purchased by the Fund. The
premiums for the Policies may be paid by the Fund and the yield on the Fund's
portfolio may be reduced thereby.
The Fund may require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities, when, in the opinion of the
Fund's Adviser, such insurance would benefit the Fund (for example, through
improvement of portfolio quality or increased liquidity of certain securities).
The Fund's Adviser anticipates that, under normal market conditions, between 50%
and 80% of the Fund's net assets will be invested in municipal securities which
are insured.
Issuer-Obtained Insurance policies are non-cancelable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by
the Fund.
The Fund may purchase two types of Policies issued by municipal bond insurers.
One type of Policy covers certain municipal securities only during the period in
which they are in the Fund's portfolio. In the event that a municipal security
covered by such a Policy is sold from the Fund, the insurer of the relevant
Policy will be liable for those payments of interest and principal which are due
and owing at the time of the sale.
The other type of Policy covers municipal securities not only while they remain
in the Fund's portfolio but also until their final maturity even if they are
sold out of the Fund's portfolio, so that the coverage may benefit all
subsequent holders of those municipal securities. The Fund will obtain insurance
which covers municipal securities until final maturity even after they are sold
out of the Fund's portfolio only if, in the judgment of the Fund's Adviser, the
Fund would receive net proceeds from the sale of those securities, after
deducting the cost of such permanent insurance and related fees, significantly
in excess of the proceeds it would receive if such municipal securities were
sold without insurance. Payments received from municipal bond issuers may not be
tax-exempt income to shareholders of the Fund.
The Fund may purchase Policies from MBIA Corp. (MBIA), AMBAC Indemnity
Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), or any other
municipal bond insurer which is rated AAA by Standard & Poor's (S&P) or Aaa by
Moody's Investors Services, Inc. (Moody's). Each Policy guarantees the payment
of principal and interest on those municipal securities it insures. The Policies
will have the same general characteristics and features. A municipal security
will be eligible for coverage if it meets certain requirements set forth in the
Policy. In the event interest or principal on an insured municipal security is
not paid when due, the insurer covering the security will be obligated under its
Policy to make such payment not later than 30 days after it has been notified by
the Fund that such non-payment has occurred.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on securities
insured by their Policies so long as such securities remain in the Fund's
portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any reason
except failure to pay premiums when due. MBIA, AMBAC, and FGIC will reserve the
right at any time upon 90 days' written notice to the Fund to refuse to insure
any additional municipal securities purchased by the Fund after the effective
date of such notice. The Fund reserves the right to terminate any of the
Policies if it determines that the benefits to the Fund of having its portfolio
insured under such Policy are not justified by the expense involved.
Additionally, the Fund reserves the right to enter into contracts with insurance
carriers other than MBIA, AMBAC, or FGIC if such carriers are rated AAA by S&P
or Aaa by Moody's.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are securities that require the issuer or a
third party, such as a dealer or bank, to repurchase the security for its face
value upon demand. The securities also pay interest at a variable rate intended
to cause the securities to trade at their face value. The Funds treat demand
instruments as short-term securities, because their variable interest rate
adjusts in response to changes in market rates, even though their stated
maturity may extend beyond thirteen months.
FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United States.
The Funds consider an issuer to be based outside the United States if:
o it is organized under the laws of, or has a principal office
located in, another country;
o the principal trading market for its securities is in another
country; or
o it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather than
in overseas markets. ADRs are also traded in U.S. dollars, eliminating the
need for foreign exchange transactions. The foreign securities underlying
European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside the
United States. Depositary receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks
of foreign investing.
FOREIGN GOVERNMENT SECURITIES
Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American
Development Bank.
Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit.
Further, foreign government securities include mortgage-related securities
issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures and options) require payments relating to a future trade involving
the underlying asset. Other derivative contracts require payments relating to
the income or returns from the underlying asset. The other party to a derivative
contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, a Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same
date. If the offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may
limit the amount of open contracts permitted at any one time. Such limits may
prevent a Fund from closing out a position. If this happens, the Fund will be
required to keep the contract open (even if it is losing money on the contract),
and to make any payments required under the contract (even if it has to sell
portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm a Fund by preventing it from disposing of or trading
any assets it has been using to secure its obligations under the contract. A
Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between a Fund and the counterparty. OTC contracts do not
necessarily have standard terms, so they cannot be directly offset with other
OTC contracts. In addition, OTC contracts with more specialized terms may be
more difficult to price than exchange traded contracts.
Depending upon how a Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose a Fund to credit risks in the event that a
counterparty defaults on the contract.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Funds will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Funds' custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which a Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which a Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
TO BE ANNOUNCED (TBA) SECURITIES
As with other when issued transactions, a seller agrees to issue a TBA security
at a future date. However, the seller does not specify the particular securities
to be delivered. Instead, a Fund agrees to accept any security that meets
specified terms. For example, in a TBA mortgage backed transaction, the Fund and
the seller would agree upon the issuer, interest rate and terms of the
underlying mortgages. However, the seller would not identify the specific
underlying mortgages until it issues the security. TBA mortgage backed
securities increase interest rate risks because the underlying mortgages may be
less favorable than anticipated by the Fund.
SECURITIES LENDING
The Funds may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, a Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
A Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for
the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Funds will either own the underlying assets, enter
into an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds a Fund's obligations. Unless a Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause a Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Funds may invest their
assets in securities of other investment companies, including the securities of
affiliated money market funds, as an efficient means of carrying out their
investment policies and managing their uninvested cash. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by a Fund in shares of other investment companies may
be subject to such duplicate expenses.
ILLIQUID SECURITIES
The Funds may invest up to 15% of the total value of their 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
TEMPORARY DEFENSIVE INVESTMENTS
The Funds may temporarily depart from their principal investment strategies by
investing their assets in U.S. government obligations, notes, zero coupon
securities (in the case of the BOND FUND and INCOME FUND), and repurchase
agreements collateralized by U.S. government obligations. In the case of ALABAMA
TAX-FREE FUND, temporary defensive investments may include taxable securities.
The Funds may do this to minimize potential losses and maintain liquidity to
meet shareholder redemptions during adverse market conditions. This may cause a
Fund to give up greater investment returns to maintain the safety of principal,
that is, the original amount invested by shareholders.
INVESTMENT RISKS
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
SECTOR RISKS
o Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the
Adviser allocates more of a Fund's portfolio holdings to a particular sector,
the Fund's performance will be more susceptible to any economic, business or
other developments which generally affect that sector.
LIQUIDITY RISKS
o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, a Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on a Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.
o Liquidity risk also refers to the possibility that a Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.
o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes a Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify a Fund's risk of loss and potential for gain.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.
o Many fixed income securities receive credit ratings from services such as S&P
and Moody's. These services assign ratings to securities by assessing the
likelihood of issuer default. Lower credit ratings correspond to higher
credit risk. If a security has not received a rating, the Funds must rely
entirely upon the Adviser's credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction involving
a Fund will fail to meet its obligations. This could cause a Fund to lose the
benefit of the transaction or prevent a Fund from selling or buying other
securities to implement its investment strategy.
PREPAYMENT RISKS
o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. As a result, increases
in prepayments of high interest rate mortgage backed securities, or decreases
in prepayments of lower interest rate mortgage backed securities, may reduce
their yield and price. This relationship between interest rates and mortgage
prepayments makes the price of mortgage backed securities more volatile than
most other types of fixed income securities with comparable credit risks.
CALL RISKS
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
o If a fixed income security is called, a Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. However, market factors, such
as the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
STOCK MARKET RISKS
o The value of equity securities in Income Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's share
price may decline and you could lose money. The Adviser attempts to manage
market risk by limiting the amount the Fund invests in each company's equity
securities. However, diversification will not protect the Fund against
widespread or prolonged declines in the stock market.
TAX RISKS
o In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by the Alabama Tax-Free Fund to shareholders to be
taxable.
o Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
CURRENCY RISKS
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and interest rate risk tends to make securities traded in foreign
markets more volatile than securities traded exclusively in the U.S.
o The Adviser attempts to manage currency risk by limiting the amount a Fund
invests in securities denominated in a particular currency. However,
diversification will not protect a Fund against a general increase in the
value of the U.S. dollar relative to other currencies.
RISKS OF FOREIGN INVESTING
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.
o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the United
States. Foreign companies may also receive less coverage than United States
companies by market analysts and the financial press. In addition, foreign
countries may lack uniform accounting, auditing and financial reporting
standards or regulatory requirements comparable to those applicable to U.S.
companies. These factors may prevent the Funds and their Adviser from
obtaining information concerning foreign companies that is as frequent,
extensive and reliable as the information available concerning companies in
the United States.
o Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Funds'
investments.
RISKS OF INVESTING IN ALABAMA
<R>
The economy of Alabama historically has relied on manufacturing and natural
resource-based industries which included textiles, apparel, food processing,
coal mining and timber. Throughout the 1990's, many of these industries have
faced intense competition from overseas and have been forced to downsize or
dramatically alter the way they do business in response to these threats. As a
result, the Alabama economy has undergone much diversification and transition in
the past decade. Since the 1991 recession, the State's proactive business
development policies have yielded big results with growth in high technology,
health care, banking and business services, particularly in the Birmingham,
Huntsville, and Mobile metropolitan areas. Once heavily reliant on the steel
industry, the Greater Birmingham area has exhibited significant transformation,
and has demonstrated its resiliency by attracting several major companies to the
region in recent years. This has fueled a dramatic suburban expansion that has
greatly benefited the real estate development and construction trades.
</R>
The outlook for the future is that modest economic growth will continue with
growth in some industries more than offsetting downsizing in the textile and
apparel sectors. Particularly noteworthy is growth associated with automobile
manufacturing as Mercedes-Benz (a subsidiary of Daimler-Chrysler) has operated
an assembly plant in Vance, Alabama since 1998 and Honda has recently announced
that it will build a plant in Lincoln, Alabama which will come online in 2001 to
meet increased demand for sport-utility vehicles. This should allow solid
employment growth to continue with unemployment expected to keep pace with the
national average as it has substantially closed the gap. These trends indicate
stable to modestly improving demographic and credit fundamentals for issuers of
municipal debt within the State.
The State has been characterized by conservative financial management and fiscal
practices as is evidenced by its fairly low general obligation debt burden and
its ability to consistently maintain a AA credit rating from both S&P and
Moody's. The state constitution does not allow for deficit spending so should a
revenue shortfall occur, the governor is required to cutback spending across the
board. This has not occurred since 1993 and is not expected in the current year.
Governor Don Siegelman's proposal to establish a state lottery would provide an
additional revenue source and would be viewed as a positive development from a
credit analysis standpoint. This proposal is currently pending in the state
legislature. A diversifying economic base coupled with sound fiscal management
leaves Alabama well-positioned for consistent growth looking ahead.
INVESTMENT LIMITATIONS
The following investment limitations pertain to each of the SouthTrust
Funds. 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. 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, provided that (a) there is no limitation with respect to
(i)instruments that are issued (as defined in Investment Limitation No. 1 above)
o 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 agreement
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).
4. Purchase or sell real estate, except that a Fund may purchase securities of
issuers which deal in real estate and may purchase securities which are secured
by interests in real estate.
5. 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 Investment Company Act of 1940.
6. 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.
7. 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.
8. Purchase securities of companies for the purpose of exercising
control.
9. 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.
10. 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
insecurities on a when-issued or forward commitment basis, and except that
anon-money market fund may enter into forward foreign currency contracts and
options thereon in accordance with its investment objectives and policies.
11. 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.
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 Investment Company Act of 1940 (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.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD AND BY
THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT").
PORTFOLIO TURNOVER
The Bond Fund experienced higher turnover variation during the past two years.
The Bond Fund's portfolio was restructured as a result of the Adviser's
expectation of the general direction of interest rates.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Funds' portfolio securities are determined as follows:
o for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
o in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices; o for bonds and other fixed
income securities, at the last sale price on a national securities exchange,
if available, otherwise, as determined by an independent pricing service;
o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the- counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and
o for all other securities, at fair value as determined in good
faith by the Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
WHAT DO SHARES COST?
The Funds' net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of each Fund.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE You can reduce or eliminate
the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases can reduce or eliminate the sales charge you pay. You can
combine purchases of Shares made on the same day by you, your spouse and your
children under age 21. In addition, purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account can be
combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Funds in calculating the applicable sales charge
on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
SouthTrust Funds in calculating the applicable sales charge.
LETTER OF INTENT
You can sign a Letter of Intent committing to purchase a certain amount of
Shares within a 13-month period to combine such purchases in calculating the
sales charge. The Funds' custodian will hold Shares in escrow equal to the
maximum applicable sales charge. If you complete the Letter of Intent, the
Custodian will release the Shares in escrow to your account. If you do not
fulfill the Letter of Intent, the Custodian will redeem the appropriate amount
from the Shares held in escrow to pay the sales charges that were not applied to
your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 30 days, your redemption proceeds at the next
determined NAV, without any sales charge.
