BOULEVARD BLUE-CHIP GROWTH FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
PROSPECTUS
The shares of the Boulevard Blue-Chip Growth Fund (the "Fund") offered by this
prospectus represent interests in a professionally managed, diversified portfo-
lio of The Boulevard Funds (the "Trust"), an open-end, management investment
company (a mutual fund).
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF BOULE-
VARD BANK NATIONAL ASSOCIATION, ARE NOT ENDORSED OR GUARANTEED BY BOULEVARD
BANK NATIONAL ASSOCIATION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVEST-
MENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
calling Boulevard Bank National Association toll-free at 1-800-285-FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objectives 3
Investment Policies 3
Acceptable Investments 3
Common Stocks 4
Other Corporate Securities 4
U.S. Government Securities 4
Repurchase Agreements 4
Bank Instruments and Securities of
Other Investment Companies 4
Temporary Investments 4
When-Issued and Delayed Delivery Transactions 4
Lending of Portfolio Securities 5
Investment Limitations 5
THE BOULEVARD FUNDS INFORMATION 5
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Management of the Trust 5
Board of Trustees 5
Investment Adviser 6
Advisory Fees 6
Adviser's Background 6
Distribution of Fund Shares 6
Distribution Plan 6
Administrative Arrangements 7
ADMINISTRATION OF THE FUND 8
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Administrative Services 8
Custodian 8
Transfer Agent, Dividend Disbursing Agent,
Shareholder Servicing Agent,
and Portfolio Accounting Services 8
Legal Counsel 8
Independent Accountants 8
Brokerage Transactions 8
Expenses of the Fund 9
NET ASSET VALUE 9
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INVESTING IN THE FUND 9
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Account Establishment 9
By Telephone 9
By Mail 9
Share Purchases 9
By Telephone 10
By Mail 10
Payment by Check 10
Payment by Wire 10
Minimum Investment Required 10
What Shares Cost 10
Purchases at Net Asset Value 10
Sales Charge Reallowance 11
Reducing the Sales Charge 11
Quantity Discounts and Accumulated Purchases 11
Letter of Intent 11
Reinvestment Privilege 12
Concurrent Purchases 12
Exchanging Securities for Fund Shares 12
Systematic Investment Program 12
Retirement Plans 12
Certificates and Confirmations 13
Dividends and Capital Gains 13
EXCHANGE PRIVILEGE 13
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By Telephone 14
REDEEMING SHARES 14
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Through Boulevard Bank 14
By Telephone 14
By Mail 15
Receiving Payment 15
Signatures 15
Redemption Before Purchase Instruments Clear 15
Systematic Withdrawal Program 15
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
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Voting Rights 16
Massachusetts Partnership Law 16
EFFECT OF BANKING LAWS 17
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TAX INFORMATION 17
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Federal Income Tax 17
PERFORMANCE INFORMATION 18
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FINANCIAL STATEMENTS 19
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REPORT OF INDEPENDENT ACCOUNTANTS 29
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ADDRESSES INSIDE BACK COVER
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SUMMARY OF FUND EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).................................................................. 4.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver)(1)......................................... 0.38%
12b-1 Fees(2)............................................................ 0.00%
Total Other Expenses..................................................... 0.63%
Total Fund Operating Expenses(3)..................................... 1.01%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum
management fee is 0.75% absent the anticipated voluntary waiver by the
adviser.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-
1 fees. The Fund will not accrue or pay 12b-1 fees until a separate class
of shares has been created for certain institutional investors. The Fund
can pay up to 0.25% as a 12b-1 fee to the distributor.
(3) The Annual Fund Operating Expenses were 0.78% for the period ending
November 30, 1993. The Annual Fund Operating Expenses in the table above
are based on estimated expenses expected during the fiscal year ending
November 30, 1994. Total Fund Operating Expenses are estimated to be 1.38%
absent the anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "THE BOULEVARD FUNDS INFORMATION" AND "INVESTING IN THE
FUNDS."
<TABLE>
<CAPTION>
EXAMPLE: 1 year 3 years 5 years 10 years
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return; (2) redemption at the end of each time
period; and (3) payment of the maximum sales
load of 4.00%. The Fund charges no redemption
fees........................................... $50 $71 $94 $159
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1994.
BOULEVARD BLUE-CHIP GROWTH FUND
FINANCIAL HIGHLIGHTS
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SUPPLEMENTARY INFORMATION
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Accountants on page 29.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.11
----------------------------------------------------
Net realized and unrealized loss on investments (0.63)
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Total from investment operations (0.52)
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.09)
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NET ASSET VALUE, END OF PERIOD $9.39
- ----------------------------------------------------- -------
TOTAL RETURN** (5.18)%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.78%(a)
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Net investment income 1.26%(a)
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Expense waiver/reimbursement(b) 0.47%(a)
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $31,084
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Portfolio turnover rate 5%
----------------------------------------------------
</TABLE>
* Reflects operations for the period from December 18, 1992 (date of initial
public investment) to November 30, 1993.
** Based on net asset value which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 3, 1992. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes.
The Fund is designed primarily for retail and trust customers of Boulevard
Bank National Association and its affiliates as a convenient means of
participating in a professionally managed, diversified portfolio investing at
least 65% of its total assets in common stock of "blue-chip" companies. In
most cases, a minimum initial investment of $1,000 is required. See "Minimum
Investment Required."
Fund shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVES
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue-chip"
companies. "Blue-chip" companies generally are top-quality, established growth
companies which, in the opinion of the investment adviser, meet one or more of
the following criteria:
. industry leader with proven management capabilities;
. historical and future earnings growth rate of approximately 10%
compounded annually;
. strong balance sheet with pension liabilities funded;
. products with brand recognition and consumer acceptance;
. growing consumer-based demand with limited government sales;
. ability to meet social, political, and environmental problems;
. vigorous research effort with continuing new product flow;
. low external capital requirements; and
. not an import competitive company but possessing international
capabilities.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that, over the long term, the economy will continue to expand and
develop and that this economic growth will be
reflected in the growth of the revenues and earnings of blue-chip companies.
Given these longer investment horizons, the Fund will attempt to hold its
portfolio securities throughout market cycles.
COMMON STOCKS. The Fund invests primarily in common stocks of blue-chip
companies selected by the Fund's investment adviser based on the criteria set
forth above and traditional research techniques and technical factors,
including assessment of earnings and dividend growth prospects and of the
risk and volatility of the company's industry. Other factors, such as product
position or market share, will also be considered by the Fund's investment
adviser.
OTHER CORPORATE SECURITIES. The Fund may invest in convertible securities and
warrants of these blue-chip companies. The convertible bonds in which the
Fund may invest will be rated "investment grade" (i.e., Baa or better by
Moody's Investors Service, Inc., or BBB or better by Standard & Poor's
Corporation or Fitch Investors Service, Inc.). If a security's rating is
reduced below the required minimum after the Fund has purchased it, the Fund
is not required to sell the security, but may consider doing so. Securities
receiving the lowest investment grade rating are considered to have some
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal
and interest payments than higher rated bonds.
U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued and/or
guaranteed as to the payment of principal and interest by the U.S. government
or its agencies or instrumentalities.
REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities to the Fund
and agree, at the time of sale, to repurchase them at a mutually agreed upon
time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
BANK INSTRUMENTS AND SECURITIES OF OTHER INVESTMENT COMPANIES. Primarily to
manage short-term cash, the Fund may also invest in certificates of deposit,
demand and time deposits, bankers' acceptances, deposit notes, and other
instruments of domestic and foreign banks and other deposit institutions
("Bank Instruments") and securities of other investment companies.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest
temporarily in cash and cash items during times of unusual market conditions
and to maintain liquidity. Cash items may include short-term obligations such
as:
. commercial paper rated A-1 or A-2 by Standard & Poor's Corporation,
Prime-1 or Prime-2 by Moody's Investors Service, Inc., or F-1 or F-2 by
Fitch Investors Service, Inc.;
. U.S. government securities, as described above; and
. repurchase agreements.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. In when-issued and delayed delivery transactions,
the Fund relies on the seller to complete the transaction. The seller's
failure to complete the transaction may cause the Fund to miss a price or
yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees, and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the portfolio securities
loaned at all times.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 10% of
its total assets to secure such borrowings;
. lend any of its assets except portfolio securities up to one-third of its
total assets; or
. with respect to 75% of its total assets, invest more than 5% in
securities of any one issuer other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
. invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933
and certain other restricted securities which meet the criteria for
liquidity as established by trustees;
. invest more than 15% of its net assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days after
notice, over-the-counter options, and certain restricted securities not
determined by the Trustees to be liquid; or
. invest more than 10% of its total assets in securities of other
investment companies.
THE BOULEVARD FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Trustees'
responsibilities between meetings of the Trustees.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Boulevard
Bank National Association, the Fund's investment adviser (the "Adviser" or
"Boulevard Bank"), subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the selection, purchase, and sale of portfolio instruments,
for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The investment
advisory fee is accrued and paid daily. The fee paid by the Fund, while
higher than the advisory fee paid by other mutual funds in general, is
comparable to fees paid by other mutual funds with similar objectives and
policies. The Adviser has undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states. The Adviser
may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion.
ADVISER'S BACKGROUND. Boulevard Bank, a national banking association,
formerly known as National Boulevard Bank of Chicago and Boulevard Bridge
Bank, has conducted operations since 1921. Boulevard Bank is a wholly-owned
subsidiary of Boulevard Bancorp, Inc., a multi-bank holding company
incorporated under the laws of the State of Delaware. While Boulevard
Bancorp, Inc., derives certain revenues and incurs certain expenses from
other operations, its income is generated primarily from the operations of
its bank subsidiaries, which offer a broad range of financial services to
customers located in the greater Chicago metropolitan area. These services
include all areas of commercial banking and other services tailored for
individual and corporate customers. In addition, trust services and a wide
variety of services for employee benefit plans are provided.
Boulevard Bank has been managing investments for its trust clients since its
trust powers were established in 1957. As of December 31, 1993, the Trust
Division of Boulevard had approximately $2.4 billion under administration, of
which it had investment discretion over approximately $800 million. Boulevard
Bank has been advising The Boulevard Funds since December 1992. The Adviser
has no prior experience in international investments.
Ron Heithoff, a Vice President of Boulevard Bank, has been the portfolio
manager of the Fund since its inception. He has 34 years of experience,
including 29 years with Boulevard Bank. He received his Bachelor of Science
degree from Marquette University. He is a Chartered Financial Analyst and
also a member of the Association for Investment Management and Research and
the Investment Analysts Society of Chicago.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the Plan) adopted in accordance
with Rule 12b-1 promulgated under the Investment Company Act of 1940, the Fund
may pay to the distributor an amount computed at an annual rate of 0.25% of
the Fund's average daily net assets to finance any
activity which is principally intended to result in the sale of shares subject
to the Plan. The Fund will not accrue or pay any distribution expenses
pursuant to the Plan until a separate class of shares has been created for
certain institutional investors.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed an expense limitation that the
distributor may, by notice to the Trust, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as may
reasonably be requested.
The distributor will pay such financial institutions a fee based upon shares
subject to the Plan and owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined,
from time to time, by the distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an underwriter
or distributor of most securities. In the event the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Trustees will consider appropriate changes in the
services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state laws.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of the Fund's shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net
assets in shareholder accounts of such clients or customers during the period
for which the brokers, dealers, and administrators provide services. Any fees
paid for these services by the distributor will be reimbursed by the Adviser
and not the Fund. Payments made here would be in addition to any payments that
may be made under the Plan.
ADMINISTRATION OF THE FUND
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ADMINISTRATIVE SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services provides these services at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
------------------ -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 with respect to the Fund. Federated Administrative Services may
choose voluntarily to reimburse a portion of its fee at any time.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, SHAREHOLDER SERVICING AGENT, AND
PORTFOLIO ACCOUNTING SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, is transfer agent for the
shares of the Fund, dividend disbursing agent for the Fund, and shareholder
servicing agent for the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio instruments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Fund are Price
Waterhouse, Chicago, Illinois.
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. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser may
effect individual securities transactions at commission rates in excess of the
minimum commission rates available, if the
Adviser determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage or research services provided by
such broker or dealer, viewed in terms of either that particular transaction
or the Adviser's overall responsibilities with respect to the Fund. The
Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund with federal and state securities authorities; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such non-recurring and
extraordinary items as may arise. However, the Adviser may voluntarily assume
some expenses and has, in addition, undertaken to reimburse the Fund, up to
the amount of the advisory fee, the amount by which operating expenses exceed
limitations imposed by certain states.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the value of all securities and other assets of the Fund, less
liabilities of the Fund, by the number of Fund shares outstanding.
INVESTING IN THE FUND
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ACCOUNT ESTABLISHMENT
BY TELEPHONE. Open an account by calling Boulevard Bank toll-free at 1-800-
285-FUND. Information needed to establish the account will be taken over the
telephone. A signed new account form will be necessary to complete the account
establishment.
BY MAIL. Mail a new account form to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181. New account forms are available directly
from the Fund.
SHARE PURCHASES
Fund shares are sold on days which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Fund shares may be ordered by
telephone through procedures established with Boulevard Bank by calling 1-800-
285-FUND. An investor may also place an order in person through an account
representative at Boulevard Bank or any of its affiliates. Texas residents
must purchase shares of the Fund through Federated Securities Corp. at 1-800-
618-8573. In connection with the sale of shares, the distributor may, from
time to time, offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call Boulevard Bank
toll-free at 1-800-285-FUND. Your purchase order will be taken directly over
the telephone. The order must be placed by 3:00 p.m. (Central time) for shares
to be purchased at that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to Boulevard
Blue-Chip Growth Fund.
PAYMENT BY CHECK. Mail to Boulevard Blue-Chip Growth Fund, P.O. Box 8609,
Boston, Massachusetts 02105. Orders by check are considered received after
payment by check is converted into federal funds. This is generally the next
business day after the check is received.
PAYMENT BY WIRE. Instruct your financial institution to wire your funds as
follows: State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Boulevard Blue-Chip
Growth Fund; Title or Name of Account; and Wire Order Number and/or Account
Number.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
may be in any amounts of $50 or more. The Fund may waive the initial minimum
investment for employees of Boulevard Bancorp, Inc., and its affiliates from
time to time. The Fund may also waive the initial and subsequent minimum
investment for any payroll deduction plan established with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------- --------------------- -------------------
<S> <C> <C>
Less than $100,000 4.00% 4.17%
$100,000 but less than $500,000 3.00% 3.09%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or more 1.00% 1.01%
</TABLE>
The net asset value is determined at the close of trading on the New York
Stock Exchange (currently 3:00 p.m. Central time), Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; or (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving
Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by: the Trust Divisions of Boulevard Bank and
its affiliates for funds which are held in a fiduciary, agency, custodial, or
similar capacity; Trustees and employees of the Fund, Boulevard Bank, or
Federated Securities Corp., or each of their affiliates, and their spouses and
children under 21; any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund; or anyone who
participates in a payroll deduction program established with the Fund. Once a
shareholder has purchased shares at net asset value, no sales charge will be
imposed on subsequent purchases, if any.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, Boulevard Bank or
any authorized broker/dealer will normally receive up to 85% of the applicable
sales charge. Any portion of the sales charge which is not paid to Boulevard
Bank or registered broker/dealers will be retained by the distributor.
However, the distributor, in its sole discretion, may uniformly offer to pay
to all dealers selling shares of the Fund additional amounts, all or a portion
of which may be paid from the sales charge it normally retains or from any
other source available to it. Such additional payments, if accepted by the
dealer, may be in the form of cash or promotional incentives and will be
predicated upon the amount of shares of the Fund or other funds of the Trust
sold by the dealer.
The sales charge for shares sold other than through Boulevard Bank or
registered broker/dealers will be retained by the distributor. The distributor
may pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Fund
shares.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age
21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchase still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.00%, not 4.00%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
purchase is made that Fund shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Trust over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter includes
a provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
up to 4.0% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period, unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may
be redeemed at the then-current redemption price (which could be less than the
purchase price for such shares) in order to realize the difference in the sales
charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90 days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest all or a part of
the redemption proceeds at the next-determined net asset value without any
sales charge. Federated Securities Corp. must be notified by the shareholder in
writing or by Boulevard Bank of the reinvestment in order to eliminate a sales
charge. If the shareholder redeems his shares in the Fund, there may be tax
consequences. Shareholders contemplating such transactions should consult their
own tax adviser.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or
more funds in the Trust, the purchase price of which includes a sales charge.
For example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund shares. The Fund reserves the right to determine
the acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values its
assets. Investors wishing to exchange securities should first contact Boulevard
Bank.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares at the net asset value next determined after an
order is received by Federated Securities Corp., plus the applicable sales
charge. A shareholder may apply for participation in this program through
Boulevard Bank.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for Individual Retirement Accounts. For further details, including prototype
retirement plans, contact Boulevard Bank at 1-800-285-FUND and consult a tax
adviser.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued
unless requested by contacting Boulevard Bank in writing.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly statements are sent to report dividends paid during the
quarter.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid quarterly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date's net asset value without a
sales charge, unless cash payments are requested by writing to the Fund or
Boulevard Bank. Dividends and capital gains can also be reinvested in shares
of any other fund comprising The Boulevard Funds.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
Shareholders may exchange shares of the Fund for shares of the other funds in
the Trust. In addition, shares of the Fund may also be exchanged for certain
other funds distributed by Federated Securities Corp. that are not advised by
Boulevard Bank ("Federated Funds"). For further information on the
availability of Federated Funds for exchanges, please call Boulevard Bank at
1-800-285-FUND. Shares of funds with a sales charge may be exchanged at net
asset value for shares of other funds with an equal sales charge or no sales
charge. Shares of funds with a sales charge may be exchanged for shares of
funds with a higher sales charge at net asset value, plus the additional sales
charge. Shares of funds with no sales charge, whether acquired by direct
purchase, reinvestment of dividends on such shares, or otherwise, may be
exchanged for shares of funds with a sales charge at net asset value, plus the
applicable sales charge.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends or capital gains on such shares retain the
character of the exchanged shares for purposes of exercising further exchange
privileges; thus, an exchange of such shares for shares of a fund with a sales
charge would be at net asset value.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The exchange privilege may be terminated at any time. Shareholders will be
notified of the termination of the exchange privilege. A shareholder may
obtain further information on the exchange privilege by calling Boulevard Bank
at 1-800-285-FUND.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to Boulevard Bank at 1-800-285-FUND. Shares
may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must
be forwarded to the transfer agent by Boulevard Bank and deposited to the
shareholder's mutual fund account before being exchanged.
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. Authorization forms and information regarding this service
are available from Boulevard Bank. Telephone exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 2:00 p.m. (Central
time) for shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders may have difficulty
in making exchanges by telephone through Boulevard Bank during times of
drastic economic or market changes. If a shareholder cannot contact Boulevard
Bank by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Boulevard
Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange or the Federal Reserve
Wire System is closed. Requests for redemption can be made by telephone or
mail.
THROUGH BOULEVARD BANK
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Boulevard
Bank toll-free at 1-800-285-FUND. For orders received before 3:00 p.m.
(Central time), proceeds will normally be wired the next day to the
shareholder's account at Boulevard Bank or a check will be sent to the address
of record. In no event will proceeds be sent more than seven days after a
proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Boulevard Bank. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as a written request to
Boulevard Bank.
If at any time the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders will be notified.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request
to Boulevard Bank at 410 North Michigan Avenue, Chicago, Illinois 60611-4181.
The written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested, and should be signed
exactly as the shares are registered. If share certificates have been issued,
they must be properly endorsed and should be sent by registered or certified
mail with the written request. Shareholders should call Boulevard Bank at 1-
800-285-FUND for assistance in redeeming by mail.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are insured
by either the Bank Insurance Fund or the Savings Association Insurance
Fund, which are administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and Federated Services Company have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Fund and Federated Services Company
reserve the right to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares of the Fund are purchased by check or through the Automated
Clearing House ("ACH"), the proceeds from the redemption of those shares are
not available, and the shares may not be exchanged, until the transfer agent
is reasonably certain that the purchase check has cleared, which could take up
to 10 calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the Fund's net asset value,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Fund. The
minimum
withdrawal amount is $50 per month. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000. A
shareholder may obtain more information about this program by calling
Boulevard Bank at 1-800-285-FUND. Due to the fact that shares are sold with a
sales charge, it is not advisable for shareholders to be purchasing shares
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Fund for vote. All shares of
each fund in the Trust have equal voting rights, except that in matters
affecting only a particular fund, only shareholders of that fund are entitled
to vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or Fund's operation and for the election of
Trustees under certain circumstances. As of January 6, 1994, First National
Bank of Des Plaines (a subsidiary of Boulevard Bancorp, Inc.), acting in
various capacities for numerous accounts, was the owner of record of 2,892,065
shares (87.99%) of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.
Trustees may be removed by a two-thirds vote of a number of the Trustees or by
a two-thirds vote of a number of the shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, instrument the Trust or its Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing securities in
general. However, such banking laws and regulations do not prohibit such a
holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customer. The Fund's Adviser, Boulevard Bank, is subject to such banking laws
and regulations.
Boulevard Bank believes, after consultation with counsel, that its performance
of the investment advisory services for the Fund, as contemplated by the
advisory agreement with the Trust, is not prohibited by the Glass-Steagall Act
as it has been interpreted by the courts and federal banking agencies or by
other banking laws and regulations applicable to national banks. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent Boulevard Bank from continuing
to perform all or a part of the above services for its customers and/or the
Fund. In such event, changes in the operation of the Fund may occur, including
the possible alteration or termination of any automatic or other Fund share
investment and redemption services that are being provided by Boulevard Bank,
and the Trustees would consider alternative investment advisers and other
means of continuing available investment services. It is not expected that
existing Fund shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Boulevard Bank is found) as a
result of any of these occurrences.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other funds, if any, will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax adviser regarding the status
of their accounts under federal, state, and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if reduced or excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
BOULEVARD BLUE-CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ---------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--96.9%
-----------------------------------------------
BEVERAGES--SOFT DRINKS--10.1%
----------------------------------------
46,500 Coca-Cola Co. $ 1,964,625
----------------------------------------
29,000 PepsiCo. 1,167,250
---------------------------------------- -----------
Total 3,131,875
---------------------------------------- -----------
BREWERS & DISTILLERS--3.2%
----------------------------------------
20,000 Anheuser-Busch Companies, Inc. 990,000
---------------------------------------- -----------
CONGLOMERATES--3.2%
----------------------------------------
9,000 Minnesota Mining & Manufacturing Co. 981,000
---------------------------------------- -----------
COSMETIC/PERSONAL CARE--3.4%
----------------------------------------
17,000 Gillette Co. 1,062,500
---------------------------------------- -----------
ELECTRICAL EQUIPMENT--3.6%
----------------------------------------
11,500 General Electric Co. 1,129,875
---------------------------------------- -----------
ENTERTAINMENT--5.0%
----------------------------------------
39,500 Disney (Walt) Co. 1,570,125
---------------------------------------- -----------
FOODS--11.3%
----------------------------------------
16,000 Kellogg Co. 966,000
----------------------------------------
34,000 Sara Lee Corp. 884,000
----------------------------------------
40,000 Sysco Corp. 1,105,000
----------------------------------------
13,000 Wrigley (Wm.), Jr. Co. 559,000
---------------------------------------- -----------
Total 3,514,000
---------------------------------------- -----------
HOUSEHOLD PRODUCTS--6.8%
----------------------------------------
19,000 Proctor & Gamble 1,078,250
----------------------------------------
31,000 Rubbermaid, Inc. 1,038,500
---------------------------------------- -----------
Total 2,116,750
---------------------------------------- -----------
INFORMATION--PROCESSING/TECHNOLOGY--6.7%
----------------------------------------
19,000 Automatic Data Processing, Inc. 1,047,375
----------------------------------------
14,000 Hewlett-Packard Co. 1,032,500
---------------------------------------- -----------
Total 2,079,875
---------------------------------------- -----------
</TABLE>
BOULEVARD BLUE-CHIP GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ --------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
----------------------------------------------------------
MEDICAL PRODUCTS/HOSPITAL SUPPLIES--8.4%
---------------------------------------------------
19,000 Bausch & Lomb, Inc. $ 992,750
---------------------------------------------------
27,000 Baxter International, Inc. 634,500
---------------------------------------------------
22,500 Johnson & Johnson 981,563
--------------------------------------------------- -----------
Total 2,608,813
--------------------------------------------------- -----------
MERCHANDISING--9.3%
---------------------------------------------------
26,000 *Toys "R' Us, Inc. 1,059,500
---------------------------------------------------
23,000 Walgreen Co. 937,250
---------------------------------------------------
31,000 Wal-Mart Stores, Inc. 887,375
--------------------------------------------------- -----------
Total 2,884,125
--------------------------------------------------- -----------
PHARMACEUTICALS--6.5%
---------------------------------------------------
11,000 Bristol-Myers Squibb 658,625
---------------------------------------------------
40,000 Merck and Co., Inc. 1,370,000
--------------------------------------------------- -----------
Total 2,028,625
--------------------------------------------------- -----------
POLLUTION CONTROL--2.2%
---------------------------------------------------
26,000 WMX Technologies, Inc. 692,250
--------------------------------------------------- -----------
PUBLISHING-PRINTING RELATED--5.6%
---------------------------------------------------
21,000 Deluxe Corp. 732,375
---------------------------------------------------
16,000 Dun & Bradstreet Corp. 998,000
--------------------------------------------------- -----------
Total 1,730,375
--------------------------------------------------- -----------
RESTAURANTS--4.6%
---------------------------------------------------
24,500 McDonald's Corp. 1,436,312
--------------------------------------------------- -----------
SPECIALTY CHEMICAL--3.8%
---------------------------------------------------
9,000 International Flavours & Fragrance, Inc. 985,500
---------------------------------------------------
4,000 Sigma Aldrich 188,000
--------------------------------------------------- -----------
Total 1,173,500
--------------------------------------------------- -----------
TELECOMMUNICATIONS--3.2%
---------------------------------------------------
18,000 American Telephone & Telegraph Co. 983,250
--------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST, $31,732,795) 30,113,250
--------------------------------------------------- -----------
</TABLE>
BOULEVARD BLUE-CHIP GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -------------------------------------------------- -----------
<C> <S> <C>
**REPURCHASE AGREEMENT--3.0%
------------------------------------------------------------
$935,202 Morgan Stanley & Co., Inc., 3.18%, dated 11/30/93,
due 12/1/93 $ 935,202
(at amortized cost)(Note 2B) -----------
--------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $32,667,997) $31,048,452+
-------------------------------------------------- -----------
</TABLE>
* Non-income producing security.
** The repurchase agreement is fully collateralized by U.S. government
obligations based on market prices at the date of the portfolio.
+ The cost for federal tax purposes amounts to $32,667,997. The net unrealized
depreciation of investments amounts to $1,619,545, which is comprised of
$865,348 appreciation and $2,484,893 depreciation at November 30, 1993.
Note: The categories of investments are shown as a percentage of net assets
($31,083,584) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD BLUE-CHIP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost; $32,667,997) $31,048,452
- ----------------------------------------------------------------
Dividends and interest receivable 75,496
- ----------------------------------------------------------------
Receivable for Fund shares sold 12,554
- ----------------------------------------------------------------
Deferred expenses (Note 2F) 19,399
- ---------------------------------------------------------------- -----------
Total assets 31,155,901
- ----------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------
Accrued expenses and other liabilities $72,317
- ------------------------------------------------------- -------
Total liabilities 72,317
- ---------------------------------------------------------------- -----------
NET ASSETS for 3,309,752 shares of
beneficial interest outstanding $31,083,584
- ---------------------------------------------------------------- -----------
NET ASSETS Consist of:
- ----------------------------------------------------------------
Paid-in capital $32,695,165
- ----------------------------------------------------------------
Net unrealized depreciation of investments (1,619,545)
- ----------------------------------------------------------------
Accumulated net realized loss on investments (43,652)
- ----------------------------------------------------------------
Undistributed net investment income 51,616
- ---------------------------------------------------------------- -----------
Total $31,083,584
- ---------------------------------------------------------------- -----------
NET ASSET VALUE, and Redemption Price Per Share
($31,083,584 /3,309,752 shares of beneficial
interest outstanding) $9.39
- ---------------------------------------------------------------- -----------
Computation of Offering Price:
Offering Price Per Share (100/96 of $9.39)* $9.78
- ---------------------------------------------------------------- -----------
</TABLE>
* No sales charges were imposed on purchases of shares prior to November 30,
1993 by deposit or credit customers of Boulevard Bank or its affiliates or
spouses and children under 21 of such customers. See "What Shares Cost" in
the Prospectus.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD BLUE-CHIP GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Dividends $ 510,693
- -------------------------------------------------------------
Interest Income 43,810
- ------------------------------------------------------------- -----------
Total investment income (Note 2C) 554,503
- -------------------------------------------------------------
EXPENSES--
- -------------------------------------------------------------
Investment advisory fee (Note 5) $205,299
- ----------------------------------------------------
Administrative personnel and services fee (Note 5) 47,123
- ----------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses (Note 5) 14,993
- ----------------------------------------------------
Custodian fees (Note 5) 7,664
- ----------------------------------------------------
Recordkeeper fees (Note 5) 37,685
- ----------------------------------------------------
Legal fees 4,250
- ----------------------------------------------------
Printing and postage 11,206
- ----------------------------------------------------
Insurance premiums 5,528
- ----------------------------------------------------
Miscellaneous 6,688
- ---------------------------------------------------- --------
Total expenses 340,436
- ----------------------------------------------------
DEDUCT--
- ----------------------------------------------------
Waiver of investment advisory fee (Note 5) $104,323
- ------------------------------------------
Waiver of administrative personnel and 24,335 128,658
services fee (Note 5) -------- --------
- ------------------------------------------
NET EXPENSES 211,778
- ------------------------------------------------------------- -----------
NET INVESTMENT INCOME 342,725
- ------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized loss on investments (identified cost basis) (43,652)
- -------------------------------------------------------------
Net change in unrealized depreciation on investments (1,619,545)
- ------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,663,197)
- ------------------------------------------------------------- -----------
Change in net assets resulting from operations $(1,320,472)
- ------------------------------------------------------------- -----------
</TABLE>
*For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD BLUE-CHIP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
- --------------------------------------------------------------- ------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 342,725
- ---------------------------------------------------------------
Net realized loss on investments ($43,652 net loss as computed
for federal tax purposes) (Note 2D) (43,652)
- ---------------------------------------------------------------
Change in net unrealized (depreciation) of investments (1,619,545)
- --------------------------------------------------------------- -----------
Change in net assets from operations (1,320,472)
- --------------------------------------------------------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (291,109)
- --------------------------------------------------------------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------
Proceeds from sale of shares 37,487,862
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in Fund shares 276,191
- ---------------------------------------------------------------
Cost of shares redeemed (5,068,888)
- --------------------------------------------------------------- -----------
Change in net assets from Fund share transactions 32,695,165
- --------------------------------------------------------------- -----------
Change in net assets 31,083,584
- ---------------------------------------------------------------
NET ASSETS--
- ---------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------- -----------
End of period (including undistributed net investment income of $31,083,584
$51,616) -----------
- ---------------------------------------------------------------
</TABLE>
* For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD BLUE-CHIP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- -------------------------------------------------------------------------------
(1) ORGANIZATION
The Boulevard Funds (the "Trust") are registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
financial statements included herein present only those of the Boulevard Blue-
Chip Growth Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio of the
Boulevard Funds are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at last sales
price reported on national securities exchanges. Unlisted securities or
listed securities for which there were no sales are valued at the mean
between bid and asked prices. Short-term obligations are valued at the mean
between bid and asked prices furnished by an independent pricing service.
Short-term obligations with maturities of sixty days or less at the time of
purchase are valued at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession of, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Interest income includes interest
and discount earned (net of premium) on short-term obligations, and
interest earned on all other debt securities including discount (net of
premium) and original issue discount as required by the Internal Revenue
Code.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income, including any net
realized gain on investments. Accordingly, no provision for federal tax is
necessary.
Boulevard Blue-Chip Growth Fund
At November 30, 1993 the Fund, for federal tax purposes, had a capital loss
carryforward of $43,652 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire in 2001.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objectives and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to its
initial registration, excluding the initial expense of registering the
shares, have been deferred and are being amortized using the straight-line
method over a period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on the payment date at the ex-
dividend date net asset value without a sales charge, unless cash payments are
requested. Distributions of any net realized capital gains will be made at
least once every twelve months. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
------------
<S> <C>
Shares outstanding, beginning of period --
- -----------------------------------------------------------------
Shares sold 3,834,545
- -----------------------------------------------------------------
Shares issued to shareholders electing to receive payment of div-
idends in Fund shares 30,143
- -----------------------------------------------------------------
Shares redeemed (554,936)
- ----------------------------------------------------------------- ---------
Shares outstanding, end of period 3,309,752
- ----------------------------------------------------------------- ---------
</TABLE>
* For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
BOULEVARD BLUE-CHIP GROWTH FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Boulevard Bank National Association, the Fund's investment adviser (the
"Adviser" or "Boulevard Bank"), receives for its services an annual investment
advisory fee equal to 0.75 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion. For the period ended November 30,
1993, the Adviser earned an investment advisory fee of $205,299, of which
$104,323 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services, and receives for its services an annual
fee equal to .150 of 1% on the first $250 million of average aggregate daily
net assets of the Trust; .125 of 1% on the next $250 million; .100 of 1% on the
next $250 million; and .075 of 1% on average aggregate daily net assets in
excess of $750 million. For the period ended November 30, 1993, FAS earned
$47,123, of which $24,335 was voluntarily waived. The administrative fee
received during any fiscal year shall aggregate at least $50,000 with respect
to the Fund. FAS may choose voluntarily to reimburse a portion of its fee at
any time.
State Street Bank and Trust Company is the custodian for the securities and
cash of the Fund. For the period ended November 30, 1993, the custodian earned
$7,664.
Federated Services Company is the transfer and dividend disbursing agent for
the Fund. It also provides certain accounting and recordkeeping services. For
the period ended November 30, 1993, Federated Services Company earned $14,993
for transfer and dividend disbursing agent fees and expenses, and $37,685, for
recordkeeping fees.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the investment Company Act of 1940. The Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund, for fees it paid which relate to the distribution and administration of
the Funds. The Plan provides that the Fund will incur distribution expenses up
to .25 of 1% of the average daily net assets of the Fund annually to pay
commissions, maintenance fees and to compensate FSC. The Fund will not accrue
or pay any distribution expenses pursuant to the Plan until a separate class of
shares has been created for certain institutional investors.
