SOUTHTRUST FUNDS, 497, 2000-10-20

SOUTHTRUST FUNDS
497, 2000-10-20

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STATEMENT OF ADDITIONAL INFORMATION

SOUTHTRUST BOND FUND

SOUTHTRUST INCOME FUND

SOUTHTRUST ALABAMA TAX-FREE INCOME FUND

PORTFOLIOS OF SOUTHTRUST FUNDS

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

(Revised October 31, 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 (10/00)

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. 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

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.

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

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.

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.

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

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.

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.

THROUGH SOUTHTRUST FUNDS SHAREHOLDER SERVICES

If you purchase Fund shares directly through SouthTrust Funds Shareholder
Services, your purchase will be made 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

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.

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.

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%).

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
CHARLES G. BROWN, President, Tubular Products Company $6,750
III (since 1985); Managing Partner, Red
Birth Date: Hollow Partnership.
November 27, 1953
P.O. Box 170100
Birmingham, AL
CHAIRMAN AND TRUSTEE
WILLIAM O. VANN* Chairman and Chief Executive Officer, $5,750
Birth Date: January Young & Vann Supply Co. (since 1987);
28, 1942 Partner, B&B Investments; Trustee and
P.O. Box 757 Past Chairman, The Childrens' Hospital
Birmingham, AL of Alabama.
TRUSTEE

RUSSELL W. CHAMBLISS President (since 1989), Executive Vice $7,250
Birth Date: President (1988), and Vice President
December 26, 1951 of Sales and Marketing (1984-1988),
Mason Corporation Mason Corporation (manufacturer of
P.O. Box 59226 roll formed aluminum and steel
Birmingham, AL products).
TRUSTEE

THOMAS M. GRADY* Partner of the law firm of Williams, $6,500
Birth Date: July Boger, Grady, Davis and Tuttle, P.A.;
25, 1941 Chairman of the Board of Pfeiffer
P.O. Box 2 University; Member of Cannon
Kannapolis, NC Foundation.
TRUSTEE

LAWRENCE W. GREER, Vice President of Investments, Dunn $3,000
M.D. Investment Company (since 1992);
Birth Date: October Chairman, Board of Directors, Southern
26, 1944 BioSystems; Director, Daily Access
3005 Brookwood Road Concepts, Inc., Electronic HealthCare
Birmingham, AL Systems, Inc.
TRUSTEE

BILLY L. HARBERT, President and Chief Operating Officer $6,000
JR.* of Bill Harbert International
Birth Date: May 23, Construction, Inc. (BHIC); Director,
1965 Harbert International Establishment;
Bill Harbert Director Bilhar International
International Establishment; Member/Shareholder,
Construction, Inc. Bonaventure Capital, LLC; Member
P.O. Box 531390 /Shareholder, Bonaventure Partners
Birmingham, AL LLC; Board Member/ Shareholder,
TRUSTEE Founders Trust Company, Inc.,; and
Member /Shareholder, treble Range
Partners, LLC.

EDWARD C. GONZALES President, Executive Vice President $0
Birth Date: October and Treasurer of some of the Funds in
22, 1930 the Federated Fund Complex; Vice
Federated Investors Chairman, Federated Investors, Inc.;
Tower Trustee, Federated Administrative
1001 Liberty Avenue Services; formerly: Trustee or
Pittsburgh, PA Director of some of the Funds in the
PRESIDENT AND Federated Fund Complex; CEO and
TREASURER Chairman, Federated Administrative
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.
PETER J. GERMAIN Senior Vice President and Director, $0
Birth Date: Mutual Fund Services Division,
September 2, 1959 Federated Services Company. Formerly
Federated Investors Senior Corporate Counsel, Federated
Tower Investors, Inc.
Pittsburgh, PA
VICE PRESIDENT
BETH BRODERICK Vice President, Federated Services $0
Birth Date: August Company (1997 to present); Client
2, 1965 Services Officer, Federated Services
Federated Investors Company (1992-1997).
Tower

Pittsburgh,
PA

VICE PRESIDENT AND
ASSISTANT TREASURER
C. TODD GIBSON Corporate Counsel, Federated $0
Birth Date: May 17, Investors, Inc.: Assistant Vice
1967 President, Federated Administrative
Federated investors Services.

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.

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.

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

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

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

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.

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%
</TABLE>

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

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.

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.