PURCHASES BY AFFILIATES OF THE FUNDS
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:
o the current or retired Trustees, employees and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates and the immediate
family members of these individuals;
o retired employees of SouthTrust Corporation and it's affiliates;
o investors for whom SouthTrust Corporation or one of it's affiliates acts in a
fiduciary, advisory, custodial, agency or similar capacity (this does not
include transactions executed by SouthTrust Securities, Inc., including, but
not limited to, self-directed Individual Retirement Accounts); and
o employees who purchase Shares through a payroll deduction plan
sponsored by their employees.
HOW ARE THE FUNDS SOLD?
Under the Distributor's Contract with the Funds, the Distributor (Federated
Securities Corp.) located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779 offers Shares on a continuous, best-efforts basis.
FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.
RULE 12B-1 PLAN -INCOME FUND AND ALABAMA TAX FREE INCOME FUND As a
compensation-type plan, the Rule 12b-1 Plan is designed to pay the Distributor
(who may then pay investment professionals such as banks, broker/dealers, trust
departments of banks, and registered investment advisers) for marketing
activities (such as advertising, printing and distributing prospectuses, and
providing incentives to investment professionals) to promote sales of Shares so
that overall Fund assets are maintained or increased. This helps the Funds
achieve economies of scale, reduce per share expenses, and provide cash for
orderly portfolio management and Share redemptions. In addition, the Funds'
service providers that receive asset-based fees also benefit from stable or
increasing Fund assets.
The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Funds pay for any expenses of the Distributor
that exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Funds may pay SouthTrust Bank, for providing shareholder services and
maintaining shareholder accounts. SouthTrust Bank, may select others to perform
these services for their customers and may pay them fees.
SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker-dealers or banks) may be paid fees, in
significant amounts, out of the assets of the Distributor Federated Shareholder
Services Company (these fees do not come out of Fund assets). The Distributor
and/or Federated Shareholder Services Company may be reimbursed by the Adviser
or its affiliates.
Investment professionals receive such fees for providing distribution-related
and/or shareholder services, such as advertising, providing incentives to their
sales personnel, sponsoring other activities intended to promote sales, and
maintaining shareholder accounts These payments may be based upon such factors
as the number or value of Shares the investment professional sells or may sell;
the value of client assets invested; and/or the type and nature of sales or
marketing support furnished by the investment professional.
EXCHANGING SECURITIES FOR SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Funds reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Funds will value
your securities in the same manner as it values its assets. This exchange is
treated as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION FEE
<R>
In order to discourage short-term investments in the Funds, the Company charges
a redemption fee in connection with redemptions of shares held less than one
year which were purchased at net asset value (for $1,000,000 or more). The
charge is 1% of either the lesser of the value of the shares redeemed (exclusive
of reinvested dividends and capital gain distributions) or the total cost of
such shares, and is retained by the Fund and not paid to the Distributor.
</R>
The redemption fee is not assessed on:
o exchanges (except if shares acquired by exchange were then
redeemed within twelve months of the initial purchase);
o redemptions made in connection with distributions from qualified retirement
plans, 403(b) plans or IRAs due to death, disability or attainment of age
591/2;
o redemptions resulting from the tax-free return of excess
contributions to IRAs or employee benefit plans; and
o redemptions through certain automatic withdrawals.
REDEMPTION IN KIND
Although the Funds intend to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Funds' portfolio securities.
Because the Funds have elected to be governed by Rule 18f-1 under the 1940 Act,
the Funds are obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Funds' Board determines that payment should be in kind. In such a
case, the Funds will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Funds determines its NAV.
The portfolio securities will be selected in a manner that the Fund's Board
deems fair and equitable and, to the extent available, such securities will be
readily marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Company. To protect its
shareholders, the Company has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Company.
In the unlikely event a shareholder is held personally liable for the Company
obligations, the Company is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Company will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Company. Therefore, financial loss resulting from liability as
a shareholder will occur only if the Company itself cannot meet its obligations
to indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Funds gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Company have equal voting rights, except that in matters
affecting only a particular Fund, only Shares of that Fund or class are entitled
to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Company's outstanding shares
of all series entitled to vote.
<R>As of June 2, 2000 the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding BOND FUND Shares: Lynspen & Co., Birmingham
AL, owned approximately 11,011,042 shares (94.78%).
As of June 2, 2000 the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding INCOME FUND Shares: Lynspen & Co., Birmingham,
AL, owned approximately 6,300,008 shares (92.45%).
As of June 2, 2000 the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding ALABAMA TAX-FREE INCOME FUND Shares: Lynspen &
Co., Birmingham, AL, owned approximately 4,681,782 shares (95.23%).
</R>
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Funds intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Funds will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Company's other portfolios will be separate from those realized by a Fund.
FOREIGN INVESTMENTS
If a Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Funds intends to operate so as to qualify for treaty-reduced tax
rates when applicable.
Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.
If a Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of a Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?
BOARD OF TRUSTEES
The Board is responsible for managing the Company's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Company,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Company for
its most recent fiscal year. The Company is comprised of six funds.
As of June 2, 1999, the Funds' Board and Officers as a group owned less than 1%
of the Funds' outstanding Shares.
------------------------------------------------------------------------------
NAME
BIRTH DATE AGGREGATE
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION
POSITION WITH FOR PAST FIVE YEARS FROM COMPANY
COMPANY
-------------------- President, Tubular Products Company --------------
CHARLES G. BROWN, (since 1985); Managing Partner, Red $6,750
III Hollow Partnership.
Birth Date:
November 27, 1953
P.O. Box 170100
Birmingham, AL
CHAIRMAN AND TRUSTEE
-------------------- Chairman and Chief Executive Officer, ------------
WILLIAM O. VANN* Young & Vann Supply Co. (since 1987); $5,750
Birth Date: January Partner, B&B Investments; Trustee and
28, 1942 Past Chairman, The Childrens' Hospital
P.O. Box 757 of Alabama.
Birmingham, AL
TRUSTEE
-------------------- President (since 1989), Executive Vice --------------
RUSSELL W. CHAMBLISS President (1988), and Vice President $7,250
Birth Date: of Sales and Marketing (1984-1988),
December 26, 1951 Mason Corporation (manufacturer of
Mason Corporation roll formed aluminum and steel
P.O. Box 59226 products).
Birmingham, AL
TRUSTEE
-------------------- Partner of the law firm of Williams, --------------
THOMAS M. GRADY* Boger, Grady, Davis and Tuttle, P.A.; $6,500
Birth Date: July Chairman of the Board of Pfeiffer
25, 1941 University; Member of Cannon
-------------------- Foundation.
P.O. Box 2
Kannapolis, NC
TRUSTEE
-------------------- Vice President of Investments, Dunn ------------
LAWRENCE W. GREER, Investment Company (since 1992); $3,000
M.D. Chairman, Board of Directors, Southern
Birth Date: October BioSystems; Director, Daily Access
26, 1944 Concepts, Inc., Electronic HealthCare
3005 Brookwood Road Systems, Inc.
Birmingham, AL
TRUSTEE
-------------------- President and Chief Operating Officer ------------
BILLY L. HARBERT, of Bill Harbert International $6,000
JR.* Construction, Inc. (BHIC); Director,
Birth Date: May 23, Harbert International Establishment;
1965 Director Bilhar International
Bill Harbert Establishment; Member/Shareholder,
International Bonaventure Capital, LLC; Member
Construction, Inc. /Shareholder, Bonaventure Partners
P.O. Box 531390 LLC; Board Member/ Shareholder,
Birmingham, AL Founders Trust Company, Inc.,; and
TRUSTEE Member /Shareholder, treble Range
Partners, LLC.
-------------------- President, Executive Vice President --------------
EDWARD C. GONZALES and Treasurer of some of the Funds in $0
Birth Date: October the Federated Fund Complex; Vice
22, 1930 Chairman, Federated Investors, Inc.;
Federated Investors Trustee, Federated Administrative
Tower Services; formerly: Trustee or
1001 Liberty Avenue Director of some of the Funds in the
Pittsburgh, PA Federated Fund Complex; CEO and
PRESIDENT AND Chairman, Federated Administrative
TREASURER Services; Vice President, Federated
Investment Management Company,
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Director and Executive Vice President,
Federated Securities Corp.; Director,
Federated Services Company; Trustee,
Federated Shareholder Services Company.
-------------------- Senior Vice President and Director, --------------
PETER J. GERMAIN Mutual Fund Services Division, $0
Birth Date: Federated Services Company. Formerly
September 2, 1959 Senior Corporate Counsel, Federated
Federated Investors Investors, Inc.
Tower
Pittsburgh, PA
VICE PRESIDENT
-------------------- Vice President, Federated Services --------------
BETH BRODERICK Company (1997 to present); Client $0
Birth Date: August Services Officer, Federated Services
2, 1965 Company (1992-1997).
Federated Investors
Tower
Pittsburgh,
PA
VICE PRESIDENT AND
ASSISTANT TREASURER
-------------------- Corporate Counsel, Federated --------------
C. TODD GIBSON Investors, Inc.: Assistant Vice $0
Birth Date: May 17, President, Federated Administrative
1967 Services.
Federated investors
Tower
Pittsburgh, PA
SECRETARY
* AN ASTERISK DENOTES A TRUSTEE WHO IS DEEMED TO BE AN INTERESTED PERSON AS
DEFINED IN THE1940 ACT. The Trust has a deferred compensation plan (the "Plan")
that permits any Trustee that is not an "affiliated person" of the Trust to
elect to defer receipt of all or a portion of his or her compensation. The
deferred compensation that would have otherwise been paid to the Trustee is
invested, at the Trustee's direction, in one or more of the SouthTrust Funds. A
Trustee may elect to participate in the Plan during any quarter. At the time for
commencing distributions from a Trustee's deferral account, which is no later
than when the Trustee ceases to be a member of the board, the Trustee may elect
to receive distributions in a lump sum or on an annual or quarterly basis over a
period of five years.
INVESTMENT ADVISER
The Adviser, SouthTrust Bank, conducts investment research and makes investment
decisions for the Funds.
The Adviser shall not be liable to the Company or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Company.
<R>
CODE OF ETHICS- RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Funds, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Company Trustees, and certain other employees. Although
they do permit these people to trade in securities, including those that the
Funds could buy, they also contain significant safeguards designed to protect
the Funds and its shareholders from abuses in this area, such as requirements to
obtain prior approval for, and to report, particular transactions.
</R>
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. 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 may select brokers and dealers
based on whether they also offer research services (as described below). 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 Funds
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Company's Board.
RESEARCH SERVICES
Research services 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 may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
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 those 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.
Investment decisions for the Funds are made independently from those of other
accounts managed by the Adviser. When the Funds and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Funds and the account(s) in
a manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Funds, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Funds.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Funds. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets as
specified below:
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE FUNDS
ADMINISTRATIVE FEE
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million
The administrative fee received during any fiscal year shall be at least $50,000
per portfolio for BOND FUND, $100, 000 for INCOME FUND, and $50,000 for ALABAMA
TAX- FREE INCOME FUND. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
-------------------------------------------------------------------------
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
SouthTrust Bank, is custodian for the securities and cash of the Funds.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Funds pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
<R>
The independent auditor for the Funds, Arthur Andersen, plans and performs its
audit so that it may provide an opinion as to whether the Funds' financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUNDS FOR SERVICES
Bond Fund
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $733,438 $746,243 $604,746
Advisory Fee Reduction $0 $0 $5,747
Brokerage Commissions $0 $0 $0
Administrative Fee $125,434 $133,295 $114,117
Administrative Fee $0 $0 $0
Reduction
INCOME FUND
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $362,670 $273,245 $233,648
Advisory Fee Reduction $181,335 $136,623 $116,824
Brokerage Commissions $0 $0 $0
Administrative Fee $100,273 $99,799 $99,999
Administrative Fee $38,315 $51,209 $55,841
Reduction
ALABAMA TAX-FREE INCOME
FUND
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $220,379 N/A N/A
Advisory Fee Reduction $146,920 N/A N/A
Brokerage Commissions 0 N/A N/A
Administrative Fee $37,328 N/A N/A
Administrative Fee $0 N/A N/A
Reduction
</R>
-------------------------------------------------------------------------
HOW DOES THE FUNDS MEASURE PERFORMANCE?
The Funds may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELDS
<R>
BOND FUND total returns are given for the one-year, five-year, and start of
performance periods ended April 30, 2000.
BOND FUND yield is given for the 30-day period ended April 30, 2000.
START OF
30-DAY PERIOD 1 YEAR 5 YEARS PERFORMANCE
Total Return N/A (3.34%) 5.05% 5.52%
Yield 5.74% N/A N/A N/A
-------------------------------------------------------------------------------
-------------------------------------------------------------------------
INCOME FUND total returns are given for the one-year and start of performance
periods ended April 30, 2000.
INCOME FUND yield is given for the 30-day period ended April 30, 2000.
START OF
30-DAY PERIOD 1 YEAR PERFORMANCE
Total Return N/A (1.28%) 3.58%
Yield 5.65% N/A N/A
----------------------------------------------------------------------
-------------------------------------------------------------------------
ALABAMA TAX- FREE INCOME FUND* total return are given for the one-year,
five-year, and 10-year periods ended April 30, 2000.