Certain of the Officers and Trustees of the Fund are Officers and Directors of
the above Corporations.
Organization expenses of $47,864 were borne initially by FAS. The Fund has
agreed to reimburse the Administrator for the organizational expenses initially
borne by the Administrator during the five year period following the date the
Trust's Portfolio became effective. For the period ended November 30, 1993,
$4,000 were incurred pursuant to this agreement.
As of November 30, 1993, the following shareholder of record owned 5% or more
of the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.), Des Plaines, IL owned approximately
2,916,081 shares (88.11%).
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments for the period ended November 30, 1993, were
as follows:
<TABLE>
<S> <C>
PURCHASES-- $33,081,607
- ----------- -----------
SALES-- $ 1,305,159
- ----------- -----------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
Boulevard Blue-Chip Growth Fund.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights (included on page 2) present
fairly, in all material respects, the financial position of Boulevard Blue-Chip
Growth Fund (one of the portfolios of the Boulevard Funds, hereafter referred
to as the "Fund") at November 30, 1993, and the results of its operations, the
changes in its net assets and the financial highlights for the period December
18, 1992 (date of initial public investment) through November 30, 1993, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at November 30, 1993 by correspondence with the custodian, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chicago, Illinois January 20, 1994
<PAGE>
[This Page Intentionally Left Blank]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Boulevard Blue-Chip Federated Investors Tower
Growth Fund Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------
Investment Adviser
Boulevard Bank National 410 North Michigan Avenue
Association Chicago, Illinois 60611-4181
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P. O. Box 8609
Boston, Massachusetts 02266-8609
- ------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent, and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Accountants
Price Waterhouse 200 East Randolph Drive
Chicago, Illinois 60601
- ------------------------------------------------------------------------------------------------
</TABLE>
BOULEVARD BLUE-CHIP GROWTH FUND
PROSPECTUS
A Diversified Portfolio of The
Boulevard Funds, an Open-End Management
Investment Company
Prospectus dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
Investment Adviser
410 NORTH MICHIGAN AVENUE CHICAGO, IL 60611-4181
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120814A (1/94)
STATEMENT OF ADDITIONAL INFORMATION
-------------------------------------------------------------------
BOULEVARD BLUE-CHIP GROWTH FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
-------------------------------------------------------------------
This Statement of Additional Information should be read with the prospec-
tus of the Boulevard Blue-Chip Growth Fund (the Fund) dated January 31,
1994. This Statement is not a prospectus itself. To receive a copy of the
prospectus, call Boulevard Bank National Association toll-free at 1-800-
285-FUND.
Statement dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
----------------------------------
Investment Adviser
FEDERATED SECURITIES CORP.
------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 1
- --------------------------------------
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 3
Portfolio Turnover 3
Investment Limitations 3
THE BOULEVARD FUNDS MANAGEMENT 5
- --------------------------------------
Officers and Trustees 5
The Funds 7
Fund Ownership 8
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 8
- --------------------------------------
Adviser to the Fund 8
Advisory Fees 8
ADMINISTRATIVE SERVICES 8
- --------------------------------------
BROKERAGE TRANSACTIONS 9
- --------------------------------------
PURCHASING SHARES 9
- --------------------------------------
Distribution Plan 9
Administrative Arrangements 10
Conversion to Federal Funds 10
Exchanging Securities for Fund
Shares 10
DETERMINING NET ASSET VALUE 10
- --------------------------------------
Determining Value of Securities 10
EXCHANGE PRIVILEGE 11
- --------------------------------------
Requirements for Exchanging Shares 11
REDEEMING SHARES 11
- --------------------------------------
Redemption in Kind 11
TAX STATUS 11
- --------------------------------------
The Fund's Tax Status 11
Shareholders' Tax Status 11
- --------------------------------------
TOTAL RETURN 11
- --------------------------------------
YIELD 12
- --------------------------------------
PERFORMANCE COMPARISONS 12
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Boulevard Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 3, 1992. The Declaration of Trust permits the Trust to offer
separate series and classes of shares.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests, under normal circumstances, at least 65% of its total assets
in common stock of "blue-chip" companies, as defined in the prospectus. The
Fund may also invest in other securities of these companies, U.S. government
securities, repurchase agreements, and bank instruments. The following
supplements the discussion of acceptable investments in the prospectus.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities which may be exchanged
or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and
warrants, or a combination of the features of several of these
securities. The investment characteristics of each convertible security
vary widely, which allows convertible securities to be employed for
different investment objectives.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in
which, in the investment adviser's opinion, the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objectives. Otherwise, the Fund may hold or
trade convertible securities. In selecting convertible securities for the
Fund, the Fund's adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible
security, the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common
stock at issuance) valid for a specific period of time. Warrants may have
a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the warrant, the
warrant will expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
Some of these securities are backed by the full faith and credit of the
U.S. Treasury.
No assurances can be given that the U.S. government will provide
financial support to certain issuing agencies or instrumentalities since
it is not obligated to do so. Securities issued by such agencies and
instrumentalities are supported by:
. the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Federal Farm Credit System;
. Federal Home Loan Banks System;
. Student Loan Marketing Association;
. Federal National Mortgage Association; and
. Federal Home Loan Mortgage Corporation.
BANK INSTRUMENTS
The Fund only invests in Bank Instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, both of which are administered by the
Federal Deposit Insurance Corporation. Bank Instruments may include
Eurodollar Certificates of Deposit, Yankee Certificates of Deposit, and
Eurodollar Time Deposits. Institutions issuing Eurodollar instruments are
not necessarily subject to the same regulatory requirements that apply to
domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, recordkeeping and the public
availability of information.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in when-
issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objectives and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of its total assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Board of Trustees
("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
. the frequency of trades and quotes for the security;
. the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objectives, without regard to the length of time a particular
security may have been held. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the period from December 18, 1992 (date of initial public
investment) to November 30, 1993, the Fund's portfolio turnover rate was 5%.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of its total assets at the time of the pledge. For purposes of this
limitation, segregation or collateral arrangements made in connection
with securities purchased on a when-issued basis are not deemed to be
pledges.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at times invest 25% or more of its total assets in
securities issued and/or guaranteed by the U.S. government, its agencies
or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objectives and policies or
the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objectives, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. (For purposes of this
limitation, the Fund considers instruments issued by a U.S. branch of a
domestic bank having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items.")
Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Fund considers common stock and all preferred stock of an issuer each as
a single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees. To comply with
certain state restrictions, the Fund will limit these transactions to 5%
of its total assets. (If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.)
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice and certain restricted securities not
determined by the Trustees to be liquid. To comply with certain state
restrictions, the Fund will limit these transactions to 10% of its net
assets. (If state restrictions change, this latter restriction may be
revised without shareholder approval or notification.)
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, other mineral
exploration or development programs, or leases, although it may purchase
the securities of issuers that invest in or sponsor such programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
other investment companies only in open-market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets. It should be noted that investment companies incur
certain
expenses, such as management fees, and, therefore, any investment by a
fund in shares of another investment company would be subject to such
duplicate expenses. The adviser will waive its investment advisory fee on
assets invested in securities of open-end investment companies.
INVESTING TO EXERCISE CONTROL
The Fund will not purchase securities of an issuer for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of its total assets in securities
of issuers, including their predecessors, that have been in operation for
less than three years.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American Stock
Exchange to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to share-holders.) For
purposes of this investment restriction, warrants acquired by the Fund in
units or attached to securities may be deemed to be without value.
ARBITRAGE TRANSACTIONS
The Fund will not enter into transactions for the purpose of engaging in
arbitrage.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
THE BOULEVARD FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Boulevard Bank National
Association, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<C> <C> <S>
John F. Donahue+* Chairman Chairman and Trustee, Federated
Federated Investors Tower and Trustee Investors; Chairman and Trustee,
Pittsburgh, PA Federated Advisers, Federated
Management, and Federated
Research; Director, AEtna Life
and Casualty Company; Chief
Executive Officer and Director,
Trustee, or Managing General
Partner of the Funds; formerly,
Director, The Standard Fire
Insurance Company. Mr. Donahue
is the father of J. Christopher
Donahue, Vice President of the
Trust.
- -------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties
Wood/IPC Commercial Corporation; Senior Vice-
Department President, John R. Wood and
John R. Wood and Associates, Inc., Realtors;
Assoc., Inc., Realtors President, Northgate Village
3255 Tamiami Trail North Development Corporation; General
Naples, FL Partner or Trustee in private
real estate ventures in
Southwest Florida; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, Naples Property
Management, Inc.
- -------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the
One PNC Plaza-23rd Floor Executive Committee, Michael
Pittsburgh, PA Baker, Inc.; Director, Trustee,
or Managing General Partner of
the Funds; formerly, Vice
Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
- -------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The
571 Hayward Mill Road Emerging Germany Fund, Inc.;
Concord, MA Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, Blue Cross
of Massachusetts, Inc.
- -------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and
3471 Fifth Avenue Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical
Pittsburgh, PA Professor of Medicine and
Trustee, University of
Pittsburgh; Director, Trustee,
or Managing General Partner of
the Funds.
- -------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Director, Eat'N
Pittsburgh, PA Park Restaurants, Inc., and
Statewide Settlement Agency,
Inc.; Director, Trustee, or
Managing General Partner of the
Funds; formerly, Counsel,
Horizon Financial, F.A., Western
Region.
- -------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and
Federated Investors Tower Treasurer, Trustee, Federated Investors;
Pittsburgh, PA and Trustee Vice President and Treasurer,
Federated Advisers, Federated
Management, and Federated
Research; Trustee, Federated
Services Company; Executive Vice
President, Treasurer, and
Director, Federated Securities
Corp.; Chairman, Treasurer, and
Director, Federated
Administrative Services; Trustee
or Director of some of the
Funds; Vice President and
Treasurer of the Funds.
- -------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State
225 Franklin Street Representative, Commonwealth of
Boston, MA Massachusetts; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, State Street Bank and
Trust Company and State Street
Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- -------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Chairman,
Pittsburgh, PA Meritcare, Inc.; Director, Eat'N
Park Restaurants, Inc.;
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Vice Chairman, Horizon
Financial, F.A.
- -------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and
1202 Cathedral of Management Consultant; Trustee,
Learning Carnegie Endowment for
University of Pittsburgh International Peace, RAND
Pittsburgh, PA Corporation, Online Computer
Library Center, Inc., and U.S.
Space Foundation; Chairman,
Czecho Slovak Management Center;
Director, Trustee, or Managing
General Partner of the Funds;
President Emeritus, University
of Pittsburgh; formerly,
Chairman, National Advisory
Council for Environmental Policy
and Technology.
- -------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing
4905 Bayard Street consultant; Director, Trustee,
Pittsburgh, PA or Managing General Partner of
the Funds.
- -------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated
Federated Investors Tower Investors; Trustee, Federated
Pittsburgh, PA Advisers, Federated Management,
and Federated Research; Trustee,
Federated Services Company;
President and Trustee, Federated
Administrative Services;
President or Vice President of
the Funds; Director, Trustee, or
Managing General Partner of some
of the Funds. Mr. Donahue is the
son of John F. Donahue, Chairman
and Trustee of the Trust.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and
Federated Investors Tower Trustee, Federated Investors;
Pittsburgh, PA Chairman and Director, Federated
Securities Corp.; President or
Vice President of the Funds;
Director or Trustee of some of
the Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary,
Federated Investors Tower and Secretary General Counsel, and Trustee,
Pittsburgh, PA Federated Investors; Vice
President, Secretary, and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Trustee,
Federated Services Company;
Executive Vice President,
Secretary, and Director,
Federated Administrative
Services; Director and Executive
Vice President, Federated
Securities Corp.; Vice President
and Secretary of the Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee,
Federated Investors Tower Federated Investors; Executive
Pittsburgh, PA Vice President, Federated
Securities Corp.; President and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Vice
President of the Funds;
Director, Trustee, or Managing
General Partner of some of the
Funds; formerly, Vice President,
The Standard Fire Insurance
Company and President of its
Federated Research Division.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey W. Sterling Vice President Vice President, Federated
Federated Investors Tower and Assistant Administrative Services; Vice
Pittsburgh, PA Treasurer President and Assistant
Treasurer of some of the Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*This Trustee is deemed to an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 111 Corcoran Funds; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
The Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; and Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be liable
for their own willful defaults. If reasonable care has been exercised in the
selection of officers, agents, employees, or investment advisers, a Trustee
shall not be liable for any neglect or wrongdoing of any such person. However,
they are not protected against any liability to which they would otherwise be
subject by reason of their willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Boulevard Bank National Association (the
"Adviser" or "Boulevard Bank"), a wholly-owned subsidiary of Boulevard Bancorp,
Inc.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the selection, 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
Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, the Adviser earned an advisory fee of $205,299, of which
$104,323 was voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund, up to the full amount of its investment advisory fee, for the
Fund's expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee set forth
in the prospectus. For the period from December 18, 1992 (date of initial
public investment) to November 30, 1993, Federated Administrative Services
earned administrative fees of $47,123, of which $24,335 was voluntarily waived.
John A. Staley, IV, an officer of the Trust, holds approximately 15% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services. For the period from December 18, 1992 (date of initial
public investment) to November 30, 1993, Federated Administrative Services paid
approximately $164,324 for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions and
determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers may be used by the Adviser in advising
the Fund and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it would
tend to reduce its expenses.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund. For the
period ended November 30, 1993, the Fund paid $18,904 in brokerage commissions.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value next determined after an
order is received, plus a sales charge as described in the prospectus, on days
the New York Stock Exchange and Federal Reserve Wire System are open for
business. The procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a distribution plan pursuant to
Rule 12b-1 which was promulgated by the SEC pursuant to the Investment Company
Act of 1940 (the "Plan"). The Plan provides for payment of fees to Federated
Securities Corp. to finance any activity which is principally intended to
result in the sale of the Fund's shares subject to the Plan. Such activities
may include the advertising and marketing of shares of the Fund; preparing,
printing, and distributing prospectuses and sales literature to prospective
shareholders, brokers, or administrators; and implementing and operating the
Plan. Pursuant to the Plan, Federated Securities Corp. may pay fees to
financial institutions, fiduciaries, custodians for public funds, investment
advisors, and brokers for distribution and administrative services and to
administrators for administrative services provided to the Fund. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions; wiring funds and
receiving funds for purchases and redemptions of Fund shares; confirming and
reconciling all transactions; reviewing the activity in Fund accounts and
providing training and supervision of broker personnel; posting and reinvesting
dividends to Fund accounts or arranging for this service to be performed by the
Fund's transfer agent; and maintaining and distributing current copies of
prospectuses and shareholder reports to the beneficial owners of Fund shares
and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking
to achieve its investment objectives.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, no costs were incurred pursuant to this agreement.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records; processing purchase and
redemption transactions; processing automatic investments of client account
cash balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund may reasonably request.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, no fees were paid to brokers and administrators.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to invest its assets in securities as fully as possible
so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Boulevard Bank as well as Federated
Services Company act as the shareholder's agent in depositing checks and
converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or they may
exchange a combination of securities and cash for Fund shares. Any securities
to be exchanged must meet the investment objectives and policies of the Fund,
must have a readily ascertainable market value, must be liquid, and must not be
subject to restrictions on resale. An investor should forward the securities in
negotiable form with an authorized letter of transmittal to Boulevard Bank. The
Fund will notify the investor of its acceptances and valuation of the
securities within five business days of their receipt by Federated Services
Company.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of Fund
shares on the day the securities are valued. One share of the Fund will be
issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
Values of the Fund's portfolio securities are determined as follows:
. for listed equity securities, according to the last sale price on a national
securities exchange, if available;
. in the absence of recorded sales for listed equity securities, according to
the mean between the last closing bid and asked prices;
. for unlisted equity securities, the latest bid prices;
. for bonds and other fixed income securities, as determined by an independent
pricing service;
. for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
. for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
. yield;
. quality;
. coupon rate;
. maturity;
. stability;
. risk;
. type of issue;
. trading characteristics;
. special circumstances of a security or trading market; and
. other market data.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
REQUIREMENTS FOR EXCHANGING SHARES
Before the exchange, the shareholder must receive a prospectus of the fund of
the Trust for which the exchange is being made. This privilege is available to
shareholders resident in any state in which the fund shares being acquired may
be sold. Upon receipt of proper instructions and required supporting documents,
shares submitted for exchange are redeemed, and the proceeds are invested in
shares of the other fund of the Trust.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are redeemed at the next computed net asset value after
Boulevard Bank receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable rules of the SEC,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Trustees determine to be
fair and equitable.
The Fund has elected to be governed by Rule 18f-1 pursuant to the Investment
Company Act of 1940 under which the Fund is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund expects to pay no federal income tax because it intends to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from gains on the sale of securities
held less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. No portion of any income dividend paid
by the Fund is expected to be eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital gains,
are taxable as ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long they have held the shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's cumulative total return from December 18, 1992 to November 30, 1993
was (9.00%). Cumulative total return reflects the Fund's total performance over
a specified period of time. This total return assumes and is reduced by the
payment of the maximum sales load. The Fund's total return is representative of
only 11 months of Fund activity since the Fund's date of initial public
investment.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the thirty-day period ended November 30, 1993 was 1.08%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the maximum offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund 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 that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute net asset value. The
financial publications and/or indices which the Fund uses in advertising may
include:
. LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any,
and takes into account any change in net asset value over a specified period
of time. From time to time, the Fund will quote its Lipper ranking in the
"equity, growth and income" category in advertising and sales literature.
. LIPPER GROWTH AND INCOME FUND AVERAGE is an average of the total returns for
251 growth and income funds tracked by Lipper Analytical Services, Inc.
. LIPPER GROWTH AND INCOME FUND INDEX is an average of the net asset-valuated
total returns for the top 30 growth and income funds tracked by Lipper
Analytical Services, Inc.
. MORNINGSTAR, INC., an independent rating service, is the publisher of the bi-
weekly Mutual Funds Values. Mutual Fund Values 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.
. DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stocks in these corporations. It also reports total sales
for this group of industries. Because it represents the top corporations of
America, the DJIA's movements are leading economic indicators for the stock
market as a whole.
. STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a 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 Standard
& Poor's index assumes reinvestments of all dividends and other distributions
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 Standard &
Poor's figures.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on nonstandardized base periods. These total returns
represent the change, over a specified period of time, in the value of an
investment in the Fund based on quarterly reinvestment of dividends and other
distributions.
Advertisements may quote performance information that does not reflect the
effect of the load.
3120814B (1/94)
BOULEVARD MANAGED MUNICIPAL FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
PROSPECTUS
The shares of the Boulevard Managed Municipal Fund (the "Fund") offered by this
prospectus represent interests in a professionally managed, diversified
portfolio of The Boulevard Funds (the "Trust"), an open-end, management
investment company (a mutual fund).
The investment objective of the Fund is to provide dividend income that is
exempt from federal regular income tax while attempting to provide a high
degree of principal stability.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
BOULEVARD BANK NATIONAL ASSOCIATION, ARE NOT ENDORSED OR GUARANTEED BY
BOULEVARD BANK NATIONAL ASSOCIATION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
calling Boulevard Bank National Association toll-free at 1-800-285-FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ----------------------------------------------------------------------------
GENERAL INFORMATION 3
- ----------------------------------------------------------------------------
INVESTMENT INFORMATION 3
- ----------------------------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Characteristics 4
Participation Interests 4
Variable Rate Municipal Securities 4
Municipal Leases 5
When-Issued and Delayed Delivery
Transactions 5
Lending of Portfolio Securities 5
Temporary Investments 5
Other Investment Techniques 5
Municipal Securities 6
Investment Risks 6
Investment Limitations 6
THE BOULEVARD FUNDS INFORMATION 7
- ----------------------------------------------------------------------------
Management of the Trust
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Fund Shares 8
Distribution Plan 8
Administrative Arrangements 9
ADMINISTRATION OF THE FUND 9
- ----------------------------------------------------------------------------
Administrative Services 9
Custodian 9
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing Agent,
and Portfolio Accounting Services 10
Legal Counsel 10
Independent Accountants 10
Brokerage Transactions 10
Expenses of the Fund 10
NET ASSET VALUE 10
- ----------------------------------------------------------------------------
INVESTING IN THE FUND 11
- ----------------------------------------------------------------------------
Account Establishment 11
By Telephone 11
By Mail 11
Share Purchases 11
By Telephone 11
By Mail 11
Payment by Check 11
Payment by Wire 11
Minimum Investment Required 11
What Shares Cost 12
Purchases at Net Asset Value 12
Sales Charge Reallowance 12
Reducing the Sale Charge 13
Quantity Discounts and Accumulated Purchases 13
Letter of Intent 13
Reinvestment Privilege 13
Concurrent Purchases 14
Exchanging Securities for Fund Shares 14
Systematic Investment Program 14
Certificates and Confirmations 14
Dividends and Capital Gains 14
EXCHANGE PRIVILEGE 14
- ----------------------------------------------------------------------------
By Telephone 15
REDEEMING SHARES 16
- ----------------------------------------------------------------------------
Through Boulevard Bank 16
By Telephone 16
By Mail 16
Receiving Payment 16
Signatures 16
Redemption Before Purchase Instruments Clear 17
Systematic Withdrawal Program 17
Accounts with Low Balances 17
SHAREHOLDER INFORMATION 17
- ----------------------------------------------------------------------------
Voting Rights 17
Massachusetts Partnership Law 18
EFFECT OF BANKING LAWS 18
- ----------------------------------------------------------------------------
TAX INFORMATION 19
- ----------------------------------------------------------------------------
Federal Income Tax 19
Other State Tax and Local Taxes 19
PERFORMANCE INFORMATION 20
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS 21
- ----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 41
- ----------------------------------------------------------------------------
ADDRESSES Inside Back Cover
- ----------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).................................................................. 3.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption proceeds,
as applicable).......................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................ 0.05%
12b-1 Fees (2)........................................................... 0.00%
Total Other Expenses..................................................... 1.06%
Total Fund Operating Expenses (3).................................... 1.11%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.70% absent the anticipated voluntary waiver by the adviser.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can
pay up to 0.25% as a 12b-1 fee to the distributor.
(3) The Annual Fund Operating Expenses were 0.81% for the period ending
November 30, 1993. The Annual Fund Operating Expenses in the table above
are based on estimated expenses expected during the fiscal year ending
November 30, 1994. Total Annual Fund Operating Expenses are estimated to be
1.76% absent the anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BOULEVARD FUNDS INFORMATION" AND "INVESTING IN THE FUNDS."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual re-
turn; (2) redemption at the end of each time
period; and (3) payment of the maximum sales
load of 3.00%. The Fund charges no redemp-
tion fees................................... $41 $64 $89 $161
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1994.
BOULEVARD MANAGED MUNICIPAL FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a share outstanding throughout the period)
Reference is made to the Report of Independent Accountants on page 41.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1993*
- ---------------------------------------------------- ------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------
Net investment income 0.18
- ----------------------------------------------------
Net realized and unrealized gain on investments 0.02
- ---------------------------------------------------- -------
Total from investment operations 0.20
- ----------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------
Dividends to shareholders from net investment income (0.17)
- ---------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $10.03
- ---------------------------------------------------- -------
TOTAL RETURN** 2.02%
- ----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------
Expenses .81%(a)
- ----------------------------------------------------
Net investment income 2.30%(a)
- ----------------------------------------------------
Expense waiver/reimbursement (b) .95%(a)
- ----------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------
Net assets, end of period (000 omitted) $19,330
- ----------------------------------------------------
Portfolio turnover rate 22%
- ----------------------------------------------------
</TABLE>
* Reflects operations for the period from February 19, 1993 (date of initial
public investment) to November 30, 1993.
** Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated August 3, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests
in separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes.
The Fund is designed primarily for retail and trust customers of Boulevard Bank
National Association and its affiliates as a convenient means of participating
in a professionally managed, diversified portfolio of municipal securities with
remaining maturities or repricing or interest rate reset terms of three years
or less at the time of purchase by the Fund. In most cases, a minimum initial
investment of $1,000 is required. See "Minimum Investment Required."
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide dividend income that is
exempt from federal regular income tax while attempting to provide a high
degree of principal stability. This investment objective cannot be changed
without the approval of the Fund's shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
While the net asset value of the Fund is expected to fluctuate, the Fund
pursues its investment objective to provide a high degree of principal
stability by investing in municipal securities with remaining maturities or
repricing or interest rate reset terms of three years or less at the time of
purchase by the Fund. As a matter of investment policy, which may not be
changed without shareholder approval, under normal circumstances, the Fund will
be invested so that at least 80% of the income from investments will be exempt
from federal regular income tax or that at least 80% of its net assets are
invested in obligations, the interest from which is exempt from federal regular
income tax.
INVESTMENT POLICIES
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The municipal securities in which the Fund invests are:
. debt obligations and municipal leases issued by or on behalf of any
state, territory, or possession of the United States, including the
District of Columbia, or any political subdivision of any of them; and
. participation interests, as described below, in any of the above
obligations, the interest from which is, in the opinion of bond counsel
for the issuers or in the opinion of officers of the Fund and/or the
investment adviser to the Fund, exempt from federal regular income tax.
CHARACTERISTICS. The municipal securities in which the Fund invests are:
. rated "investment grade," i.e., Baa or better by Moody's Investors
Service, Inc. ("Moody's"), or BBB or better by Standard & Poor's
Corporation ("S&P") or Fitch Investors Service, Inc. ("Fitch");
. guaranteed at the time of purchase by the U.S. government, its agencies
or instrumentalities, as to the payment of principal and interest;
. fully collateralized by an escrow of U.S. government or other securities
acceptable to the Fund's investment adviser;
. rated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest municipal
commercial paper rating (P-1) or S&P's highest short-term municipal
commercial paper rating (SP-1) or Fitch's highest tax-exempt municipal
obligation rating (FIN-1);
. unrated if, at the time of purchase, longer term municipal securities of
the issuer are rated Baa or better by Moody's or BBB or better by S&P or
Fitch (however, investments in unrated securities will not exceed 10% of
the Fund's total assets); or
. unrated, if determined by the Fund's investment adviser to be equivalent
to municipal securities which are rated Baa or better by Moody's or BBB
or better by S&P or Fitch.
If a security's rating is reduced below the required minimum after the Fund
has purchased it, the Fund is not required to sell the security, but may
consider doing so. It should be noted that securities receiving the lowest
investment-grade rating are considered to have some speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. A description of the rating categories
begins on page 30 of this prospectus.
PARTICIPATION INTERESTS. The Fund may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests give
the Fund an undivided interest in municipal securities. The municipal
securities subject to the participation interests are not limited to
maturities of three years or less, so long as the participation interests
include the right to demand payment, typically within seven days, from the
issuers of those interests. The Fund will purchase only participation
interests which have such a demand feature. The financial institutions
from which the Fund purchases participation interests frequently provide
or secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Trustees will determine
that participation interests meet the prescribed quality standards for the
Fund.
VARIABLE RATE MUNICIPAL SECURITIES. The Fund may purchase municipal
securities that have variable interest rates. Variable interest rates are
ordinarily based on a published interest rate or interest rate index or
some similar standard, such as the 91-day U.S. Treasury bill rate.
Many variable rate municipal securities are subject to payment of
principal on demand by the Fund, usually in not more than seven days. All
variable rate municipal securities will meet the quality standards for the
Fund.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, or a conditional sales
contract.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. In when-issued and delayed delivery transactions,
the Fund relies on the seller to complete the transaction. The seller's
failure to complete the transaction may cause the Fund to miss a price or
yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees, and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the portfolio securities
loaned at all times.
TEMPORARY INVESTMENTS. As a matter of investment policy, the Fund invests so
that at least 80% of the income from investments will be exempt from federal
regular income tax or that at least 80% of its net assets are invested in
obligations, the interest from which is exempt from federal regular income
tax. However, from time to time, during periods of other than normal market
conditions, the Fund may invest in short-term tax-exempt or taxable temporary
investments. These temporary investments include: fixed or variable rate notes
issued by or on behalf of municipal or corporate issuers; obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities; other
debt securities; securities of other investment companies; commercial paper;
certificates of deposit, demand and time deposits, bankers' acceptances,
deposit notes, and other instruments of domestic and foreign banks and other
deposit institutions ("Bank Instruments"); and repurchase agreements
(arrangements in which the institution selling the Fund a bond or temporary
investment agrees at the time of sale to repurchase it at a mutually agreed
upon time and price). There are no rating requirements applicable to temporary
investments.
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular income
tax.
OTHER INVESTMENT TECHNIQUES. The Fund may purchase a right to sell a security
held by it back to the issuer or to another party at an agreed upon price at
any time during a stated period or on a certain date. These rights may be
referred to as "liquidity puts" or "standby commitments."
The Fund may also hedge all or a portion of its investments by entering into
futures contracts or options on them. Any gains realized on futures contracts
and options thereon are taxable. The Fund will notify shareholders before it
engages in these futures transactions.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Municipal securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. Interest on and principal of revenue bonds, however,
are payable only from the revenue generated by the facility financed by the
bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues
of a municipality or public authority. Industrial development bonds are
typically classified as revenue bonds.
The Fund does not intend to purchase securities if, as a result of such
purchase, more than 25% of its total assets would be invested in the securities
of governmental subdivisions located in any one state, territory, or possession
of the United States.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors, including: the
general conditions of the money market and the taxable and municipal bond
markets; the size of the particular offering; the maturity of the obligations;
and the rating of the issue. The ability of the Fund to achieve its investment
objective also depends on the continuing ability of the issuers of municipal
securities and participation interests, or the guarantors of either, to meet
their obligations for the payment of interest and principal when due.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of its total assets and pledge up to 10% of its total
assets to secure such borrowings;
. lend any of its assets except portfolio securities up to one-third of
its total assets; or
. with respect to 75% of its total assets, invest more than 5% in
securities of any one issuer other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
. invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933
and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees;
. invest more than 15% of its net assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days
after notice, over-the-counter options, and certain restricted
securities not determined by the Trustees to be liquid; or
. invest more than 10% of its total assets in securities of other
investment companies.
THE BOULEVARD FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Trustees'
responsibilities between meetings of the Trustees.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Boulevard
Bank National Association, the Fund's investment adviser (the "Adviser" or
"Boulevard Bank"), subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the selection, purchase, and sale of portfolio instruments,
for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory
fee equal to 0.70% of the Fund's average daily net assets. The investment
advisory fee is accrued and paid daily. The Adviser has undertaken to
reimburse the Fund for operating expenses in excess of limitations
established by certain states. The Adviser may voluntarily choose to waive
a portion of its fee or reimburse other expenses of the Fund. The Adviser
can terminate such waiver or reimbursement policy at any time at its sole
discretion.
ADVISER'S BACKGROUND. Boulevard Bank, a national banking association,
formerly known as National Boulevard Bank of Chicago and Boulevard Bridge
Bank, has conducted operations since 1921. Boulevard Bank is a wholly-
owned subsidiary of Boulevard Bancorp, Inc., a multi-bank holding company
incorporated under the laws of the State of Delaware. While Boulevard
Bancorp, Inc. derives certain revenues and incurs certain expenses from
other operations, its income is generated primarily from the operations of
its bank subsidiaries, which offer a broad range of financial services to
customers located in the greater Chicago metropolitan area. These services
include all areas of commercial banking and other services tailored for
individual and corporate customers. In addition, trust services and a wide
variety of services for employee benefit plans are provided.
Boulevard Bank has been managing investments for its trust clients since
its trust powers were established in 1957. As of December 31, 1993, the
Trust Division of Boulevard Bank had approximately $2.4 billion under
administration, of which it had investment discretion over approximately
$800 million. Boulevard Bank has been advising The Boulevard Funds since
December, 1992.
Scott Limper, a Vice President of Boulevard Bank, has been the portfolio
manager of the Fund since January 1, 1994. He has eleven years of
experience, all with Boulevard Bancorp. He received his Bachelor of Arts
degree from Western Illinois University. He is a member of the Association
for Investment Management and Research.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in
accordance with Rule 12b-1 promulgated under the Investment Company Act of
1940, the Fund may pay to the distributor an amount computed at an annual rate
of 0.25% of the Fund's average daily net assets to finance any activity which
is principally intended to result in the sale of shares subject to the Plan.
The Fund will not accrue or pay any distribution expenses pursuant to the Plan
until a separate class of shares has been created for certain institutional
investors.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed an expense limitation that the
distributor may, by notice to the Trust, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as may
reasonably be requested.
The distributor will pay such financial institutions a fee based upon shares
subject to the Plan and owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined,
from time to time, by the distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an underwriter
or distributor of most securities. In the event the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Trustees will consider appropriate changes in the
services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state laws.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of the Fund's shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net assets in
shareholder accounts of such clients or customers during the period for which
the brokers, dealers, and administrators provide services. Any fees paid for
these services by the distributor will be reimbursed by the Adviser and not
the Fund. Payments made here would be in addition to any payments that may be
made under the Plan.
ADMINISTRATION OF THE FUND
- -------------------------------------------------------------------------------
ADMINISTRATION SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services provides these services at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE DAILY
FEE NET ASSETS OF THE TRUST
-------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 with respect to the Fund. Federated Administrative Services may
choose voluntarily to reimburse a portion of its fee at any time.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, SHAREHOLDER SERVICING AGENT, AND
PORTFOLIO ACCOUNTING SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, is transfer agent for the
shares of the Fund, dividend disbursing agent for the Fund, and shareholder
servicing agent for the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio instruments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Fund are Price
Waterhouse, Chicago, Illinois.
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. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund with federal and state securities authorities; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such non-recurring and
extraordinary items as may arise. However, the Adviser may voluntarily assume
some expenses and has, in addition, undertaken to reimburse the Fund, up to
the amount of the advisory fee, the amount by which operating expenses exceed
limitations imposed by certain states.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the value of all securities and other assets of the Fund, less
liabilities of the Fund, by the number of Fund shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
ACCOUNT ESTABLISHMENT
BY TELEPHONE. Open an account by calling Boulevard Bank toll-free at 1-800-
285-FUND. Information needed to establish the account will be taken over the
telephone. A signed new account form will be necessary to complete the account
establishment.