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

STATEMENT OF ADDITIONAL INFORMATION

SOUTHTRUST VALUE FUND

SOUTHTRUST GROWTH FUND

PORTFOLIOS OF SOUTHTRUST FUNDS

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
Revised October 31, 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 (10/00)

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

COMMON STOCKS

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

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.

BANK INSTRUMENTS

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.

VARIABLE RATE DEMAND INSTRUMENTS

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

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

DELAYED DELIVERY TRANSACTIONS

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

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

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.

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 OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

LEVERAGE RISKS

INTEREST RATE RISKS

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.

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.

8. Purchase securities of companies for the purpose of exercising control.

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:

(gamma) 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; (gamma) 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; (gamma) 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 (gamma) 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

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.

THROUGH SOUTHTRUST FUNDS SHAREHOLDER SERVICES

If you purchase Fund shares directly through SouthTrust Funds Shareholder
Services, your purchase will be made 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?

FRONT-END SALES CHARGE REALLOWANCES

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.

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

EXCHANGING SECURITIES FOR SHARES

SUBACCOUNTING SERVICES

REDEMPTION FEE

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.

MASSACHUSETTS PARTNERSHIP LAW

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.

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%).

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 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.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

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
CHARLES G. BROWN, III President, Tubular Products Company $6,750
Birth Date: November (since 1985); Managing Partner, Red
27, 1953 Hollow Partnership.
P.O. Box 170100
Birmingham, AL

CHAIRMAN AND TRUSTEE
----------------------------------------------------------------------------
WILLIAM O. VANN* Chairman and Chief Executive Officer, $5750
Birth Date: January Young & Vann Supply Co. (since 1987);
28, 1942 Partner, B&B Investments; Trustee and
P.O. Box 757 Past Chairman, The Childrens' Hospital
Birmingham, AL of Alabama.
TRUSTEE

RUSSELL W. CHAMBLISS President (since 1989), Executive Vice $7,250
Birth Date: President (1988), and Vice President of
December 26, 1951 Sales and Marketing (1984-1988), Mason
Mason Corporation Corporation (manufacturer of roll
P.O. Box 59226 formed aluminum and steel products).
Birmingham, AL

TRUSTEE

BILLY L. HARBERT, President and Chief Operating Officer $6,000
JR.* of Bill Harbert Construction, Inc.
Birth Date: May 23, (BHIC) and Vice President of BHIC
1965 (until 1998); Director, Harbert
Bill Harbert International Establishment; Director,
International Harbert International Establishment,
Construction, Inc. S.C.; Director Bilhar International
P.O. Box 531390 Establishment; Member/Shareholder,
Birmingham, AL Bonaventure Capital, LLC; Member
TRUSTEE /Shareholder, Bonaventure Partners LLC;
Board Member/ Shareholder, Founders

Trust Company, Inc.,; and Member

/Shareholder, treble Range Partners,

LLC.

EDWARD C. GONZALES President, Executive Vice President and $0
Birth Date: October Treasurer of some of the Funds in the
22, 1930 Federated Fund Complex; Vice Chairman,
Federated Investors Federated Investors, Inc.; Trustee,
Tower Federated Administrative Services;
1001 Liberty Avenue formerly: Trustee or Director of some
Pittsburgh, PA of the Funds in the Federated Fund
PRESIDENT AND Complex; CEO and Chairman, Federated
TREASURER Administrative 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.
PETER J. GERMAIN Senior Vice President and Director, $0
Birth Date: Mutual Fund Services Division,
September 2, 1959 Federated Services Company. Formerly
Federated Investors Senior Corporate Counsel, Federated
Tower Investors, Inc.
Pittsburgh, PA
VICE PRESIDENT
BETH BRODERICK Vice President, Federated Services $0
Birth Date: August Company (1997 to present); Client
2, 1965 Services Officer, Federated Services
Federated Investors Company (1992-1997).
Tower

Pittsburgh,
PA

VICE PRESIDENT AND
ASSISTANT TREASURER
C. TODD GIBSON Corporate Counsel, Federated Investors, $0
Birth Date: May 17, Inc.: Assistant Vice President,
1967 Federated Administrative Services.
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.

CODE OF ETHICS- RESTRICTIONS ON PERSONAL TRADING

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

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

INDEPENDENT AUDITORS

Arthur Andersen LLP are the independent auditors for the Funds.

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

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 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

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.

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.

YIELD

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

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.

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