ALABAMA TAX- FREE INCOME FUND yield is given for the 30-day period ended April
30, 2000.
30-DAY PERIOD 1 YEAR 5 YEARS 10
YEARS
Total Return N/A (4.81%) 3.15% 4.27%
Yield 4.10% N/A N/A N/A
--------------------------------------------------------------------
-------------------------------------------------------------------------
* THE ALABAMA TAX- FREE INCOME FUND IS THE SUCCESSOR TO A PORTFOLIO OF A COMMON
TRUST FUND MANAGED BY THE ADVISER.
</R>
At the Fund's commencement of operations, the assets from the common trust fund
were transferred to the Fund on August 20, 1999 in exchange for Fund shares. The
quoted performance data includes the performance of the common trust fund for
the periods before the Fund's registration statement became effective on August
10, 1999, as adjusted to reflect the Fund's expenses and sales load.
The common trust fund was not registered under the 1940 Act and therefore was
not subject to certain investment restrictions that are imposed by the 1940 Act.
If the common trust fund had been registered under the 1940 Act, the performance
may have been adversely affected.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the ALABAMA TAX- FREE
INCOME FUND. The interest earned by the municipal securities owned by the Fund
generally remains free from federal regular income tax and is often free from
state and local taxes as well. However, some of the Fund's income may be subject
to the federal alternative minimum tax and state and/or local taxes.
TAXABLE YIELD EQUIVALENT FOR 1999- STATE OF ALABAMA
COMBINED FEDERAL AND STATE INCOME 20.00% 33.00% 36.00% 41.00% 44.60%
TAX BRACKET:
Joint Return $1-43,05$43,051-104,$104,051-158$158,551-283,OVER
$283,150
Single Return $1-25,75$25,751-62,4$62,451-130,$130,251-283,OVER
$283,150
TAX-EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
2.50% 3.13% 3.73% 3.91% 4.24% 4.51%
3.00% 3.75% 4.48% 4.69% 5.08% 5.42%
3.50% 4.38% 5.22% 5.47% 5.93% 6.32%
4.00% 5.00% 5.97% 6.25% 6.78% 7.22%
4.50% 5.63% 6.72% 7.03% 7.63% 8.12%
5.00% 6.25% 7.46% 7.81% 8.47% 9.03%
5.50% 6.88% 8.21% 8.59% 9.32% 9.93%
6.00% 7.50 8.96% 9.38% 10.17% 10.83%
6.50% 8.13% 9.70% 10.16% 11.02% 11.73%
7.00% 8.75% 10.45% 10.94% 11.86% 12.64%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE
AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO
INCREASE FEDERAL DEDUCTIONS.
-------------------------------------------------------------------------
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o.....references to ratings, rankings, and financial publications
and/or performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as
the Investment Company Institute.
In reports or other communications to shareholders or in advertising material,
the Funds 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.
The Funds may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit ,and Treasury bills.
The Funds may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price.
FINANCIAL INFORMATION
<R>The Financial Statements for the Fund for the fiscal year ended April 30,
2000 are incorporated herein by reference to the Annual Report to Shareholders
dated April 30, 2000.
</R>
INVESTMENT RATINGS
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS AAA--Debt rated AAA has
the highest rating assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degree. A--Debt rated A
has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse 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 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 repayments. 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 BB-
rating. CCC--Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating. C--The rating C typically is
applied to debt subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS AAA--Bonds
which are rated AAA are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as gilt edged.
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS AAA--Bonds considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings. BBB--Bonds considered to be
investment grade and of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue. CCC--Bonds have certain identifiable characteristics which,
if not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment. CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable over
time.
C--Bonds are imminent default in payment of interest or principal. MOODY'S
INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS PRIME-1--Issuers rated Prime-1
(or related supporting institutions) have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
(gamma) Leading market positions in well-established industries; (gamma) High
rates of return on funds employed; (gamma) Conservative capitalization structure
with moderate reliance on debt and ample asset protection; (gamma) Broad margins
in earning coverage of fixed financial charges and high internal cash
generation; and (gamma) Well-established access to a range of financial markets
and assured sources of alternate liquidity. PRIME-2--Issuers rated Prime-2 (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. STANDARD AND POOR'S
COMMERCIAL PAPER RATINGS A-1--This designation indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation. A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1. FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment. FITCH-2--(Very Good
Grade) Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than the strongest issues.
52
ADDRESSES
SOUTHTRUST BOND FUND
SOUTHTRUST INCOME FUND
SOUTHTRUST ALABAMA TAX- FREE INCOME FUND
PORTFOLIOS OF SOUTHTRUST FUNDS
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
SouthTrust Bank
420 North 20th Street
Birmingham, AL 35203
CUSTODIAN
SouthTrust Bank
420 North 20th Street
Birmingham, AL 35203
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110-2812
[Graphic Representation Omitted - See Appendix]
Not part of the prospectus
| Fund Goals, Strategies, Performance and Investment Risks | 1 | |
| What are the Funds’ Fees and Expenses? | 5 | |
| More Information on the Funds’ Strategies | 6 | |
| What are the Principal Securities in Which the Funds Invest? | 8 | |
| What are the Main Risks of Investing in the Funds? | 9 | |
| What do Shares Cost? | 10 | |
| How are the Funds Sold? | 12 | |
| How to Purchase Shares | 12 | |
| How to Redeem and Exchange Shares | 14 | |
| Account and Share Information | 18 | |
| Who Manages the Funds? | 19 | |
| Financial Information | 20 |
| What is the
Value Fund’s Goal?
|
| What are the
Fund’s Main Investment Strategies?
|
| What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | 1 Year | 5 Years | Start of
Performance(1) |
||||
|---|---|---|---|---|---|---|---|
| Fund | 1.55% | 19.65% | 13.55% | ||||
| S&P 500 | 21.05% | 28.56% | 20.57% | ||||
(1)
|
The Fund’s
start of performance date was May 8, 1992.
|
| What is the
Growth Fund’s Goal?
|
| What are the
Fund’s Main Investment Strategies?
|
| What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | 1 Year | 5 Years | 10 Years | ||||
|---|---|---|---|---|---|---|---|
| Fund | 15.54% | 26.46% | 15.94% | ||||
| S&P 500 | 21.05% | 28.56% | 18.21% | ||||
*
|
The
SouthTrust Growth Fund is the successor to a portfolio of a
common
trust fund managed by the Adviser. At the Fund’s commencement
of
operations, the assets from the common trust fund were transferred
to the
Fund on August 20, 1999 in exchange for Fund shares. The quoted
performance data includes the performance of the common trust fund
for
periods before the SouthTrust Growth Fund’s
registration
statement became effective on August 10, 1999, as adjusted to
reflect
SouthTrust Growth Fund’s expenses and sales load. The
common
trust fund was not registered under the Investment Company Act of
1940
(“1940 Act”) and therefore was not subject to certain
investment
restrictions that are imposed by the 1940 Act. If the common trust
fund
had been registered under the 1940 Act, the performance may have
been
adversely affected.
|
| Value
Fund |
Growth
Fund |
|||||
|---|---|---|---|---|---|---|
| Shareholder Fees | ||||||
| Fees Paid Directly From Your Investment | ||||||
| Maximum Sales
Charge (Load) Imposed on Purchases
(as a percentage of offering price) |
4.50 | % | 4.50 | % | ||
| Redemption Fee (as a percentage of amount redeemed, if applicable)(1) | 0.00 | % | 0.00 | % | ||
| Annual Fund Operating Expenses (Before Waiver)(2) | ||||||
| Expenses That are Deducted From Fund Assets | ||||||
| (as percentage of average net assets) | ||||||
| Management Fee | 0.75% | 0.75 | % | |||
| Distribution (12b-1) Fee(3) | None | 0.25 | % | |||
| Shareholder Services Fee(4) | 0.25% | 0.25 | % | |||
| Other Expenses | 0.16% | 0.35 | % | |||
| Total Annual Fund Operating Expenses | 1.16% | 1.60 | % | |||
(1)
|
A 1.00% redemption
fee applies only to purchases at net asset value (investments of
$1,000,000 or more) which are redeemed within one year of
purchase. See
“How to Redeem and Exchange Shares”.
|
(2)
|
Although not
contractually obligated to do so, the shareholder servicing agent
waived
certain amounts. These are shown below along with the net expenses
the
Funds actually paid for the fiscal year ending April 30,
2000.
|
| Total Waiver of Fund Expenses | 0.22 | % | 0.45 | % | ||
| Total Actual Annual Fund Operating Expenses (after waiver) | 0.94 | % | 1.15 | % | ||
(3)
|
The Growth Fund
did not pay or accrue the distribution (12b-1) fee during the
year
ended April 30, 2000. The Growth Fund has no present
intention of
paying or accruing the distribution (12b-1) fee during the fiscal
year
ended April 30, 2001.
|
(4)
|
The shareholder
servicing agent voluntarily waived a portion of the shareholder
services
fee. The shareholder servicing agent can terminate this voluntary
waiver
at any time. The shareholder services fee paid by the Value
Fund
and the Growth Fund (after voluntary waivers) were
0.03% and
0.05% for the fiscal year ended April 30, 2000.
|
| 1 Year |
3 Years |
5 Years |
10 Years |
|||||
|---|---|---|---|---|---|---|---|---|
| Value Fund | $563 | $802 | $1,060 | $1,796 | ||||
| Growth Fund | $605 | $932 | $1,282 | $2,265 |
| Common
Stocks
|
| Depositary
Receipts
|
•
|
The value of equity
securities in the Funds’ portfolios will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. The
Funds’ portfolios will reflect changes in prices of
individual
portfolio stocks or general changes in stock valuations.
Consequently, a
Fund’s share price may decline and you could lose
money.
|
•
|
The Adviser
attempts to manage market risk by limiting the amount the Funds
invest in
each company’s equity securities. However, diversification
will not
protect a Fund against widespread or prolonged declines in the
stock
market.
|
•
|
Companies with
similar characteristics may be grouped together in broad
categories called
sectors. Sector risk is the possibility that a certain sector may
underperform other sectors or the market as a whole. If the
Adviser
allocates more of a Fund’s portfolio holdings to a particular
sector,
the Fund’s performance will be more susceptible to any
economic,
business, or other developments which generally affect that
sector.
|
•
|
Due to their
relatively low valuations, value stocks are typically less
volatile than
growth stocks. For instance, the price of a value stock may
experience a smaller increase on a forecast of higher earnings, a
positive
fundamental development, or positive market development. Further,
value
stocks tend to have higher dividends than growth stocks. This
means they
depend less on price changes for returns and may lag behind growth
stocks
in an up market.
|
•
|
Due to their
relatively high valuations, growth stocks are typically more
volatile than
value stocks. For instance, the price of a growth stock may
experience a
larger decline on an analyst’s downward earnings estimate
revision, a
negative fundamental development, or other adverse market
development.
Further, growth stocks tend to have lower dividend yields than
value
stocks. This means they depend more on price changes for returns
and may
be more adversely affected in a down market compared to higher
yielding
stocks.
|
| Purchase
Amount |
Sales Charge
as a Percentage of Public Offering Price |
Sales Charge
as a Percentage of Net Amount Invested |
Dealer Allowance
as a Percentage of Offering Price |
||||||
|---|---|---|---|---|---|---|---|---|---|
| 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* | 0.00 | % | 0.00 | % | 0.00 | % | |||
*
|
A redemption fee of
1% may be imposed on certain redemptions made within one year of
purchase.
See “How to Redeem and Exchange Shares.”
|
•
|
purchasing shares
in greater quantities to reduce the applicable sales charge;
combining
concurrent purchases of shares by you, your spouse, and your
children
under age 21;
|
•
|
accumulating
purchases (in calculating the sales charge on an additional
purchase,
include the current value of previous share purchases still
invested in
the Fund); or
|
•
|
signing a letter of
intent to purchase a specific dollar amount of shares within 13
months
(call your SouthTrust Funds Dealer or the Fund for more
information).
|
•
|
of $1 million or
more;
|
•
|
by reinvesting
redemption proceeds within 30 days of redeeming
shares;
|
•
|
by exchanging
shares of a Fund for other SouthTrust Funds or Class A Shares in
certain
funds which are distributed by Federated Securities Corp.