BY MAIL. Mail a new account form to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181. New account forms are available directly
from the Fund.
SHARE PURCHASES
Fund shares are sold on days which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Fund shares may be ordered by
telephone through procedures established with Boulevard Bank by calling 1-800-
285-FUND. An investor may also place an order in person through an account
representative at Boulevard Bank or any of its affiliates. Texas residents
must purchase shares of the Fund through Federated Securities Corp. at 1-800-
618-8573. In connection with the sale of shares, the distributor may, from
time to time, offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call Boulevard Bank
toll-free at 1-800-285-FUND. Your purchase order will be taken directly over
the telephone. The order must be placed by 3:00 p.m. (Central time) for shares
to be purchased at that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to Boulevard
Managed Municipal Fund.
PAYMENT BY CHECK. Mail to Boulevard Managed Municipal Fund, P.O. Box 8609,
Boston, Massachusetts 02105. Orders by check are considered received after
payment by check is converted into federal funds. This is generally the next
business day after the check is received.
PAYMENT BY WIRE. Instruct your financial institution to wire your funds as
follows: State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Boulevard Managed
Municipal Fund; Title or Name of Account; and Wire Order Number and/or Account
Number.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
may be in any amounts of $50 or more. The Fund may waive the initial minimum
investment for employees of Boulevard Bancorp, Inc., and its affiliates from
time to time. The Fund may also waive the initial and subsequent minimum
investment for any payroll deduction plan established with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
PUBLIC OFFERING NET AMOUNT
AMOUNT OF TRANSACTION PRICE INVESTED
- ------------------------- --------------- ---------------
<S> <C> <C>
Less than $100,000 3.00% 3.09%
$100,000 but less than $500,000 2.00% 2.04%
$500,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
The net asset value is determined at 3:00 p.m. (Central time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by: the Trust Divisions of Boulevard Bank and
its affiliates for funds which are held in a fiduciary, agency, custodial, or
similar capacity; Trustees and employees of the Fund, Boulevard Bank, or
Federated Securities Corp., or each of their affiliates, and their spouses and
children under 21; any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund; or anyone who
participates in a payroll deduction program established with the Fund. Once a
shareholder has purchased shares at net asset value, no sales charge will be
imposed on subsequent purchases, if any.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, Boulevard Bank or
any authorized broker/dealer will normally receive up to 85% of the applicable
sales charge. Any portion of the sales charge which is not paid to Boulevard
Bank or registered broker/dealers will be retained by the distributor.
However, the distributor, in its sole discretion, may uniformly offer to pay
to all dealers selling shares of the Fund additional amounts, all or a portion
of which may be paid from the sales charge it normally retains or from any
other source available to it. Such additional payments, if accepted by the
dealer, may be in the form of cash or promotional incentives and will be
predicated upon the amount of shares of the Fund or other funds of the Trust
sold by the dealer.
The sales charge for shares sold other than through Boulevard Bank or
registered broker/dealers will be retained by the distributor. The distributor
may pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Fund
shares.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age
21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchase still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 2.00%, not 3.00%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
purchase is made that Fund shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Trust over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter includes
a provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
up to 3.0% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period, unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate number of escrowed
shares may be redeemed at the then-current redemption price (which could be
less than the purchase price for such shares) in order to realize the
difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares,
but if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90
days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest all or a part of
the redemption proceeds at the next-determined net asset value without any
sales charge. Federated Securities Corp. must be notified by the shareholder
in writing or by Boulevard Bank of the reinvestment in order to eliminate a
sales charge. If the shareholder redeems his shares in the Fund, there may be
tax consequences. Shareholders contemplating such transactions should consult
their own tax adviser.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or
more funds in the Trust, the purchase price of which includes a sales charge.
For example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund shares. The Fund reserves the right to determine
the acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values its
assets. Investors wishing to exchange securities should first contact Boulevard
Bank.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares at the net asset value next determined after an
order is received by Federated Securities Corp., plus the applicable sales
charge. A shareholder may apply for participation in this program through
Boulevard Bank.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued
unless requested by contacting Boulevard Bank in writing.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid monthly. Capital gains realized by the Fund, if
any, will be distributed at least once every 12 months. Dividends and capital
gains will be automatically reinvested in additional shares of the Fund on
payment dates at the ex-dividend date's net asset value without a sales charge,
unless cash payments are requested by writing to the Fund or Boulevard Bank.
Dividends and capital gains can also be reinvested in shares of any other fund
comprising The Boulevard Funds.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange shares of the Fund for shares of the other funds in
the Trust. In addition, shares of the Fund may also be exchanged for certain
other funds distributed by Federated Securities Corp. that are not advised by
Boulevard Bank ("Federated Funds"). For further information on the availability
of Federated Funds for exchanges, please call Boulevard Bank at 1-800-285-FUND.
Shares of funds with a sales charge may be exchanged at net asset value for
shares of other funds with an equal sales charge or no sales charge. Shares of
funds with a sales charge may be exchanged for shares
of funds with a higher sales charge at net asset value, plus the additional
sales charge. Shares of funds with no sales charge, whether acquired by direct
purchase, reinvestment of dividends on such shares, or otherwise, may be
exchanged for shares of funds with a sales charge at net asset value, plus the
applicable sales charge.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends or capital gains on such shares retain the
character of the exchanged shares for purposes of exercising further exchange
privileges; thus, an exchange of such shares for shares of a fund with a sales
charge would be at net asset value.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The exchange privilege may be terminated at any time. Shareholders will be
notified of the termination of the exchange privilege. A shareholder may obtain
further information on the exchange privilege by calling Boulevard Bank at 1-
800-285-FUND.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to Boulevard Bank at 1-800-285-FUND. Shares may
be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must
be forwarded to the transfer agent by Boulevard Bank and deposited to the
shareholder's mutual fund account before being exchanged.
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. Authorization forms and information regarding this service
are available from Boulevard Bank. Telephone exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 2:00 p.m. (Central
time) for shares to be exchanged the same day. The telephone exchange privilege
may be modified or terminated at any time. Shareholders will be notified of
such modification or termination. Shareholders may have difficulty in making
exchanges by telephone through Boulevard Bank during times of drastic economic
or market changes. If a shareholder cannot contact Boulevard Bank by telephone,
it is recommended that an exchange request be made in writing and sent by
overnight mail to The Boulevard Funds, 410 North Michigan Avenue, Chicago,
Illinois 60611-4181.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Boulevard
Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange or the Federal Reserve
Wire System is closed. Requests for redemption can be made by telephone or by
mail.
THROUGH BOULEVARD BANK
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Boulevard
Bank toll-free at 1-800-285-FUND. For orders received before 3:00 p.m.
(Central time), proceeds will normally be wired the next day to the
shareholder's account at Boulevard Bank or a check will be sent to the address
of record. In no event will proceeds be sent more than seven days after a
proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Boulevard Bank. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as a written request to
Boulevard Bank.
If at any time the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders will be notified.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request
to Boulevard Bank at 410 North Michigan Avenue, Chicago, Illinois 60611-4181.
The written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested, and should be signed
exactly as the shares are registered. If share certificates have been issued,
they must be properly endorsed and should be sent by registered or certified
mail with the written request. Shareholders should call Boulevard Bank at 1-
800-285-FUND for assistance in redeeming by mail.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund, which are administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and Federated Services Company have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Fund and Federated Services Company
reserve the right to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares of the Fund are purchased by check or through the Automated
Clearing House ("ACH"), the proceeds from the redemption of those shares are
not available, and the shares may not be exchanged, until the transfer agent
is reasonably certain that the purchase check has cleared, which could take up
to 10 calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the Fund's net asset value,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Fund. The
minimum withdrawal amount is $50 per month. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may obtain more information about this program by calling
Boulevard Bank at 1-800-285-FUND. Due to the fact that shares are sold with a
sales charge, it is not advisable for shareholders to be purchasing shares
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Fund for vote. All shares of
each fund in the Trust have equal voting rights, except that in matters
affecting only a particular fund, only shareholders of that fund are entitled
to vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or Fund's operation and for the election of
Trustees under certain circumstances. As of January 6, 1994, First National
Bank of Des Plaines (a subsidiary of Boulevard Bancorp, Inc.), acting in
various capacities for numerous accounts, was the owner of record of 685,536
shares (36.37%) and 1,121,602 shares (59.51%) of the Fund, and therefore,
may, for certain purposes, be deemed to control the Fund and be able to affect
the outcome of certain matters presented for a vote of shareholders.
Trustees may be removed by a two-thirds vote of a number of the Trustees or by
a two-thirds vote of a number of the shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities in
general. However, such banking laws and regulations do not prohibit such a
holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customer. The Fund's Adviser, Boulevard Bank, is subject to such banking laws
and regulations.
Boulevard Bank believes, after consultation with counsel, that its performance
of the investment advisory services for the Fund, as contemplated by the
advisory agreement with the Trust, is not prohibited by the Glass-Steagall Act
as it has been interpreted by the courts and federal banking agencies or by
other banking laws and regulations applicable to national banks. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of present or future
statutes and regulations, could prevent Boulevard Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
In such event, changes in the operation of the Fund may occur, including the
possible alteration or termination of any automatic or other Fund share
investment and redemption services that are being provided by Boulevard Bank,
and the Trustees would consider alternative investment advisers and other
means of continuing available investment services. It is not expected that
existing Fund shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Boulevard Bank is found) as a
result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other funds, if any, will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal securities. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The Fund may purchase all types of municipal bonds, including
private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
Shareholders should consult with their tax adviser to determine whether they
are subject to the alternative minimum tax or the corporate alternative minimum
tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net long-term capital gains realized by the Fund, if
any, will be taxable as long-term capital gains regardless of the length of
time shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
OTHER STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue and shareholders are urged to
consult their own tax adviser regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, and tax-
equivalent yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of the Fund is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming a specific tax rate. The
yield and the tax-equivalent yield do not necessarily reflect income actually
earned by the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if reduced or excluded, would increase the total return, yield, and tax-
equivalent yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
BOULEVARD MANAGED MUNICIPAL FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES RATINGS:
OR MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- -------------------------------------- ----------- -----------
SHORT-TERM SECURITIES--6.7%
-------------------------------------------------
<C> <S> <C> <C>
MUTUAL FUND SHARES--4.1%
--------------------------------------
364,877 Dreyfus Tax Exempt Cash Management AAA $ 364,877
Trust
--------------------------------------
428,123 SEI Tax Exempt Trust NR 428,123
-------------------------------------- -----------
TOTAL MUTUAL FUND SHARES 793,000
-------------------------------------- -----------
SHORT-TERM MUNICIPAL SECURITIES--2.6%
--------------------------------------
$500,000 Louisiana State, Public Authority 500,000
Hospital, Weekly VRDN, (MBIA Insured) AA -----------
--------------------------------------
TOTAL SHORT-TERM SECURITIES (AT
AMORTIZED COST AND AT NET ASSET 1,293,000
VALUE--NOTE 2A) -----------
--------------------------------------
LONG-TERM MUNICIPAL SECURITIES--93.1%
------------------------------------------------
ALASKA--2.4%
--------------------------------------
200,000 Alaska State, 9.50%, CTFS Partnership
In Rent (Spring Creek Correctional
Center), 10/1/2000 AAA 225,626
--------------------------------------
225,000 Anchorage, AK, 9.00%, Electric Utility
Revenue Bonds, 229,539
PRE-REF 12/1/93 AAA -----------
--------------------------------------
Total 455,165
-------------------------------------- -----------
ARIZONA--4.6%
--------------------------------------
250,000 Arizona State, 2.80%, Power Authority
Bonds (Hoover Dam Project)/(MBIA
Insured), 10/1/94 AAA 249,932
--------------------------------------
300,000 Maricopa County, AZ, 0.00%, School
District No. 41 (Gilbert) Bonds (FGIC
Insured), 7/1/94 AAA 294,366
--------------------------------------
50,000 Maricopa County, AZ, 7.00%, School
District No. 80 Bonds (FGIC Insured),
7/1/96 AAA 51,690
--------------------------------------
50,000 Mesa, AZ, 5.00%, (Mewsa
Arizona)/(AMBAC Insured), 7/1/94 AAA 50,592
--------------------------------------
230,000 Salt River, AZ, 9.625%, Agricultural
Impact & Power District (Series 1983), 235,934
1/1/2023 AAA -----------
--------------------------------------
Total 882,514
-------------------------------------- -----------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- ------------------------------------------ ----------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
----------------------------------------------------
CALIFORNIA--3.8%
------------------------------------------
$250,000 Los Angeles, CA, Judgement Obligation
Bonds, 4.75%,
(Series A), 2/1/95 AA- $ 254,167
------------------------------------------
San Diego, CA, 3.00%, Tax Anticipation
200,000 Note, 6/30/94 SP-1+ 200,584
------------------------------------------
300,000 San Marcos, CA, 0.00%, CTFS (ETM), 3/2/95 AAA 285,798
------------------------------------------ -----------
Total 740,549
------------------------------------------ -----------
COLORADO--1.0%
------------------------------------------
Denver, Colorado City & County, 7.75%, GO, 206,562
200,000 8/1/94 AA -----------
------------------------------------------
CONNECTICUT--1.9%
------------------------------------------
Connecticut State, 6.20%, LTGO, (Series
150,000 B), 7/15/95 AA- 157,329
------------------------------------------
Connecticut State, 7.125% LTGO, (Series 202,252
200,000 A), 3/1/94 AA- -----------
------------------------------------------
Total 359,581
------------------------------------------ -----------
DELAWARE--1.0%
------------------------------------------
200,000 Delaware State, 5.00%, Transportation 202,368
Authority Revenue Bonds, 7/1/94 AA- -----------
------------------------------------------
FLORIDA--3.7%
------------------------------------------
200,000 Dade County, FL, 3.50%, Water Systems
Revenue Bonds (FGIC Insured), 6/1/94 AAA 200,614
------------------------------------------
200,000 Jacksonville, FL, 5.45%, Electric
Authority Revenue Bonds, 10/1/94 AA 204,006
------------------------------------------
300,000 Miami Beach, FL, 3.30% GO Refunding Bonds, 301,101
(FGIC Insured), 9/1/94 AAA -----------
------------------------------------------
Total 705,721
------------------------------------------ -----------
GEORGIA--1.9%
------------------------------------------
325,000 Georgia Municipal Electric Authority
Power, 10.75%, Revenue Bonds (Series J),
(AMBAC Insured), 361,250
PRE-REF 1/1/95 AAA -----------
------------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- ------------------------------------------ ----------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
----------------------------------------------------
HAWAII--1.3%
------------------------------------------
Hawaii State, 6.125%, GO (Series BK), $ 252,825
$250,000 4/1/94 AA -----------
------------------------------------------
INDIANA--2.6%
------------------------------------------
215,000 Indianapolis, Indiana, 4.85%, Local Public
Improvement Bonds, (Series A), 1/10/95 AA+ 217,962
------------------------------------------
270,000 New Albany, Indiana, 5.20%, Sewage Works 278,510
Revenue Bond (AMBAC Insured), 9/1/95 AAA -----------
------------------------------------------
Total 496,472
------------------------------------------ -----------
ILLINOIS--11.3%
------------------------------------------
250,000 Chicago, IL, 7.80%, Water Revenue Bonds
(Chicago, IL, Waterworks)/(FGIC Insured),
(ETM), 11/1/94 AAA 260,955
------------------------------------------
100,000 Du Page Water Commission of Illinois,
5.50%, Water Revenue Bonds, 5/1/94 AA- 101,076
------------------------------------------
155,000 Illinois, 4.00%, Educational Facilities
Bonds (Columbia College), 12/1/94 BBB 155,170
------------------------------------------
300,000 Illinois, 9.00%, Development Financial
Authority Revenue School District Bonds,
(PG-Geneva School 304 Project)/(FGIC
Insured), 6/1/94 AAA 308,808
------------------------------------------
225,000 Illinois Educational Facility Authority,
3.90%, (RFDG-Art Institute of Chicago),
3/1/95 A 226,606
------------------------------------------
300,000 Illinois, 3.25% Health Facilities
Authority Revenue Bonds
(Series C)/(RFDG-Lutheran General Health),
4/1/94 A 299,541
------------------------------------------
200,000 Illinois Metropolitan Pier & Exposition
Authority, 0.00%, Revenue Bonds (AMBAC
Insured), 12/15/94 AAA 193,296
------------------------------------------
200,000 Illinois State, 3.25%, Sales Tax Revenue
Bonds (Series S), 6/15/95 AA 200,234
------------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- --------------------------------------- ----------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------
ILLINOIS--CONTINUED
---------------------------------------
Rockford, IL, 4.25%, Park District
$200,000 Bonds (Series A), 1/1/95 A1 $ 201,768
---------------------------------------
235,000 Will County, IL, 9.00%, Will County
School District 122 Bonds (FGIC 238,496
Insured), 3/1/94 AAA ----------
---------------------------------------
Total 2,185,950
--------------------------------------- ----------
IOWA--2.1%
---------------------------------------
150,000 Cedar Rapids, IA, 3.70%, Hospital
Facilities Revenue Bonds (St. Luke's
Methodist Hospital Project)/(FGIC
Insured), 8/15/94 AAA 150,640
---------------------------------------
250,000 Iowa School Corp., 4.10%, WT/CTFS 250,319
Capital Bonds, 12/30/93 SP-1 ----------
---------------------------------------
Total 400,959
--------------------------------------- ----------
KENTUCKY--1.5%
---------------------------------------
250,000 Kenton County, KY, 9.30%, Hospital
Facility Revenue Bonds, (St. Elizabeth 282,812
Medical Center), PRE-REF 11/1/95 AAA ----------
---------------------------------------
LOUISIANA--1.7%
---------------------------------------
135,000 Louisiana State, 4.20%, Offshore Term
Authority Deepwater Port Revenue Bonds,
9/1/94 A 135,797
---------------------------------------
200,000 Louisiana State, 4.60%, Offshore Term 201,898
Bond (Series B), (Loop Inc.), 9/1/95 A ----------
---------------------------------------
Total 337,695
--------------------------------------- ----------
MAINE--1.3%
---------------------------------------
250,000 State of Maine, 4.50%, Educational Loan
Marketing Corp. Revenue Bonds, 250,862
(National Westminister LOC), 12/1/2009 AA2 ----------
---------------------------------------
MARYLAND--1.0%
---------------------------------------
200,000 Baltimore, MD, 2.85%, Revenue Bonds AAA 200,000
(Water Project)/(MBIA Insured), ----------
Optional Tender, 1/15/94
---------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- --------------------------------------- ----------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------
MASSACHUSETTS--2.3%
---------------------------------------
$250,000 Massachusetts State, 3.60%, Port
Authority Revenue Bonds (Series A),
7/1/95 AA- $ 250,950
---------------------------------------
200,000 Massachusetts State, 4.125%, BAN (Water 202,278
Resource Authority), 10/15/95 VMIG-1 ----------
---------------------------------------
Total 453,228
--------------------------------------- ----------
MINNESOTA--2.6%
---------------------------------------
250,000 Rosemont, MN, 5.40%, Independent School
District No. 196 Bonds, 2/1/94 A 251,057
---------------------------------------
225,000 Western Minnesota, 9.50%, Municipal
Power Agency Supply Revenue Bonds 256,297
(Series A), PRE-REF 1/1/96 AAA ----------
---------------------------------------
Total 507,354
--------------------------------------- ----------
NEBRASKA--3.1%
---------------------------------------
300,000 Omaha, NE, 3.40%, Public Power District
Nebraska Electric Revenue Bonds (Series
B), 2/1/95 AA 300,810
---------------------------------------
300,000 Omaha, NE, 3.30%, Public Power District
Nebraska Electric Revenue Bonds (Series 300,501
D), 2/1/95 AA ----------
---------------------------------------
Total 601,311
--------------------------------------- ----------
NEVADA--1.7%
---------------------------------------
300,000 Las Vegas Valley, NV, 9.50% Water
District (AMBAC 328,398
Insured), 8/1/95 AAA ----------
---------------------------------------
NEW JERSEY--1.3%
---------------------------------------
250,000 New Jersey State, 6.55%, Highway
Authority Garden State Parkway General 250,833
Revenue Bonds, 1/1/94 AA- ----------
---------------------------------------
NEW MEXICO--1.7%
---------------------------------------
300,000 Albuquerque, NM, 8.25%, Gross Receipt 324,258
Sales Tax Revenue, 7/1/2014 AA ----------
---------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- ------------------------------------------- ----------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-----------------------------------------------------
NORTH CAROLINA--1.6%
-------------------------------------------
$300,000 North Carolina, 5.90%, Coastal Regional
Solid Waste Management Authority Revenue $ 304,257
Bonds (ETM), 6/1/94 NR ----------
-------------------------------------------
OHIO--5.0%
-------------------------------------------
200,000 Columbus, OH, 4.75%, Light & Water Works,
9/15/94 AA+ 203,212
-------------------------------------------
300,000 Ohio State, 2.70%, Air Quality Development
Authority Revenue Bonds (RFDG-Buckeye
Power, Inc. Project), 8/1/94 AA- 299,598
-------------------------------------------
200,000 Ohio State, 3.25%, Building Authority
(William Green Building), 4/1/95 A+ 199,966
-------------------------------------------
250,000 Ohio State, 7.20%, Public Facilities
Commission Higher Education Bonds (Series 254,490
A), 5/1/94 A+ ----------
-------------------------------------------
Total 957,266
------------------------------------------- ----------
PENNSYLVANIA--1.1%
-------------------------------------------
205,000 Pittsburgh, PA, 2.75%, School District 204,767
(Series B)/(FGIC Insured), 9/1/94 AAA ----------
-------------------------------------------
RHODE ISLAND--1.1%
-------------------------------------------
200,000 State of Rhode Island, 6.90%, LTGO, 6/15/95 AA- 210,239
------------------------------------------- ----------
SOUTH CAROLINA--1.0%
-------------------------------------------
200,000 Greenville County, SC, 4.80%, UTGO, 12/1/93 AA 200,000
------------------------------------------- ----------
TENNESSEE--3.5%
-------------------------------------------
225,000 Chattanooga, TN, 8.70%, 4/1/97 AAA 247,953
-------------------------------------------
100,000 Knoxville, TN, 4.20%, Water Revenue Bonds,
3/1/95 AA 101,202
-------------------------------------------
300,000 Metropolitan Government, TN, 9.60%,
Nashville & Davidson Counties Convention 329,679
Bonds, PRE-REF 3/1/95 AAA ----------
-------------------------------------------
Total 678,834
------------------------------------------- ----------
TEXAS--9.6%
-------------------------------------------
200,000 Harris County, TX, 9.75%, Flood Control
Bonds (Series 1984), PRE-REF 12/1/94 AAA 213,589
-------------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- ------------------------------------------- ----------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-----------------------------------------------------
TEXAS--CONTINUED
-------------------------------------------
$100,000 Rowlett, TX, 10.35%, Waterworks Sewage
Systems Bonds (AMBAC Insured), PRE-REF
3/1/94 AAA $ 101,899
-------------------------------------------
300,000 Panhandle-Plains, TX, 3.65%, Higher
Education Authority, Inc. Student Loan
Revenue Bonds (Series A), 6/1/2021, Putable
3/2/95 AAA 300,072
-------------------------------------------
250,000 San Antonio, Texas, 8.00%, GO, 8/1/95 AA 269,551
-------------------------------------------
300,000 Texas State, 4.15%, RFDG--Superconducting
(Series C),
GO, 4/1/95 AA 303,921
-------------------------------------------
200,000 Texas State Park, 8.00%, UTGO, PRE-REF
10/1/95 AA 216,597
-------------------------------------------
200,000 Texas Tech. University Revenue Bonds,
3.35%, (Texas Tech. Health Science Center),
2/15/95 AA 200,462
-------------------------------------------
100,000 Tyler, TX, 8.40%, Independent School
District Bonds, 2/15/97, PRE-REF 2/15/95 AAA 106,403
-------------------------------------------
150,000 Wylie, TX, 8.50%, UTGO Independent School
District 151,728
Bonds, 2/15/94 AAA ----------
-------------------------------------------
Total 1,864,222
------------------------------------------- ----------
UTAH--1.7%
-------------------------------------------
300,000 Intermountain Power Agency, 9.25%, Utah 335,265
Power Bonds (1985 Series A), 7/1/96 AAA ----------
-------------------------------------------
VIRGINIA--1.1%
-------------------------------------------
200,000 Virginia Beach, VA, 3.35%, GO Bonds, 201,033
7/15/95 AA ----------
-------------------------------------------
WASHINGTON--6.2%
-------------------------------------------
300,000 King County, WA, 4.60%, UTGO Youth Service
Center, Parks & Arterial Impacts Bonds
(ETM), 10/1/94 AAA 304,420
-------------------------------------------
300,000 Seattle, WA, 3.45%, Municipal Light & Power
Revenue
Bonds, 5/1/95 AA 301,146
-------------------------------------------
</TABLE>
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (UNAUDITED) VALUE
--------- ------------------------------------- ----------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
-----------------------------------------------
WASHINGTON--CONTINUED
-------------------------------------
$300,000 Washington State, 3.50%, Public Power
Supply System Nuclear Project No. 3,
7/1/95 AA $ 300,082
-------------------------------------
300,000 Washington State, 3.40%, (RFDG-Series 301,488
R-94A), 8/1/95 AA -----------
-------------------------------------
Total 1,207,136
------------------------------------- -----------
WISCONSIN-5.4%
-------------------------------------
200,000 Kenosha, WI, 3.80%, GO Promissory
Notes (Series A)/
(AMBAC Insured), 4/1/95 AAA 201,447
-------------------------------------
175,000 Kenosha, WI, 5.45%, GO University
School District No. 001 Promissory
Notes, 4/1/94 A1 176,569
-------------------------------------
200,000 Milwaukee, WI, 3.75% (Series B3),
6/15/95 AA+ 201,609
-------------------------------------
250,000 Oshkosh, WI, 9.15%, GO, 5/1/94 A 256,342
-------------------------------------
200,000 South Columbia, 4.80% Basin 205,761
Irrigation District, 12/1/95 AA -----------
-------------------------------------
Total 1,041,728
------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES 17,991,414
(IDENTIFIED COST, $17,955,813) -----------
-------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $19,284,414+
$19,248,813) -----------
-------------------------------------
</TABLE>
* See Notes to Portfolio of Investments on page 30 (unaudited).
+ The cost of investments for federal tax purposes amounts to $19,248,813. The
net unrealized appreciation on a federal tax basis amounts to $35,601 which
is comprised of $41,327 appreciation and $5,726 depreciation at November 30,
1993.
Note: The categories of investments are shown as a percentage of net assets
of ($19,329,829) at November 30, 1993.
See Notes which are an integral part of the Financial Statements.
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
The following abbreviations are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corp.
BAN--Bond Anticipation Note
CTFS--Certificates of Participation
ETM--Escrowed to Maturity
FGIC--Financial Guaranty Insurance Co.
GO--General Obligation
LTGO--Limited Tax General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance Corp.
PRE-REF--Pre-Refunded
RFDG--Refunding
UTGO--Unlimited Tax General Obligation
VRDN--Variable Rate Demand Note
WT/CTFS--Warrant Certificates
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(UNAUDITED)
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
S&P
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MOODY'S
Moody's short-term ratings are designated Moody's Investment Grade (MIG or VMIG
(see below)). The purpose of the MIG or VMIG ratings is to provide investors
with a simple system by which the relative investment qualities of short-term
obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
FITCH
Fitch's short term ratings place greater emphasis on the existence of liquidity
necessary to meet the issuers obligations in a timely manner.
F-1 Strongest degree of assurance for timely payment. Those issues
determined to provide exceptionally strong credit quality are
given a plus (+) designation.
F-2 Notes reflecting a degree of assurance for timely payment only
slightly less in degree than the highest category.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P
Standard & Poor's assigns dual ratings to all long-term debt issues that have
as part of their provisions a variable rate demand feature. The first rating
(long-term rating) addresses the likelihood of repayment of principal and
interest when due, and the second rating (short-term rating) describes the
demand characteristics. Several examples are AAA/A-1+, AA/A-1+, and A/A-1. (The
definitions for the long-term and short-term ratings are provided below.)
BOULEVARD MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
MOODY'S
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity rates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
FITCH
Fitch usually assigns two ratings to long-term debt issues that include
provisions for a variable rate demand feature. The long-term rating addresses
the ability of the obligor to pay debt service and the short-term rating
addresses the timely payment of the demand feature. Examples of rating
designations are as follows: AAA/F-1+, AA/F-1+, A/F-1. (The definitions for the
long-term and short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
S&P
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1 This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as
for issues designated "A-1."
MOODY'S
P-1 Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory
obligations.
P-2 Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory
obligations.
The following is an explanation of the Fitch ratings. These ratings are not
referenced in the Portfolio of Investments.
FITCH
F-1 Issues assigned this rating reflect a strong degree of assurance
for timely payment. Those issuers determined to possess the
strongest degree of assurance for timely payment, are denoted with
a plus (+) sign designation.
F-2 Issuers carrying this rating have a satisfactory degree of
assurance for timely payment but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
LONG TERM DEBT RATINGS
(INVESTMENT GRADE)
S&P
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 highest rated issues only a
small degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB Debt rated "BBB" is regarding 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 principal and interest than debt rated in higher
ratings categories.
MOODY'S
Aaa Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large margin and principal is secure. While the
various protective elements are likely to change, such changes
which can be foreseen are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present that suggest a
susceptibility to impairment some time 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.
FITCH
AAA Bonds that are rated AAA are of the highest credit quality. The
obligor has an exceptionally strong ability to pay debt service.
AA Bonds that are rated AA are of very high quality. The obligor has
a very strong ability to pay debt service. Debt rated in this
category may also have a (+) or (-) sign with a rating to indicate
the relative position within the rating category.
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.
NR indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P, Moody's, or Fitch with respect to short-term
indebtedness. However, management considers them to be of comparable quality to
securities rated in one of the two highest short-term ratings categories by a
nationally recognized statistical ratings organization.
NR(1) The underlying issuer/obligor/guarantor has other outstanding
long-term debt rated "AAA" by Standard & Poor's, "Aaa" by Moody's
or "AAA" by Fitch.
NR(2) The underlying issuer/obligor/guarantor has other outstanding
long-term debt rated "AA" by Standard & Poor's, "Aa" by Moody's,
or "AA" by Fitch.
NR(3) The underlying issuer/obligor/guarantor has other outstanding
long-term debt rated "A" by Standard & Poor's, Moody's, or Fitch.
NR(4) The underlying issuer/obligor/guarantor has other outstanding
long-term debt rated "BBB" by Standard & Poor's, "Baa" by Moody's,
or "BBB" by Fitch.
BOULEVARD MANAGED MUNICIPAL FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------
Investments in securities, at value (Note 2A)
(Identified and tax cost: $19,248,813) $19,284,414
- -------------------------------------------------
Interest receivable 307,385
- -------------------------------------------------
Deferred expenses (Note 2E) 12,622
- ------------------------------------------------- -----------
Total assets 19,604,421
- -------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------
Payable to Custodian (Note 5) $200,838
- ---------------------------------------
Payable for fund shares redeemed 5,090
- ---------------------------------------
Accrued expenses and other liabilities 68,664
- --------------------------------------- ---------
Total liabilities 274,592
- ------------------------------------------------- -----------
NET ASSETS for 1,927,503 shares of beneficial in-
terest outstanding $19,329,829
- ------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------
Paid-in capital $19,284,589
- -------------------------------------------------
Net unrealized appreciation of investments 35,601
- -------------------------------------------------
Accumulated net realized loss on investments (1,667)
- -------------------------------------------------
Undistributed net investment income 11,306
- ------------------------------------------------- -----------
Total $19,329,829
- ------------------------------------------------- -----------
NET ASSET VALUE, and Redemption Price Per Share
($19,329,829 / 1,927,503 shares of beneficial
interest outstanding) $10.03
- ------------------------------------------------- -----------
Computation of Offering Price:*
Offering Price Per Share (100/97 of $10.03) $10.34
- ------------------------------------------------- -----------
</TABLE>
* No sales charges were imposed on purchases of shares prior to November 30,
1993 by deposit or credit customers of Boulevard Bank or its affiliates or
spouses and children under 21 of such customers. See "What Shares Cost" in the
Prospectus.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD MANAGED MUNICIPAL FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------
Interest income (Note 2B) $373,308
- -------------------------------------------------------------
EXPENSES--
- -------------------------------------------------------------
Investment advisory fee (Note 5) $83,941
- -----------------------------------------------------
Administrative personnel and services fee (Note 5) 38,493
- -----------------------------------------------------
Transfer and dividend disbursing agent fees and ex-
penses (Note 5) 11,974
- -----------------------------------------------------
Custodian expenses (Note 5) 7,672
- -----------------------------------------------------
Recordkeeper fees (Note 5) 44,294
- -----------------------------------------------------
Legal fees 4,250
- -----------------------------------------------------
Printing and postage 10,211
- -----------------------------------------------------
Insurance premiums 5,547
- -----------------------------------------------------
Miscellaneous 5,261
- ----------------------------------------------------- -------
Total expenses 211,643
- -----------------------------------------------------
DEDUCT--
- -----------------------------------------------------
Waiver of investment advisory fee (Note 5) $76,691
- --------------------------------------------
Waiver of administrative personnel and serv-
ice fees (Note 5) 37,233 113,924
- -------------------------------------------- ------- -------
Net expenses 97,719
- ------------------------------------------------------------- --------
Net investment income 275,589
- ------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------
Net realized loss on investments (identified cost basis) (1,667)
- -------------------------------------------------------------
Net change in unrealized appreciation on investments 35,601
- ------------------------------------------------------------- --------
Net realized and unrealized gain on investments 33,934
- ------------------------------------------------------------- --------
Change in net assets resulting from operations $309,523
- ------------------------------------------------------------- --------
</TABLE>
*For the period from February 19, 1993 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD MANAGED MUNICIPAL FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 275,589
- ----------------------------------------------------------------
Net realized loss on investments ($1,667 net loss, as computed
for federal tax purposes) (Note 2C) (1,667)
- ----------------------------------------------------------------
Change in net unrealized appreciation of investments 35,601
- ---------------------------------------------------------------- -----------
Change in net assets from operations 309,523
- ---------------------------------------------------------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (264,283)
- ---------------------------------------------------------------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------
Proceeds from sale of shares 20,877,084
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders electing to re-
ceive payment of
dividends in Fund shares 84,226
- ----------------------------------------------------------------
Cost of shares redeemed (1,676,721)
- ---------------------------------------------------------------- -----------
Change in net assets from Fund share transactions 19,284,589
- ---------------------------------------------------------------- -----------
Change in net assets 19,329,829
- ---------------------------------------------------------------- -----------
NET ASSETS--
- ----------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------- -----------
End of period (including undistributed net investment income of $19,329,829
$11,306) -----------
- ----------------------------------------------------------------
</TABLE>
*For the period from February 19, 1993 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part to the Financial Statements)
BOULEVARD MANAGED MUNICIPAL FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Boulevard Funds (the "Trust") are registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
financial statements included herein present only those of the Boulevard
Managed Municipal Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio of the
Boulevard Funds are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are valued at fair market value. An
independent pricing service values the Fund's municipal bonds taking into
consideration yield, stability, risk, quality, coupon maturity, type of
issue, trading characteristics, special circumstances of a security or
trading market, and any other factors or market data it deems relevant in
determining valuations for normal institutional size trading units of debt
securities and does not rely on quoted prices. The Trustees have determined
that the fair value of debt securities authorized to be purchased by the
Fund with remaining maturities of sixty days or less at the time of purchase
shall be their amortized cost value unless the particular circumstances of
the security indicate otherwise. Investments in other regulated investment
companies are valued at net asset value.
B. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium) on short-term
obligations, and interest earned on all other debt securities including
discount (net of premium) and original issue discount as required by the
Internal Revenue Code.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income, including any net
realized gain on investments. Accordingly, no provision for federal tax is
necessary.
Dividends paid by the Fund representing net interest received on tax-exempt
municipal securities are not includable by shareholders as gross income for
federal tax purposes because the Fund intends to meet certain requirements of
the Internal Revenue Code applicable to regulated investment companies which
will enable the payment of tax-exempt interest dividends.
At November 30, 1993 the Fund, for federal tax purposes, had a capital loss
carryforward of $1,667 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted
by the Internal Revenue Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Fund of any liability for federal tax. Pursuant to the Code, such capital
loss carryforward will expire in 2001.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage is when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to its
initial registration, excluding the initial expense of registering the
shares, have been deferred and are being amortized using the straight-line
method over a period of five years from the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on the payment date at the ex-
dividend date net asset value without a sales charge, unless cash payments are
requested. Distributions of any net realized capital gains will be made at
least once every twelve months. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1993*
- ---------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- ----------------------------------------------------------
Shares sold 2,086,520
- ----------------------------------------------------------
Shares issued to shareholders electing to receive payments
of dividends in Fund shares 8,447
- ----------------------------------------------------------
Shares redeemed (167,464)
- ---------------------------------------------------------- ---------
Shares outstanding, end of period 1,927,503
- ---------------------------------------------------------- ---------
</TABLE>
* The period from February 19, 1993 (date of initial public investment) to
November 30, 1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Boulevard Bank National Association, the Fund's investment adviser (the
"Adviser" or "Boulevard Bank"), receives for its services an annual investment
advisory fee equal to 0.70 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion. For the period ended November 30,
1993, the Adviser earned an investment advisory fee of $83,941, of which
$76,691 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services and receives for its services an annual
fee equal to .150 of 1% on the first $250 million of average aggregate daily
net assets of the Trust; .125 of 1% on the next $250 million; .100 of 1% on the
next $250 million; and .075 of 1% on average aggregate daily net assets in
excess of $750 million. For the period ended November 30, 1993, FAS earned
$38,493, of which $37,233 was voluntarily waived. The administrative fee
received during any fiscal year shall aggregate at least $50,000 with respect
to the Fund. FAS may choose voluntarily to reimburse a portion of its fee at
any time.
State Street Bank and Trust Company is the custodian for the securities and
cash of the Fund. For the period ended November 30, 1993, the custodian earned
$7,672.
Federated Services Company is the transfer and dividend disbursing agent for
the Fund. It also provides certain accounting and recordkeeping services. For
the period ended November 30, 1993, Federated Services Company earned $11,974
for transfer and dividend disbursing agent fees and expenses, and $44,294 for
recordkeeping fees.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the investment Company Act of 1940. The Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund, for fees it paid which relates to the distribution and administration of
the Fund. The Plan provided that the Fund will incur distribution expenses up
to .25 of 1% of the average daily net assets of the Fund annually to pay
commissions, maintenance fees and to compensate FSC. The Fund will not accrue
or pay any distribution expenses pursuant to the Plan until a separate class of
shares has been created for certain institutional investors.
Certain of the Officers and Trustees of the Fund are Officers and Directors of
the above Corporations.
Organization expenses of $48,856 were borne initially by FAS. The Fund has
agreed to reimburse the Administrator for the organizational expenses initially
borne by the Administrator during the five year period following the date the
Trust's Portfolio became effective. For the period ended November 30, 1993,
$4,000 of costs were incurred pursuant to this agreement.
As of November 30, 1993, the following shareholder of record owned 5% or more
of the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.), Des Plaines, IL owned approximately
1,849,802 shares (95.97%).
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
period ended November 30, 1993 were as follows:
<TABLE>
<S> <C>
- -----------
PURCHASES-- $21,271,185
- ----------- -----------
SALES-- $ 3,055,000
- ----------- -----------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Boulevard Managed Municipal Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments (except for the Credit Ratings by Moody's or S&P
and the Notes to Portfolio of Investments), and the related statements of
operations and of changes in net assets and the financial highlights (included
on page 2) present fairly, in all material respects, the financial position of
the Boulevard Managed Municipal Fund (one of the portfolios of The Boulevard
Funds, (hereafter referred to as the "Fund") at November 30, 1993, the results
of its operations, the changes in its net assets and the financial highlights
for the period February 19, 1993 (date of initial public investment) through
November 30, 1993, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at November 30, 1993, by correspondence with the custodian, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chicago, Illinois
January 20, 1994
<PAGE>
[This Page Intentionally Left Blank]
ADDRESSES
- --------------------------------------------------------------------------------
Boulevard Managed Federated Investors Tower
Municipal Fund Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Boulevard Bank National 410 North Michigan Avenue
Association Chicago, Illinois 60611-4181
- --------------------------------------------------------------------------------
Custodian
State Street Bank and P. O. Box 8609
Trust Company Boston, Massachusetts 02266-
8609
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing Agent, and
Portfolio Accounting Services
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Independent Accountants
Price Waterhouse
200 East Randolph Drive
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
BOULEVARD MANAGED MUNICIPAL FUND
PROSPECTUS
A Diversified Portfolio of The
Boulevard Funds, an Open-End Management
Investment Company
Prospectus dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
---------------------------------------------------------------------------
Investment Adviser
410 NORTH MICHIGAN AVENUE
CHICAGO, IL 60611-4181
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120816A 1/94
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------------
BOULEVARD MANAGED MUNICIPAL FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
----------------------------------------------------------------------
This Statement of Additional Information should be read with the pro-
spectus of the Boulevard Managed Municipal Fund (the "Fund") dated
January 31, 1994. This Statement is not a prospectus itself. To re-
ceive a copy of the prospectus, call Boulevard Bank National Associa-
tion toll-free at 1-800-285-FUND.
Statement dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
- -----------------------------------
Investment Adviser
FEDERATED SECURITIES CORP.
- -------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 2
Lending of Portfolio Securities 2
Temporary Investments 2
Restricted and Illiquid Securities 3
Reverse Repurchase Agreements 3
Portfolio Turnover 3
Securities of Foreign Issuers 3
Investment Limitations 3
THE BOULEVARD FUNDS MANAGEMENT 6
- --------------------------------------
Officers and Trustees 6
The Funds 8
Fund Ownership 8
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 9
- --------------------------------------
Adviser to the Fund 9
Advisory Fees 9
ADMINISTRATIVE SERVICES 9
- --------------------------------------
BROKERAGE TRANSACTIONS 9
- --------------------------------------
PURCHASING SHARES 10
- --------------------------------------
Distribution Plan 10
Administration Arrangements 10
Conversion to Federal Funds 10
Exchanging Securities for Fund
Shares 10
DETERMINING NET ASSET VALUE 11
- --------------------------------------
Valuing Municipal Securities 11
EXCHANGE PRIVILEGE 11
- --------------------------------------
Requirements for Exchanging Shares 11
REDEEMING SHARES 11
- --------------------------------------
Redemption in Kind 11
TAX STATUS 11
- --------------------------------------
The Fund's Tax Status 11
TOTAL RETURN 12
- --------------------------------------
YIELD 12
- --------------------------------------
TAX-EQUIVALENT YIELD 12
- --------------------------------------
Tax-Equivalency Table 12
PERFORMANCE COMPARISONS 13
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Boulevard Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 3, 1992. The Declaration of Trust permits the Trust to offer
separate series and classes of shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide dividend income that is exempt
from federal regular income tax while attempting to provide a high degree of
principal stability. The investment objective cannot be changed without
approval of shareholders.
ACCEPTABLE INVESTMENTS
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
CHARACTERISTICS
The municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. The Fund may use similar
services or ratings other than Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P"), or Fitch Investors
Service, Inc. ("Fitch"). If a security's rating is reduced below the
required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so. If ratings made
by Moody's, S&P, or Fitch change because of changes in those
organizations or in their rating systems, the Fund will try to use
comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation
interests, plus accrued interest, on short notice (usually within seven
days). The municipal securities subject to the participation interests
are not limited to maturities of three years or less, so long as the
participation interests include the right to demand payment from the
applicable issuer of those interests. These financial institutions may
charge certain fees in connection with their repurchase commitments,
including a fee equal to the excess of the interest paid on the municipal
securities over the negotiated yield at which the participation interests
were purchased by the Fund. By purchasing participation interests having
a seven-day demand feature, the Fund is buying a security meeting the
maturity and quality requirements of the Fund and also is receiving the
tax-free benefits of the underlying securities.
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations. Many municipal securities
with variable interest rates purchased by the Fund are subject to
repayment of principal (usually within seven days) on the Fund's demand.
For purposes of determining the Fund's average maturity, the maturities
of these variable rate demand municipal securities (including
participation interests) are the longer of the periods remaining until
the next readjustment of their interest rates or the periods remaining
until their principal amounts can be recovered by exercising the right to
demand payment. The terms of these variable rate demand instruments
require payment of principal and accrued interest from the issuer of the
municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates evidencing the participation interests. Lease obligations
may be limited by municipal charter or the nature of the appropriation
for the lease. In particular, lease obligations may be subject to
periodic appropriation. If the entity does not appropriate funds for
future lease payments, the entity cannot be compelled to make such
payments. Furthermore, a lease may provide that the certificate trustee
cannot accelerate lease obligations upon default. The trustee would only
be able to enforce lease payments as they become due. In the event of a
default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment or
that the substitute source of payment will generate tax-exempt income.
In determining the liquidity of municipal lease securities, the adviser,
under the authority delegated by the Board of Trustees, will base its
determination on the following factors: (a) whether the lease can be
terminated by the lessee; (b) the potential recovery, if any, from a sale
of the leased property upon termination of the lease; (c) the lessee's
general credit strength (e.g., its debts, administrative, economic and
financial characteristics, and prospects); (d) the likelihood that the
lessee will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of nonappropriation"); and (e) any
credit enhancement of legal recourse provided upon an event of
nonappropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in when-
issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
Municipal securities purchased in when-issued or delayed delivery transactions
are treated as issued on the date at which they begin to accrue interest in
determining whether they mature within three years from the date of purchase.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of its total assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes.
BANK INSTRUMENTS
The Fund only invests in Bank Instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, both of which are administered by the
Federal Deposit Insurance Corporation. Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of
Deposit ("Yankee CDs"), and Eurodollar Time Deposits ("ETDs").
Institutions issuing Eurodollar instruments are not necessarily subject
to the same regulatory requirements that apply to domestic banks, such as
reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping and the public availability of information.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject
to repurchase agreements, and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action.
The Fund believes that, under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund may
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are found by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the Trustees.
From time to time, such as when suitable municipal bonds are not
available, the Fund may retain a portion of its assets in cash. Any
portion of the Fund's assets maintained in cash will reduce the amount of
assets in municipal securities and thereby reduce the Fund's yield.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
. the frequency of trades and quotes for the security;
. the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace trades.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the period from February 19, 1993 (date of initial public
investment) to November 30, 1993, the Fund's portfolio turnover was 22%.
SECURITIES OF FOREIGN ISSUERS
The Fund may invest in securities of foreign issuers, such as ECDs, Yankee CDs,
ETDs, and Yankee Bonds. Yankee Bonds are U.S. dollar-denominated bonds issued
and traded primarily in the United States by foreign issuers. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of its total assets at the time of the pledge. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits
for the purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the Fund's total assets, the Fund will not invest
more than 5% of its total assets in any one issuer (except cash and cash
items, repurchase agreements, and securities issued and/or guaranteed by
the U.S. government, its agencies or instrumentalities). (For purposes of
this limitation, the Fund considers instruments issued by a U.S. branch
of a domestic bank having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items.")
Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Fund considers common stock and all preferred stock of an issuer each as
a single class, regardless of priorities, series, designations, or other
differences.
Under this limitation, each governmental subdivision, including states
and the District of Columbia, territories and possessions of the United
States or their political subdivisions, agencies, authorities,
instrumentalities, or similar entities, will be considered a separate
issuer if its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its own
assets and revenues.
Private activity bonds backed only by the assets and revenues of a non-
governmental user are considered to be issued solely by that user. If, in
the case of a private activity bond or government-issued security, a
governmental or other entity guarantees the security, such guarantee
would be considered a separate security issued by the guarantor as well
as the other issuer, subject to limited exclusions allowed by the
Investment Company Act of 1940.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry or
in industrial development bonds or other securities, the interest upon
which is paid from revenues of similar type projects.
The Fund may invest, as temporary investments, 25% or more of its total
assets in cash or cash items (including demand deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment), securities issued and/or guaranteed by the U.S. government,
its agencies or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
The Fund does not intend to purchase securities that would increase the
percentage of its total assets invested in the securities of governmental
subdivisions located in any one state, territory, or U.S. possession to
25% or more. However, the Fund may invest 25% or more of its total assets
in tax-exempt project notes guaranteed by the U.S. government, regardless
of the location of the issuing municipality.
If the value of Fund assets invested in the securities of a governmental
subdivision changes because of changing values, the Fund will not be
required to make any reduction in its holdings.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts, except that the Fund may purchase and sell
futures contracts and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objective and policies or
the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice and certain restricted securities not
determined by the Trustees to be liquid. To comply with certain state
restrictions, the Fund will limit these transactions to 10% of its net
assets. (If state restrictions change, this latter restriction may be
revised without shareholder approval or notification.)
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, other mineral
exploration or development programs, or mineral leases, although it may
purchase the securities of issuers that invest in or sponsor such
programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
other investment companies only in open-market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets. It should be noted that investment companies incur
certain expenses, such as management fees, and, therefore, any investment
by a fund in shares of another investment company would be subject to
such duplicate expenses. The adviser will waive its investment advisory
fee on assets invested in securities of open-end investment companies.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of its total assets in industrial
development bonds where the payment of principal and interest is the
responsibility of companies, including their predecessors, with less than
three years of operating history.
ARBITRAGE TRANSACTIONS
The Fund will not enter into transactions for the purpose of engaging in
arbitrage.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
THE BOULEVARD FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Boulevard Bank National
Association, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman
Federated Investors Trustee and Trustee, Federated Advisers, Federated
Tower Management, and Federated Research; Director, AEtna
Pittsburgh, PA Life and Casualty Company; Chief Executive Officer
and Director, Trustee, or Managing General Partner
of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
- -------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc.,
Department Realtors; President, Northgate Village Development
John R. Wood and Corporation; General Partner or Trustee in private
Associates, Inc., real estate ventures in Southwest Florida; Director,
Realtors Trustee, or Managing General Partner of the Funds;
3255 Tamiami Trail North formerly, President, Naples Property Management,
Naples, FL Inc.
- -------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee,
One PNC Plaza-23rd Floor Michael Baker, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp. and Director, Ryan Homes, Inc.
- -------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany
571 Hayward Mill Road Fund, Inc.; Director, Trustee, or Managing General
Concord, MA Partner of the Funds; formerly, Director, Blue Cross
of Massachusetts, Inc.
- -------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist,
3471 Fifth Avenue Presbyterian and Montefiore Hospitals; Clinical
Suite 1111 Professor of Medicine and Trustee, University of
Pittsburgh, PA Pittsburgh; Director, Trustee, or Managing General
Partner of the Funds.
- -------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc., and
Pittsburgh, PA Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds;
formerly, Counsel, Horizon Financial, F.A., Western
Region.
- -------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated
Federated Investors Treasurer, Investors; Vice President and Treasurer, Federated
Tower and Trustee Advisers, Federated Management, and Federated
Pittsburgh, PA Research; Trustee, Federated Services Company;
Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Chairman, Treasurer, and
Director, Federated Administrative Services; Trustee
or Director of some of the Funds; Vice President and
Treasurer of the Funds.
- -----------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing
Boston, MA General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street
Boston Corporation and Trustee, Lahey Clinic
Foundation, Inc.
- -----------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Chairman, Meritcare, Inc.; Director, Eat'N Park
Pittsburgh, PA Restaurants, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
- -----------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace,
Learning University of RAND Corporation, Online Computer Library Center,
Pittsburgh Inc., and U.S. Space Foundation; Chairman, Czecho
Pittsburgh, PA Slovak Management Center; Director, Trustee, or
Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for
Environmental Policy and Technology.
- -----------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director,
4905 Bayard Street Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- -----------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and
Tower Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; President and Director, Federated
Administrative Services; President or Vice President
of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, Chairman and Trustee of the
Trust.
- -----------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated
Federated Investors Investors; Chairman and Director, Federated
Tower Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
- -----------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and
Federated Investors and Secretary Trustee, Federated Investors; Vice President,
Tower Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research;
Trustee, Federated Services Company; Executive Vice
President, Secretary, and Director, Federated
Administrative Services; Director and Executive Vice
President, Federated Securities Corp.; Vice
President and Secretary of the Funds.
- -----------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors;
Federated Investors Executive Vice President, Federated Securities
Tower Corp.; President and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Vice
President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire
Insurance Company and President of its Federated
Research Division.
- ------------------------------------------------------------------------------------------
Jeffrey W. Sterling Vice President Vice President, Federated Administrative Services;
Federated Investors and Assistant Vice President and Assistant Treasurer of some of
Tower Treasurer the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------
</TABLE>
*This Trustee is deemed to an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 111 Corcoran Funds; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; and Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be liable
for their own willful defaults. If reasonable care has been exercised in the
selection of officers, agents, employees, or investment advisers, a Trustee
shall not be liable for any neglect or wrongdoing of any such person. However,
they are not protected against any liability to which they would otherwise be
subject by reason of their willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Boulevard Bank National Association (the
"Adviser" or "Boulevard Bank"), a wholly-owned subsidiary of Boulevard Bancorp,
Inc.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the selection, 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
Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the period from February 19, 1993 (date of initial public investment) to
November 30, 1993, the Adviser earned advisory fees of $83,941, of which
$76,691 was voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund, up to the full amount of its investment advisory fee, for the
Fund's expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee set forth
in the prospectus. For the period from February 19, 1993 (date of initial
public investment) to November 30, 1993, Federated Administrative Services
earned $38,493, of which $37,233 was voluntarily waived.
John A. Staley, IV, an officer of the Fund, holds approximately 15% of the
outstanding common stock and serves as a Director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services. For the fiscal year ended November 30, 1993, Federated
Administrative Services paid approximately $164,324 for services provided by
Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions and
determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers may be used by the Adviser in advising
the Fund and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it would
tend to reduce its expenses.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund. For the
period ended November 30, 1993, the Fund paid no brokerage commissions.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value next determined after an
order is received, plus a sales charge as described in the prospectus, on days
the New York Stock Exchange and Federal Reserve Wire System are open for
business. The procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a distribution plan pursuant to
Rule 12b-1 which was promulgated by the Securities and Exchange Commission
pursuant to the Investment Company Act of 1940 (the "Plan"). The Plan provides
for payment of fees to Federated Securities Corp. to finance any activity which
is principally intended to result in the sale of the Fund's shares subject to
the Plan. Such activities may include the advertising and marketing of shares
of the Fund; preparing, printing, and distributing prospectuses and sales
literature to prospective shareholders, brokers, or administrators; and
implementing and operating the Plan. Pursuant to the Plan, Federated Securities
Corp. may pay fees to financial institutions, fiduciaries, custodians for
public funds, investment advisors, and brokers for distribution and
administrative services and to administrators for administrative services
provided to the Fund. The administrative services are provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals, and include, but are not limited to: communicating account openings;
communicating account closings; entering purchase transactions; entering
redemption transactions; providing or arranging to provide accounting support
for all transactions; wiring funds and receiving funds for purchases and
redemptions of Fund shares; confirming and reconciling all transactions;
reviewing the activity in Fund accounts and providing training and supervision
of broker personnel; posting and reinvesting dividends to Fund accounts or
arranging for this service to be performed by the Fund's transfer agent; and
maintaining and distributing current copies of prospectuses and shareholder
reports to the beneficial owners of Fund shares and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking
to achieve its investment objective.
For the period from February 19, 1993 (date of initial public investment) to
November 30, 1993, no costs were incurred pursuant to this agreement.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records; processing purchase and
redemption transactions; processing automatic investments of client account
cash balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund may reasonably request.
For the period from February 19, 1993 (date of initial public investment) to
November 30, 1993, no fees were paid to brokers and administrators.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to invest its assets in securities as fully as possible
so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Boulevard Bank, as well as Federated
Services Company, acts as the shareholder's agent in depositing checks and
converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or they may
exchange a combination of securities and cash for Fund shares. Any securities
to be exchanged must meet the investment objective and policies of the Fund,
must have a readily ascertainable market value, must be liquid, and must not be
subject to restrictions on resale. An investor should forward the securities in
negotiable form with an authorized letter of transmittal to Boulevard Bank. The
Fund will notify the investor of its acceptance and valuation of the securities
within five business days of their receipt by Federated Services Company.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of Fund
shares on the day the securities are valued. One share of the Fund will be
issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL SECURITIES
The Trustees use an independent pricing service to value municipal securities.
The independent pricing service may consider: yield; stability; risk; quality;
coupon rate; maturity; type of issue; trading characteristics; special
circumstances of a security or trading market; and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities and does not rely exclusively on quoted
prices.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
REQUIREMENTS FOR EXCHANGING SHARES
Before the exchange, the shareholder must receive a prospectus of the fund of
the Trust for which the exchange is being made. This privilege is available to
shareholders resident in any state in which the fund shares being acquired may
be sold. Upon receipt of proper instructions and required supporting documents,
shares submitted for exchange are redeemed, and the proceeds are invested in
shares of the other fund of the Trust.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are redeemed at the next computed net asset value after
Boulevard Bank receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable rules of the SEC,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Trustees determine to be
fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from gains on the sale of securities
held less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's cumulative total return from February 19, 1993 to November 30, 1993,
was (1.05%). Cumulative total return reflects the Fund's total performance over
a specific period of time. This total return assumes and is reduced by the
payment of the maximum sales load. The Funds total return is representative of
only nine months of Fund activity since the Fund's date of initial public
investment.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the thirty-day period ended November 30, 1993, was 2.33%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the maximum offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund 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 that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The tax-equivalent yield for the Fund for the thirty-day period ended November
30, 1993, was 3.24%, assuming an effective tax rate of 28%.
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a stated effective federal rate and
assuming that the income of the Fund is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal securities in the Fund's
portfolio generally remains free from federal regular income tax,* and is often
free from state and local taxes as well. As the table below indicates, a "tax-
free" investment is an attractive choice for investors, particularly in times
of narrow spreads between tax-free and taxable yields.
TAX-FREE YIELD VS. TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX BRACKET:
<TABLE>
<CAPTION>
15.00% 28.00% 31.00% 36.00% 39.60%
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JOINT RE-
TURN: $1-36,900 $36,901-89,150 $89,151-140,000 $140,001-250,000 Over $250,000
SINGLE
RETURN: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 Over $250,000
- ----------------------------------------------------------------------------------
TAX-EX-
EMPT
YIELD TAXABLE YIELD EQUIVALENT
- ----------------------------------------------------------------------------------
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
8.50% 10.00% 11.81% 12.32% 13.28% 14.07%
</TABLE>
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING
THE TAXABLE YIELD EQUIVALENT.
- --------------------------------------------------------------------------------
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund. The maximum marginal tax rate for each
bracket was used in calculating the taxable yield equivalent.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute net asset value. The
financial publications and/or indices which the Fund uses in advertising may
include:
. LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any,
and takes into account any change in net asset value over a specified period
of time. From time to time, the Fund will quote its Lipper ranking in the
"municipal funds" categories in advertising and sales literature.
. MORNINGSTAR, INC., an independent rating service, is the publisher of the bi-
weekly Mutual Fund Values. Mutual Fund Values 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.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
represent the change, over a specified period of time, in the value of an
investment in the Fund based on monthly reinvestment of dividends and other
investments.
Advertisements may quote performance information that does not reflect the
effect of the sales load.
BOULEVARD STRATEGIC BALANCE FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
PROSPECTUS
The shares of the Boulevard Strategic Balance Fund (the "Fund") offered by this
prospectus represent interests in a professionally managed, diversified
portfolio of The Boulevard Funds (the "Trust"), an open-end, management
investment company (a mutual fund).
The investment objective of the Fund is to achieve long-term growth of capital
and income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
BOULEVARD BANK NATIONAL ASSOCIATION, ARE NOT ENDORSED OR GUARANTEED BY
BOULEVARD BANK NATIONAL ASSOCIATION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
calling Boulevard Bank National Association toll-free at 1-800-285-FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- -------------------------------------------------------------------
GENERAL INFORMATION 3
- -------------------------------------------------------------------
INVESTMENT INFORMATION 3
- -------------------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Domestic Corporate Securities 3
International Securities 4
U.S. Government Securities 4
Bank Instruments and Securities of Other Investment Companies 4
Asset-Backed Securities 4
Non-Mortgage Related Asset-Backed Securities 5
Mortgage-Backed Securities 5
Adjustable Rate Mortgage Securities ("ARMS") 5
Collateralized Mortgage Obligations ("CMOs") 6
Real Estate Mortgage Investment Conduits ("REMICs") 6
Repurchase Agreements 6
Temporary Investments 6
Credit Facilities 6
Variable Rate Demand Notes 7
Demand Features 7
When-Issued and Delayed Delivery Transactions 7
Put and Call Options 7
Stock Index Options 8
Futures and Options on Futures 8
Risks 9
Lending of Portfolio Securities 9
Foreign Investment Risks 9
Investment Limitations 10
THE BOULEVARD FUNDS INFORMATION 10
- -------------------------------------------------------------------
Management of the Trust 10
Board of Trustees 10
Investment Adviser 10
Advisory Fees 11
Adviser's Background 11
Distribution of Fund Shares 11
Distribution Plan 11
Administrative Arrangements 12
ADMINISTRATION OF THE FUND 13
- -------------------------------------------------------------------
Administrative Services 13
Custodian 13
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent, and Portfolio Accounting Services 13
Legal Counsel 13
Independent Accountants 13
Brokerage Transactions 13
Expenses of the Fund 14
NET ASSET VALUE 14
- -------------------------------------------------------------------
INVESTING IN THE FUND 14
- -------------------------------------------------------------------
Account Establishment 14
By Telephone 14
By Mail 15
Share Purchases 15
By Telephone 15
By Mail 15
Payment by Check 15
Payment by Wire 15
Minimum Investment Required 15
What Shares Cost 15
Purchases at Net Asset Value 15
Sales Charge Reallowance 16
Reducing the Sales Charge 16
Quantity Discounts and Accumulated Purchases 16
Letter of Intent 16
Reinvestment Privilege 17
Concurrent Purchases 17
Exchanging Securities for Fund Shares 17
Systematic Investment Program 17
Retirement Plans 17
Certificates and Confirmations 17
Dividends and Capital Gains 18
EXCHANGE PRIVILEGE 18
- -------------------------------------------------------------------
By Telephone 18
REDEEMING SHARES 19
- -------------------------------------------------------------------
Through Boulevard Bank 19
By Telephone 19
By Mail 19
Receiving Payment 20
Signatures 20
Redemption Before Purchase Instruments Clear 20
Systematic Withdrawal Program 20
Accounts With Low Balances 21
SHAREHOLDER INFORMATION 21
- -------------------------------------------------------------------
Voting Rights 21
Massachusetts Partnership Law 21
EFFECT OF BANKING LAWS 22
- -------------------------------------------------------------------
TAX INFORMATION 22
- -------------------------------------------------------------------
Federal Income Tax 22
PERFORMANCE INFORMATION 23
- -------------------------------------------------------------------
FINANCIAL STATEMENTS 24
- -------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 36
- -------------------------------------------------------------------
ADDRESSES Inside Back Cover
- -------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).................................................................. 4.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)..................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................ 0.25%
12b-1 Fees (2)........................................................... 0.00%
Total Other Expenses..................................................... 0.69%
Total Fund Operating Expenses (3).................................... 0.94%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.75% absent the anticipated voluntary waiver by the adviser.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can
pay up to 0.25% as a 12b-1 fee to the distributor.
(3) The Annual Fund Operating Expenses were 0.75% for the period ending
November 30, 1993. The Annual Fund Operating Expenses in the table above
are based on estimated expenses expected during the fiscal year ending
November 30, 1994. Total Fund Operating Expenses are estimated to be 1.44%
absent the anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BOULEVARD FUNDS INFORMATION" AND "INVESTING IN THE FUNDS."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return; (2) redemption at the end of each time
period; and (3) payment of the maximum sales
load of 4.00%. The Fund charges no redemption
fees. ......................................... $49 $64 $90 $151
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1994.
BOULEVARD STRATEGIC BALANCE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
- ----------------------------------------------------- ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.57
- -----------------------------------------------------
Net realized and unrealized loss on investments (0.14)
- ----------------------------------------------------- -------
Total from investment operations 0.43
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment income (0.56)
- ----------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.87
- ----------------------------------------------------- ------
TOTAL RETURN** 4.44%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.75%(a)
- -----------------------------------------------------
Net investment income 6.09%(a)
- -----------------------------------------------------
Expense waiver/reimbursement(b) 0.61%(a)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets end of period (000 omitted) $28,786
- -----------------------------------------------------
Portfolio turnover rate 68%
- -----------------------------------------------------
</TABLE>
* Reflects operations for the period from December 18, 1992 (date of initial
public investment) to November 30, 1993.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1 993, which can be obtained free of charge.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 3, 1992. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes.
The Fund is designed primarily for retail and trust customers of Boulevard
Bank National Association and its affiliates as a convenient means of
participating in a professionally managed, diversified portfolio investing
primarily in domestic and international securities, as well as securities
issued and/or guaranteed by the U.S. government, its agencies and
instrumentalities, and asset-backed and mortgage-backed securities. In most
cases, a minimum initial investment of $1,000 is required. See "Minimum
Investment Required."
Fund shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve long-term growth of capital
and income. This investment objective cannot be changed without the approval
of the Fund's shareholders. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in common and preferred
stocks, which are utilized primarily for growth, and in debt instruments that
provide income flows. It is felt this combination, which covers both the
domestic and international markets, will achieve a "balance" of investment
risk and relative safety for the Fund by avoiding the volatility associated
with an investment program that is limited to one type of issuer, instrument,
or market. Under normal circumstances, at least 25% of the Fund's total assets
will be invested in domestic corporate securities and up to 25% of its total
assets may be invested in international securities. The remaining portion of
the Fund's assets will be invested primarily in securities issued and/or
guaranteed as to the payment of principal and interest by the U.S. government,
its agencies or instrumentalities, and asset-backed and mortgage-backed
securities.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. Consistent with the above, the Fund will invest
primarily in the securities described below:
DOMESTIC CORPORATE SECURITIES. The domestic corporate securities of the
Fund will consist of U.S. common and preferred stocks of companies with at
least $25 million in equity (as shown in their most recent published
financial statements) which are listed on the New York or American
Stock Exchange or traded in the over-the-counter market. The companies
will be selected by the Fund's investment adviser based on traditional
research techniques and technical factors, including assessment of
earnings and dividend growth prospects and of the risk and volatility of
the company's industry. Other factors, such as product position or market
share, will also be considered by the Fund's investment adviser.
The Fund may also invest in fixed or variable rate obligations of these
companies, including variable rate demand notes and convertible bonds, all
of which are rated investment grade, i.e., Baa or better by Moody's
Investors Service, Inc. ("Moody's"), or BBB or better by Standard & Poor's
Corporation ("S&P") or Fitch Investors Service, Inc. ("Fitch") (or, if
unrated, are deemed to be of comparable quality by the Fund's investment
adviser), or warrants of these companies. It should be noted that
securities receiving the lowest investment grade rating are considered to
have some speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. If a security's
rating is reduced below the required minimum after the Fund has purchased
it, the Fund is not required to sell the security, but may consider doing
so. Under normal market conditions, at least 25% of the Fund's total
assets will be invested in fixed income senior securities. A description
of the rating categories is contained in the Appendix to the Statement of
Additional Information.
INTERNATIONAL SECURITIES. Up to 25% of the Fund's total assets may be
invested in equity securities and corporate and government debt securities
that are denominated in currencies other than U.S. dollars. The
international equity securities in which the Fund may also invest include
international stocks traded domestically through various stock exchanges,
American Depositary Receipts, or International Depositary Receipts ("ADRs"
and "IDRs," respectively). Ratings for international debt securities may
not be available from Moody's, S&P, or Fitch; however, the Fund will
invest in international debt securities, including Yankee bonds, which are
deemed by the investment adviser to be of a quality comparable to domestic
bonds rated at least Baa by Moody's, BBB by S&P, or BBB by Fitch. If a
security's rating is reduced below the required minimum after the Fund has
purchased it, the Fund is not required to sell the security, but may
consider doing so. The Fund may also invest in shares of open-end and
closed-end management investment companies which invest primarily in
international securities as described above.
U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued
and/or guaranteed as to the payment of principal and interest by the U.S.
government or its agencies or instrumentalities.