(Federated
Funds);
|
•
|
Establish your
account with the Fund by submitting a completed account
application;
and
|
•
|
Send your payment
to the Fund by Federal Reserve wire or check.
|
| By
Check
|
| By
Wire
|
| By
Telephone
|
•
|
Establish an
account with a SouthTrust Funds Dealer; and
|
•
|
Submit your
purchase order to your SouthTrust Funds Dealer before the end of
trading
on the NYSE (normally 4:00 p.m. Eastern time). You
will receive the next calculated NAV if the SouthTrust Funds Dealer
forwards
the order to the Fund on the same day and the Fund receives
payment within
three business days. You will become the owner of shares and
receive
dividends when the Fund receives your payment. SouthTrust Funds
Dealers
should send payments according to the instructions in the sections
“By Check” or “By Wire.”
|
| By
Telephone
|
| By
Mail
|
•
|
Fund name, account
number and account registration;
|
•
|
amount to be
redeemed or exchanged;
|
•
|
signatures of all
shareholders exactly as registered; and
|
•
|
if exchanging,
the Fund name, account number and account registration into
which you
are exchanging.
|
| Signature
Guarantees
|
•
|
your redemption
will be sent to an address other than the address of
record;
|
•
|
your redemption
will be sent to an address of record that was changed within the
last 30
days;
|
•
|
a redemption is
payable to someone other than the shareholder(s) of record;
or
|
•
|
if exchanging
(transferring) into another fund with a different shareholder
registration.
|
•
|
an electronic
transfer to your account at a financial institution that is an ACH
member;
or
|
•
|
wire payment to
your account at a domestic commercial bank that is a Federal
Reserve
System member.
|
| Redemption in
Kind
|
•
|
to allow your
purchase to clear;
|
•
|
during periods of
market volatility; or
|
•
|
when a
shareholder’s trade activity or amount adversely impacts a
Fund’s ability to manage its assets.
|
•
|
You will not accrue
interest or dividends on uncashed checks from the Fund if those
checks are
undeliverable and returned to the Fund.
|
•
|
exchange shares
having a net asset value of at least $1,000;
|
•
|
ensure that the
account registrations are identical;
|
•
|
meet any minimum
initial investment requirements; and
|
•
|
receive a
prospectus for the fund into which you wish to
exchange.
|
| Telephone
Transactions
|
| Share
Certificates
|
| Year Ended April 30,
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 |
1999 |
1998 |
1997 |
1996 |
|||||||||||
| Net Asset Value,
Beginning of
Period |
$ 17.90 | $ 19.05 | $ 15.81 | $ 14.40 | $ 11.51 | ||||||||||
| Income from Investment Operations: | |||||||||||||||
| Net investment income | 0.06 | 0.08 | 0.15 | 0.20 | 0.23 | ||||||||||
| Net realized and unrealized gain on
investments |
0.63 | 0.43 | 5.26 | 2.59 | 3.33 | ||||||||||
| Total from investment operations | 0.69 | 0.51 | 5.41 | 2.79 | 3.56 | ||||||||||
| Less Distributions: | |||||||||||||||
| Distributions from net investment
income |
(0.06 | ) | (0.08 | ) | (0.15 | ) | (0.21 | ) | (0.23 | ) | |||||
| Distributions from net realized gain
on investments |
(1.56 | ) | (1.58 | ) | (2.02 | ) | (1.17 | ) | (0.44 | ) | |||||
| Total distributions | (1.62 | ) | (1.66 | ) | (2.17 | ) | (1.38 | ) | (0.67 | ) | |||||
| Net Asset Value, End of Period | $ 16.97 | $ 17.90 | $ 19.05 | $ 15.81 | $ 14.40 | ||||||||||
| Total Return(1) | 4.26 | % | 5.17 | % | 36.39 | % | 19.99 | % | 31.51 | % | |||||
| Ratios to Average Net Assets: | |||||||||||||||
| Expenses | 0.94 | % | 0.91 | % | 0.94 | % | 0.94 | % | 0.87 | % | |||||
| Net investment income | 0.37 | % | 0.48 | % | 0.77 | % | 1.33 | % | 1.75 | % | |||||
| Expense Waiver/
Reimbursements(2) |
0.22 | % | — | — | 0.03 | % | 0.11 | % | |||||||
| Supplemental Data: | |||||||||||||||
| Net assets, end of period
(000 omitted) |
$329,419 | $388,731 | $412,857 | $272,665 | $204,421 | ||||||||||
| Portfolio turnover rate | 45 | % | 45 | % | 75 | % | 27 | % | 39 | % | |||||
(1)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(2)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Period Ended
April 30, 2000(1) |
|||
|---|---|---|---|
| Net Asset Value, Beginning of Period | $ 10.00 | ||
| Income from Investment Operations: | |||
| Net realized and unrealized gain on investments | 0.65 | ||
| Less Distributions: | |||
| Distributions from net realized gain on investments | (0.25 | ) | |
| Net Asset Value, End of Period | $ 10.40 | ||
| Total Return(2) | 6.54 | % | |
| Ratios to Average Net Assets: | |||
| Expenses | 1.15 | %(3) | |
| Net investment loss | (0.01 | )%(3) | |
| Expense Waiver/Reimbursements(4) | 0.20 | %(3) | |
| Supplemental Data: | |||
| Net assets, end of period (000 omitted) | $86,367 | ||
| Portfolio turnover rate | 28 | % | |
(1)
|
Reflects operations
for the period form August 20, 1999 (date of initial public
investment) to
April 30, 2000.
|
(2)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(3)
|
Computed on an
annualized basis.
|
(4)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Not FDIC Insured | No Bank Guarantee | May Lose Value |
Not part of the prospectus
Investment Adviser: SouthTrust Bank
Distributor: Federated Securities Corp.
Cusip 844734301
Cusip 844734509
G00859-02 (6/00)
STATEMENT OF ADDITIONAL INFORMATION
SOUTHTRUST VALUE FUND
SOUTHTRUST GROWTH FUND
PORTFOLIOS OF SOUTHTRUST FUNDS
<R>
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for SOUTHTRUST VALUE FUND (formerly, Core
Equity Fund) and SOUTHTRUST GROWTH FUND ( the Funds), dated June 30, 2000. This
SAI incorporates by reference the Funds' Annual Report. Obtain the prospectuses
or the Annual Report without charge by calling 1-800-843-8618.
june 30, 2000
CONTENTS
How are the Funds Organized?
2
Securities in Which the Funds Invest
2
What do Shares Cost?
12
How are the Funds Sold?
12
Exchanging Securities for Shares
13
Subaccounting Services
13
Redemption Fee
14
Redemption in Kind
14
Massachusetts Partnership Law
14
Account and Share Information
14
Tax Information
15
Who Manages and Provides Services
to the Funds? 15
How Does the Funds Measure
Performance? 18
Financial Information
20
Addresses
Back Cover
CUSIP 844734301
CUSIP 844734509
G00859-06 (6/00)
</R>
HOW ARE THE FUNDS ORGANIZED?
The SouthTrust Value Fund and SouthTrust Growth Fund are diversified portfolios
of SouthTrust Funds (Company). The Company is an open-end management investment
company that was established as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts on March 4, 1992. The Company may offer
separate series of shares representing interests in separate portfolios of
securities.. On June 30, 1998, the name of the Company changed from "Vulcan
Funds" to "SouthTrust Vulcan Funds." Effective July 22, 1998, the name of the
Company changed from "SouthTrust Vulcan Funds" to "SouthTrust Funds." On August
10, 1999, SouthTrust Core Equity Fund changed its name to SouthTrust Value Fund.
The Board of Trustees has established five diversified and one non-diversified
investment portfolios. This SAI relates to SouthTrust SouthTrust Value Fund and
SouthTrust Growth Fund. The Funds' investment adviser is SouthTrust Bank.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing their investment strategy, the Funds may invest in the following
securities for any purpose that is consistent with their respective investment
objective.
Following is a table that indicates which types of securities are a:
P = Principal investment of a Fund; or
A = Acceptable (but not principal) investment of a Fund;
SECURITIES VALUE FUND GROWTH
FUND
Equity Securities P P
Common Stocks P P
Preferred Stocks A A
Real Estate Trusts A A
Warrants A A
Fixed Income Securities A A
Treasury Securities A A
Agency Securities A A
Corporate Debt Securities A A
Commercial Paper A A
Demand Instruments A A
Zero Coupon Securities A A
Bank Instruments A A
Credit Enhancement A A
Variable Rate Demand Notes A A
Convertible Securities 1 A A
Foreign Securities A A
Depositary Receipts A A
Brady Bonds A A
Derivative Contracts A A
Futures Contracts A A
Options A A
Hybrid Instruments A A
1. ALTHOUGH THE VALUE FUND MAY ACQUIRE CONVERTIBLE SECURITIES THAT ARE RATED
BELOW INVESTMENT GRADE, THE COMPANY DOES NOT EXPECT THAT INVESTMENTS IN LOWER
RATED CONVERTIBLE SECURITIES WILL EXCEED 5% OF THE VALUE OF THE TOTAL ASSETS AT
THE TIME OF PURCHASE.
-------------------------------------------------------------------------
Special Transactions A A
Repurchase Agreements A A
Reverse Repurchase Agreements A N
Delayed Delivery A A
To Be Announced Securities A A
Securities Lending 2 A A
Asset Coverage A A
Investing in Securities of Other Investment A A Illiquid Securities A A 2. 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.
-------------------------------------------------------------------------
SECURITIES DESCRIPTIONS AND TECHNIQUES
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. A Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Funds invest.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.
WARRANTS
Warrants give a Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). A Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Funds
invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest credit
risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Investors regard agency
securities as having low credit risks, but not as low as treasury securities.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Funds may also purchase interests in bank loans
to companies. The credit risks of corporate debt securities vary widely among
issuers. In addition, the credit risk of an issuer's debt security may vary
based on its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated) securities.
This means that the issuer might not make payments on subordinated securities
while continuing to make payments on senior securities. In addition, in the
event of bankruptcy, holders of senior securities may receive amounts otherwise
payable to the holders of subordinated securities. Some subordinated securities,
such as trust preferred and capital securities notes, also permit the issuer to
defer payments under certain circumstances. For example, insurance companies
issue securities known as surplus notes that permit the insurance company to
defer any payment that would reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the market and credit risks as
compared to other debt securities of the same issuer.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Funds treat
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in-kind or PIK securities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks.
Bank instruments include bank accounts, time deposits, certificates of
deposit and banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-U.S.
branches of U.S. or foreign banks.
CREDIT ENHANCEMENT
The Funds may purchase securities backed by credit enhancement. Credit
enhancement consists of an arrangement in which a company agrees to pay amounts
due on a fixed income security if the issuer defaults. In some cases the company
providing credit enhancement makes all payments directly to the security holders
and receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason, the
Adviser usually evaluates the credit risk of a fixed income security based
solely upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are securities that require the issuer or a
third party, such as a dealer or bank, to repurchase the security for its face
value upon demand. The securities also pay interest at a variable rate intended
to cause the securities to trade at their face value. The Funds treat demand
instruments as short-term securities, because their variable interest rate
adjusts in response to changes in market rates, even though their stated
maturity may extend beyond thirteen months.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that have the option to
exchange for equity securities at a specified conversion price. The option
allows a Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.
FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United States
.The Funds consider an issuer to be based outside the United States if:
o it is organized under the laws of, or has a principal office
located in, another country;
o the principal trading market for its securities is in another
country; or
o it (or its subsidiaries) derived in its most current fiscal yea rat least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.
Brady Bonds
Brady Bonds are U.S. dollar denominated debt obligations that foreign
governments issue in exchange for commercial bank loans. The International
Monetary Fund (IMF) typically negotiates the exchange to cure or avoid a default
by restructuring the terms of the bank loans. The principal amount of some Brady
Bonds is collateralized by zero coupon U.S. Treasury securities which have the
same maturity as the Brady Bonds. However, neither the U.S. government nor the
IMF has guaranteed the repayment of any Brady Bond.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures and options) require payments relating to a future trade involving
the underlying asset. Other derivative contracts require payments relating to
the income or returns from the underlying asset. The other party to a derivative
contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract
make(or collect) daily payments to the margin accounts to reflect losses (or
gains)in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, a Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same
date. If the offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may
limit the amount of open contracts permitted at any one time. Such limits may
prevent the Fund from closing out a position. If this happens, the Fund will be
required to keep the contract open (even if it is losing money on the
contract),and to make any payments required under the contract (even if it has
to sell portfolio securities at unfavorable prices to do so). Inability to close
out a contract could also harm the Fund by preventing it from disposing of or
trading any assets it has been using to secure its obligations under the
contract.
A Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how a Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks
.OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Funds may trade in the following types of derivative contracts:
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.
Options
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.
The Funds may:
o Buy call options on financial futures contracts in anticipation of an
increase in the value of the underlying asset.
o Buy put options on financial futures contracts in anticipation of a decrease
in the value of the underlying asset.
o Write call options on financial futures contracts to generate income from
premiums, and in anticipation of a decrease or only limited increase in the
value of the underlying asset. If a call written by a Fund is exercised, the
Fund foregoes any possible profit from an increase in the market price of the
underlying asset over the exercise price plus the premium received.
o Write put options on financial futures contracts to generate income from
premiums, and in anticipation of an increase or only limited decrease in the
value of the underlying asset. In writing puts, there is a risk that a Fund
may be required to take delivery of the underlying asset when its current
market price is lower than the exercise price.
When a Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.
A Fund may also buy or write options to close out existing options positions.