BANK INSTRUMENTS AND SECURITIES OF OTHER INVESTMENT COMPANIES. Primarily
to manage short-term cash, the Fund may also invest in certificates of
deposit, demand and time deposits, bankers' acceptances, deposit notes,
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments") and securities of other investment
companies.
ASSET-BACKED SECURITIES. Asset-backed securities are created by the
grouping of certain governmental, government-related, and private loans,
receivables, and other lender assets into pools. Interests in these pools
are sold as individual securities. Payments from the asset pools may be
divided into several different tranches of debt securities, with some
tranches entitled to receive regular installments of principal and
interest, other tranches entitled to receive regular installments of
interest, with principal payable at maturity or upon specified call dates,
and other tranches only
entitled to receive payments of principal and accrued interest at maturity
or upon specified call dates. Different tranches of securities will bear
different interest rates, which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities are generally subject to
higher prepayment risks than most other types of debt instruments. For
example, prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates because many borrowers
refinance their mortgages to take advantage of the more favorable rates.
Depending upon market conditions, the yield that the Fund receives from
the reinvestment of such prepayments, or any scheduled principal payments,
may be lower than the yield on the original mortgage security. As a
consequence, mortgage securities may be a less effective means of "locking
in" interest rates than other types of debt securities having the same
stated maturity and may also have less potential for capital appreciation.
For certain types of asset pools, such as collateralized mortgage
obligations, prepayments may be allocated to one tranche of securities
ahead of other tranches, in order to reduce the risk of prepayment for the
other tranches.
Prepayments may result in a capital loss to the Fund to the extent that
the prepaid mortgage securities were purchased at a market premium over
their stated principal amount. Conversely, the prepayment of mortgage
securities purchased at a market discount from their stated principal
amount will accelerate the recognition of interest income by the Fund,
which would be taxed as ordinary income when distributed to the
shareholders.
The credit characteristics of asset-backed securities also differ in a
number of respects from those of traditional debt securities. The credit
quality of most asset-backed securities depends primarily upon the credit
quality of the assets underlying such securities, how well the entity
issuing the securities is insulated from the credit risk of the originator
or any other affiliated entities, and the amount and quality of any credit
enhancement to such securities.
NON-MORTGAGE RELATED ASSET-BACKED SECURITIES. The Fund may invest in non-
mortgage related asset-backed securities, including interests in pools of
receivables, such as credit card and accounts receivable and motor vehicle
and other installment purchase obligations and leases. These securities
may be in the form of pass-through instruments or asset-backed
obligations. The securities, all of which are issued by non-governmental
entities and carry no direct or indirect government guarantee, are
structurally similar to collateralized mortgage obligations and mortgage
pass-through securities, which are described below.
MORTGAGE-BACKED SECURITIES. The Fund may also invest in various mortgage-
backed securities. These types of investments may include adjustable rate
mortgage securities, collateralized mortgage obligations, real estate
mortgage investment conduits, or other securities collateralized by or
representing an interest in real estate mortgages. Many mortgage-backed
securities are issued or guaranteed by government agencies.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through
mortgage securities representing interests in adjustable rather than fixed
interest rate mortgages. The ARMS in which the Fund invests are issued by
the Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage
Corporation ("FHLMC") and are actively traded. The underlying mortgages
which collateralize ARMS issued by GNMA are fully guaranteed by the
Federal Housing Administration or the
Veterans Administration while those collateralizing ARMS issued by FHLMC
or FNMA are typically conventional residential mortgages conforming to
strict underwriting size and maturity constraints.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies
related to the construction industry. CMOs purchased by the Fund may be:
. collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of prinicipal and interest by an agency or
instrumentality of the U.S. government;
. collateralized by pools of mortgages in which payment of principal
and interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or
. securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S.
government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings
of multiple-class real estate mortgage-backed securities which qualify and
elect treatment as such under provisions of the Internal Revenue Code of
1986, as amended. Issuers of REMICs may take several forms, such as
trusts, partnerships, corporations, associations, or segregated pools of
mortgages. Once REMIC status is elected and obtained, the entity is not
subject to federal income taxation. Instead, income is passed through the
entity and is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of "regular
interests," some of which may offer adjustable rates of interest, and a
single class of "residual interests." To qualify as a REMIC, substantially
all the assets of the entity must be in assets directly or indirectly
secured principally by real property.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or other securities
in which the Fund may invest to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the original seller does not repurchase the securities from the Fund,
the Fund could receive less than the repurchase price on any sale of such
securities.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest
temporarily in cash and cash items during times of unusual market conditions
and to maintain liquidity. Cash items may include short-term obligations such
as:
. commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch;
. U.S. government securities, as described above; and
. repurchase agreements.
CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender payable upon demand by either party.
The notice period for demand typically ranges from one to seven days, and the
party may demand full or partial payment. Revolving credit facilities
are borrowing arrangements in which the lender agrees to make loans up to a
maximum amount upon demand by the borrower during a specified term. As the
borrower repays the loan, an amount equal to the repayment may be borrowed
again during the term of the facility. The Fund generally acquires a
participation interest in a revolving credit facility from a bank or other
financial institution. The terms of the participation requires the Fund to
make a pro rata share of all loans extended to the borrower and entitles the
Fund to a pro rata share of all payments made by the borrower. Demand notes
and revolving facilities usually provide for floating or variable rates of
interest.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
daily to annually), and is normally based on a published interest rate or
interest rate index. Many variable rate demand notes allow the Fund to demand
the repurchase of the security on not more than seven days prior notice. Other
notes only permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features."
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
following a demand by the Fund. The demand feature may be issued by the issuer
of the underlying securities, a dealer in the securities or by another third
party, and may not be transferred separately from the underlying security. The
Fund uses these arrangements to provide the Fund with liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security are treated as a form of credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. In when-issued and delayed delivery transactions,
the Fund relies on the seller to complete the transaction. The seller's
failure to complete the transaction may cause the Fund to miss a price or
yield considered to be advantageous.
PUT AND CALL OPTIONS. The Fund may purchase put and call options. These
options will be used as a hedge to attempt to protect securities which the
Fund holds against decreases in value. The Fund may also write covered call
options on all or any portion of its portfolio to generate income for the
Fund. The Fund will write call options on securities either held in its
portfolio or which it has the right to obtain without payment of further
consideration or for which it has segregated cash or U.S. government
securities in the amount of any additional consideration necessary to obtain
such securities.
The Fund may purchase and write over-the-counter options in negotiated
transactions with the buyers or writers of the options when such options are
not traded on an exchange. The Fund purchases and writes over-the-counter
options only with investment dealers and other financial institutions (such as
commercial banks or savings and loan associations) deemed creditworthy by the
Fund's adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
STOCK INDEX OPTIONS. The Fund may purchase and write exchange-listed put and
call options on stock indexes. A stock index measures the movement of a
certain group of stocks by assigning relative values to the common stocks
included in the index. (Examples of well-known stock indexes are the S&P 500
Index of Composite Stocks and the NYSE Composite Index.) Options on stock
indexes are similar to options on securities. However, because options on
stock indexes do not involve the delivery of an underlying security, the
option represents the holder's right to obtain from the writer in cash a fixed
multiple of the amount by which the exercise price exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the
underlying index on the exercise date.
FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell currency and
other futures contracts to hedge all or a portion of its portfolio against
changes in interest or exchange rates or securities prices. The Fund will not
engage in futures transactions for speculative purposes. Futures contracts
generally call for the delivery of particular securities at a certain time in
the future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
Futures contracts on a variety of stock and bond indices are currently
available. An index futures contract is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. The Fund may purchase and sell futures contracts on any index
approved for trading by the Commodity Futures Trading Commission to hedge
against general changes in market values of securities which the Fund owns or
expects to purchase.
The Fund may also write call options and purchase put options on currency and
other futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of selling a futures
contract at a fixed price at any time during a specified period if the option
is exercised. Conversely, as purchaser of a put option on a futures contract,
the Fund is entitled (but not obligated) to sell a futures contract at the
fixed price during the life of the option.
The Fund may buy or sell foreign currencies and forward foreign currency
exchange contracts for hedging purposes in connection with its foreign
investments.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the Fund's total assets. When the Fund purchases futures contracts, an
amount of cash and cash equivalents, equal to the underlying commodity value
of the futures contracts (less any related margin deposits), will be deposited
in a segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of
such futures contract is unleveraged.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract
and any related options to react differently than the portfolio securities
to market changes. In addition, the Fund's investment adviser could be
incorrect in its expectations about the direction or extent of market
factors such as stock price movements. In these events, the Fund may lose
money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into options transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.
Special risks are presented by internationally-traded options. Because of
time differences between the United States and various foreign countries
and because different holidays are observed in different countries,
foreign options markets may be open for trading during hours or on days
when U.S. markets are closed. As a result, option premium may not reflect
the current prices of the underlying interest in the United States.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees, and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the portfolio securities
loaned at all times.
FOREIGN INVESTMENT RISKS
Except as otherwise limited in this prospectus, the Fund may invest up to 25%
of its total assets in securities denominated in foreign currencies. The value
of the Fund's assets may be affected favorably or unfavorably by currency
exchange rates and exchange control regulation. Exchange rates with respect to
certain currencies may be particularly volatile. There may be less information
publicly available about a foreign company than about a U.S. company, and
foreign companies are not generally subject to accounting, auditing, and
financial reporting standards and practices comparable to those in the United
States. The securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies. Foreign brokerage
commissions and other fees are also generally higher than in the United
States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delays in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, with respect to certain foreign countries, there is a possibility
of nationalization or expropriation of assets, confiscatory taxation,
political or financial instability, and diplomatic developments which could
affect the value of investments in those countries and make it difficult to
effect repatriation of capital invested abroad. In certain countries, legal
remedies available to investors may be more limited than those available with
respect to investments in the United States or other countries, and judgments
may be difficult to obtain. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located in those
countries. Special tax considerations apply to foreign securities. Foreign
securities, like other assets of the Fund, will be held by the Trust's
custodian or a subcustodian.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 10% of
its total assets to secure such borrowings;
.lend any of its assets except portfolio securities up to one-third of its
total assets; or
. with respect to 75% of its total assets, invest more than 5% in
securities of any one issuer other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
. invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933
and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees;
. invest more than 15% of its net assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days
after notice, over-the-counter options, and certain restricted
securities not determined by the Trustees to be liquid; or
. invest more than 10% of its total assets in securities of other
investment companies.
THE BOULEVARD FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Trustees'
responsibilities between meetings of the Trustees.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Boulevard
Bank National Association, the Fund's investment adviser (the "Adviser" or
"Boulevard Bank"), subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the selection, purchase, and sale of portfolio instruments,
for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory
fee equal to 0.75% of the Fund's average daily net assets. The investment
advisory fee is accrued and paid daily. The fee paid by the Fund, while
higher than the advisory fee paid by other mutual funds in general, is
comparable to fees paid by other mutual funds with similar objectives and
policies. The Adviser has undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund. The Adviser can terminate such waiver or
reimbursement policy at any time at its sole discretion.
ADVISER'S BACKGROUND. Boulevard Bank, a national banking association,
formerly known as National Boulevard Bank of Chicago and Boulevard Bridge
Bank, has conducted operations since 1921. Boulevard Bank is a wholly-
owned subsidiary of Boulevard Bancorp, Inc., a multi-bank holding company
incorporated under the laws of the State of Delaware. While Boulevard
Bancorp, Inc., derives certain revenues and incurs certain expenses from
other operations, its income is generated primarily from the operations of
its bank subsidiaries, which offer a broad range of financial services to
customers located in the greater Chicago metropolitan area. These services
include all areas of commercial banking and other services tailored for
individual and corporate customers. In addition, trust services and a wide
variety of services for employee benefit plans are provided.
Boulevard Bank has been managing investments for its trust clients since
its trust powers were established in 1957. As of December 31, 1993, the
Trust Division of Boulevard Bank had approximately $2.4 billion under
administration, of which it had investment discretion over approximately
$800 million. Boulevard Bank has been advising The Boulevard Funds since
December, 1992. The Adviser has no prior experience in international
investments.
Scott Limper, a Vice President of Boulevard Bank, has been the portfolio
manager of the Fund since January 1, 1994. He has eleven years of experience,
all with Boulevard Bancorp. He received his Bachelor of Arts degree from
Western Illinois University. He is a member of the Association for Investment
Management and Research.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in
accordance with Rule 12b-1 promulgated under the Investment Company Act of
1940, the Fund may pay to the distributor an amount computed at an annual rate
of 0.25% of the Fund's average daily net assets to finance any activity which
is principally intended to result in the sale of shares subject to the Plan.
The Fund will not accrue or pay any distribution expenses pursuant to the Plan
until a separate class of shares has been created for certain institutional
investors.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed an expense limitation that the
distributor may, by notice to the Trust, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as may
reasonably be requested.
The distributor will pay such financial institutions a fee based upon shares
subject to the Plan and owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined,
from time to time, by the distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an underwriter
or distributor of most securities. In the event the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Trustees will consider appropriate changes in the
services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state laws.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of the Fund's shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net assets in
shareholder accounts of such clients or customers during the period for which
the brokers, dealers, and administrators provide services. Any fees paid for
these services by the distributor will be reimbursed by the Adviser and not
the Fund. Payments made here would be in addition to any payments that may be
made under the Plan.
ADMINISTRATION OF THE FUND
- -------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services provides these services at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
------------------ -----------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 with respect to the Fund. Federated Administrative Services may
choose voluntarily to reimburse a portion of its fee at any time.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, SHAREHOLDER SERVICING AGENT, AND
PORTFOLIO ACCOUNTING SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, is transfer agent for the
shares of the Fund, dividend disbursing agent for the Fund, and shareholder
servicing agent for the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio instruments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Fund are Price
Waterhouse, Chicago, Illinois.
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. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser may
effect individual securities transactions at commission rates in excess of the
minimum commission rates available, if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the Fund. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by
the Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund with federal and state securities authorities; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such non-recurring and
extraordinary items as may arise. However, the Adviser may voluntarily assume
some expenses and has, in addition, undertaken to reimburse the Fund, up to
the amount of the advisory fee, the amount by which operating expenses exceed
limitations imposed by certain states.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the value of all securities and other assets of the Fund, less
liabilities of the Fund, by the number of Fund shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
ACCOUNT ESTABLISHMENT
BY TELEPHONE. Open an account by calling Boulevard Bank toll-free at 1-800-
285-FUND. Information needed to establish the account will be taken over the
telephone. A signed new account form will be necessary to complete the account
establishment.
BY MAIL. Mail a new account form to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181. New account forms are available directly
from the Fund.
SHARE PURCHASES
Fund shares are sold on days which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Fund shares may be ordered by
telephone through procedures established with Boulevard Bank by calling 1-800-
285-FUND. An investor may also place an order in person through an account
representative at Boulevard Bank or any of its affiliates. Texas residents
must purchase shares of the Fund through Federated Securities Corp. at 1-800-
618-8573. In connection with the sale of shares, the distributor may, from
time to time, offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call Boulevard Bank
toll-free at 1-800-285-FUND. Your purchase order will be taken directly over
the telephone. The order must be placed by 3:00 p.m. (Central time) for shares
to be purchased at that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to Boulevard
Strategic Balance Fund.
PAYMENT BY CHECK. Mail to Boulevard Strategic Balance Fund, P.O. Box 8609,
Boston, Massachusetts 02105. Orders by check are considered received after
payment by check is converted into federal funds. This is generally the next
business day after the check is received.
PAYMENT BY WIRE. Instruct your financial institution to wire your funds as
follows: State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Boulevard Strategic
Balance Fund; Title or Name of Account; and Wire Order Number and/or Account
Number.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
may be in any amounts of $50 or more. The Fund may waive the initial minimum
investment for employees of Boulevard Bancorp, Inc., and its affiliates from
time to time. The Fund may also waive the initial and subsequent minimum
investment for any payroll deduction plan established with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------- --------------------- -------------------
<S> <C> <C>
Less than $100,000 4.00% 4.17%
$100,000 but less than $500,000 3.00% 3.09%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or more 1.00% 1.01%
</TABLE>
The net asset value is determined at the close of trading on the New York
Stock Exchange (currently 3:00 p.m. Central time), Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; or (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving
Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by: the Trust Divisions of Boulevard Bank and
its affiliates for funds which are held in a fiduciary, agency, custodial, or
similar capacity; Trustees and employees of the Fund, Boulevard Bank, or
Federated Securities Corp., or each of their affiliates, and their spouses and
children under 21; any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund; or anyone who
participates in a payroll deduction program established with the Fund. Once a
shareholder has purchased shares at net asset value, no sales charge will be
imposed on subsequent purchases, if any.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, Boulevard Bank or
any authorized broker/dealer will normally receive up to 85% of the applicable
sales charge. Any portion of the sales charge which is not paid to Boulevard
Bank or registered broker/dealers will be retained by the distributor.
However, the distributor, in its sole discretion, may uniformly offer to pay
to all dealers selling shares of the Fund additional amounts, all or a portion
of which may be paid from the sales charge it normally retains or from any
other source available to it. Such additional payments, if accepted by the
dealer, may be in the form of cash or promotional incentives and will be
predicated upon the amount of shares of the Fund or other funds of the Trust
sold by the dealer.
The sales charge for shares sold other than through Boulevard Bank or
registered broker/dealers will be retained by the distributor. The distributor
may pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the banks' customers in
connection with the initiation of customer accounts and purchases of Fund
shares.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age
21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchase still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.00%, not 4.00%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
purchase is made that Fund shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Trust over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter includes
a provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
up to 4.0% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period, unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate
number of escrowed shares may be redeemed at the then-current redemption price
(which could be less than the purchase price for such shares) in order to
realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90 days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest all or a part of
the redemption proceeds at the next-determined net asset value without any
sales charge. Federated Securities Corp. must be notified by the shareholder in
writing or by Boulevard Bank of the reinvestment in order to eliminate a sales
charge. If the shareholder redeems his shares in the Fund, there may be tax
consequences. Shareholders contemplating such transactions should consult their
own tax adviser.
CONCURRENT PURCHASES. For puposes of qualifying for a sales charge reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced. To receive this sales charge reduction, Federated
Securities Corp. must be notified by the shareholder in writing or by Boulevard
Bank at the time the concurrent purchases are made. The Fund will reduce the
sales charge after it confirms the purchases.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund shares. The Fund reserves the right to determine
the acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values its
assets. Investors wishing to exchange securities should first contact Boulevard
Bank.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares at the net asset value next determined after an
order is received by Federated Securities Corp., plus the applicable sales
charge. A shareholder may apply for participation in this program through
Boulevard Bank.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for Individual Retirement Accounts. For further details, including prototype
retirement plans, contact Boulevard Bank at 1-800-285-FUND and consult a tax
adviser.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued
unless requested by contacting Boulevard Bank in writing.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid monthly. Capital gains realized by the Fund,
if any, will be distributed at least once every 12 months. Dividends and
capital gains will be automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date's net asset value without a
sales charge, unless cash payments are requested by writing to the Fund or
Boulevard Bank. Dividends and capital gains can also be reinvested in shares
of any other fund comprising The Boulevard Funds.
EXCHANGE PRIVILEGE
- -------------------------------------------------------------------------------
Shareholders may exchange shares of the Fund for shares of the other funds in
the Trust. In addition, shares of the Fund may also be exchanged for certain
other funds distributed by Federated Securities Corp. that are not advised by
Boulevard Bank ("Federated Funds"). For further information on the availabilty
of Federated Funds for exchanges, please call Boulevard Bank at 1-800-285-
FUND. Shares of funds with a sales charge may be exchanged at net asset value
for shares of other funds with an equal sales charge or no sales charge.
Shares of funds with a sales charge may be exchanged for shares of funds with
a higher sales charge at net asset value, plus the additional sales charge.
Shares of funds with no sales charge, whether acquired by direct purchase,
reinvestment of dividends on such shares, or otherwise, may be exchanged for
shares of funds with a sales charge at net asset value, plus the applicable
sales charge.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends or capital gains on such shares retain the
character of the exchanged shares for purposes of exercising further exchange
privileges; thus, an exchange of such shares for shares of a fund with a sales
charge would be at net asset value.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The exchange privilege may be terminated at any time. Shareholders will be
notified of the termination of the exchange privilege. A shareholder may
obtain further information on the exchange privilege by calling Boulevard Bank
at 1-800-285-FUND.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to Boulevard Bank at 1-800-285-FUND. Shares
may be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must
be forwarded to the transfer agent by Boulevard Bank and deposited to the
shareholder's mutual fund account before being exchanged.
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. Authorization forms and information regarding this service
are available from Boulevard Bank. Telephone exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 2:00 p.m. (Central
time) for shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders may have difficulty
in making exchanges by telephone through Boulevard Bank during times of
drastic economic or market changes. If a shareholder cannot contact Boulevard
Bank by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Boulevard
Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange or the Federal Reserve
Wire System is closed. Requests for redemption can be made by telephone or by
mail.
THROUGH BOULEVARD BANK
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Boulevard
Bank toll-free at 1-800-285-FUND. For orders received before 3:00 p.m.
(Central time), proceeds will normally be wired the next day to the
shareholder's account at Boulevard Bank or a check will be sent to the address
of record. In no event will proceeds be sent more than seven days after a
proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Boulevard Bank. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as a written request to
Boulevard Bank.
If at any time the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders will be notified.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request
to Boulevard Bank at 410 North Michigan Avenue, Chicago, Illinois 60611-4181.
The written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested, and should be signed
exactly as the shares are registered. If share certificates have been issued,
they must be
properly endorsed and should be sent by registered or certified mail with the
written request. Shareholders should call Boulevard Bank at 1-800-285-FUND for
assistance in redeeming by mail.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund, which are administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and Federated Services Company have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Fund and Federated Services Company
reserve the right to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares of the Fund are purchased by check or through the Automated
Clearing House ("ACH"), the proceeds from the redemption of those shares are
not available, and the shares may not be exchanged, until the transfer agent
is reasonably certain that the purchase check has cleared, which could take up
to 10 calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the Fund's net asset value,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Fund. The
minimum withdrawal amount is $50 per month. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may obtain more information about this program by calling
Boulevard Bank at 1-800-285-FUND. Due to the fact that shares are sold with a
sales charge, it is not advisable for shareholders to be purchasing shares
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Fund for vote. All shares of
each fund in the Trust have equal voting rights, except that in matters
affecting only a particular fund, only shareholders of that fund are entitled
to vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or Fund's operation and for the election of
Trustees under certain circumstances. As of January 6, 1994, First National
Bank of Des Plaines (a subsidiary of Boulevard Bancorp, Inc.), acting in
various capacities for numerous accounts, was the owner of record of 2,231,957
shares (77.32%) of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.
Trustees may be removed by a two-thirds vote of a number of the Trustees or by
a two-thirds vote of a number of the shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities in
general. However, such banking laws and regulations do not prohibit such a
holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customer. The Fund's Adviser, Boulevard Bank, is subject to such banking laws
and regulations.
Boulevard Bank believes, after consultation with counsel, that its performance
of the investment advisory services for the Fund, as contemplated by the
advisory agreement with the Trust, is not prohibited by the Glass-Steagall Act
as it has been interpreted by the courts and federal banking agencies or by
other banking laws and regulations applicable to national banks. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of present or future
statutes and regulations, could prevent Boulevard Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
In such event, changes in the operation of the Fund may occur, including the
possible alteration or termination of any automatic or other Fund share
investment and redemption services that are being provided by Boulevard Bank,
and the Trustees would consider alternative investment advisers and other
means of continuing available investment services. It is not expected that
existing Fund shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Boulevard Bank is found) as a
result of any of these occurrences.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other funds, if any, will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax adviser regarding the status
of their accounts under federal, state, and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if reduced or excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
BOULEVARD STRATEGIC BALANCE FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- --------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--55.7%
--------------------------------------------------------------
AEROSPACE--0.9%
---------------------------------------------------
$ 250,000 Lockheed Corp., 4.57%, 4/3/95 $ 248,933
--------------------------------------------------- -----------
BANKING--5.2%
---------------------------------------------------
400,000 Credit Suisse, 9.50%, 7/1/94 411,920
---------------------------------------------------
300,000 Great Western Bank of Beverly Hills, 9.80%, 2/15/94 303,147
---------------------------------------------------
750,000 Wells Fargo & Co., 7.625%, 10/1/94 770,633
--------------------------------------------------- -----------
Total 1,485,700
--------------------------------------------------- -----------
BUSINESS CREDIT--7.4%
---------------------------------------------------
550,000 CIT Group Holdings, Inc., 8.625%, 1/1/94 552,055
---------------------------------------------------
1,000,000 IBM Credit Corp., 5.55%, 1/27/95 1,010,880
---------------------------------------------------
300,000 International Lease & Finance Corp., 6.50%, 4/1/94 302,040
---------------------------------------------------
250,000 Xerox Credit Corp., 9.25%, 2/15/2000 262,727
--------------------------------------------------- -----------
Total 2,127,702
--------------------------------------------------- -----------
CHEMICAL--1.8%
---------------------------------------------------
500,000 ICI Wilmington Inc., 7.83%, 5/9/95 520,720
--------------------------------------------------- -----------
DIVERSIFIED--1.8%
---------------------------------------------------
500,000 Textron, Inc., 10.20%, 9/1/94 517,665
--------------------------------------------------- -----------
FOOD & BEVERAGE--4.7%
---------------------------------------------------
500,000 ConAgra, Inc., 9.19%, 6/30/95 532,150
---------------------------------------------------
450,000 Quaker Oats Co., 8.55%, 10/31/94 467,086
---------------------------------------------------
100,000 Quaker Oats Co., 7.60%, 1/15/94 100,518
---------------------------------------------------
250,000 Sara Lee Corp., 9.70%, 9/1/2000 266,380
--------------------------------------------------- -----------
Total 1,366,134
--------------------------------------------------- -----------
INSURANCE--2.7%
---------------------------------------------------
750,000 Chubb Corp., 8.625%, 1/15/95 781,455
--------------------------------------------------- -----------
</TABLE>
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------
OIL--0.9%
-----------------------------------------------
$ 250,000 Union Oil Company of California, 9.75%, 3/1/94 $ 253,002
----------------------------------------------- -----------
PERSONAL CREDIT--11.2%
-----------------------------------------------
300,000 Beneficial Corp., 10.20%, 3/15/94 305,724
-----------------------------------------------
500,000 Commercial Credit Group, Inc., 8.45%, 2/1/94 503,165
-----------------------------------------------
500,000 Commercial Credit Group, Inc., 6.95%, 10/1/94 510,225
-----------------------------------------------
700,000 General Motors Acceptance Corp., 8.50%, 7/18/94 716,345
-----------------------------------------------
500,000 Household Finance Corp., 9.25%, 4/1/95 519,200
-----------------------------------------------
250,000 ITT Financial Corp., 8.80%, 3/1/94 252,998
-----------------------------------------------
200,000 Nordstrom Credit, Inc., 8.65%, 12/7/93 200,154
-----------------------------------------------
225,000 Primerica Corp., 8.60%, 3/15/94 227,560
----------------------------------------------- -----------
Total 3,235,371
----------------------------------------------- -----------
PHOTOGRAPH EQUIPMENT--3.2%
-----------------------------------------------
400,000 Eastman Kodak Co., 10.05%, 3/15/94 406,164
-----------------------------------------------
500,000 Eastman Kodak Co., 9.625%, 11/15/99 524,135
----------------------------------------------- -----------
Total 930,299
----------------------------------------------- -----------
RAILWAYS--0.9%
-----------------------------------------------
250,000 GATX Leasing Corp., 9.90%, 6/15/94 257,145
----------------------------------------------- -----------
RETAIL--3.9%
-----------------------------------------------
500,000 Sears Roebuck & Co., 9.05%, 6/13/94 510,525
-----------------------------------------------
150,000 Sears Roebuck & Co., 8.19%, 7/20/94 153,043
-----------------------------------------------
250,000 Super Value Stores, Inc., 5.875%, 11/15/95 255,695
-----------------------------------------------
200,000 Super Value Stores, Inc., 9.375%, 8/15/94 207,196
----------------------------------------------- -----------
Total 1,126,459
----------------------------------------------- -----------
SECURITY BROKERS--2.0%
-----------------------------------------------
350,000 Merrill Lynch & Co., Inc., 8.77%, 2/15/94 353,147
-----------------------------------------------
200,000 Paine Webber Group, Inc., 9.625%, 5/1/95 212,618
----------------------------------------------- -----------
Total 565,765
----------------------------------------------- -----------
</TABLE>
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
SHARES VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------------
TOBACCO--3.7%
-----------------------------------------------------
$ 500,000 American Brands, Inc., 7.84%, 5/24/94 $ 507,475
-----------------------------------------------------
300,000 Phillip Morris Cos., Inc., 9.10%, 11/14/95 321,267
-----------------------------------------------------
250,000 Phillip Morris Cos., Inc., 8.60%, 12/8/93 250,213
----------------------------------------------------- -----------
Total 1,078,955
----------------------------------------------------- -----------
UTILITIES--5.4%
-----------------------------------------------------
500,000 Houston Lighting & Power Co., 8.625%, 1/15/96 529,370
-----------------------------------------------------
500,000 New York State Electric & Gas Corp., 8.375%, 8/15/94 513,935
-----------------------------------------------------
500,000 Washington Gas & Lighting Co., 7.01%, 9/26/94 509,625
----------------------------------------------------- -----------
Total 1,552,930
----------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $16,433,213) 16,048,235
----------------------------------------------------- -----------
FLOATING RATE NOTES--5.2%
----------------------------------------------------------------
AEROSPACE--1.7%
-----------------------------------------------------
500,000 Lockheed Corp., 3.70%, 5/11/95 499,600
----------------------------------------------------- -----------
SECURITY BROKERS--3.5%
-----------------------------------------------------
1,000,000 Shearson Lehman Brothers, Inc., 4.125%, 5/17/96 998,440
----------------------------------------------------- -----------
TOTAL FLOATING RATE NOTES (IDENTIFIED COST, 1,498,040
$1,500,000) -----------
-----------------------------------------------------
COMMON STOCKS--17.6%
----------------------------------------------------------------
AEROSPACE--2.2%
-----------------------------------------------------
16,000 Boeing Co. 618,000
----------------------------------------------------- -----------
ALUMINUM--1.9%
-----------------------------------------------------
8,000 Aluminum Co. of America 554,000
----------------------------------------------------- -----------
BANKING--2.2%
-----------------------------------------------------
22,000 Boatmen's Bancshares, Inc. 632,500
----------------------------------------------------- -----------
</TABLE>
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
--------- -------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
-------------------------------------------------------------
CHEMICAL--2.0%
--------------------------------------------------
10,000 Dow Chemical Co. $ 581,250
-------------------------------------------------- -----------
FOOD & BEVERAGE--1.7%
--------------------------------------------------
9,000 CPC International, Inc. 421,875
--------------------------------------------------
5,000 Sanfilippo, John B & Sons, Inc. 76,250
-------------------------------------------------- -----------
Total 498,125
-------------------------------------------------- -----------
MACHINERY--1.8%
--------------------------------------------------
6,000 Caterpillar, Inc. 511,500
-------------------------------------------------- -----------
OIL--2.2%
--------------------------------------------------
10,000 Texaco, Inc. 642,500
-------------------------------------------------- -----------
PHARMACEUTICALS--1.6%
--------------------------------------------------
8,000 Merck & Co., Inc. 274,000
--------------------------------------------------
3,000 Pfizer, Inc. 199,500
-------------------------------------------------- -----------
Total 473,500
-------------------------------------------------- -----------
TOBACCO--2.0%
--------------------------------------------------
10,000 Philip Morris Cos., Inc. 558,750
-------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST, $5,066,786) 5,070,125
-------------------------------------------------- -----------
GOVERNMENT OBLIGATIONS--12.1%
-------------------------------------------------------------
$ 500,000 Federal Home Loan Mortgage Corp., 4.75%, 1/15/2001 495,684
--------------------------------------------------
3,000,000 U.S. Treasury Notes, 3.875-4.75%, 8/31/95-10/31/98 2,976,850
-------------------------------------------------- -----------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST, 3,472,534
$3,489,922) -----------
--------------------------------------------------
</TABLE>
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ------------------------------------------------- -----------
<C> <S> <C>
*REPURCHASE AGREEMENT--8.4%
------------------------------------------------------------
$2,409,220 Morgan Stanley & Co., 3.18%, dated 11/30/93, due
12/1/93
(at amortized cost) (Note 2B) $ 2,409,220
------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $28,899,141) $28,498,154+
------------------------------------------------- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost for federal tax purposes amounts to $28,899,141. The net unrealized
depreciation of investments on a federal tax basis amounts to $400,987, which
is comprised of $160,517 unrealized appreciation and $561,504 unrealized
depreciation at November 30, 1993.
Note: The categories of investments are shown as a percentage of net assets
($28,786,469) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD STRATEGIC BALANCE FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------
Investments in securities, at value (Notes 2A
and 2B)
(identified and tax cost; $28,899,141) $28,498,154
- ------------------------------------------------
Dividends and interest receivable 346,957
- ------------------------------------------------
Receivable for Fund shares sold 3,073
- ------------------------------------------------
Deferred expenses (Note 2F) 15,960
- ------------------------------------------------ -----------
Total assets 28,864,144
- ------------------------------------------------
LIABILITIES:
- ------------------------------------------------
Payable for Fund shares redeemed $ 84
- ---------------------------------------
Accrued expenses and other liabilities 77,591
- --------------------------------------- --------
Total liabilities 77,675
- ------------------------------------------------ -----------
NET ASSETS for 2,916,667 shares of beneficial
interest outstanding $28,786,469
- ------------------------------------------------ -----------
NET ASSETS CONSIST OF:
- ------------------------------------------------
Paid-in capital $29,199,400
- ------------------------------------------------
Net unrealized depreciation of investments (400,987)
- ------------------------------------------------
Accumulated net realized loss on investments (23,645)
- ------------------------------------------------
Undistributed net investment income 11,701
- ------------------------------------------------ -----------
Total $28,786,469
- ------------------------------------------------ -----------
NET ASSET VALUE and Redemption Price Per Share
($28,786,469 / 2,916,667 shares of beneficial
interest outstanding) $9.87
- ------------------------------------------------ -----------
Computation of Offering Price: Offering Price
Per Share (100/96 of $9.87)* $10.28
- ------------------------------------------------ -----------
</TABLE>
* No sales charges were imposed on purchases of shares prior to November 30,
1993 by deposit or credit customers of Boulevard Bank or its affiliates or
spouses and children under 21 of such customers. See "What Shares Cost" in
the prospectus.