HYBRID INSTRUMENTS
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of an underlying asset or by reference to another benchmark
(such as interest rates, currency exchange rates or indices). Hybrid instruments
also include convertible securities with conversion terms related to an
underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the risks
of investing in securities, options, futures and currencies, and depend upon the
terms of the instrument. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional fixed income
or convertible securities. Hybrid instruments are also potentially more volatile
and carry greater interest rate risks than traditional instruments. Moreover,
depending on the structure of the particular hybrid, it may expose the Fund to
leverage risks or carry liquidity risks.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Funds will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser. The Funds' custodian or
subcustodian will take possession of the securities subject to repurchase
agreements. The Adviser or subcustodian will monitor the value of the underlying
security each day to ensure that the value of the security always equals or
exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which a Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which a Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
TO BE ANNOUNCED (TBA) SECURITIES
As with other when issued transactions, a seller agrees to issue a TBA security
at a future date. However, the seller does not specify the particular securities
to be delivered. Instead, a Fund agrees to accept any security that meets
specified terms. For example, the Fund and the seller would agree upon the
issuer, interest rate and terms of the underlying securities. However, the
seller would not identify the specific underlying security until it issues the
security.
SECURITIES LENDING
The Funds may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, a Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
A Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for
the use of cash collateral. Loans are subject to termination at the option of
the Fund or the borrower. The Fund will not have the right to vote on securities
while they are on loan, but it will terminate a loan in anticipation of any
important vote. The Fund may pay administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks.
ASSET COVERAGE
In order to secure their obligations in connection with derivatives contracts or
special transactions, the Funds will either own the underlying assets, enter
into an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds a Fund's obligations. Unless a Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause a Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Funds may invest their
assets in securities of other investment companies, including the securities of
affiliated money market funds, as an efficient means of carrying out their
investment policies and managing their uninvested cash. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by a Fund in shares of other investment companies may
be subject to such duplicate expenses.
ILLIQUID SECURITIES
The Funds may invest up to 15% of the total value of their net assets
insecurities 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.
INVESTMENT RISKS
There are many factors which may affect an investment in the Funds. The Funds'
principal risks are described in its prospectus. Additional risk factors are
outlined below.
STOCK MARKET RISKS
o The value of equity securities in a Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. A Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, a Fund's share price may
decline and you could lose money. The Adviser attempts to manage market risk
by limiting the amount a Fund invests in each company's equity securities.
However, diversification will not protect a Fund against widespread or
prolonged declines in the stock market.
SECTOR RISKS
o Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may under perform other sectors or the market as a whole. As the
Adviser allocates more of a Fund's portfolio holdings to a particular sector,
the Fund's performance will be more susceptible to any economic, business or
other developments which generally affect that sector
.RISKS RELATED TO INVESTING FOR GROWTH
o Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on an analyst's downward earnings estimate
revision, a negative fundamental development, or other adverse market
development. Further, growth stocks tend to have lower dividend yields than
value stocks. This means they depend more on price changes for returns and
may be more adversely affected in a down market compared to higher yielding
stocks.
RISKS RELATED TO INVESTING FOR VALUE
o Due to their relatively low valuations, value stocks are typically less
volatile than growth stocks. For instance, the price of a value stock may
experience a smaller increase on a forecast of higher earnings, a positive
fundamental development, or positive market development. Further, value
stocks tend to have higher dividends than growth stocks. This means they
depend less on price changes for returns and may lag behind growth stocks in
an up market.
CURRENCY RISKS
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the United States.
o The Adviser attempts to manage currency risk by limiting the amount a Fund
invests in securities denominated in a particular currency. However,
diversification will not protect a Fund against a general increase in the
value of the U.S. dollar relative to other currencies.
RISKS OF FOREIGN INVESTING
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Foreign financial markets may also have fewer investor protections.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.
o Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the United States.
LIQUIDITY RISKS
o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, a Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on a Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.
o Liquidity risk also refers to the possibility that a Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.
o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes a Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify a Fund's risk of loss and potential for gain.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. However, market factors, such
as the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Funds must rely entirely upon the Adviser's credit
assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction involving
a Fund will fail to meet its obligations. This could cause a Fund to lose the
benefit of the transaction or prevent a Fund from selling or buying other
securities to implement its investment strategy.
RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES
o Securities rated below investment grade, also known as junk bonds, generally
entail greater interest rate, credit and liquidity risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively, and
their trading market may be more limited.
INVESTMENT LIMITATIONS
The following investment limitations pertain to each of the SouthTrust
Funds. 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.. 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
aFund'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, 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 as separate industry).
4. Purchase or sell real estate, except that a Fund may purchase securities of
issuers which deal in real estate and may purchase securities which are secured
by interests in real estate.
5. 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 Investment Company Act of 1940.
6. 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.
7. 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.
8. Purchase securities of companies for the purpose of exercising
control.
9. 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.
10. 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
insecurities on a when-issued or forward commitment basis, and except that
anon-money market fund may enter into forward foreign currency contracts and
options thereon in accordance with its investment objectives and policies
11. 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.
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 Investment Company Act of 1940 (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.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE "VOTE OF A
MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE INVESTMENT
COMPANY ACT OF 1940.
PORTFOLIO TURNOVER
The VALUE FUND experienced higher turnover variations during the past two years.
The VALUE FUND'S portfolio was restructured in response to the rising stock
market.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Funds' portfolio securities are determined as follows:
g for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available; (gamma) in the absence of recorded sales
for equity securities, according to the mean between the last closing bid and
asked prices; g for bonds and other fixed income sales for equity securities,
according to the mean between the last closing bid and asked prices; (gamma)
futures contracts and options are generally valued at market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are generally valued
according to the mean between the last bid and the last asked price for the
option as provided by an investment dealer or other financial institution that
deals in the option. The Board may determine in good faith that another method
of valuing such investments is necessary to appraise their fair market value; g
for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and g for all other securities at fair value as
determined in good faith by the Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
WHAT DO SHARES COST?
The Funds' net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of each Fund.
REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE You can reduce or eliminate
the applicable front-end sales charge, as follows:
QUANTITY DISCOUNTS
Larger purchases can reduce or eliminate the sales charge you pay. You can
combine purchases of Shares made on the same day by you, your spouse and your
children under age 21. In addition, purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account can be
combined.
ACCUMULATED PURCHASES
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Funds' in calculating the applicable sales
charge on the additional purchase.
CONCURRENT PURCHASES
You can combine concurrent purchases of the same share class of two or more
SouthTrust Funds in calculating the applicable sales charge.
LETTER OF INTENT
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Funds' custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.
REINVESTMENT PRIVILEGE
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.
PURCHASES BY AFFILIATES OF THE FUND
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:
(gamma) the current or retired Trustees, employees and sales representatives of
the Fund, the Adviser, the Distributor and their affiliates and the immediate
family members of these individuals; (gamma) retired employees of SouthTrust
Corporation and it's affiliates; (gamma) investors for whom SouthTrust
Corporation or one of it's affiliates acts in a fiduciary, advisory, custodial,
agency or similar capacity (this does not include transactions executed by
SouthTrust Securities, Inc., including, but not limited to, self-directed
Individual Retirement Accounts); and (gamma) employees who purchase Shares
through a payroll deduction plan sponsored by their employees.
HOW ARE THE FUNDS SOLD?
Under the Distributor's Contract with the Funds, the Distributor (Federated
Securities Corp.) located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779 offers Shares on a continuous, best-efforts basis.
FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
RULE 12B-1 PLAN-GROWTH FUND
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Funds pay for any expenses of the Distributor
that exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Funds may pay SouthTrust Bank for providing shareholder services and
maintaining shareholder accounts. SouthTrust Bank, may select others to perform
these services for their customers and may pay them fees.
SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker-dealers or banks) may be paid fees, in
significant amounts, out of the assets of the Distributor Federated Shareholder
Services Company (these fees do not come out of Fund assets). The Distributor
and/or Federated Shareholder Services Company may be reimbursed by the Adviser
or its affiliates.
Investment professionals receive such fees for providing distribution-related
and/or shareholder services, such as advertising, providing incentives to their
sales personnel, sponsoring other activities intended to promote sales, and
maintaining shareholder accounts These payments may be based upon such factors
as the number or value of Shares the investment professional sells or may sell;
the value of client assets invested; and/or the type and nature of sales or
marketing support furnished by the investment professional.
EXCHANGING SECURITIES FOR SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Funds reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Funds will value
your securities in the same manner as it values its assets. This exchange is
treated as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION FEE
<R>In order to discourage short-term investments in the Funds, the Company
charges a redemption fee in connection with redemptions of shares held less than
one year which were purchased at net asset value (for $1,000,000 or more). The
charge is 1% of either the lesser of the value of the shares redeemed (exclusive
of reinvested dividends and capital gain distributions) or the total cost of
such shares, and is retained by the Fund and not paid to the Distributor.
</R>
The redemption fee is not assessed on:
o exchanges (except if shares acquired by exchange were then
redeemed within twelve months of the initial purchase);
o redemptions made in connection with distributions from qualified retirement
plans, 403(b) plans or IRAs due to death, disability or attainment of age
591/2;
o redemptions resulting from the tax-free return of excess
contributions to IRAs or employee benefit plans; and
o redemptions through certain automatic withdrawals.
REDEMPTION IN KIND
Although the Funds intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Funds' portfolio securities.
Because the Funds has elected to be governed by Rule 18f-1 under the 1940 Act,
the Funds is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Funds' Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Funds determines its NAV.
The portfolio securities will be selected in a manner that the Fund's Board
deems fair and equitable and, to the extent available, such securities will be
readily marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Company. To protect its
shareholders, the Company has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Company.
In the unlikely event a shareholder is held personally liable for the Company's
obligations, the Company is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Company will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Company. Therefore, financial loss resulting from liability as
a shareholder will occur only if the Company itself cannot meet its obligations
to indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Funds gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Company have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Company's outstanding shares
of all series entitled to vote.
<R>
of June 2, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares of the VALUE
FUND: Lynspen & Co., Birmingham, AL, owned approximately 17,965,897
shares (93.24%).
As of June 2, 2000, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Shares of the GROWTH FUND: Lynspen & Co.,
Birmingham, AL, owned approximately 7,835,146 shares (94.52%).
</R>
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Funds intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Funds will each be treated as a single, separate entity for federal income
tax purposes so that income earned and capital gains and losses realized by the
Company's other portfolios will be separate from those realized by a Fund.
FOREIGN INVESTMENTS
If a Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of a Fund assets to be invested within various countries is
uncertain. However, the Funds intends to operate so as to qualify for
treaty-reduced tax rates when applicable.
Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.
If a Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of a Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
The Board is responsible for managing the Company's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Company,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Company for
its most recent fiscal year. The Company is comprised of six funds. As of June
2, 1999, the Fund's Board and Officers as a group owned less than 1% of the
Funds' outstanding Shares.
----------------------------------------------------------------------------
NAME
BIRTH DATE AGGREGATE
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION
POSITION WITH FOR PAST FIVE YEARS FROM
COMPANY COMPANY
--------------------- President, Tubular Products Company $6,750
CHARLES G. BROWN, III (since 1985); Managing Partner, Red
Birth Date: November Hollow Partnership.
27, 1953
P.O. Box 170100
Birmingham, AL
CHAIRMAN AND TRUSTEE
-------------------- Chairman and Chief Executive Officer, $5750
WILLIAM O. VANN* Young & Vann Supply Co. (since 1987);
Birth Date: January Partner, B&B Investments; Trustee and
28, 1942 Past Chairman, The Childrens' Hospital
P.O. Box 757 of Alabama.
Birmingham, AL
TRUSTEE
-------------------- President (since 1989), Executive Vice $7,250 RUSSELL W.
CHAMBLISS President (1988), and Vice President of Birth Date: Sales and
Marketing (1984-1988), Mason December 26, 1951 Corporation (manufacturer of roll
Mason Corporation formed aluminum and steel products).
P.O. Box 59226
Birmingham, AL
TRUSTEE
-------------------- Partner of the law firm of Williams, $6,500
THOMAS M. GRADY* Boger, Grady, Davis and Tuttle, P.A.;
Birth Date: July Chairman of the Board of Pfeiffer
25, 1941 University; Member of Cannon Foundation.
--------------------
P.O. Box 2
Kannapolis, NC
TRUSTEE
-------------------- Vice President of Investments, Dunn -----------
LAWRENCE W. GREER, Investment Company (since 1992); $3,000
M.D. Chairman, Board of Directors, Southern
Birth Date: October BioSystems; Director, Daily Access
26, 1944 Concepts, Inc., Electronic HealthCare
3005 Brookwood Road Systems, Inc.
Birmingham, AL
TRUSTEE
-------------------- President and Chief Operating Officer $6,000
BILLY L. HARBERT, of Bill Harbert Construction, Inc.