(See Notes which are an integral part of the Financial Statements.)
BOULEVARD STRATEGIC BALANCE FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME
- ------------------------------------------------------
Interest income $1,558,971
- ------------------------------------------------------
Dividend income 90,081
- ------------------------------------------------------ ----------
Total investment income (Note 2C) 1,649,052
- ------------------------------------------------------
EXPENSES--
- ------------------------------------------------------
Investment advisory fee (Note 5) $180,729
- ---------------------------------------------
Administrative personnel and services fee
(Note 5) 47,123
- ---------------------------------------------
Transfer and dividend disbursing agent fees
and expenses (Note 5) 14,618
- ---------------------------------------------
Custodian fees (Note 5) 9,079
- ---------------------------------------------
Recordkeeper fees (Note 5) 47,391
- ---------------------------------------------
Legal fees 7,000
- ---------------------------------------------
Printing and postage 9,909
- ---------------------------------------------
Insurance premiums 5,783
- ---------------------------------------------
Miscellaneous 5,711
- --------------------------------------------- --------
Total expenses 327,343
- ---------------------------------------------
DEDUCT--
- ---------------------------------------------
Waiver of investment advisory fee
(Note 5) $120,486
- -----------------------------------
Waiver of administrative personnel
and services fee (Note 5) 26,186 146,672
- ----------------------------------- --------- --------
Net expenses 180,671
- ------------------------------------------------------ ----------
Net investment income 1,468,381
- ------------------------------------------------------ ----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
- ------------------------------------------------------
Net realized loss on investments (identified cost ba-
sis) (23,645)
- ------------------------------------------------------
Net change in unrealized depreciation on investments (400,987)
- ------------------------------------------------------ ----------
Net realized and unrealized loss on investments (424,632)
- ------------------------------------------------------ ----------
Change in net assets resulting from operations $1,043,749
- ------------------------------------------------------ ----------
</TABLE>
* For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD STRATEGIC BALANCE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 1,468,381
- ---------------------------------------------------------------
Net realized loss on investments ($23,645 net loss as computed
for federal tax purposes) (Note 2D) (23,645)
- ---------------------------------------------------------------
Change in unrealized depreciation of investments (400,987)
- --------------------------------------------------------------- -----------
Change in net assets from operations 1,043,749
- --------------------------------------------------------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (1,456,680)
- --------------------------------------------------------------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------
Proceeds from sale of shares 35,768,506
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in Fund shares 1,277,516
- ---------------------------------------------------------------
Cost of shares redeemed (7,846,622)
- --------------------------------------------------------------- -----------
Change in net assets from Fund share transactions 29,199,400
- --------------------------------------------------------------- -----------
Change in net assets 28,786,469
- ---------------------------------------------------------------
NET ASSETS--
- ---------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------
End of period (including undistributed net investment income of $28,786,469
$11,701) -----------
- ---------------------------------------------------------------
</TABLE>
*For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD STRATEGIC BALANCE FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- -------------------------------------------------------------------------------
(1) ORGANIZATION
The Boulevard Funds (the "Trust") are registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
financial statements included herein present only those of the Boulevard
Strategic Balance Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio of the
Boulevard Funds are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities are valued at last sales
price reported on national securities exchanges. Unlisted securities or
listed securities for which there were no sales are valued at the mean
between bid and asked prices. Bonds and other fixed income portfolio
securities (which may trade on a national securities exchange and/or over-
the-counter) are valued at the last sale price on a national securities
exchange on that day, if available. Otherwise, they are valued at the mean
between the bid and asked prices provided by independent pricing services.
Short-term obligations are valued at the mean between bid and asked prices
as furnished by an independent pricing service. However, short-term
obligations with maturities of sixty days or less at the time of purchase
are valued at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession of, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines
established by the Trustees. Risks may arise from the potential inability
of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
BOULEVARD STRATEGIC BALANCE FUND
- -------------------------------------------------------------------------------
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Interest income includes interest
and discount earned (net of premium) on short-term obligations, and
interest earned on all other debt securities including original issue
discount as required by the Internal Revenue Code.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income, including any net
realized gain on investments. Accordingly, no provision for federal tax is
necessary.
At November 30, 1993 the Fund, for federal tax purposes, had a capital loss
carryforward of $23,645 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire in 2001.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not
for the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to its
initial registration, excluding the initial expense of registering the
shares, have been deferred and are being amortized using the straight-line
method over a period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on the payment date at the ex-
dividend date net asset value without a sales charge, unless cash payments are
requested. Distributions of any net realized capital gains will be made at
least once every twelve months. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
- ----------------------------------------------------------------- ------------
<S> <C>
Shares outstanding, beginning of period --
- -----------------------------------------------------------------
Shares sold 3,572,286
- -----------------------------------------------------------------
Shares issued to shareholders electing to receive payment of div-
idends in Fund shares 128,429
- -----------------------------------------------------------------
Shares redeemed (784,048)
- ----------------------------------------------------------------- ---------
Shares outstanding, end of period 2,916,667
- ----------------------------------------------------------------- ---------
</TABLE>
*For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Boulevard Bank National Association, the Fund's investment adviser (the
"Adviser" or "Boulevard Bank"), receives for its services an annual investment
advisory fee equal to 0.75 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion. For the period ended November 30,
1993, the Adviser earned an investment advisory fee of $180,729, of which
$120,486 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services, and receives for its services an annual
fee equal to .150 of 1% on the first $250 million of average aggregate daily
net assets of the Trust; .125 of 1% on the next $250 million; .100 of 1% on the
next $250 million; and .075 of 1% on average aggregate daily net assets in
excess of $750 million. For the period ended November 30, 1993, FAS earned
$47,123, of which $26,186 was voluntarily waived. The administrative fee
received during any fiscal year shall aggregate at least $50,000 with respect
to the Fund. FAS may choose voluntarily to reimburse a portion of its fee at
any time.
State Street Bank and Trust Company is the custodian for the securities and
cash of the Fund. For the period ended November 30, 1993, the custodian earned
$9,079.
Federated Services Company is the transfer and dividend disbursing agent for
the Fund. It also provides certain accounting and recordkeeping services. For
the period ended November 30, 1993, Federated Services Company earned $14,618,
for transfer and dividend disbursing agent fees and expenses, and $47,391, for
recordkeeping fees.
BOULEVARD STRATEGIC BALANCE FUND
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund, for fees it paid which relate to the distribution and administration of
the Fund. The Plan provides that the Fund will incur distribution expenses up
to .25 of 1% of the average daily net assets of the Fund annually to pay
commissions, maintenance fees and to compensate FSC. The Fund will not accrue
or pay any distribution expenses pursuant to the Plan until a separate class of
shares has been created for certain institutional investors.
Certain of the Officers and Trustees of the Fund are Officers and Directors of
the above Corporations.
Organization expenses of $49,060 were borne initially by FAS. The Fund has
agreed to reimburse the Administrator for the organizational expenses initially
borne by the Administrator during the five year period following the date the
Trust's Portfolio became effective. For the period ended November 30, 1993,
$4,000 were incurred pursuant to this agreement.
As of November 30, 1993, the following shareholder of record owned 5% or more
of the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.), Des Plaines, IL owned approximately
2,710,188 shares (92.92%).
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
period ended November 30, 1993, were as follows:
<TABLE>
<S> <C>
- -----------
PURCHASES-- $41,552,383
- ----------- -----------
SALES-- $15,038,816
- ----------- -----------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Boulevard Strategic Balance Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights (included on page 2) present
fairly, in all material respects, the financial position of Boulevard Strategic
Balance Fund, (one of the portfolios of The Boulevard Funds, hereafter referred
to as the "Fund") at November 30, 1993, and the results of its operations, the
changes in its net assets and the financial highlights for the period December
18, 1992 (date of initial public investment) through November 30, 1993, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at November 30, 1993, by correspondence with the custodian, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chicago, Illinois
January 20, 1994
<PAGE>
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<PAGE>
[This Page Intentionally Left Blank]
ADDRESSES
- --------------------------------------------------------------------------------
Boulevard Strategic Federated Investors Tower
Balance Fund Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Boulevard Bank National Association 410 North Michigan Avenue
Chicago, Illinois 60611-4181
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8609
Boston, Massachusetts 02266-
8609
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing Agent, and
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Independent Accountants
Price Waterhouse
200 East Randolph Drive
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
BOULEVARD STRATEGIC
BALANCE FUND
PROSPECTUS
A Diversified Portfolio of The
Boulevard Funds, an Open-End
Management Investment Company
Prospectus dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
Investment Adviser
410 NORTH MICHIGAN AVENUE CHICAGO, IL 60611-4181
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120817A (1/94)
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
BOULEVARD STRATEGIC BALANCE FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
--------------------------------------------------------------------
This Statement of Additional Information should be read with the prospec-
tus of the Boulevard Strategic Balance Fund (the "Fund") dated January
31, 1994. This Statement is not a prospectus itself. To receive a copy of
the prospectus, call Boulevard Bank National Association toll-free at 1-
800-285-FUND.
Statement dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
-------------------------------------
Investment Adviser
FEDERATED SECURITIES CORP.
--------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Types of Investments 1
Securities of Foreign Issuers 2
Mortgage-Backed and Asset-Backed
Securities Risks 2
Futures and Options Transactions 4
Futures Contracts 4
Put Options on Futures Contracts 4
Call Options on Futures Contracts 4
Index Futures Contracts 5
"Margin" in Futures Transactions 5
Purchasing Put Options 5
Purchasing Call Options 5
Writing Covered Call Options 5
Stock Index Options 6
Foreign Currency Transactions 6
When-Issued and Delayed Delivery
Transactions 8
Lending of Portfolio Securities 8
Repurchase Agreements 8
Reverse Repurchase Agreements 8
Restricted and Illiquid Securities 8
Portfolio Turnover 9
Investment Limitations 9
THE BOULEVARD FUNDS MANAGEMENT 11
- --------------------------------------
Officers and Trustees 11
The Funds 13
Fund Ownership 14
Trustee Liability 14
INVESTMENT ADVISORY SERVICES 14
- --------------------------------------
Adviser to the Fund 14
Advisory Fees 14
ADMINISTRATIVE SERVICES 14
- --------------------------------------
BROKERAGE TRANSACTIONS 15
- --------------------------------------
PURCHASING SHARES 15
- --------------------------------------
Distribution Plan 15
Administrative Arrangements 16
Conversion to Federal Funds 16
Exchanging Securities for Fund
Shares 16
DETERMINING NET ASSET VALUE 16
- --------------------------------------
Determining Value of Securities 16
Trading in Foreign Securities 17
EXCHANGE PRIVILEGE 17
- --------------------------------------
Requirements for Exchanging Shares 17
REDEEMING SHARES 17
- --------------------------------------
Redemption in Kind 17
TAX STATUS 17
- --------------------------------------
The Fund's Tax Status 17
Shareholders' Tax Status 18
TOTAL RETURN 18
- --------------------------------------
YIELD 18
- --------------------------------------
PERFORMANCE COMPARISONS 18
- --------------------------------------
APPENDIX 20
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Boulevard Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 3, 1992. The Declaration of Trust permits the Trust to offer
separate series and classes of shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve long-term growth of capital and
income. The investment objective cannot be changed without approval of
shareholders.
TYPES OF INVESTMENTS
The Fund pursues its investment objective by investing, under normal
circumstances, at least 25% of its total assets in domestic corporate
securities, up to 25% of its total assets in international securities, and the
remaining portion of the Fund's assets primarily in securities of the U.S.
government, its agencies or instrumentalities, and asset-backed securities and
mortgage-backed securities. The following supplements the discussion of
acceptable investments in the prospectus.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities which may be exchanged
or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and
warrants, or a combination of the features of several of these
securities. The investment characteristics of each convertible security
vary widely, which allows convertible securities to be employed for
different investment objectives.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in
which, in the investment adviser's opinion, the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objective. Otherwise, the Fund may hold or trade
convertible securities. In selecting convertible securities for the Fund,
the Fund's adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible
security, the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common
stock at issuance) valid for a specific period of time. Warrants may have
a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the warrant, the
warrant will expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or different issuer, participations based on revenues,
sales, or profits, or the purchase of common stock in a unit transaction
(where corporate debt securities and common stock are offered as a unit).
These securities must be rated as investment grade (as described in the
prospectus) or, if unrated, deemed to be of comparable quality. If a
security's rating is reduced below the required minimum after the Fund
has purchased it, the Fund is not required to sell the security, but may
consider doing so. If ratings made by Moody's Investors Service, Inc.,
Standard & Poor's Corporation, or Fitch Investors Service, Inc., change
because of changes in those organizations or in their rating systems, the
Fund will try to use comparable ratings as standards in accordance with
the investment policies described in the Fund's prospectus.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
Some of these securities are backed by the full faith and credit of the
U.S. Treasury.
No assurances can be given that the U.S. government will provide
financial support to certain issuing agencies or instrumentalities since
it is not obligated to do so. Securities issued by such agencies and
instrumentalities are supported by:
. the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Federal Farm Credit System;
. Federal Home Loan Banks System;
. Student Loan Marketing Association;
. Federal National Mortgage Association; and
. Federal Home Loan Mortgage Corporation.
BANK INSTRUMENTS
The Fund only invests in Bank Instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, both of which are administered by the
Federal Deposit Insurance Corporation. Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of
Deposit ("Yankee CDs"), and Eurodollar Time Deposits ("ETDs").
Institutions issuing Eurodollar instruments are not necessarily subject
to the same regulatory requirements that apply to domestic banks, such as
reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping and the public availability of information.
AMERICAN DEPOSITORY RECEIPTS ("ADRS")
ADRs are receipts typically issued by an American bank or trust company
that evidences ownership of underlying securities issued by a foreign
issuer. ADRs are denominated in U.S. currency. Generally, ADRs, in
registered form, are designed for use in U.S. securities markets.
INTERNATIONAL DEPOSITORY RECEIPTS ("IDRS")
IDRs are receipts typically issued by a non-U.S. bank or trust company
that evidences ownership of underlying securities issued by a foreign
issuer. IDRs may not necessarily be denominated in the same currency as
the securities into which they may be converted.
YANKEE BONDS
Yankee bonds are U.S. dollar-denominated bonds issued and traded
primarily in the United States by foreign banks and corporations.
SECURITIES OF FOREIGN ISSUERS
The Fund may invest in securities of foreign issuers, such as ECDs,
Yankee CDs, ETDs, and Yankee Bonds. Yankee Bonds are U.S. dollar-
denominated bonds issued and traded primarily in the United States by
foreign issuers. Securities of a foreign issuer may present greater risks
in the form of nationalization, confiscation, domestic marketability, or
other national or international restrictions. As a matter of practice,
the Fund will not invest in the securities of a foreign issuer if any
such risk appears to the investment adviser to be substantial.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES RISKS
Mortgage-backed and asset-backed securities generally pay back principal
and interest over the life of the security. At the time the Fund
reinvests the payments and any unscheduled prepayments of principal
received, the Fund may receive a rate of interest which is actually lower
than the rate of interest paid on these securities ("prepayment risks").
Mortgage-backed and asset-backed securities are subject to higher
prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans or the collateral
supporting asset-backed securities may be prepaid without penalty or
premium. Prepayment risks on mortgage-backed securities tend to increase
during periods of declining mortgage interest rates because many
borrowers refinance their mortgages to take advantage of the more
favorable rates. Prepayments on mortgage-backed securities are also
affected by other factors, such as the frequency with which people sell
their homes or elect to make unscheduled payments on their mortgages.
Although asset-backed securities
generally are less likely to experience substantial prepayments than are
mortgage-backed securities, certain of the factors that affect the rate
of prepayments on mortgage-backed securities also affect the rate of
prepayments on asset-backed securities.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily these securities do not have the
benefit of the same security interest in the related collateral. Credit
card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws,
many of which give such debtors the right to set off certain amounts owed
on credit cards, thereby reducing the balance due. Most issuers of asset-
backed securities backed by motor vehicle installment purchase
obligations permit the servicer of such receivables to retain possession
of the underlying obligations. If the servicer sells these obligations to
another party, there is a risk that the purchaser would acquire an
interest superior to that of the holders of the related asset-backed
securities. Further, if a vehicle is registered in one state and is then
reregistered in another state because the owner and obligor moves to
another state, such reregistration could defeat the original security
interest in the vehicle in certain cases. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of asset-
backed securities backed by automobile receivables may not have a proper
security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on
these securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The following example illustrates how mortgage cash flows are prioritized
in the case of CMOs. Most of the CMOs in which the Fund invests use the
same basic structure.
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four tranches of
securities: the first three (A, B, and C bonds) pay interest at
their stated rates beginning with the issue date; the final tranche
(Z bonds) typically receives any excess income from the underlying
investments after payments are made to the other tranches and
receives no principal or interest payments until the shorter
maturity tranches have been retired, but then receives all remaining
principal and interest payments.
(2) The cash flows from the underlying mortgages are applied first to
pay interest and then to retire securities.
(3) The tranches of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity tranche (or A
bonds). When those securities are completely retired, all principal
payments are then directed to the next-shortest-maturity tranche (or
B bonds). This process continues until all of the tranches have been
completely retired. Because the cash flow is distributed
sequentially instead of pro rata, as with pass-through securities,
the cash flows and average lives of CMOs are more predictable, and
there is a period of time during which the investors in the longer-
maturity classes receive no principal paydowns. One or more of the
tranches often bear interest at an adjustable rate. The interest
portion of these payments is distributed by the Fund as income, and
the principal portion is reinvested.
RESETS OF INTEREST
The interest rates paid on some of the adjustable rate mortgage
securities ("ARMS"), CMOs, and real estate mortgage investment conduits
("REMICs") in which the Fund invests will be readjusted at intervals of
one year or less to an increment over some predetermined interest rate
index. There are two main categories of indices: those based on U.S.
Treasury securities and those derived from a calculated measure, such as
a cost of funds index or a moving average of mortgage rates. Commonly
utilized indices include the one-year and five-year constant maturity
Treasury Note rates, the three-month Treasury Bill rate, the 180-day
Treasury Bill rate, rates on longer-term Treasury securities, the
National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate ("LIBOR"), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant
maturity Treasury Note rate, closely mirror changes in market interest
rate levels. Others tend to lag behind changes in market rate levels and
tend to have somewhat less volatile interest rates.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence,
adjustable rate mortgage securities which use indices that lag behind
changes in market rates should experience greater price volatility than
adjustable rate mortgage securities that closely mirror the market.
Certain residual interest tranches of CMOs may have adjustable interest
rates that deviate significantly from prevailing market rates, even after
the interest rate is reset, and are subject to correspondingly increased
price volatility.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs
in which the Fund invests will frequently have caps and floors which
limit the maximum amount by which the loan rate to the residential
borrower may change up or down: (1) per reset or adjustment interval and
(2) over the life of the loan. Some residential mortgage loans restrict
periodic adjustments by limiting changes in the borrower's monthly
principal and interest payments rather than limiting interest rate
changes. These payment caps may result in negative amortization.
The value of mortgage securities in which the Fund invests may be
affected if market interest rates rise or fall faster and farther than
the allowable caps or floors on the underlying residential mortgage
loans. Additionally, even though the interest rates on the underlying
residential mortgages are adjustable, amortization and prepayments may
occur, thereby causing the effective maturities of the mortgage
securities in which the Fund invests to be shorter than the maturities
stated in the underlying mortgages.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its portfolio
by buying and selling futures and index futures contracts, buying put
options on portfolio securities, call options and listed options on
futures contracts, and writing options on futures contracts. The Fund may
also write covered call options on securities to attempt to increase its
current income. The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the
options are exercised, closed, or have expired. An option position on
futures contracts may be closed out only on an exchange which provides a
secondary market for options of the same series.
FUTURES CONTRACTS
A futures contract is a firm commitment between the seller, who agrees to
make delivery of the specific type of security called for in the contract
("going short"), and the buyer, who agrees to take delivery of the
security ("going long") at a certain time in the future.
Futures contracts may call for the delivery of shares of common stock
represented in a particular index.
PUT OPTIONS ON FUTURES CONTRACTS
The Fund may purchase listed put options on futures contracts. Unlike
entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
CALL OPTIONS ON FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts to hedge its portfolio. When the
Fund writes a call option on a futures contract, it is undertaking the
obligation of assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As stock prices fall, causing the
prices of futures to go down, the Fund's obligation under a call option
on a future (to sell a futures contract) costs less to fulfill, causing
the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the call,
so that the Fund keeps the premium received for the option. This premium
can substantially offset the drop in value of the hedged securities which
is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then substantially offset the
decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
INDEX FUTURES CONTRACTS
The Fund may invest in debt index futures contracts and stock index
futures contracts and in related options. A debt index futures contract
is a contract to buy or sell units of a specified debt index at a
specified future date at a price agreed upon when the contract is made. A
unit is the current value of the index. A stock index futures contract is
a contract to buy or sell units of a stock index at a specified future
date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.
The Fund may purchase or sell futures contracts with respect to any stock
index. Positions in index futures may be closed out only on an exchange
or board of trade which provides a secondary market for such futures. The
Fund will purchase and sell index futures in order to hedge its
investments. To hedge its investments successfully, however, the Fund
must invest in futures contracts with respect to indexes or sub-indexes
the movements of which will, in its judgment, have a significant
correlation with movements in the prices of the Fund's securities.
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in an index
futures contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the
holder would assume the underlying futures position and would receive a
variation margin payment of cash or securities approximating the increase
in the value of the holder's option position. If an option is exercised
on the last trading day prior to the expiration date of the option, the
settlement will be made entirely in cash based on the difference between
the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date
suffer a loss of the premium paid.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial
margin in futures transactions does not involve the borrowing of funds by
the Fund to finance the transactions. Initial margin is in the nature of
a performance bond or good-faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT OPTIONS
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. A put
option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during
the term of the option.
PURCHASING CALL OPTIONS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a call option. When the Fund purchases a call
option, it is purchasing the right (not the obligation) to purchase the
underlying security at a fixed price at any time during the life of the
option.
WRITING COVERED CALL OPTIONS
The Fund may also write covered call options to generate income. As
writer of a call option, the Fund has the obligation, upon exercise of
the option during the option period, to deliver the underlying security
upon payment of the exercise price. The Fund may only sell call options
either on securities held in its portfolio or
on securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any additional
consideration necessary to obtain such securities).
STOCK INDEX OPTIONS
The Fund may purchase and write call and put options on stock indexes
traded on national securities exchanges. Index options are similar to
options on individual securities in that the purchaser of an index option
acquires the right to buy, and the writer undertakes the obligation to
sell, an index at a stated exercise price during the term of the option.
Instead of giving the right to take or make actual delivery of
securities, the holder of an index option has the right to receive a cash
"exercise settlement amount." This amount is equal to the amount by which
the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying
index on the date of the exercise, multiplied by a fixed "index
multiplier."
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. The Fund may engage in both "transaction
hedging" and "position hedging."
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables
generally arising in connection with the purchase or sale of its
portfolio securities. The Fund will engage in transaction hedging when it
desires to "lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging, the Fund will
attempt to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the applicable
foreign currency during the period between the date on which the security
is purchased or sold or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging.
The Fund may also enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") and purchase and sell
foreign currency futures contracts.
For transaction hedging purposes, the Fund may also purchase exchange-
listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a foreign
currency futures contract gives the Fund the right to assume a short
position in the futures contract until expiration of the option. A put
option on currency gives the Fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a
foreign currency futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option.
A call option on currency gives the Fund the right to purchase a currency
at the exercise price until the expiration of the option.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values
of the foreign currencies in which securities held by it are denominated
or are quoted in their principal trading markets or an increase in the
value of currency for securities which the Fund expects to purchase. In
connection with position hedging, the Fund may purchase put or call
options on foreign currency and foreign currency futures contracts and
buy or sell forward contracts and foreign currency futures contracts. The
Fund may also purchase or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in
foreign currencies will change as a consequence of market movements in
the values of those securities between the dates the currency exchange
transactions are entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security or
securities being hedged is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the
security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security or
securities of the Fund if the market value of such security or securities
exceeds the amount of foreign currency the Fund is obligated to deliver.
To offset some of the costs of hedging against fluctuations in currency
exchange rates, the Fund may write covered call options on those
currencies. Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which the Fund
owns or intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk of loss
due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in the value of
such currency.
The Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, and by purchasing and selling
options on foreign currencies and on foreign currency futures contracts,
and by purchasing and selling forward foreign currency contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND FOREIGN CURRENCY FUTURES
CONTRACTS
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract as agreed by the
parties, at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts
are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers.
A forward foreign currency exchange contract generally has no margin or
other deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a standardized
contract for the future delivery of a specified amount of a foreign
currency at a future date at a price set at the time of the contract.
Foreign currency futures contracts traded in the United States are
designed by and traded on exchanges regulated by the Commodity Futures
Trading Commission (the "CFTC"), such as the New York Mercantile
Exchange.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of
a forward foreign currency exchange contract may be any fixed number of
days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward foreign currency
exchange contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign currency
exchange contracts are traded directly between currency traders so that
no intermediary is required.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract or at
or prior to maturity enter into a closing transaction involving the
purchase or sale of an offsetting contract. Closing transactions with
respect to forward foreign currency exchange contracts are usually
effected with the currency trader who is a party to the original forward
foreign currency exchange contract. Closing transactions with respect to
futures contracts are effected on a commodities exchange; a clearing
corporation associated with the exchange assumes responsibility for
closing out such contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a
secondary market in such contracts or options. Although it is intended
that the Fund will purchase or sell foreign currency futures contracts
and related options only on exchanges or boards of trade where there
appears to be an active secondary market, there is no assurance that a
secondary market on an exchange or board of trade will exist for any
particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and,
in the event of adverse price movements, the Fund would continue to be
required to make daily cash payments of variation margin on its futures
positions.
FOREIGN CURRENCY OPTIONS
Options on foreign currencies operate similarly to options on securities,
and are traded primarily in the over-the-counter market, although options
on foreign currencies have recently been listed on several exchanges.
Such options will be purchased or written only when the adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular
option in any specific time. Options on foreign currencies are affected
by all of those factors which influence exchange rates and investments
generally.
The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in foreign currency
options transactions, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a
timely basis. Available quotation information is generally representative
of very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (less than $1 million) where
rates may be less favorable. The interbank market in foreign currencies
is a global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the U.S. options markets.
FOREIGN CURRENCY CONVERSION
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the
"spread") between prices at which they buy and sell various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in when-
issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of its total assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Board of Trustees
("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
. the frequency of trades and quotes for the security;
. the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the period from December 18, 1992 (date of initial public
investment) to November 30, 1993, the Fund's portfolio turnover rate was 68%.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of its total assets at the time of the pledge. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits
for the purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at times invest 25% or more of its total assets in
securities issued and/or guaranteed by the U.S. government, its agencies
or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures and stock index futures contracts and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objective and policies or
the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. (For purposes of this
limitation, the Fund considers instruments issued by a U.S. branch of a
domestic bank having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items.")
Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Fund considers common stock and all preferred stock of an issuer each as
a single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees. To comply with
certain state restrictions, the Fund will limit these transactions to 5%
of its total assets. (If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.)
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice, over-the-counter options, and certain
restricted securities not determined by the Trustees to be liquid. To
comply with certain state restrictions, the Fund will limit these
transactions to 10% of its net assets. (If state restrictions change,
this latter restriction may be revised without shareholder approval or
notification.)
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, other mineral
exploration or development programs, or leases, although it may purchase
the securities of issuers that invest in or sponsor such programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
other investment companies only in open-market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets; nor are they applicable with respect to securities
of investment companies that have been exempted from registration under
the Investment Company Act of 1940. It should be noted that investment
companies incur certain expenses, such as management fees, and,
therefore, any investment by a fund in shares of another investment
company would be subject to such duplicate expenses. The adviser will
waive its investment advisory fee on assets invested in securities of
open-end investment companies.
INVESTING TO EXERCISE CONTROL
The Fund will not purchase securities of an issuer for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of its total assets in securities
of issuers, including their predecessors, that have been in operation for
less than three years. With respect to asset-backed securities, the Fund
will treat the originator of the asset pool as the company issuing the
security for purposes of determining compliance with this limitation.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American Stock
Exchange to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants acquired by the Fund in
units or attached to securities may be deemed to be without value.
ARBITRAGE TRANSACTIONS
The Fund will not enter into transactions for the purpose of engaging in
arbitrage.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of the
Fund's total assets would be invested in premiums on open put option
positions.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them
in deliverable form without further payment or after segregating cash in
the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value of total or net assets will not result in a
violation of such restriction.
To comply with registration requirements in certain states, the Fund (a) will
limit the aggregate value of the assets underlying covered call options or put
options written by the Fund to not more than 25% of its net assets, (b) will
limit the premiums paid for options purchased by the Fund to 20% of its net
assets, and (c) will limit the margin deposits on futures contracts entered
into by the Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification.)
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
THE BOULEVARD FUNDS MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Boulevard Bank National
Association, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
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<S> <C> <C>
John F. Donahue+* Chairman Chairman and Trustee, Federated Investors; Chairman
Federated Investors and Trustee and Trustee, Federated Advisers, Federated Management,
Tower and Federated Research; Director, AEtna Life and
Pittsburgh, PA Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the
Funds; formerly, Director, The Standard Fire Insurance
Company. Mr. Donahue is the father of J. Christopher
Donahue, Vice President of the Trust.
- ----------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice- President, John R. Wood and Associates, Inc.,
Department Realtors; President, Northgate Village Development
John R. Wood and Corporation; General Partner or Trustee in private
Associates, Inc., real estate ventures in Southwest Florida; Director,
Realtors Trustee, or Managing General Partner of the Funds,
3255 Tamiami Trail North formerly, President, Naples Property Management, Inc.
Naples, FL
- ---------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee,
One PNC Plaza-23rd Floor Michael Baker, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman
and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
- ---------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund,
571 Hayward Mill Road Inc., Director, Trustee, or Managing General Partner
Concord, MA of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- ---------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian
3471 Fifth Avenue and Montefiore Hospitals; Clinical Professor of
Suite 1111 Medicine and Trustee, University of Pittsburgh;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the
Funds.
- ---------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc., and Statewide
Pittsburgh, PA Settlement Agency, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
- ---------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated
Federated Investors Treasurer, Investors; Vice President and Treasurer, Federated
Tower and Trustee Advisers, Federated Management, and Federated
Pittsburgh, PA Research; Trustee, Federated Services Company;
Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Chairman, Treasurer, and
Director, Federated Administrative Services; Trustee
or Director of some of the Funds; Vice President and
Treasurer of the Funds.
- ---------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
- ---------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Chairman, Meritcare, Inc.; Director, Eat'N Park
Pittsburgh, PA Restaurants, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Vice Chairman,
Horizon Financial, F.A.
- ---------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace,
Learning RAND Corporation, Online Computer Library Center,
University of Pittsburgh Inc., and U.S. Space Foundation; Chairman, Czecho
Pittsburgh, PA Slovak Management Center; Director, Trustee, or
Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental
Policy and Technology.
- ---------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director,
4905 Bayard Street Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and
Tower Pittsburgh, PA Federated Research; Trustee, Federated Services
Company; President and Director, Federated
Administrative Services; President or Vice President
of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, Chairman and Trustee of the Trust.
- -------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated
Federated Investors Investors; Chairman and Director, Federated Securities
Tower Corp.; President or Vice President of the Funds;
Pittsburgh, PA Director or Trustee of some of the Funds.
- -------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and
Federated Investors and Secretary Trustee, Federated Investors; Vice President,
Tower Pittsburgh, PA Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary,
and Director, Federated Administrative Services;
Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the
Funds.
- -------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors;
Federated Investors Executive Vice President, Federated Securities Corp.;
Tower Pittsburgh, PA President and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President of
the Funds; Director, Trustee, or Managing General
Partner of some of the Funds; formerly, Vice
President, The Standard Fire Insurance Company and
President of its Federated Research Division.
- -------------------------------------------------------------------------------------------------
Jeffrey W. Sterling Vice President Vice President, Federated Administrative Services;
Federated Investors and Assistant Vice President and Assistant Treasurer of some of the
Tower Pittsburgh, PA Treasurer Funds.
- -------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 111 Corcoran Funds; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of January 6, 1994, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.), Des Plaines, IL owned approximately
436,054 shares (15.11%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be liable
for their own willful defaults. If reasonable care has been exercised in the
selection of officers, agents, employees, or investment advisers, a Trustee
shall not be liable for any neglect or wrongdoing of any such person. However,
they are not protected against any liability to which they would otherwise be
subject by reason of their willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Boulevard Bank National Association (the
"Adviser" or "Boulevard Bank"), a wholly-owned subsidiary of Boulevard Bancorp,
Inc.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the selection, 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
Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, the Adviser earned advisory fees of $180,729 of which
$120,486 was voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund, up to the full amount of its investment advisory fee, for the
Fund's expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee set forth
in the prospectus. For the period from December 18, 1992 (date of initial
public investment) to November 30, 1993, Federated Administrative Services
earned administrative fees of $47,123, of which $26,186 was voluntarily waived.
John A. Staley, IV, an officer of the Fund, holds approximately 15% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services. For the period from December 18, 1992 (date of initial
public investment) to November 30, 1993, Federated Administrative Services paid
approximately $164,324 for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions and
determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers may be used by the Adviser in advising
the Fund and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it would
tend to reduce its expenses.
Although investment decisions for the Fund are made independently from those of
other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund. For the
period from December 18, 1992 (date of initial public investment) to November
30, 1993, the Fund paid $15,230 in brokerage commissions.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value next determined after an
order is received, plus a sales charge as described in the prospectus, on days
the New York Stock Exchange and Federal Reserve Wire System are open for
business. The procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a distribution plan pursuant to
Rule 12b-1 which was promulgated by the SEC pursuant to the Investment Company
Act of 1940 (the "Plan"). The Plan provides for payment of fees to Federated
Securities Corp. to finance any activity which is principally intended to
result in the sale of the Fund's shares subject to the Plan. Such activities
may include the advertising and marketing of shares of the Fund; preparing,
printing, and distributing prospectuses and sales literature to prospective
shareholders, brokers, or administrators; and implementing and operating the
Plan. Pursuant to the Plan, Federated Securities Corp. may pay fees to
financial institutions, fiduciaries, custodians for public funds, investment
advisors, and brokers for distribution and administrative services and to
administrators for administrative services provided to the Fund. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions; wiring funds and
receiving funds for purchases and redemptions of Fund shares; confirming and
reconciling all transactions; reviewing the activity in Fund accounts and
providing training and supervision of broker personnel; posting and reinvesting
dividends to Fund accounts or arranging for this service to be performed by the
Fund's transfer agent; and maintaining and distributing current copies of
prospectuses and shareholder reports to the beneficial owners of Fund shares
and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking
to achieve its investment objective.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, no costs were incurred pursuant to this agreement.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records; processing purchase and
redemption transactions; processing automatic investments of client account
cash balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund may reasonably request.
For the period from December 18, 1992 (date of initial public investment) to
November 30, 1993, no fees were paid to brokers and administrators.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to invest its assets in securities as fully as possible
so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Boulevard Bank as well as Federated
Services Company act as the shareholder's agent in depositing checks and
converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or they may
exchange a combination of securities and cash for Fund shares. Any securities
to be exchanged must meet the investment objective and policies of the Fund,
must have a readily ascertainable market value, must be liquid, and must not be
subject to restrictions on resale. An investor should forward the securities in
negotiable form with an authorized letter of transmittal to Boulevard Bank. The
Fund will notify the investor of its acceptance and valuation of the securities
within five business days of their receipt by Federated Services Company.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of Fund
shares on the day the securities are valued. One share of the Fund will be
issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
Values of the Fund's portfolio securities, other than options, are determined
as follows:
. for listed equity securities, according to the last sale price on a national
securities exchange, if available;
. in the absence of recorded sales for listed equity securities, according to
the mean between the last closing bid and asked prices;
. for unlisted equity securities, the latest bid prices;
. for bonds and other fixed income securities, as determined by an independent
pricing service;
. for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
. for all other securities, at fair value as determined in good faith by the
Trustees.
The Fund will value futures contracts, options, and put options on futures at
their market value established by the exchanges at the close of trading on such
exchanges unless the Trustees determine in good faith that another method of
valuation is necessary to determine their fair value. All investments
denominated in foreign securities are valued daily in U.S. dollars based on the
then-prevailing exchange rate.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
. yield;
. quality;
. coupon rate;
. maturity;
. stability;
. risk;
. type of issue;
. trading characteristics;
. special circumstances of a security or trading market; and
. other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value as
determined in good faith by the Trustees, although the actual calculation may
be done by others.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
REQUIREMENTS FOR EXCHANGING SHARES
Before the exchange, the shareholder must receive a prospectus of the fund of
the Trust for which the exchange is being made. This privilege is available to
shareholders resident in any state in which the fund shares being acquired may
be sold. Upon receipt of proper instructions and required supporting documents,
shares submitted for exchange are redeemed, and the proceeds are invested in
shares of the other fund of the Trust.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are redeemed at the next computed net asset value after
Boulevard Bank receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable rules of the SEC,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Trustees determine to be
fair and equitable.
The Fund has elected to be governed by Rule 18f-1 pursuant to the Investment
Company Act of 1940 under which the Fund is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund expects to pay no federal income tax because it intends to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from gains on the sale of
securities held less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. No portion of any income dividend paid
by the Fund is expected to be eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital gains,
are taxable as ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long they have held the shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's cumulative total return from December 18, 1992 to November 30, 1993,
was 0.23%. Cumulative total return reflects the Fund's total performance over a
specific period of time. This total return assumes and is reduced by the
payment of the maximum sales load. The Fund's total return is representative of
only eleven months of fund activity since the Fund's date of initial public
investment.
YIELD
- --------------------------------------------------------------------------------
The Fund's yield for the thirty-day period ended November 30, 1993 was 3.38%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the maximum offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund 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 that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute net asset value. The
financial publications and/or indices which the Fund uses in advertising may
include:
. LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if
any, and takes into account any change in net asset value over a specific
period of time. From time to time, the Fund will quote its Lipper ranking in
the "flexible equity" category in advertising and sales literature.
. LIPPER GROWTH AND INCOME FUND AVERAGE is an average of the total returns for
251 growth and income funds tracked by Lipper Analytical Services, Inc.
. LIPPER GROWTH AND INCOME FUND INDEX is an average of the net asset-valuated
total returns for the top 30 growth and income funds tracked by Lipper
Analytical Services, Inc.
. MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values 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 AND POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and financial
and public utility companies can be used to compare the total returns of
funds whose portfolios are invested primarily in common stocks. In addition,
the Standard & Poor's index assumes reinvestments of all dividends and other
distributions 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 Standard & Poor's figures.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
represent the change, over a specified period of time, in the value of an
investment in the Fund based on monthly reinvestment of dividends and other
distributions.
Advertisements may quote performance information that does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. 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.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
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
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds 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.
NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
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.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (for 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:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternative liquidity.
P-2--Issuers rated PRIME-2 (for 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.
FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
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.
3120817B (1/94)
BOULEVARD MANAGED INCOME FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
PROSPECTUS
The shares of the Boulevard Managed Income Fund (the "Fund") offered by this
prospectus represent interests in a professionally managed, diversified
portfolio of The Boulevard Funds (the "Trust"), an open-end, management
investment company (a mutual fund).
The investment objective of the Fund is to provide current income while
attempting to provide a high degree of principal stability.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
BOULEVARD BANK NATIONAL ASSOCIATION, ARE NOT ENDORSED OR GUARANTEED BY
BOULEVARD BANK NATIONAL ASSOCIATION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
calling Boulevard Bank National Association toll-free at 1-800-285-FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ----------------------------------------------------------
GENERAL INFORMATION 3
- ----------------------------------------------------------
INVESTMENT INFORMATION 3
- ----------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Variable Rate Demand Notes 4
Asset-Backed Securities 4
Non-Mortgage Related
Asset-Backed Securities 5
Mortgage-Backed Securities 5
Adjustable Rate Mortgage
Securities ("ARMS") 5
Collateralized Mortgage
Obligations ("CMOs") 6
Real Estate Mortgage Investment Conduits ("REMICs") 6
Bank Instruments 6
Credit Facilities 6
Demand Features 6
Repurchase Agreements 7
Lending of Portfolio Securities 7
When-Issued and Delayed
Delivery Transactions 7
Securities of Foreign Issuers 7
Investment Limitations 7
THE BOULEVARD FUNDS INFORMATION 8
- ----------------------------------------------------------
Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Fund Shares 9
Distribution Plan 9
Administrative Arrangements 10
ADMINISTRATION OF THE FUND 10
- ----------------------------------------------------------
Administrative Services 10
Custodian 11
Transfer Agent, Dividend Disbursing Agent,
Shareholder Servicing Agent,
and Portfolio Accounting Services 11
Legal Counsel 11
Independent Accountants 11
Brokerage Transactions 11
Expenses of the Fund 11
NET ASSET VALUE 11
- ----------------------------------------------------------
INVESTING IN THE FUND 12
- ----------------------------------------------------------
Account Establishment 12
By Telephone 12
By Mail 12
Share Purchases 12
By Telephone 12
By Mail 12
Payment by Check 12
Payment by Wire 12
Minimum Investment Required 12
What Shares Cost 13
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 14
Quantity Discounts and
Accumulated Purchases 14
Letter of Intent 14
Reinvestment Privilege 14
Concurrent Purchases 15
Exchanging Securities for Fund Shares 15
Systematic Investment Program 15
Retirement Plans 15
Certificates and Confirmations 15
Dividends and Capital Gains 15
EXCHANGE PRIVILEGE 16
- ----------------------------------------------------------
By Telephone 16
REDEEMING SHARES 17
- ----------------------------------------------------------
Through Boulevard Bank 17
By Telephone 17
By Mail 17
Receiving Payment 17
Signatures 18
Redemption Before Purchase
Instruments Clear 18
Systematic Withdrawal Program 18
Accounts With Low Balances 18
SHAREHOLDER INFORMATION 19
- ----------------------------------------------------------
Voting Rights 19
Massachusetts Partnership Law 19
EFFECT OF BANKING LAWS 19
- ----------------------------------------------------------
TAX INFORMATION 20
- ----------------------------------------------------------
Federal Income Tax 20
PERFORMANCE INFORMATION 20
- ----------------------------------------------------------
FINANCIAL STATEMENTS 22
- ----------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 35
- ----------------------------------------------------------
ADDRESSES INSIDE BACK COVER
- ----------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).................................................................. 3.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)......................................................... None
Deferred Sales Load (as a percentage of original purchase price or re-
demption
proceeds, as applicable)................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)....... None
Exchange Fee............................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................ 0.35%
12b-1 Fees (2)........................................................... 0.00%
Total Other Expenses .................................................... 0.38%
Total Fund Operating Expenses (3)...................................... 0.73%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.70% absent the anticipated voluntary waiver by the adviser.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can
pay up to 0.25% as a 12b-1 fee to the distributor.
(3) The Annual Fund Operating Expenses were 0.65% for the period ending
November 30, 1993. The Annual Fund Operating Expenses in the table above
are based on estimated expenses expected during the fiscal year ending
November 30, 1994. Total Annual Fund Operating Expenses are estimated to be
1.08% absent the anticipated voluntary waiver described above in note (1).
*EXPENSES IN THIS TABLE ARE ESTIMATED BASED ON AVERAGE EXPENSES EXPECTED TO
BE INCURRED DURING THE FISCAL YEAR ENDING NOVEMBER 30, 1994. DURING THE COURSE
OF THIS PERIOD, EXPENSES MAY BE MORE OR LESS THAN THE AVERAGE AMOUNT SHOWN.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BOULEVARD FUNDS INFORMATION" AND "INVESTING IN THE FUNDS."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual re-
turn; (2) redemption at the end of each time
period; and (3) payment of the maximum sales
load of 3.00%. The Fund charges no redemp-
tion fees .................................. $37 $53 $69 $118
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1994.
BOULEVARD MANAGED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
- ----------------------------------------------------- ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.61
- -----------------------------------------------------
Net realized and unrealized loss on investments (0.23)
- ----------------------------------------------------- ------
Total from investment operations 0.38
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Dividends to shareholders from net investment income (0.60)
- ----------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $ 9.78
- ----------------------------------------------------- ------
TOTAL RETURN** 3.88%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.65%(a)
- -----------------------------------------------------
Net investment income 6.69%(a)
- -----------------------------------------------------
Expense waiver/reimbursement (b) .42%(a)
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $73,748
- -----------------------------------------------------
Portfolio turnover rate 39%
- -----------------------------------------------------
</TABLE>
* Reflects operations for the period from December 18, 1992 (date of initial
public investment) to November 30, 1993. For the period from the start of
business, November 17, 1992 to December 18, 1992, net investment income
aggregating $0.03 per share ($273) was distributed to Federated
Administrative Services.
** Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated November 30, 1993, which can be obtained free of charge.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated August 3, 1992. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes.
The Fund is designed primarily for retail and trust customers of Boulevard
Bank National Association and its affiliates as a convenient means of
participating in a professionally managed, diversified portfolio of debt
instruments. The investment company shares offered by this prospectus are not
deposits or obligations of, or endorsed or guaranteed by, Boulevard Bank
National Association or any of its affiliates nor are they federally insured.
In most cases, a minimum initial investment of $1,000 is required. See
"Minimum Investment Required."
Fund shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income while
attempting to provide a high degree of principal stability. This investment
objective cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
While the net asset value of the Fund is expected to fluctuate, the Fund
pursues its investment objective to provide a high degree of principal
stability by investing primarily in investment grade bonds with remaining
maturities of three years or less. Under normal circumstances, the Fund will
invest at least 65% of its total assets in investment grade bonds. Investment
grade bonds are generally described as bonds which are rated in one of the top
four rating categories by a nationally recognized statistical rating
organization ("NRSRO"), such as Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), or Fitch Investors Service, Inc.
("Fitch"). A description of the ratings categories is contained in the
Appendix to the Statement of Additional Information. Unless indicated
otherwise, the investment policies may be changed by the Board of Trustees
("Trustees") without the approval of shareholders. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The debt securities in which the Fund invests will
only be rated investment grade or of comparable quality at the time of
purchase. Investment grade debt securities are described as bonds which are
rated in one of the top four rating categories by a NRSRO (rated BBB or better
by S&P, Baa or better by Moody's, or BBB or better by Fitch) and short-term
commercial paper rated within the top two categories by one or more NRSROs
(rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's, or F-1 or F-2 by
Fitch). The Fund may also invest up to 10% of its total assets in unrated debt
securities that are determined by the Fund's investment adviser to be of
comparable quality to instruments having such ratings. If a security's rating
is reduced below the required minimum after the Fund has purchased it, the
Fund is not required to sell the security, but may consider doing so. It
should be noted that bonds receiving the lowest investment grade rating are
considered to have some speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than higher rated bonds.
The Fund intends to limit the market exposure of the securities it purchases
to not more than three years. For example, the Fund may invest in: fixed rate
securities with remaining maturities of three years or less; variable rate
instruments with maximum repricing or interest rate reset terms of three
years; asset-backed securities with average maturities of three years or less;
and instruments that may be put to the issuer within three years.
Acceptable investments currently include the following:
. corporate debt obligations, including variable rate demand notes;
. asset-backed securities, including mortgage-backed securities;
. commercial paper, including Canadian Commercial Paper and Europaper;
. certificates of deposit, demand and time deposits, bankers acceptances,
deposit notes and other instruments of domestic and foreign banks and
other depository institutions ("Bank Instruments");
. medium and short-term credit facilities, including demand notes and
participations in revolving credit facilities; and
. obligations issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities ("Government Securities").
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging from
daily to annually), and is normally based on a published interest rate or
interest rate index. Many variable rate demand notes allow the Fund to demand
the repurchase of the security on not more than seven days prior notice. Other
notes only permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features."
ASSET-BACKED SECURITIES. Asset-backed securities are created by the grouping
of certain governmental, government-related, and private loans, receivables,
and other lender assets into pools. Interests in these pools are sold as
individual securities. Payments from the asset pools may be divided into
several different tranches of debt securities, with some tranches entitled to
receive regular installments of principal and interest, other tranches
entitled to receive regular installments of interest, with principal payable
at maturity or upon specified call dates, and other tranches only entitled to
receive payments of principal and accrued interest at maturity or upon
specified call dates. Different tranches of securities will bear different
interest rates, which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without penalty
or premium, asset-backed securities are generally subject to higher prepayment
risks than most other types of debt instruments. For example, prepayment risks
on mortgage securities tend to increase during periods of declining mortgage
interest rates, because many borrowers refinance their mortgages to take
advantage of the more favorable rates. Depending upon market conditions, the
yield that the Fund receives from the reinvestment of such prepayments, or any
scheduled principal payments, may be lower than the yield on the original
mortgage security. As a consequence, mortgage securities may be a less
effective means of "locking in" interest rates than other types of debt
securities having the same stated maturity and may also have less potential
for capital appreciation. For certain types of asset pools, such as
collateralized mortgage obligations, prepayments may be allocated to one
tranche of securities ahead of other tranches, in order to reduce the risk of
prepayment for the other tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their
stated principal amount. Conversely, the prepayment of mortgage securities
purchased at a market discount from their stated principal amount will
accelerate the recognition of interest income by the Fund, which would be
taxed as ordinary income when distributed to shareholders.
The credit characteristics of asset-backed securities also differ in a number
of respects from those of traditional debt securities. The credit quality of
most asset-backed securities depends primarily upon the credit quality of the
assets underlying such securities, how well the entity issuing the securities
is insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement to such
securities.
NON-MORTGAGE RELATED ASSET-BACKED SECURITIES. The Fund may invest in non-
mortgage related asset-backed securities, including interests in pools of
receivables, such as credit card and accounts receivable and motor vehicle and
other installment purchase obligations and leases. These securities may be in
the form of pass-through instruments or asset-backed obligations. The
securities, all of which are issued by non-governmental entities and carry no
direct or indirect government guarantee, are structurally similar to
collateralized mortgage obligations and mortgage pass-through securities,
which are described below.
MORTGAGE-BACKED SECURITIES. The Fund may invest in various mortgage-backed
securities. These types of investments may include adjustable rate mortgage
securities, collateralized mortgage obligations, real estate mortgage
investment conduits, or other securities collateralized by or representing an
interest in real estate mortgages. Many mortgage-backed securities are issued
or guaranteed by government agencies.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through mortgage
securities representing interests in adjustable rather than fixed interest
rate mortgages. The ARMS in which the Fund invests are issued by the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC") and are actively traded. The underlying mortgages which
collateralize ARMS issued by GNMA are fully guaranteed by the Federal Housing
Administration or the Veterans Administration, while those collateralizing
ARMS issued by FHLMC or FNMA are typically conventional residential mortgages
conforming to strict underwriting, size and maturity constraints.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by single-
purpose, stand-alone finance subsidiaries or trusts of financial institutions,
government agencies, investment bankers, or companies related to the
construction industry. CMOs purchased by the Fund may be:
. collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government;
. collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by Government Securities; or
. securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S.
government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple-class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code of 1986, as
amended. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages.
Once REMIC status is elected and obtained, the entity is not subject to
federal income taxation. Instead, income is passed through the entity and is
taxed to the person or persons who hold interests in the REMIC. A REMIC
interest must consist of one or more classes of "regular interests," some of
which may offer adjustable rates of interest, and a single class of "residual
interests." To qualify as a REMIC, substantially all the assets of the entity
must be in assets directly or indirectly secured principally by real property.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued by
an institution having capital, surplus, and undivided profits over $100
million or insured by the Bank Insurance Fund or the Savings Association
Insurance Fund, both of which are administered by the Federal Deposit
Insurance Corporation. Bank Instruments may include Eurodollar Certificates of
Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar
Time Deposits ("ETDs"). Institutions issuing such instruments are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as the reserve requirements, loan limitations, examinations,
accounting, auditing, recordkeeping and the public availability of
information.
CREDIT FACILITIES. Demand notes are borrowing arrangements between a
corporation and an institutional lender payable upon demand by either
party. The notice period for demand typically ranges from one to seven
days, and the party may demand full or partial payment. Revolving credit
facilities are borrowing arrangements in which the lender agrees to make
loans up to a maximum amount upon demand by the borrower during a
specified term. As the borrower repays the loan, an amount equal to the
repayment may be borrowed again during the term of the facility. The Fund
generally acquires a participation interest in a revolving credit facility
from a bank or other financial institution. The terms of the participation
require the Fund to make a pro rata share of all loans extended to the
borrower and entitles the Fund to a pro rata share of all payments made by
the borrower. Demand notes and revolving facilities usually provide for
floating or variable rates of interest.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period following a demand by the Fund. The demand feature
may be issued by the issuer of the underlying securities, a dealer in the
securities or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security are treated as a form of credit
enhancement.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell Government Securities or other securities in which the Fund
may invest to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the original seller
does not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees, and will receive collateral in the form of cash or Government
Securities equal to at least 100% of the value of the portfolio securities
loaned at all times.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. In when-issued and delayed delivery transactions,
the Fund relies on the seller to complete the transaction. The seller's
failure to complete the transaction may cause the Fund to miss a price or
yield considered to be advantageous.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest in securities of foreign
issuers, such as ECDs, Yankee CDs, ETDs, and Yankee Bonds. Yankee Bonds are
U.S. dollar-denominated bonds issued and traded primarily in the United States
by foreign issuers. Securities of a foreign issuer may present greater risks
in the form of nationalization, confiscation, domestic marketability, or other
national or international restrictions. As a matter of practice, the Fund will
not invest in the securities of a foreign issuer if any such risk appears to
the investment adviser to be substantial.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 10% of
its total assets to secure such borrowings;
. lend any of its assets except portfolio securities up to one-third of
its total assets; or
. with respect to 75% of its total assets, invest more than 5% in
securities of any one issuer other than cash, cash items, or Government
Securities, and repurchase agreements collateralized by such securities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
. invest more than 10% of its total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
commercial paper issued under Section 4(2) of the Securities Act of 1933
and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees;
. invest more than 15% of its net assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days
after notice and certain restricted securities not determined by the
Trustees to be liquid; or
. invest more than 10% of its total assets in securities of other
investment companies.
THE BOULEVARD FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Trustees'
responsibilities between meetings of the Trustees.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Boulevard
Bank National Association, the Fund's investment adviser (the "Adviser" or
"Boulevard Bank"), subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the selection, purchase, and sale of portfolio instruments,
for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory
fee equal to 0.70% of the Fund's average daily net assets. The investment
advisory fee is accrued and paid daily. The Adviser has undertaken to
reimburse the Fund for operating expenses in excess of limitations
established by certain states. The Adviser may voluntarily choose to waive
a portion of its fee or reimburse other expenses of the Fund. The Adviser
can terminate such waiver or reimbursement policy at any time at its sole
discretion.
ADVISER'S BACKGROUND. Boulevard Bank, a national banking association,
formerly known as National Boulevard Bank of Chicago and Boulevard Bridge
Bank, has conducted operations since 1921. Boulevard Bank is a wholly-
owned subsidiary of Boulevard Bancorp, Inc., a multi-bank holding company
incorporated under the laws of the State of Delaware. While Boulevard
Bancorp, Inc., derives certain revenues and incurs certain expenses from
other operations, its income is
generated primarily from the operations of its bank subsidiaries, which
offer a broad range of financial services to customers located in the
greater Chicago metropolitan area. These services include all areas of
commercial banking and other services tailored for individual and
corporate customers. In addition, trust services and a wide variety of
services for employee benefit plans are provided.
Boulevard Bank has been managing investments for its trust clients since
its trust powers were established in 1957. As of December 31, 1993, the
Trust Division of Boulevard Bank had approximately $2.4 billion under
administration, of which it had investment discretion over approximately
$800 million. Boulevard Bank has been advising The Boulevard Funds since
December 1992. The Adviser has no prior experience in international
investments.
Scott Limper, a Vice President of Boulevard Bank, has been the portfolio
manager of the Fund since January 1, 1994. He has eleven years of experience,
all with Boulevard Bancorp. He received his Bachelor of Arts degree from
Western Illinois University. He is a member of the Association for Investment
Management and Research.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in
accordance with Rule 12b-1 promulgated under the Investment Company Act of
1940, the Fund may pay to the distributor an amount computed at an annual rate
of 0.25% of the Fund's average daily net assets to finance any activity which
is principally intended to result in the sale of shares subject to the Plan.
The Fund will not accrue or pay any distribution expenses pursuant to the Plan
until a separate class of shares has been created for certain institutional
investors.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed an expense limitation that the
distributor may, by notice to the Trust, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as may
reasonably be requested.
The distributor will pay such financial institutions a fee based upon shares
subject to the Plan and owned by their clients or customer. The schedules of
such fees and the basis upon which such fees will be paid will be determined
from time to time by the distributor.
The Fund's plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the
distributor, including amounts expended by the distributor in excess of
amounts received by it from the Fund, interest, carrying or other financing
charges in connection with excess amounts expended, or the distributor's
overhead expenses. However, the distributor may be able to recover such
amounts or may earn a profit from future payments made by the Fund under the
Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an underwriter
or distributor of most securities. In the event the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Trustees will consider appropriate changes in the
services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state laws.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include distributing prospectuses and other
information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of the Fund's shares.
Brokers, dealers, and administrators will receive fees from the distributor
based upon shares of the Fund owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net assets in
shareholder accounts of such clients or customers during the period for which
the brokers, dealers, and administrators provide services. Any fees paid for
these services by the distributor will be reimbursed by the Adviser and not
the Fund. Payments made here would be in addition to any payments that may be
made under the Plan.
ADMINISTRATION OF THE FUND
- -------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES. Federated Administrative Services, which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services provides these services at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE DAILY
FEE NET ASSETS OF THE TRUST
-------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 with respect to the Fund. Federated Administrative Services may
choose voluntarily to reimburse a portion of its fee at any time.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, SHAREHOLDER SERVICING AGENT, AND
PORTFOLIO ACCOUNTING SERVICES. Federated Services Company, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, is transfer agent for the
shares of the Fund, dividend disbursing agent for the Fund, and shareholder
servicing agent for the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio instruments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin,
Washington, D.C.
INDEPENDENT ACCOUNTANTS. The independent accountants for the Fund are Price
Waterhouse, Chicago, Illinois.
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. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling shares of the Fund
and other funds distributed by Federated Securities Corp. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other Fund documents for shareholders; registering the Trust, the Fund, and
shares of the Fund with federal and state securities authorities; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such non-recurring and
extraordinary items as may arise. However, the Adviser may voluntarily assume
some expenses and has, in addition, undertaken to reimburse the Fund, up to
the amount of the advisory fee, the amount by which operating expenses exceed
limitations imposed by certain states.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the value of all securities and other assets of the Fund, less
liabilities of the Fund, by the number of Fund shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
ACCOUNT ESTABLISHMENT
BY TELEPHONE. Open an account by calling Boulevard Bank toll-free at 1-800-
285-FUND. Information needed to establish the account will be taken over the
telephone. A signed new account form will be necessary to complete the account
establishment.
BY MAIL. Mail a new account form to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181. New account forms are available directly
from the Fund.
SHARE PURCHASES
Fund shares are sold on days which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Fund shares may be ordered by
telephone through procedures established with Boulevard Bank by calling 1-800-
285-FUND. An investor may also place an order in person through an account
representative at Boulevard Bank or any of its affiliates. Texas residents
must purchase shares of the Fund through Federated Securities Corp. at 1-800-
618-8573. In connection with the sale of shares, the distributor may, from
time to time, offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.
BY TELEPHONE. To place an order to purchase Fund shares, call Boulevard Bank
toll-free at 1-800-285-FUND. Your purchase order will be taken directly over
the telephone. The order must be placed by 3:00 p.m. (Central time) for shares
to be purchased at that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to Boulevard
Managed Income Fund.
PAYMENT BY CHECK. Mail to Boulevard Managed Income Fund, P.O. Box 8609,
Boston, Massachusetts 02105. Orders by check are considered received after
payment by check is converted into federal funds. This is generally the next
business day after the check is received.
PAYMENT BY WIRE. Instruct your financial institution to wire your funds as
follows: State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Boulevard Managed
Income Fund; Title or Name of Account; and Wire Order Number and/or Account
Number.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
may be in any amounts of $50 or more. The Fund may waive the initial minimum
investment for employees of Boulevard Bancorp, Inc., and its affiliates from
time to time. The Fund may also waive the initial and subsequent minimum
investment for any payroll deduction plan established with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
PUBLIC OFFERING NET AMOUNT
AMOUNT OF TRANSACTION PRICE INVESTED
- --------------------- --------------- ---------------
<S> <C> <C>
Less than $100,000.............................. 3.00% 3.09%
$100,000 but less than $500,000................. 2.00% 2.04%
$500,000 but less than $1 million............... 1.00% 1.01%
$1 million or more.............................. 0.00% 0.00%
</TABLE>
The net asset value is determined at 3:00 p.m. (Central time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by: the Trust Divisions of Boulevard Bank and
its affiliates for funds which are held in a fiduciary, agency, custodial, or
similar capacity; Trustees and employees of the Fund, Boulevard Bank, or
Federated Securities Corp., or each of their affiliates, and their spouses and
children under 21; any bank or investment dealer who has a sales agreement
with Federated Securities Corp. with regard to the Fund; or anyone who
participates in a payroll deduction plan established with the Fund. Once a
shareholder has purchased shares at net asset value, no sales charge will be
imposed on subsequent purchases, if any.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, Boulevard Bank or
any authorized broker/dealer will normally receive up to 85% of the applicable
sales charge. Any portion of the sales charge which is not paid to Boulevard
Bank or registered broker/dealers will be retained by the distributor.
However, the distributor, in its sole discretion, may uniformly offer to pay
to all dealers selling shares of the Fund additional amounts, all or a portion
of which may be paid from the sales charge it normally retains or from any
other source available to it. Such additional payments, if accepted by the
dealer, may be in the form of cash or promotional incentives and will be
predicated upon the amount of shares of the Fund or other funds of the Trust
sold by the dealer.
The sales charge for shares sold other than through Boulevard Bank or
registered broker/dealers will be retained by the distributor. The distributor
may pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the banks' customers in
connection with the initiation of customer accounts and purchases of Fund
shares.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinvestment privilege; or
. concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age
21 when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchase still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 2.00%, not 3.00%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
purchase is made that Fund shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Trust over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter includes
a provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
up to 3.0% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period, unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate number of escrowed
shares may be redeemed at the then-current redemption price (which could be
less than the purchase price for such shares) in order to realize the
difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares,
but if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90
days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest all or a part of
the redemption proceeds at the next-determined net asset value without any
sales charge. Federated Securities Corp. must be notified by the shareholder
in writing or by Boulevard Bank of the reinvestment in order to eliminate a
sales charge. If the shareholder redeems his shares in the Fund, there may be
tax consequences. Shareholders contemplating such transactions should consult
their own tax adviser.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or
more funds in the Trust, the purchase price of which includes a sales charge.
For example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.
To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by Boulevard Bank at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund shares. The Fund reserves the right to determine
the acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values its
assets. Investors wishing to exchange securities should first contact Boulevard
Bank.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares at the net asset value next determined after an
order is received by Federated Securities Corp., plus the applicable sales
charge. A shareholder may apply for participation in this program through
Boulevard Bank.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or
for Individual Retirement Accounts. For further details, including prototype
retirement plans, contact Boulevard Bank at 1-800-285-FUND and consult a tax
adviser.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued
unless requested by contacting Boulevard Bank in writing.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared and paid monthly. Capital gains realized by the Fund, if
any, will be distributed at least once every 12 months. Dividends and capital
gains will be automatically reinvested in additional shares of the Fund on
payment dates at the ex-dividend date's net asset value without a sales charge,
unless cash payments are requested by writing to the Fund or Boulevard Bank.
Dividends and capital gains can also be reinvested in shares of any other fund
comprising The Boulevard Funds.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange shares of the Fund for shares of the other funds in
the Trust. In addition, shares of the Fund may also be exchanged for certain
other funds distributed by Federated Securities Corp. that are not advised by
Boulevard Bank ("Federated Funds"). For further information on the availability
of Federated Funds for exchanges, please call Boulevard Bank at 1-800-285-FUND.
Shares of funds with a sales charge may be exchanged at net asset value for
shares of other funds with an equal sales charge or no sales charge. Shares of
funds with a sales charge may be exchanged for shares of funds with a higher
sales charge at net asset value, plus the additional sales charge. Shares of
funds with no sales charge, whether acquired by direct purchase, reinvestment
of dividends on such shares, or otherwise, may be exchanged for shares of funds
with a sales charge at net asset value, plus the applicable sales charge.
When an exchange is made from a fund with a sales charge to a fund with no
sales charge, the shares exchanged and additional shares which have been
purchased by reinvesting dividends or capital gains on such shares retain the
character of the exchanged shares for purposes of exercising further exchange
privileges; thus, an exchange of such shares for shares of a fund with a sales
charge would be at net asset value.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the fund into which an exchange is to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of
proper instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The exchange privilege may be terminated at any time. Shareholders will be
notified of the termination of the exchange privilege. A shareholder may obtain
further information on the exchange privilege by calling Boulevard Bank at 1-
800-285-FUND.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to Boulevard Bank at 1-800-285-FUND. Shares may
be exchanged by telephone only between fund accounts having identical
shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must
be forwarded to the transfer agent by Boulevard Bank and deposited to the
shareholder's mutual fund account before being exchanged.
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. Authorization forms and information regarding this service
are available from Boulevard Bank. Telephone exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 2:00 p.m. (Central
time) for shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders may have difficulty
in making exchanges by telephone through Boulevard Bank during times of
drastic economic or market changes. If a shareholder cannot contact Boulevard
Bank by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to The Boulevard Funds, 410 North Michigan
Avenue, Chicago, Illinois 60611-4181.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Boulevard
Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests cannot be
executed on days on which the New York Stock Exchange or the Federal Reserve
Wire System is closed. Requests for redemption can be made by telephone or by
mail.
THROUGH BOULEVARD BANK
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling Boulevard
Bank toll-free at 1-800-285-FUND. For orders received before 3:00 p.m.
(Central time), proceeds will normally be wired the next day to the
shareholder's account at Boulevard Bank or a check will be sent to the address
of record. In no event will proceeds be sent more than seven days after a
proper request for redemption has been received.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Boulevard Bank. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be utilized, such as a written request to
Boulevard Bank.
If at any time the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders will be notified.
BY MAIL. Any shareholder may redeem Fund shares by sending a written request
to Boulevard Bank at 410 North Michigan Avenue, Chicago, Illinois 60611-4181.
The written request should include the shareholder's name, the Fund name, the
account number, and the share or dollar amount requested, and should be signed
exactly as the shares are registered. If share certificates have been issued,
they must be properly endorsed and should be sent by registered or certified
mail with the written request. Shareholders should call Boulevard Bank at 1-
800-285-FUND for assistance in redeeming by mail.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
. a savings bank or savings and loan association whose deposits are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund, which are administered by or the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and Federated Services Company have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Fund and Federated Services Company
reserve the right to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares of the Fund are purchased by check, or through the Automated
Clearing House, the proceeds from the redemption of those shares are not
available, and the shares may not be exchanged, until the transfer agent is
reasonably certain that the purchase check has cleared, which could take up to
10 calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund
shares are redeemed to provide for periodic withdrawal payments in an amount
directed by the shareholder. Depending upon the amount of the withdrawal
payments and the amount of dividends paid and capital gains distributions with
respect to Fund shares, and the fluctuation of the Fund's net asset value,
redemptions may reduce, and eventually deplete, the shareholder's investment
in the Fund. For this reason, payments under this program should not be
considered as yield or income on the shareholder's investment in the Fund. The
minimum withdrawal amount is $50 per month. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may obtain more information about this program by calling
Boulevard Bank at 1-800-285-FUND. Due to the fact that shares are sold with a
sales charge, it is not advisable for shareholders to be purchasing shares
while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders of the Fund for vote. All shares of
each fund in the Trust have equal voting rights, except that in matters
affecting only a particular fund, only shareholders of that fund are entitled
to vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or Fund's operation and for the election of
Trustees under certain circumstances. As of January 6, 1994, First National
Bank of Des Plaines (a subsidiary of Boulevard Bancorp, Inc.) acting in
various capacities for numerous accounts, was the owner of record of 4,979,783
shares (67.52%) of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund, and be able to affect the outcome of certain
matters presented for a vote of shareholders.