JR.* (BHIC) and Vice President of BHIC
Birth Date: May 23, (until 1998); Director, Harbert
1965 International Establishment; Director,
Bill Harbert Harbert International Establishment,
International S.C.; Director Bilhar International
Construction, Inc. Establishment; Member/Shareholder,
P.O. Box 531390 Bonaventure Capital, LLC; Member
Birmingham, AL /Shareholder, Bonaventure Partners LLC;
TRUSTEE Board Member/ Shareholder, Founders
Trust Company, Inc.,; and Member
/Shareholder, treble Range Partners,
LLC.
-------------------- President, Executive Vice President and $0
EDWARD C. GONZALES Treasurer of some of the Funds in the
Birth Date: October Federated Fund Complex; Vice Chairman,
22, 1930 Federated Investors, Inc.; Trustee,
Federated Investors Federated Administrative Services;
Tower formerly: Trustee or Director of some
1001 Liberty Avenue of the Funds in the Federated Fund
Pittsburgh, PA Complex; CEO and Chairman, Federated
PRESIDENT AND Administrative Services; Vice
TREASURER President, Federated Investment
Management Company, Federated
Investment Counseling, Federated Global
Investment Management Corp. and
Passport Research, Ltd.; Director and
Executive Vice President, Federated
Securities Corp.; Director, Federated
Services Company; Trustee, Federated
Shareholder Services Company.
-------------------- Senior Vice President and Director, $0
PETER J. GERMAIN Mutual Fund Services Division,
Birth Date: Federated Services Company. Formerly
September 2, 1959 Senior Corporate Counsel, Federated
Federated Investors Investors, Inc.
Tower
Pittsburgh, PA
VICE PRESIDENT
-------------------- Vice President, Federated Services $0
BETH BRODERICK Company (1997 to present); Client
Birth Date: August Services Officer, Federated Services
2, 1965 Company (1992-1997).
Federated Investors
Tower
Pittsburgh,
PA
VICE PRESIDENT AND
ASSISTANT TREASURER
-------------------- Corporate Counsel, Federated Investors, $0
C. TODD GIBSON Inc.: Assistant Vice President,
Birth Date: May 17, Federated Administrative Services.
1967
Federated investors
Tower
Pittsburgh, PA
SECRETARY
-------------------------------------------------------------------------
* AN ASTERISK DENOTES A TRUSTEE WHO IS DEEMED TO BE AN INTERESTED PERSON AS
DEFINED IN THE 1940 ACT. The Trust has a deferred compensation plan (the "Plan")
that permits any Trustee that is not an "affiliated person" of the Trust to
elect to defer receipt of all or a portion of his or her compensation. The
deferred compensation that would have otherwise been paid to the Trustee is
invested, at the Trustee's direction, in one or more of the SouthTrust Funds. A
Trustee may elect to participate in the Plan during any quarter. At the time for
commencing distributions from a Trustee's deferral account, which is no later
than when the Trustee ceases to be a member of the board, the Trustee may elect
to receive distributions in a lump sum or on an annual or quarterly basis over a
period of five years.
INVESTMENT ADVISER
The Adviser, SouthTrust Bank conducts investment research and makes investment
decisions for the Funds.
The Adviser shall not be liable to the Company or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Company.
<R>
CODE OF ETHICS- RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Funds, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Company Trustees, and certain other employees. Although
they do permit these people to trade in securities, including those that the
Funds could buy, they also contain significant safeguards designed to protect
the Funds and its shareholders from abuses in this area, such as requirements to
obtain prior approval for, and to report, particular transactions.
</R>
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. 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 may select brokers and dealers
based on whether they also offer research services (as described below). 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 Funds
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Company's Board.
RESEARCH SERVICES
Research services 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 may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
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 those 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.
Investment decisions for the Funds are made independently from those of other
accounts managed by the Adviser. When the Funds and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Funds.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
SouthTrust Bank is custodian for the securities and cash of the Funds.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Funds pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
Arthur Andersen LLP are the independent auditors for the Funds.
<R>
FEES PAID BY THE VALUE FUND FOR SERVICES
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $2,586,903 $2,779,844 $2,550,383
Advisory Fee Reduction $0 $0 $10,794
Brokerage Commissions $583,110 $616,769 $658,372
Administrative Fee $354,127 $396,862 $384,783
Administrative Fee $0 $0 $0
Reduction
FEES PAID BY THE GROWTH FUND FOR SERVICES
-------------------------------------------------------------------------
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $394,712 N/A N/A
Advisory Fee Reduction $0 N/A N/A
Brokerage Commissions $75,468 N/A N/A
Administrative Fee $53,459 N/A N/A
Administrative Fee $0 N/A N/A
Reduction
</R>
-------------------------------------------------------------------------
HOW DOES THE FUNDS MEASURE PERFORMANCE?
The Funds may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
VALUE FUND
<R>
al returns are given for the one-year, five-year and start of performance
periods ended April 30, 2000.
Yield is given for the 30-day period ended April 30, 2000.
START OF
30-DAY PERIOD 1 YEAR 5 YEARS PERFORMANCE ON
Total Return N/A (0.41)% 17.65% 13.48%
Yield 0.34% N/A N/A N/A
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
-------------------------------------------------------------------------
GROWTH FUND*
Total returns are given for the one-year, five-year and 10-year periods ended
April 30, 2000.
Yield is given for the 30-day period ended April 30, 2000.
------------------
30-DAY PERIOD 1 YEAR 5 YEARS
10 YEARS
Total Return N/A 4.14% 22.83% 16.27% Yield 0.00% N/A N/A N/A *THE GROWTH FUND IS
THE SUCCESSOR TO A PORTFOLIO OF A COMMON TRUST FUND MANAGED BY THE ADVISER. AT
THE FUND'S COMMENCEMENT OF OPERATIONS, THE ASSETS FROM THE COMMON TRUST FUND
WERE TRANSFERRED TO THE FUND ON AUGUST 20, 1999 IN EXCHANGE FOR FUND SHARES. THE
QUOTED PERFORMANCE DATA INCLUDES THE PERFORMANCE OF THE COMMON TRUST FUND FOR
THE PERIODS BEFORE THE FUND'S REGISTRATION STATEMENT BECAME EFFECTIVE ON AUGUST
10, 1999, AS ADJUSTED TO REFLECT THE FUND'S EXPENSES AND SALES LOAD. THE COMMON
TRUST FUND WAS NOT REGISTERED UNDER THE 1940 ACT AND THEREFORE WAS NOT SUBJECT
TO CERTAIN INVESTMENT RESTRICTIONS THAT ARE IMPOSED BY THE 1940 ACT. IF THE
COMMON TRUST FUND HAD BEEN REGISTERED UNDER THE 1940 ACT, THE PERFORMANCE MAY
HAVE BEEN ADVERSELY AFFECTED.
-------------------------------------------------------------------------
</R>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
(gamma) references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices; (gamma) charts, graphs and
illustrations using the Fund's returns, or returns in general, that demonstrate
investment concepts such as tax-deferred compounding, dollar-cost averaging and
systematic investment; (gamma) discussions of economic, financial and political
developments and their impact on the securities market, including the portfolio
manager's views on how such developments could impact the Funds; and (gamma)
information about the mutual fund industry from sources such as the Investment
Company Institute.
The Funds may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.
The Funds may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
DOW JONES INDUSTRIAL AVERAGE (DJIA)
Represents share prices of selected blue-chip industrial corporations. The DJIA
indicates daily changes in the average price of stock of these corporations.
Because it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
FINANCIAL PUBLICATIONS
THE WALL STREET JOURNAL, BUSINESS WEEK, CHANGING TIMES, FINANCIAL WORLD, FORBES,
FORTUNE, and MONEY magazines, among others-provide performance statistics over
specified time periods.
LIPPER ANALYTICAL SERVICES, INC.
Ranks funds in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change in net
asset value over a specified period of time.
MOODY'S INVESTORS SERVICES, INC., FITCH IBCA, INC. AND STANDARD &
POOR'S
Various publications.
MORNINGSTAR, INC.
An independent rating service, is the publisher of the bi-weekly Mutual Fund
Values, which rates more than 1,000 NASDAQ- listed mutual funds of all types,
according to their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (S&P 500)
Composite index of common stocks in industry, transportation, and financial and
public utility companies can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the S &
P500 assumes reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in the S & P figures.
S&P 500 BARRA GROWTH INDEX is constructed by sorting the S&P 500 based on their
price/book ratios, with the high price/ book companies making up the index.
FINANCIAL INFORMATION
<R>
The Financial Statements for the Funds for the fiscal year ended April 30, 2000
are incorporated herein by reference to the Annual Report to Shareholders dated
April 30, 2000.
</R>
66
ADDRESSES
SOUTHTRUST VALUE FUND
SOUTHTRUST GROWTH FUND
PORTFOLIOS OF SOUTHTRUST FUNDS
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
SouthTrust Bank
420 North 20th Street
Birmingham, AL 35203
CUSTODIAN
SouthTrust Bank
420 North 20th Street
Birmingham, AL 35203
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110-2812
[Graphic Representation Omitted - See Appendix]
Not part of the prospectus
| Fund Goals, Strategies, Performance and Investment Risks | 1 | |
| What are the Fund’s Fees and Expenses? | 3 | |
| What are the Principal Securities in Which the Fund Invests? | 4 | |
| What are the Main Risks of Investing in the Fund? | 4 | |
| What do Shares Cost? | 5 | |
| How is the Fund Sold? | 5 | |
| How to Purchase Shares | 6 | |
| How to Redeem and Exchange Shares | 8 | |
| Account and Share Information | 12 | |
| Who Manages the Fund? | 13 | |
| Financial Information | 13 |
What is the
Treasury Money Fund’s Goal?
|
What are the
Fund’s Main Investment Strategies?
|
What are the
Main Risks of Investing in the Fund?
|
| Calendar Period | Fund | ||
|---|---|---|---|
| 1 Year | 4.61% | ||
| 5 Year | 5.00% | ||
| Start of Performance(1) | 4.39% | ||
(1)
|
The Fund’s
start of performance date was May 8, 1992.
|
| Shareholder Fees | ||
|---|---|---|
| Fees Paid Directly From Your Investment | None | |
| Annual Fund Operating Expenses (Before Waiver)(1) | ||
| Expenses That are Deducted From Fund Assets (as percentage of average net assets) | ||
| Management Fee(2) | 0.50% | |
| Distribution (12b-1) Fee | None | |
| Shareholder Services Fee(3) | 0.25% | |
| Other Expenses | 0.14% | |
| Total Annual Fund Operating Expenses | 0.89% |
(1)
|
Although not
contractually obligated to do so, the adviser and the shareholder
servicing agent waived certain amounts. These are shown below
along with
the net expenses the Fund actually paid for the fiscal year
ending
April 30, 2000.
|
| Total Waiver of Fund Expenses | 0.40 | % | |
| Total Actual Annual Fund Operating Expenses (after waiver) | 0.49 | % |
(2)
|
The Adviser
voluntarily waived a portion of the management fee. The Adviser
can
terminate this voluntary waiver at any time. The management fee
paid by
the U.S. Treasury Money Market Fund (after voluntary
waiver) was
0.31% for the year ended April 30, 2000.
|
(3)
|
The shareholder
servicing agent will voluntarily waive a portion of the
shareholder
services fee. The shareholder servicing agent can terminate this
voluntary
waiver at any time. The shareholder services fee paid by the Fund
(after
voluntary waiver) was 0.03% for the fiscal year ended April 30,
2000.
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|||||
|---|---|---|---|---|---|---|---|---|
| U.S. Treasury Money Market Fund | $91 | $284 | $493 | $1,096 |
•
|
Establish your
account with the Fund by submitting a completed account
application;
and
|
•
|
Send your payment
to the Fund by Federal Reserve wire or check.
|
By
Check
|
By
Wire
|
By
Telephone
|
•
|
Establish an
account with the SouthTrust Funds Dealer; and
|
•
|
Submit your
purchase order to the SouthTrust Funds Dealer before 12:00 noon
(Eastern
time). You will receive that day’s dividends if the
SouthTrust Funds
Dealer forwards the order to the Fund and the Fund receives
payment by
4:00 p.m. (Eastern time). You will become the owner of shares and
receive
dividends when the Fund receives your payment. SouthTrust Funds
Dealers
should send payments according to the instructions in the sections
“By Check” or “By Wire.”
|
By
Telephone
|
By
Mail
|
•
|
Fund name, account
number and account registration;
|
•
|
amount to be
redeemed or exchanged;
|
•
|
signatures of all
shareholders exactly as registered; and
|
•
|
if exchanging,
the Fund name, account number and account registration into
which you
are exchanging.
|
Signature
Guarantees
|
•
|
your redemption
will be sent to an address other than the address of
record;
|
•
|
your redemption
will be sent to an address of record that was changed within the
last 30
days;
|
•
|
a redemption is
payable to someone other than the shareholder(s) of record;
or
|
•
|
if exchanging
(transferring) into another fund with a different shareholder
registration.
|
•
|
an electronic
transfer to your account at a financial institution that is an ACH
member;
or
|
•
|
wire payment to
your account at a domestic commercial bank that is a Federal
Reserve
System member.
|
Redemption in
Kind
|
•
|
to allow your
purchase to clear;
|
•
|
during periods of
market volatility; or
|
•
|
when a
shareholder’s trade activity or amount adversely impacts the
Fund’s ability to manage its assets.
|
•
|
exchange shares
having a net asset value of at least $1,000;
|
•
|
ensure that the
account registrations are identical;
|
•
|
meet any minimum
initial investment requirements; and
|
•
|
receive a
prospectus for the fund into which you wish to
exchange.
|
Checkwriting
|
Telephone
Transactions
|
Share
Certificates
|
|
Year Ended April 30, |
|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2000 |
1999 |
1998 |
1997 |
1996 |
|||||||||||||
| Net Asset Value,
Beginning of
Period |
$ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | ||||||||||||
| Income from Investment Operations: | |||||||||||||||||
| Net investment income | 0.05 | 0.05 | 0.05 | 0.05 | 0.05 | ||||||||||||
| Less Distributions: | |||||||||||||||||
|
Distributions from net investment
income |
(0.05 | ) | (0.05 | ) | (0.05 | ) | (0.05 | ) | (0.05 | ) | |||||||
| Net Asset Value, End of Period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | ||||||||||||
| Total Return(1) | 4.91 | % | 4.77 | % | 5.14 | % | 4.88 | % | 5.26 | % | |||||||
| Ratios to Average Net Assets: | |||||||||||||||||
| Expenses | 0.49 | % | 0.45 | % | 0.48 | % | 0.51 | % | 0.48 | % | |||||||
| Net investment income | 4.82 | % | 4.65 | % | 5.03 | % | 4.78 | % | 5.11 | % | |||||||
|
Expense Waiver/
Reimbursements(2) |
0.40 | % | 0.19 | % | 0.19 | % | 0.20 | % | 0.22 | % | |||||||
| Supplemental Data: | |||||||||||||||||
|
Net assets, end of period (000
omitted) |
$852,783 | $687,683 | $631,869 | $524,462 | $445,729 | ||||||||||||
(1)
|
Based on net asset
value, which does not reflect the sales charge or contingent
deferred
sales charge, if applicable.
|
(2)
|
This voluntary
expense decrease is reflected in both the expense and the net
investment
income ratios shown above.
|
| Not FDIC Insured | No Bank Guarantee | May Lose Value |
Not part of the prospectus
Investment Adviser:SouthTrust Bank
Distributor:Federated Securities Corp.
Cusip 844734103
G00859-02 (6/00)
STATEMENT OF ADDITIONAL INFORMATION
SOUTHTRUST U.S. TREASURY MONEY MARKET FUND
A PORTFOLIO OF SOUTHTRUST FUNDS
<R>
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for SouthTrust U.S. Treasury Money Market
Fund dated June 30, 2000. This SAI incorporates by reference the Fund's Annual
Report. Obtain the prospectus or the Annual Report without charge by calling
1-800-843-8618.
June 30, 2000
CONTENTS
How is the Fund Organized?
2
Securities in Which the Fund Invests
2
How is the Fund Sold?
6
Exchanging Securities for Shares
7
Subaccounting Services
7
Redemption in Kind
7
Massachusetts Partnership Law
7
Account and Share Information
8
Tax Information
8
Who Manages and Provides Services
to the Fund? 8
How Does the Fund Measure
Performance? 11
Financial Information
12
Addresses Back
Cover
CUSIP 844734103
G00859-05 (6/00)
</R>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of SouthTrust Funds (Company) The Company is
an open-end management investment company that was established as a
Massachusetts business trust under the laws of the Commonwealth of Massachusetts
on March 4, 1992. The Company may offer separate series of shares representing
interests in separate portfolios of securities.. On June 30, 1998, the name of
the Company changed from "Vulcan Funds" to "SouthTrust Vulcan Funds." Effective
July 22, 1998, the name of the Company changed from "SouthTrust Vulcan Funds" to
"SouthTrust Funds." The Fund changed its name from SouthTrust Treasury Money
Market Obligations Fund to SouthTrust U.S. Treasury Money Market Fund on August
10, 1999.
The Board of Trustees has established five diversified and one
non-diversified investment portfolios. This SAI relates to SouthTrust
U.S. Treasury Money Market Fund. The Fund's investment adviser is
SouthTrust Bank.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
Following is a table that indicates which types of securities are a:
P = Principal investment of the Fund; or
A = Acceptable (but not principal) investment of the Fund;
Fixed Income Securities A
Treasury Securities P
Zero Coupon Securities A
Variable Rate Demand Instruments A
Special Transactions A
Repurchase Agreements P
Reverse Repurchase Agreements A
Delayed Delivery A
To Be Announced Securities A
Securities Lending 1 A
Asset Coverage A
Investing in Securities of Other A
Investment Companies
Illiquid Securities A
1. SUCH LOANS WILL NOT EXCEED 20% OF THE FUND'S TOTAL ASSETS. LOANS OF PORTFOLIO
SECURITIES BY THE 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.
-------------------------------------------------------------------------
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
ZERO COUPON SECURITIES
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in-kind or PIK securities.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are securities that require the issuer or a
third party, such as a dealer or bank, to repurchase the security for its face
value upon demand. The securities also pay interest at a variable rate intended
to cause the securities to trade at their face value. The Fund treats demand
instruments as short-term securities, because their variable interest rate
adjusts in response to changes in market rates, even though their stated
maturity may extend beyond thirteen months. The Fund will invest in variable and
floating rate instruments only when the Adviser deems the investment to involve
minimal credit risk. Variable and floating rate instruments held by the Fund
maybe subject to the Fund's 10% limitation on illiquid investments when the Fund
cannot demand payment of the principal amount within seven days absent a
reliable trading market.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which a Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
TO BE ANNOUNCED (TBA) SECURITIES
As with other when issued transactions, a seller agrees to issue a TBA security
at a future date. However, the seller does not specify the particular securities
to be delivered. Instead, the Fund agrees to accept any security that meets
specified terms.
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities. The Fund will reinvest cash collateral in securities that qualify as
an acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations entering into
an offsetting contract or terminating a special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on special
transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies and managing its uninvested cash. The Fund
will only invest in money market funds that seek to maintain a $1.00 net asset
value and that invest in securities eligible for direct purchase by the Fund. It
should be noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by the Fund in shares of other
investment companies may be subject to such duplicate expenses.
ILLIQUID SECURITIES
The Fund may invest up to 10% 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 Fund to be
illiquid.
INVESTMENT RISKS
Although there are many factors which may effect an investment in the Fund, the
principal risks of investing in a U.S. Treasury money market fund are described
below.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CREDIT RISK
o Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
INVESTMENT LIMITATIONS
The following investment limitations pertain to each of the SouthTrust
Funds. 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 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).
4. Purchase or sell real estate, except that a Fund may purchase securities of
issuers which deal in real estate and may purchase securities which are secured
by interests in real estate.
5. 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 Investment Company Act of 1940.
6. 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.
7. 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.
8. Purchase securities of companies for the purpose of exercising
control.
9. 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.
10. 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
insecurities on a when-issued or forward commitment basis, and except that
anon-money market fund may enter into forward foreign currency contracts and
options thereon in accordance with its investment objectives and policies.
11. 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.
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 Investment Company Act of 1940 (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.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE "VOTE OF A
MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE INVESTMENT
COMPANY ACT OF 1940 (1940 ACT) .
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund computed by dividing the annualized daily income on the Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in the Rule. Under the Rule,
the Board must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the Fund's
investment objective. The procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share based upon
available indications of market value. The Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers appropriate (such as
redemption in kind or shortening the average portfolio maturity) to minimize any
material dilution or other unfair results arising from differences between the
two methods of determining net asset value.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Company, the Distributor
(Federated Securities Corp.) offers Shares on a continuous,
best-efforts basis.
SHAREHOLDER SERVICES
The Funds may pay SouthTrust Bank for providing shareholder services and
maintaining shareholder accounts. SouthTrust Bank, may select others to perform
these services for their customers and may pay them fees.
SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker-dealers or banks) may be paid fees, in
significant amounts, out of the assets of the Distributor Federated Shareholder
Services Company (these fees do not come out of Fund assets). The Distributor
and/or Federated Shareholder Services Company may be reimbursed by the Adviser
or its affiliates.
Investment professionals receive such fees for providing distribution-related
and/or shareholder services, such as advertising, providing incentives to their
sales personnel, sponsoring other activities intended to promote sales, and
maintaining shareholder accounts These payments may be based upon such factors
as the number or value of Shares the investment professional sells or may sell;
the value of client assets invested; and/or the type and nature of sales or
marketing support furnished by the investment professional.
EXCHANGING SECURITIES FOR SHARES
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Company. To protect its
shareholders, the Company has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Company.
In the unlikely event a shareholder is held personally liable for the Company.
obligations, the Company is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Company will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Company. Therefore, financial loss resulting from liability as
a shareholder will occur only if the Company itself cannot meet its obligations
to indemnify shareholders and pay judgments against them.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Company have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund are entitled
to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Company's outstanding shares
of all series entitled to vote.
<R>As of June 2, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares of the U.S.
TREASURY MONEY MARKET FUND: Lynspen & Co., Birmingham, AL, owned
approximately 772,265,036 shares (87.04%), and FiServ Securities, Inc.,
Philadelphia, PA, owned approximately 75,223,305 shares (8.48%).
</R>
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Company's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?
BOARD OF TRUSTEES
The Board is responsible for managing the Company's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Company,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Company for
its most recent fiscal year. The Company is comprised of six funds. As of June
2, 1999, the Fund's Board and Officers as a group owned less than 1% of the
Funds' outstanding Shares.
NAME
BIRTH DATE AGGREGATE
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION
POSITION WITH FOR PAST FIVE YEARS FROM COMPANY
COMPANY
-------------------- President, Tubular Products Company $6,750
CHARLES G. BROWN, (since 1985); Managing Partner, Red
III Hollow Partnership.
Birth Date:
November 27, 1953
P.O. Box 170100
Birmingham, AL
CHAIRMAN AND TRUSTEE
-------------------- Chairman and Chief Executive Officer, $5,750
WILLIAM O. VANN* Young &Vann Supply Co. (since 1987);
Birth Date: January Partner, B&B Investments; Trustee and
28, 1942 Past Chairman, The Childrens' Hospital
P.O. Box 757 of Alabama.
Birmingham, AL
TRUSTEE
-------------------- President (since 1989), Executive Vice $7,250
RUSSELL W. CHAMBLISS President (1988), and Vice President
Birth Date: of Sales and Marketing (1984-1988),
December 26, 1951 Mason Corporation (manufacturer of
Mason Corporation roll formed aluminum and steel
P.O. Box 59226 products).
Birmingham, AL
TRUSTEE
-------------------- Partner of the law firm of Williams, $6,500
THOMAS M. GRADY* Boger, Grady, Davis and Tuttle, P.A.;
Birth Date: July Chairman of the Board of Pfeiffer
25, 1941 University; Member of Cannon
P.O. Box 2 Foundation.
Kannapolis, NC
TRUSTEE
-------------------- Vice President of Investments, Dunn ------------
LAWRENCE W. GREER, Investment Company (since 1992); $3,000
M.D. Chairman, Board of Directors, Southern
-------------------- BioSystems; Director, Daily Access
Birth Date: October Concepts, Inc., Electronic HealthCare
26, 1944 Systems, Inc.
3005 Brookwood Road
Birmingham, AL
TRUSTEE
-------------------- President and Chief Operating Officer $6,000
BILLY L. HARBERT, of Bill Harbert Construction, Inc.
JR.* (BHIC) and Vice President of BHIC
Birth Date: May 23, (until 1998); Director, Harbert
1965 International Establishment; Director,
Bill Harbert Harbert International Establishment,
International S.C.; Director Bilhar International
Construction, Inc. Establishment; Member/Shareholder,
P.O. Box 531390 Bonaventure Capital, LLC; Member
Birmingham, AL /Shareholder, Bonaventure Partners
TRUSTEE LLC; Board Member/ Shareholder,
Founders Trust Company, Inc.,; and
Member /Shareholder, treble Range
Partners, LLC.
-------------------- President, Executive Vice President $0
EDWARD C. GONZALES and Treasurer of some of the Funds in
Birth Date: October the Federated Fund Complex; Vice
22, 1930 Chairman, Federated Investors, Inc.;
Federated Investors Trustee, Federated Administrative
Tower Services; formerly: Trustee or
1001 Liberty Avenue Director of some of the Funds in the
Pittsburgh, PA Federated Fund Complex; CEO and
PRESIDENT AND Chairman, Federated Administrative
TREASURER Services; Vice President, Federated
Investment Management Company,
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Director and Executive Vice President,
Federated Securities Corp.; Director,
Federated Services Company; Trustee,
Federated Shareholder Services Company.
-------------------- Senior Vice President and Director, $0
PETER J. GERMAIN Mutual Fund Services Division,
Birth Date: Federated Services Company. Formerly
September 2, 1959 Senior Corporate Counsel, Federated
Federated Investors Investors, Inc.
Tower
Pittsburgh, PA
VICE PRESIDENT
-------------------- Vice President, Federated Services $0
BETH BRODERICK Company (1997 to present); Client
Birth Date: August Services Officer, Federated Services
2, 1965 Company (1992-1997).
Federated Investors
Tower
Pittsburgh, PA
VICE PRESIDENT AND
ASSISTANT TREASURER
-------------------- Corporate Counsel, Federated $0
C. TODD GIBSON Investors, Inc.: Assistant Vice
Birth Date: May 17, President, Federated Administrative
1967 Services.
Federated investors
Tower
Pittsburgh, PA
SECRETARY
-------------------------------------------------------------------------
* AN ASTERISK DENOTES A TRUSTEE WHO IS DEEMED TO BE AN INTERESTED PERSON AS
DEFINED IN THE1940 ACT. The Trust has a deferred compensation plan (the "Plan")
that permits any Trustee that is not an "affiliated person" of the Trust to
elect to defer receipt of all or a portion of his or her compensation. The
deferred compensation that would have otherwise been paid to the Trustee is
invested, at the Trustee's direction, in one or more of the SouthTrust Funds. A
Trustee may elect to participate in the Plan during any quarter. At the time for
commencing distributions from a Trustee's deferral account, which is no later
than when the Trustee ceases to be a member of the board, the Trustee may elect
to receive distributions in a lump sum or on an annual or quarterly basis over a
period of five years.
INVESTMENT ADVISER
The Adviser, SouthTrust Bank, conducts investment research and makes investment
decisions for the Fund.
The Adviser shall not be liable to the Company or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Company.
<R>
CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Funds, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Company Trustees, and certain other employees. Although
they do permit these people to trade in securities, including those that the
Funds could buy, they also contain significant safeguards designed to protect
the Funds and its shareholders from abuses in this area, such as requirements to
obtain prior approval for, and to report, particular transactions.
</R>
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. 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 the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Company's Board.
RESEARCH SERVICES
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE
ADMINISTRATIVE FEE FEDERATED FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million
The administrative fee received during any fiscal year shall be at least $50,000
per portfolio. Federated Services Company may voluntarily waive a portion of its
fee and may reimburse the Fund for expenses.
-------------------------------------------------------------------------
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
SouthTrust Bank is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Arthur Andersen LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<R>
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED APRIL 2000 1999 1998
30
Advisory Fee Earned $3,741,253 $3,148,280 $2,507,721
Advisory Fee Reduction $1,421,676 $1,196,347 $959,228
Brokerage Commissions $0 $0 $0
Administrative Fee $766,631 $673,714 $567,937
Administrative Fee $0 $0 $0
Reduction
</R>
-------------------------------------------------------------------------
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
<R>Total returns are given for the one-year, five-year and start of performance
periods ended April 30, 2000.
Yield and Effective Yield are given for the seven-day period ended
April 30, 2000
START OF
7- DAY PERIOD 1 YEAR 5 YEARS PERFORMANCE
Total Return N/A 4.91% 4.99% 4.43%
Yield 5.27% N/A N/A N/A
Effective Yield 5.41% N/A N/A N/A
</R>
-------------------------------------------------------------------------
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated by: determining
the net change in the value of a hypothetical account with a balance of one
Share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional Shares purchased with
dividends earned from the original one Share and all dividends declared on the
original and any purchased Shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7. The effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. [
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
(gamma) references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices; (gamma) charts, graphs and
illustrations using the Fund's returns, or returns in general, that demonstrate
investment concepts such as tax-deferred compounding, dollar-cost averaging and
systematic investment; (gamma) discussions of economic, financial and political
developments and their impact on the securities market, including the portfolio
manager's views on how such developments could impact the Fund; and (gamma)
information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. For example, the 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.
FINANCIAL INFORMATION
<R>
The Financial Statements for the Fund for the fiscal year ended April 30, 2000
are incorporated herein by reference to the Annual Report to Shareholders dated
April 30, 2000.
</R>
89
307732/D/2 9CGK02_
ADDRESSES
SOUTHTRUST U.S. TREASURY MONEY MARKET FUND
A PORTFOLIO OF SOUTHTRUST FUNDS
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
SouthTrust Bank,
420 North 20th Street
Birmingham, AL 35203
CUSTODIAN
SouthTrust Bank,
420 North 20th Street
Birmingham, AL 35203
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Arthur Andersen LLP
225 Franklin Street
Boston, MA 02110-2812
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust Value Fund as of the calendar year-end
for each of seven years. The `y' axis reflects the "% Total Return" beginning
with "-5.00%" and increasing in increments of 5.00% up to 40.00%. The `x' axis
represents calculation periods from the earliest calendar year end of the Fund's
start of business through the calendar year ended 1999. The light gray shaded
chart features seven distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund's Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1993 through 1999. The percentages noted
are: 2.86%, -1.71%, 36.54%, 23.17%, 27.45%, 12.61% and 6.35% respectively.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust Growth Fund as of the calendar year-end
for each of ten years. The `y' axis reflects the "% Total Return" beginning with
"-5.00%" and increasing in increments of 5.00% up to 40.00%. The `x' axis
represents calculation periods from the earliest calendar year end of the Fund's
start of business through the calendar year ended 1999. The light gray shaded
chart features ten distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund's Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1990 through 1999. The percentages noted
are: 0.91%, 30.29%, 3.94%, 1.80%, -2.30%, 36.25%, 24.29%, 27.23%, 29.84% and
21.02% respectively.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust Bond Fund as of the calendar year-end for
each of seven years. The `y' axis reflects the "% Total Return" beginning with
"-5.00%" and increasing in increments of 5.00% up to 20.00%. The `x' axis
represents calculation periods from the earliest calendar year end of the Fund's
start of business through the calendar year ended 1999. The light gray shaded
chart features seven distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund's Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1993 through 1999. The percentages noted
are: 10.42%, -4.67%, 15.95%, 2.89%, 9.51%, 9.26% and -4.14% respectively.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust Income Fund as of the calendar year-end
for each of three years. The `y' axis reflects the "% Total Return" beginning
with "0.00%" and increasing in increments of 3.00% up to 15.00%. The `x' axis
represents calculation periods from the earliest calendar year end of the Fund's
start of business through the calendar year ended 1999. The light gray shaded
chart features three distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund's Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1997 through 1999. The percentages noted
are: 6.76%, 7.00% and 1.33% respectively.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust Alabama Tax-Free Income Fund as of the
calendar year-end for each of ten years. The `y' axis reflects the "% Total
Return" beginning with "-4.00%" and increasing in increments of 2.00% up to
12.00%. The `x' axis represents calculation periods from the earliest calendar
year end of the Fund's start of business through the calendar year ended 1999.
The light gray shaded chart features ten distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund's Shares for each calendar year is stated directly at
the top of each respective bar, for the calendar years 1990 through 1999. The
percentages noted are: 6.32%, 7.93%, 5.92%, 6.28%, -2.91%, 11.23%, 2.88%, 5.69%,
5.49% and -4.63% respectively.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the SouthTrust U.S. Treasury Money Market Fund as of the
calendar year-end for each of seven years. The `y' axis reflects the "% Total
Return" beginning with "0.00%" and increasing in increments of 1.00% up to
6.00%. The `x' axis represents calculation periods from the earliest calendar
year end of the Fund's start of business through the calendar year ended 1999.
The light gray shaded chart features seven distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund's Shares for each calendar year is stated
directly at the top of each respective bar, for the calendar years 1993 through
1999. The percentages noted are: 2.78%, 3.77%, 5.48%, 4.87%, 5.07%, 5.00% and
4.61% respectively.
PART C. OTHER INFORMATION.
Item 23. Exhibits:
(a) (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)
(vii) Conformed copy of Amendment No. 8 to the
Master Trust Agreement; +
(viii) Conformed copy of Amendment No. 9 to the
Master Trust Agreement; +
(viv) Conformed copy of Amendment No. 10 to the
Master Trust Agreement; +
(b) Copy of By-Laws of the Registrant; (1)
(c) Not applicable;
(d) (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)
(iii) Conformed copy of Amendment No. 2 to Investment
Advisory Contract dated August 1, 1999;
+
(e) (i) Conformed copy of Distributor's Contract of the
Registrant; (5) (ii) Conformed copy of Exhibit D to
Distributor's Contract; (9) (iii) Conformed copy of
Exhibit E to Distributor's Contract; + (iv) Conformed
copy of Exhibit F to Distributor's Contract; +
(f) Form of Deferred Compensation Plan for Trustees; +
+ 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)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 filed on July 20, 1998. (File Nos. 33-46190 and
811-6580)
(g) (i) Conformed copy of Custodian Contract of
the Registrant; (11)
(ii) Conformed copy of Custodian Fee
Schedule;(11)
(h) (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 Amendment No. 2 to
Administrative Services Agreement of
Registrant; (11)
(iv) Conformed copy of Fund Accounting and
Shareholder Recordkeeping Agreement of
Registrant; (5)
(v) Conformed copy of Electronic
Communications and Recordkeeping
Agreement; (6)
(vi) Conformed copy of Amendment No. 1 to
Schedule A, Fund Accounting and
Shareholder Recordkeeping Agreement; (10)
(vii) Conformed copy of Amendment No. 1 to
Schedule C, Fund Accounting and
Shareholder Recordkeeping Agreement; (10)
(viii) Form of Sub-Transfer Agency and Service
Agreement (including Exhibits A& B); +
(i) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered; (2)
(j) Conformed copy of Consent of Independent Public
Auditors; +
(l) Conformed copy of Purchase Agreement of the
Registrant; (3)
(m) (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)
+ 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)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 filed on June 24, 1997. (File Nos. 33-46190 and
811-6580)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 filed on July 20, 1998. (File Nos. 33-46190 and
811-6580)
(iv) Conformed copy of Exhibit B to the 12b-1 Plan dated
August 1, 1999; +
(v) Conformed copy of Exhibit C to the 12b-1 Plan dated
August 1, 1999; +
(vi) Conformed copy of Sales Agreement of the Registrant;+
(vii) Conformed copy of Amendment 1 to Exhibit A to the
12b-1 Plan; +
(n) Not included per Footnote 60 of Release No. 33- 7684;
(o) Conformed copy of Power of Attorney; +
(p) Conformed copy of Registrant's Code of Ethics; +
Item 24. Persons Controlled by or Under Common Control with Registrant:
None
Item 25. Indemnification: (3)
Item 26. 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.
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
NAME THE ADVISER THE PAST TWO YEARS
Julian W. Banton Director, Chairman, Banking.
President, and Chief
Executive Officer
Gene Bartow Director Athletic Director,
University of
Alabama at
Birmingham.
Thomas E. Bradford, Jr. Director Chairman and Chief
Executive Officer, Bradford & Company.
Ronald G. Bruno Director Chairman, President
and Chief Executive Officer, Bruno's
Inc.
--------------------------------
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)
(1) (2) (3)
Principal Occupation
or Other Employment
of a Substantial
Position with Nature During
NAME THE ADVISER THE PAST TWO YEARS
H.M. Burt, Jr. Director Chairman and Chief
Executive Officer Southern
Tool Inc.
David J. Cooper Director President,
Cooper/T. Smith Corporation
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
(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
ITEM 27. PRINCIPAL UNDERWRITERS:
(a)...Federated Securities Corp. the Distributor for shares of
the ......Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated
ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fixed Income Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; 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
International Series, Inc.; Federated Investment Series Funds, Inc.;
Federated Managed Allocation Portfolios; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Securities Income Trust; Federated Short-Term
Municipal 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.; Federated World Investment Series, Inc.;
FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds;
Intermediate Municipal Trust; Marshall Funds, Inc.; Money Market
Obligations Trust; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia Municipal
Funds; and Vision Group of Funds, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Richard B. Fisher Chairman, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice --
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John M. Albert Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
------------------ ------------------------ -----------------
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant 5800 Corporate Drive
Pittsburgh, PA 15237-7010
Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend Disbursing 1001 Liberty Avenue
Agent and Portfolio Recordkeeper") Pittsburgh, PA 15222-3779
Federated Administrative Services Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
SouthTrust Bank, 420 North 20th Street
("Adviser") Birmingham, AL 35203
SouthTrust Bank, 420 North 20th Street
("Custodian") Birmingham, AL 35203
Item 29. Management Services: Not applicable.
Item 30. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, SOUTHTRUST FUNDS (formerly,
SouthTrust Vulcan Funds), certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 26th day of June, 2000.
SOUTHTRUST FUNDS
(formerly, SouthTrust Vulcan Funds)
BY: /s/C. Todd Gibson
C. Todd Gibson, Secretary
Attorney in Fact for William O. Vann
June 26, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
---- ----- ----
By: /s/C. Todd Gibson Attorney In Fact June 26, 2000
C. Todd Gibson For the Persons
SECRETARY 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)
Lawrence W. Greer, M.D. Trustee
Thomas M. Grady * Trustee
Billy L. Harbert, Jr. Trustee
* By Power of Attorney
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