Trustees may be removed by a two-thirds vote of a number of the Trustees or by
a two-thirds vote of a number of the shareholders at a special meeting. A
special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of all
shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from its assets.
EFFECT OF BANKING LAWS
- -------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Bank Holding Company Act
of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling, or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities in
general. However, such banking laws and regulations do not prohibit such a
holding company or bank or non-bank affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of their
customer. The Fund's Adviser, Boulevard Bank, is subject to such banking laws
and regulations.
Boulevard Bank believes, after consultation with counsel, that its performance
of the investment advisory services for the Fund, as contemplated by the
advisory agreement with the Trust, is not prohibited by the Glass-Steagall Act
as it has been interpreted by the courts and federal banking agencies or by
other banking laws and regulations applicable to national banks. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of present or future
statutes and regulations, could prevent Boulevard Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
In such event, changes in the operation of the Fund may occur, including the
possible alteration or termination of any automatic or other Fund share
investment and redemption services that are being provided by Boulevard Bank,
and the Trustees would consider alternative investment advisers and other means
of continuing available investment services. It is not expected that existing
Fund shareholders would suffer any adverse financial consequences (if another
adviser with equivalent abilities to Boulevard Bank is found) as a result of
any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other funds, if any, will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax adviser regarding the status of
their accounts under federal, state, and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income actually
earned by the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if reduced or excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
BOULEVARD MANAGED INCOME FUND PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ------------------------ ----------
<C> <S> <C>
CORPORATE BONDS--88.9%
-----------------------------------
AEROSPACE--1.0%
------------------------
Lockheed Corp., 4.57%, $ 746,798
$ 750,000 4/3/95 ----------
------------------------
AUTO/RENTAL--0.7%
------------------------
Hertz, Corp., 8.00%, 519,520
500,000 4/1/95 ----------
------------------------
BANKING--10.9%
------------------------
500,000 Citicorp, 8.84%, 6/17/94 512,180
------------------------
Citicorp, 8.63%,
1,000,000 12/15/95 1,036,750
------------------------
Citicorp, 8.625%,
500,000 11/15/94 518,875
------------------------
Credit Suisse, 9.50%,
600,000 7/1/94 617,880
------------------------
Fleet/Norstar Financial
1,000,000 Group, 10.20%, 9/15/95 1,087,810
------------------------
Great Western Bank of
Beverly Hills, 9.80%,
1,700,000 2/15/94 1,717,833
------------------------
Mellon Bank, N.A.,
500,000 8.15%, 5/16/94 508,580
------------------------
Wells Fargo & Co., 2,055,020
2,000,000 7.63%, 10/1/94 ----------
------------------------
Total 8,054,928
------------------------ ----------
BUSINESS CREDIT--6.2%
------------------------
CIT Group Holdings,
800,000 Inc., 8.625%, 1/1/94 802,988
------------------------
International Lease &
Finance Corp., 5.50%,
500,000 6/20/94 504,445
------------------------
International Lease &
Finance Corp., 6.50%,
700,000 4/1/94 704,760
------------------------
International Lease &
Finance Corp., 7.00%,
500,000 11/7/94 511,025
------------------------
U.S. West Financial
Services, Inc., 8.55%,
485,000 12/1/93 485,000
------------------------
Xerox Credit Corp.,
500,000 9.50%, 11/1/94 519,590
------------------------
Xerox Credit Corp., 1,005,650
1,000,000 5.375%, 7/15/95 ----------
------------------------
Total 4,533,458
------------------------ ----------
</TABLE>
BOULEVARD MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ------------------------ ----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
-----------------------------------
CHEMICALS--1.7%
------------------------
ICI Wilmington Inc.,
$ 500,000 7.83%, 5/9/95 $ 520,720
------------------------
Monsanto Co., 9.45%, 751,563
750,000 12/15/93 ----------
------------------------
Total 1,272,283
------------------------ ----------
COMPUTERS--2.2%
------------------------
1,000,000 Comdisco, 6.50%, 6/15/94 1,009,970
------------------------
Intel Overseas, Corp., 566,589
608,000 0.00%, 5/15/95 ----------
------------------------
Total 1,576,559
------------------------ ----------
CONSTRUCTION--0.3%
------------------------
Caterpillar Inc., 200,000
200,000 9.375%, 12/1/93 ----------
------------------------
DIVERSIFIED--1.8%
------------------------
Textron, Inc., 10.20%,
500,000 9/1/94 517,665
------------------------
Tenneco Inc., 9.625%, 782,948
750,000 11/15/94 ----------
------------------------
Total 1,300,613
------------------------ ----------
FINANCE--1.4%
------------------------
Heller Financial, Inc., 1,026,920
1,000,000 6.50%, 11/15/95 ----------
------------------------
FINANCE-LEASING--1.4%
------------------------
GATX Leasing, Corp., 1,028,580
1,000,000 9.90%, 6/15/94 ----------
------------------------
FINANCE-RECEIVABLES--
1.4%
------------------------
IBM Credit, Corp., 1,004,890
1,000,000 5.13%, 8/11/95 ----------
------------------------
FOOD & BEVERAGE--2.5%
------------------------
ConAgra, Inc., 9.19%,
1,000,000 6/30/95 1,064,300
------------------------
Wendy's International, 816,083
750,000 Inc., 12.125%, 4/1/95 ----------
------------------------
Total 1,880,383
------------------------ ----------
GOVERNMENT-AGENCY--1.3%
------------------------
Federal Home Loan
Mortgage, Corp., 4.75%, 991,370
1,000,000 1/15/2001 ----------
------------------------
</TABLE>
BOULEVARD MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------------------------------------------- ----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------
HEALTHCARE--0.7%
-----------------------------------------------
$ 500,000 Baxter International, 8.20%, 4/1/95 $ 521,525
----------------------------------------------- ----------
INSURANCE--3.0%
-----------------------------------------------
725,000 AON Corp., 7.50%, 2/1/94 728,850
-----------------------------------------------
1,425,000 Provident Life Capital Corp., 9.65%, 12/1/94 1,492,160
----------------------------------------------- ----------
Total 2,221,010
----------------------------------------------- ----------
OIL & GAS--4.7%
-----------------------------------------------
600,000 Ashland Oil Co., 9.27%, 4/15/94 609,570
-----------------------------------------------
500,000 Ashland Oil Co., 9.875%, 9/1/95 536,015
-----------------------------------------------
500,000 Atlantic Richfield Co., 10.375%, 7/15/95 545,890
-----------------------------------------------
725,000 Occidental Petroleum, Corp., 5.37%, 9/11/95 730,300
-----------------------------------------------
275,000 Union Oil Co. of California, 9.75%, 3/1/94 278,303
-----------------------------------------------
780,000 Union Oil Co. of California, 8.50%, 4/1/94 790,226
----------------------------------------------- ----------
Total 3,490,304
----------------------------------------------- ----------
PAPER PRODUCTS--0.7%
-----------------------------------------------
450,000 International Paper, Co., 9.625%, 10/15/95 486,747
----------------------------------------------- ----------
PERSONAL CREDIT--14.7%
-----------------------------------------------
500,000 American General Finance Corp., 7.30%, 10/16/95 523,285
-----------------------------------------------
200,000 American General Finance Corp., 9.25%, 7/1/94 205,470
-----------------------------------------------
750,000 American General Finance Corp., 9.50%, 12/15/94 786,870
-----------------------------------------------
600,000 Beneficial Corp., 10.20%, 3/15/94 611,448
-----------------------------------------------
1,000,000 Beneficial Corp., 6.06%, 6/30/95 1,020,540
-----------------------------------------------
500,000 Commercial Credit Group, Inc., 6.95%, 10/1/94 510,225
-----------------------------------------------
350,000 Commercial Credit Group, Inc., 8.45%, 2/1/94 352,216
-----------------------------------------------
1,000,000 Discover Credit Corp., 6.30%, 5/9/94 1,006,560
-----------------------------------------------
500,000 Discover Credit Corp., 6.68%, 5/15/95 511,225
-----------------------------------------------
1,000,000 General Motors Acceptance Corp., 9.45%, 5/15/94 1,023,350
-----------------------------------------------
1,000,000 General Motors Acceptance Corp., 8.00%, 4/1/94 1,010,820
-----------------------------------------------
</TABLE>
BOULEVARD MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
------------------------------------------------------
PERSONAL CREDIT--CONTINUED
-------------------------------------------
$ 500,000 Household Finance Corp., 9.25%, 4/1/95 $ 519,200
-------------------------------------------
200,000 Household Finance Corp., 8.75%, 3/15/94 202,388
-------------------------------------------
300,000 ITT Financial Corp., 9.38%, 1/15/94 302,086
-------------------------------------------
1,000,000 ITT Financial Corp., 7.125%, 10/1/94 1,020,800
-------------------------------------------
500,000 Nordstrom Credit, Inc., 8.75%, 3/20/95 523,690
-------------------------------------------
150,000 Nordstrom Credit, Inc., 8.65%, 12/7/93 150,115
-------------------------------------------
500,000 Primerica Corp., 8.60%, 3/15/94 505,818
------------------------------------------- -----------
Total 10,786,106
------------------------------------------- -----------
PHOTOGRAPH EQUIPMENT--2.0%
-------------------------------------------
750,000 Eastman Kodak Co., 10.05%, 3/15/94 761,558
-------------------------------------------
700,000 Eastman Kodak Co., 9.2%, 1/15/95 736,575
------------------------------------------- -----------
Total 1,498,133
------------------------------------------- -----------
RAILWAYS--0.8%
-------------------------------------------
300,000 Southern Railway Co., 8.00%, 3/15/94 303,828
-------------------------------------------
250,000 Union Pacific Corp., 9.16%, 9/25/95 267,708
------------------------------------------- -----------
Total 571,536
------------------------------------------- -----------
RETAIL--4.8%
-------------------------------------------
Great Atlantic & Pacific Tea, Inc., 8.125%,
1,000,000 1/15/94 1,004,110
-------------------------------------------
500,000 Sears Roebuck & Co., 8.19%, 7/20/94 513,285
-------------------------------------------
500,000 Sears Roebuck & Co., 9.05%, 6/13/94 510,525
-------------------------------------------
750,000 Super Value Stores, Inc., 9.375%, 8/15/94 776,985
-------------------------------------------
750,000 Super Value Stores, Inc., 5.875%, 11/15/95 767,085
------------------------------------------- -----------
Total 3,571,990
------------------------------------------- -----------
</TABLE>
BOULEVARD MANAGED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------------------------------------------- ----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------
SECURITY BROKERS--9.8%
-----------------------------------------------
$1,170,000 Goldman Sachs & Co., 7.00%, 11/29/94 $1,201,590
-----------------------------------------------
550,000 Merrill Lynch & Co., 8.77%, 2/15/94 554,945
-----------------------------------------------
1,000,000 Paine Webber Group, Inc., 9.90%, 6/29/94 1,030,670
-----------------------------------------------
1,000,000 Salomon Inc., 4.60%, 1/15/95 996,130
-----------------------------------------------
600,000 Salomon Inc., 9.07%, 3/15/94 606,984
-----------------------------------------------
200,000 Salomon Inc., 8.40%, 4/15/94 202,778
-----------------------------------------------
1,000,000 Salomon Inc., 4.80%, 5/15/95 993,560
-----------------------------------------------
1,000,000 Shearson Lehman Brothers, Inc., 6.00%, 12/30/94 1,012,390
-----------------------------------------------
615,000 Shearson Lehman Hutton, Inc., 12.50%, 10/15/94 654,747
----------------------------------------------- ----------
Total 7,253,794
----------------------------------------------- ----------
TOBACCO--2.9%
-----------------------------------------------
400,000 American Brands, Inc., 7.84%, 5/24/94 405,980
-----------------------------------------------
250,000 Philip Morris Cos., Inc., 7.625%, 2/15/94 251,760
-----------------------------------------------
500,000 Philip Morris Cos., Inc., 8.60%, 12/8/93 500,425
-----------------------------------------------
1,000,000 Philip Morris Cos., Inc., 6.25%, 6/5/95 1,019,710
----------------------------------------------- ----------
Total 2,177,875
----------------------------------------------- ----------
UTILITIES--12.0%
-----------------------------------------------
1,000,000 Houston Light & Power Co., 8.625%, 1/15/96 1,058,740
-----------------------------------------------
1,150,000 Jersey Central Power & Light, 8.70%, 9/20/94 1,189,330
-----------------------------------------------
1,000,000 Mississippi Power & Light Co., 4.625%, 3/1/95 995,240
-----------------------------------------------
New York State Electric & Gas Corp., 8.375%,
1,000,000 8/15/94 1,027,870
-----------------------------------------------
1,050,000 Niagara Mohawk Power Corp., 8.88%, 8/1/94 1,079,672
-----------------------------------------------
700,000 Pacificorp, 8.41%, 2/1/95 727,460
-----------------------------------------------
725,000 Pacific Gas & Electric Co., 4.50%, 6/1/96 716,074
-----------------------------------------------
500,000 Southern Natural Gas Co., 9.625%, 6/15/94 513,505
-----------------------------------------------
500,000 United Illuminating Co., 7.62%, 9/12/94 508,510
-----------------------------------------------
</TABLE>
BOULEVARD MANAGED INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ---------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
----------------------------------------------------------
UTILITIES--CONTINUED
----------------------------------------------
$ 1,000,000 Washington Gas & Lighting Co., 7.01%, 9/26/94 $ 1,019,250
---------------------------------------------- -----------
Total 8,835,651
---------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST 65,550,973
$66,941,858) -----------
----------------------------------------------
FLOATING RATE NOTES--6.8%
----------------------------------------------------------
AEROSPACE--1.4%
----------------------------------------------
1,000,000 Lockheed Corp., 3.95%, 5/11/95 999,200
---------------------------------------------- -----------
BANKING--1.4%
----------------------------------------------
1,000,000 Chemical Banking Corp., 3.78%, 2/15/95 999,700
---------------------------------------------- -----------
GOVERNMENT AGENCY--2.7%
----------------------------------------------
1,000,000 Federal National Mortgage Association, 3.40%,
4/16/95 1,000,710
----------------------------------------------
1,000,000 Federal Home Loan Bank, REMIC, 4.00%, 8/24/98 999,380
---------------------------------------------- -----------
Total 2,000,090
---------------------------------------------- -----------
SECURITY BROKERS--1.3%
----------------------------------------------
1,000,000 Shearson Lehman Brothers, Inc., 4.13%, 5/17/96 998,440
---------------------------------------------- -----------
TOTAL FLOATING RATE NOTES (IDENTIFIED COST 4,997,430
$4,999,180) -----------
----------------------------------------------
*REPURCHASE AGREEMENT--3.4%
----------------------------------------------------------
2,516,568 Morgan Stanley & Co. Repo., 3.18%, dated
11/30/93,
----------------------------------------------
due 12/01/93 (at amortized cost) (Note 2A) 2,516,568
---------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $73,064,971+
$74,457,606) -----------
----------------------------------------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations, based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $74,457,606. The
net unrealized depreciation of investments on a federal income tax basis
amounts to $1,392,635 which is comprised of $1,530 appreciation and
$1,394,165 depreciation at November 30, 1993.
The following abbreviation is used in this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
Note: The categories of investments are shown as a percentage of net assets
($73,748,278) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD MANAGED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------
Investments in securities, at value (Notes 2A and
2B) (identified and tax cost; $74,457,606) $73,064,971
- -------------------------------------------------
Cash 81,900
- -------------------------------------------------
Interest and dividend receivable 1,311,295
- -------------------------------------------------
Receivable for Fund shares sold 10,263
- -------------------------------------------------
Deferred expenses (Note 2F) 31,844
- ------------------------------------------------- -----------
Total assets 74,500,273
- -------------------------------------------------
LIABILITIES:
- -------------------------------------------------
Payable for investments purchased $528,556
- ---------------------------------------
Payable for Fund shares redeemed 110,766
- ---------------------------------------
Accrual expenses and other liabilities 112,673
- --------------------------------------- ---------
Total liabilities 751,995
- ------------------------------------------------- -----------
NET ASSETS for 7,542,897 shares of beneficial in-
terest outstanding $73,748,278
- ------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------
Paid in capital $75,536,642
- -------------------------------------------------
Net unrealized depreciation of investments (1,392,635)
- -------------------------------------------------
Accumulated net realized loss on investments (446,246)
- -------------------------------------------------
Undistributed net investment income 50,517
- ------------------------------------------------- -----------
Total $73,748,278
- ------------------------------------------------- -----------
NET ASSET VALUE, and Redemption Price Per Share
($73,748,278 / 7,542,897 shares of beneficial
interest outstanding) $9.78
- ------------------------------------------------- -----------
Computation of Offering Price*:
Offering Price Per Share (100/97 of $9.78) $10.08
- ------------------------------------------------- -----------
</TABLE>
* No sales charges were imposed on purchases of shares prior to November 30,
1993 by deposit or credit customers of Boulevard Bank or its affiliates or
spouses and children under 21 of such customers. See "What Shares Cost" in
the Prospectus.
(See Notes which are an integral part of the Financial Statements).
BOULEVARD MANAGED INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Interest Income (Note 2C) $4,154,291
- ------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------
Investment advisory fee (Note 5) $396,467
- ---------------------------------------------------------
Administrative personnel and services fee (Note 5) 84,957
- ---------------------------------------------------------
Transfer and dividend disbursing agent fees and expense
(Note 5) 20,367
- ---------------------------------------------------------
Custodian expenses (Note 5) 18,262
- ---------------------------------------------------------
Recordkeeper fees (Note 5) 57,058
- ---------------------------------------------------------
Legal fees 3,271
- ---------------------------------------------------------
Printing and postage 10,212
- ---------------------------------------------------------
Insurance premiums 6,645
- ---------------------------------------------------------
Miscellaneous 7,365
- --------------------------------------------------------- --------
Total expenses 604,604
- ---------------------------------------------------------
DEDUCT--
- ---------------------------------------------------------
Waiver of investment advisory fee (Note 5) $198,233
- -----------------------------------------------
Waiver of administrative personnel and service
fees (Note 5) 40,782 239,015
- ----------------------------------------------- --------- --------
NET EXPENSES 365,589
- ------------------------------------------------------------------ ----------
NET INVESTMENT INCOME 3,788,702
- ------------------------------------------------------------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (446,246)
- ------------------------------------------------------------------
Net change in unrealized depreciation on investments (1,392,635)
- ------------------------------------------------------------------ ----------
Net realized and unrealized loss on investments (1,838,881)
- ------------------------------------------------------------------ ----------
Change in net assets resulting from operations $1,949,821
- ------------------------------------------------------------------ ----------
</TABLE>
*For the period from November 17, 1992 (start of business) to November 30,
1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD MANAGED INCOME FUND STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 3,788,702
- ---------------------------------------------------------------
Net realized loss on investments ($446,246 net loss as computed
for federal tax purposes) (Note 2D) (446,246)
- ---------------------------------------------------------------
Change in net unrealized depreciation of investments (1,392,635)
- --------------------------------------------------------------- -----------
Change in net assets from operations 1,949,821
- --------------------------------------------------------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (3,738,185)
- --------------------------------------------------------------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- ---------------------------------------------------------------
Proceeds from sale of shares 87,518,079
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive
payment of dividends in Fund shares 2,847,794
- ---------------------------------------------------------------
Cost of shares redeemed (14,929,231)
- --------------------------------------------------------------- -----------
Change in net assets from Fund share transactions 75,436,642
- --------------------------------------------------------------- -----------
Change in net assets 73,648,278
- ---------------------------------------------------------------
NET ASSETS--
- ---------------------------------------------------------------
Beginning of period 100,000
- --------------------------------------------------------------- -----------
End of period (including undistributed net investment income of
$50,517) $73,748,278
- --------------------------------------------------------------- -----------
</TABLE>
*For the period from November 17, 1992 (start of business) to November 30,
1993.
(See Notes which are an integral part of the Financial Statements)
BOULEVARD MANAGED INCOME FUND NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- -------------------------------------------------------------------------------
(1) ORGANIZATION
The Boulevard Funds (the "Trust") are registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
financial statements included herein present only those of the Boulevard
Managed Income Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio of the
Boulevard Funds are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Corporate bonds (and other fixed income
securities/asset backed securities) are valued on the last sale price on a
national securities exchange, if available. Otherwise, they are valued at
the mean between the bid and asked prices provided by independent pricing
services. Short-term obligations are valued at the mean between bid and
asked prices as furnished by an independent pricing service. However,
short-term obligations with maturities of sixty days or less at the time of
purchase are valued at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession of, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium) on short-term
obligations, and interest earned on all other debt securities including
original issue discount as required by the Internal Revenue Code
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal tax is necessary.
At November 30, 1993, the Fund, for federal tax purposes, had a capital
loss carryforward of $446,246 which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire in 2001.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to its
initial registration, excluding the initial expense of registering the
shares, have been deferred and are being amortized using the straight-line
method over a period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on the payment date at the ex-
dividend date net asset value without a sales charge, unless cash payments are
requested. Distributions of any net realized capital gains will be made at
least once every twelve months. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1993*
------------------
<S> <C>
Shares outstanding, beginning of period 10,000
- ---------------------------------------------------------
Shares sold 8,749,204
- ---------------------------------------------------------
Shares issued to shareholders electing to receive payment
of dividends in Fund shares 287,777
- ---------------------------------------------------------
Shares redeemed (1,504,084)
- --------------------------------------------------------- ----------
Shares outstanding, end of period 7,542,897
- --------------------------------------------------------- ----------
</TABLE>
*For the period from November 17, 1992 (start of business) to November 30,
1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Boulevard Bank National Association, the Fund's investment adviser (the
"Adviser" or "Boulevard Bank"), receives for its services an annual investment
advisory fee equal to 0.70 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion. For the period ended November 30,
1993, the Adviser earned an investment advisory fee of $396,467, of which
$198,233 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services, and receives for its services an annual
fee equal to .150 of 1% on the first $250 million of average aggregate daily
net assets of the Trust; .125 of 1% on the next $250 million; .100 of 1% on the
next $250 million; and .075 of 1% on average aggregate daily net assets in
excess of $750 million. For the period ended November 30, 1993, FAS earned
$84,957, of which $40,782 was voluntarily waived. The administrative fee
received during any fiscal year shall aggregate at least $50,000 with respect
to the Fund. FAS may choose voluntarily to reimburse a portion of its fee at
any time.
State Street Bank and Trust Company is the custodian for the securities and
cash of the Fund. For the period ended November 30, 1993, the custodian earned
$18,262.
Federated Services Company is the transfer and dividend disbursing agent for
the Fund. It also provides certain accounting and recordkeeping services. For
the period ended November 30, 1993, Federated Services Company earned $20,367,
for transfer and dividend disbursing agent fees and expenses, and $57,058, for
recordkeeping fees.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Fund will compensate Federated
Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund, for fees it paid which relate to
the distribution and administration of the Fund. The Plan provides that the
Fund will incur distribution expenses up to .25 of 1% of the average daily net
assets of the Fund annually to pay commissions, maintenance fees and to
compensate FSC. The Fund will not accrue or pay any distribution expenses
pursuant to the Plan until a separate class of shares has been created for
certain institutional investors.
Certain of the Officers and Trustees of the Fund are Officers and Directors of
the above Corporations.
Organization expenses of $48,249 were borne initially by FAS. The Fund has
agreed to reimburse the Administrator for the organizational expenses initially
borne by the Administrator during the five year period following the date the
Trust's Portfolio became effective. For the period ended November 30, 1993,
$4,000 of costs were incurred pursuant to this agreement.
As of November 30, 1993, the following shareholder of record owned 5% or more
of the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.) Des Plaines, IL owned approximately
6,544,261 shares (86.76%).
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
period ended November 30, 1993, were as follows:
<TABLE>
<S> <C>
PURCHASES-- $93,086,367
- ----------- -----------
SALES-- $20,711,859
- ----------- -----------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Boulevard Managed Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights (included on page 2) present
fairly, in all material respects, the financial position of Boulevard Managed
Income Fund, (one of the portfolios of The Boulevard Funds, hereafter referred
to as the "Fund") at November 30, 1993, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at November 30, 1993, by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chicago, Illinois
January 20, 1994
<PAGE>
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ADDRESSES
- --------------------------------------------------------------------------------
Boulevard Managed Federated Investors Tower
Income Fund
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Boulevard Bank NationalAssociation 410 North Michigan Avenue
Chicago, Illinois 60611-4181
- --------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8609
Trust Company Boston, Massachusetts 02266-
8609
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing Agent, and
Portfolio Accounting Services
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
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Independent Accountants
Price Waterhouse
200 East Randolph Drive
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
BOULEVARD MANAGED INCOME FUND
PROSPECTUS
A Diversified Portfolio of The
Boulevard Funds,
an Open-End Management Investment
Company
Prospectus dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
-----------------------------------
Investment Adviser
410 NORTH MICHIGAN AVENUE
CHICAGO, IL 60611-4181
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3120815A (1/94)
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
BOULEVARD MANAGED INCOME FUND
(A PORTFOLIO OF THE BOULEVARD FUNDS)
--------------------------------------------------------------------
This Statement of Additional Information should be read with the prospec-
tus of the Boulevard Managed Income Fund (the "Fund") dated January 31,
1994. This Statement is not a prospectus itself. To receive a copy of the
prospectus, call Boulevard Bank National Association toll-free at 1-800-
285-FUND.
Statement dated January 31, 1994
BOULEVARD BANK NATIONAL ASSOCIATION
----------------------------------
Investment Adviser
FEDERATED SECURITIES CORP.
-------------------------
Distributor
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Types of Investments 1
U.S. Government Obligations 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Lending of Portfolio Securities 2
Collateralized Mortgage Obligations
("CMOs") 2
Resets of Interest Rates 2
Caps and Floors 3
Restricted and Illiquid Securities 3
Portfolio Turnover 3
Investment Limitations 3
THE BOULEVARD FUNDS MANAGEMENT 5
- --------------------------------------
Officers and Trustees 5
The Funds 8
Fund Ownership 8
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 8
- --------------------------------------
Adviser to the Fund 8
Advisory Fees 8
ADMINISTRATIVE SERVICES 9
- --------------------------------------
BROKERAGE TRANSACTIONS 9
- --------------------------------------
PURCHASING SHARES 9
- --------------------------------------
Distribution Plan 9
Administrative Arrangements 10
Conversion to Federal Funds 10
Exchanging Securities for
Fund Shares 10
DETERMINING NET ASSET VALUE 10
- --------------------------------------
Determining Value of Securities 11
EXCHANGE PRIVILEGE 11
- --------------------------------------
Requirements for Exchanging Shares 11
REDEEMING SHARES 11
- --------------------------------------
Redemption in Kind 11
TAX STATUS 11
- --------------------------------------
The Fund's Tax Status 11
Shareholders' Tax Status 12
Capital Gains 12
TOTAL RETURN 12
- --------------------------------------
YIELD 12
- --------------------------------------
PERFORMANCE COMPARISONS 12
- --------------------------------------
APPENDIX 13
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Boulevard Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 3, 1992. The Declaration of Trust permits the Trust to offer
separate series and classes of shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income while attempting
to provide a high degree of principal stability. The Fund will pursue this
objective by investing primarily in a diversified portfolio of debt securities
as described in the prospectus under "Acceptable Investments." The investment
objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in investment-grade bonds (as described in the prospectus).
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities. Some of these securities are
backed by the full faith and credit of the U.S. Treasury.
No assurances can be given that the U.S. government will provide financial
support to certain issuing agencies or instrumentalities since it is not
obligated to do so. Securities issued by such agencies and instrumentalities
are supported by:
. the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Federal Farm Credit System;
. Federal Home Loan Banks System;
. Federal National Mortgage Association;
. Student Loan Marketing Association; and
. Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in when-
issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of its total assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Board of Trustees
("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The following example illustrates how mortgage cash flows are prioritized in
the case of CMOs. Most of the CMOs in which the Fund invests use the same basic
structure.
(1) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four tranches of securities:
the first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date; the final tranche (Z bonds) typically
receives any excess income from the underlying investments after payments
are made to the other tranches and receives no principal or interest
payments until the shorter maturity tranches have been retired, but then
receives all remaining principal and interest payments.
(2) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.
(3) The tranches of securities are retired sequentially. All principal payments
are directed first to the shortest-maturity tranche (or A bonds). When
those securities are completely retired, all principal payments are then
directed to the next-shortest-maturity tranche (or B bonds.) This process
continues until all of the tranches have been completely retired.
Because the cash flow is distributed sequentially instead of pro rata, as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. One or more of the
tranches often bear interest at an adjustable rate. The interest portion of
these payments is distributed by the Fund as income, and the principal portion
is reinvested.
RESETS OF INTEREST RATES
The interest rates paid on some of the adjustable rate mortgage securities
("ARMS"), CMOs, and real estate mortgage investment conduits ("REMICs") in
which the Fund invests will be readjusted at intervals of one year or less to
an increment over some predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those
derived from a calculated measure, such as a cost of funds index or a moving
average of mortgage rates. Commonly utilized indices include the one-year and
five-year constant maturity Treasury Note rates, the three-month Treasury Bill
rate, the 180-day Treasury Bill rate, rates on longer-term Treasury securities,
the National Median Cost of Funds, the one-month or three-month London
Interbank Offered Rate ("LIBOR"), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant maturity
Treasury Note rate, closely mirror changes in market interest rate levels.
Others tend to lag behind changes in market rate levels and tend to have
somewhat less volatile interest rates.
To the extent that the adjusted interest rate on the mortgage security reflects
current market rates, the market value of an adjustable rate mortgage security
will tend to be less sensitive to interest rate changes than a fixed rate debt
security of the same stated maturity. Hence, adjustable rate mortgage
securities which use indices that lag behind changes in market rates should
experience greater price volatility than adjustable rate mortgage securities
that closely mirror the market. Certain residual interest tranches of CMOs may
have adjustable interest rates that deviate significantly from prevailing
market rates, even after the interest rate is reset, and are subject to
correspondingly increased price volatility.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may change up
or down: (1) per reset or adjustment interval and (2) over the life of the
loan. Some residential mortgage loans restrict periodic adjustments by limiting
changes in the borrower's monthly principal and interest payments rather than
limiting interest rate changes. These payment caps may result in negative
amortization.
The value of mortgage securities in which the Fund invests may be affected if
market interest rates rise or fall faster and farther than the allowable caps
or floors on the underlying residential mortgage loans. Additionally, even
though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which the Fund invests to be
shorter than the maturities stated in the underlying mortgages.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
. the frequency of trades and quotes for the security;
. the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the period from December 18, 1992 (date of initial public
investment) to November 30, 1993, the Fund's portfolio turnover rate was 39%.
INVESTMENT LIMITATIONS
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at times invest 25% or more of its total assets in
securities issued and/or guaranteed by the U.S. government, its agencies
or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in the
securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or
interests in real estate.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of its total assets at the time of the pledge. For purposes of this
limitation, the purchase of securities on a when-issued basis is not
deemed to be a pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objective and policies or
the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of such issuer. (For the purpose of this
limitation, the Fund considers instruments issued by a U.S. branch of a
domestic bank having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items.")
Also, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Fund considers common stock and all preferred stock of an issuer each as
a single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice and certain restricted securities not
determined by the Trustees to be liquid. To comply with certain state
restrictions, the Fund will limit these transactions to 10% of its net
assets. (If state restrictions change, this latter restriction may be
revised without shareholder approval or notification.)
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs, or leases, although it may purchase
the securities of issuers that invest in or sponsor such programs.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of its total assets in securities
of issuers, including their predecessors, that have been in operation for
less than three years. With respect to asset-backed securities, the Fund
will treat the originator of the asset pool as the company issuing the
security for purposes of determining compliance with this limitation.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING TO EXERCISE CONTROL
The Fund will not purchase securities of an issuer for the purpose of
exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
other investment companies only in open-market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets; nor are they applicable with
respect to securities of investment companies that have been exempted
from registration under the Investment Company Act of 1940. It should be
noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by a fund in shares of
another investment company would be subject to such duplicate expenses.
The adviser will waive its investment advisory fee on assets invested in
securities of open-end investment companies.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
THE BOULEVARD FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Boulevard Bank National
Association, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman
Federated Investors Trustee and Trustee, Federated Advisers, Federated
Tower Management, and Federated Research; Director, AEtna
Pittsburgh, PA Life and Casualty Company; Chief Executive Officer
and Director, Trustee, or Managing General Partner
of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
- -------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc.,
Department Realtors; President, Northgate Village Development
John R. Wood and Corporation; General Partner or Trustee in private
Associates, Inc., real estate ventures in Southwest Florida; Director,
Realtors Trustee, or Managing General Partner of the Funds;
3255 Tamiami Trail North formerly, President, Naples Property Management,
Naples, FL Inc.
- -------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee,
One PNC Plaza-23rd Floor Michael Baker, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp. and Director, Ryan Homes, Inc.
- -------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany
571 Hayward Mill Road Fund, Inc.; Director, Trustee, or Managing General
Concord, MA Partner of the Funds; formerly, Director, Blue Cross
of Massachusetts, Inc.
- -------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist,
3471 Fifth Avenue Presbyterian and Montefiore Hospitals; Clinical
Suite 1111 Professor of Medicine and Trustee, University of
Pittsburgh, PA Pittsburgh; Director, Trustee, or Managing General
Partner of the Funds.
- -------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc., and
Pittsburgh, PA Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds;
formerly, Counsel, Horizon Financial, F.A., Western
Region.
- -------------------------------------------------------------------------------------------------
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated
Federated Investors Treasurer, Investors; Vice President and Treasurer, Federated
Tower and Trustee Advisers, Federated Management, and Federated
Pittsburgh, PA Research; Trustee, Federated Services Company;
Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Chairman, Treasurer, and
Director, Federated Administrative Services; Trustee
or Director of some of the Funds; Vice President and
Treasurer of the Funds.
- -------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing
Boston, MA General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street
Boston Corporation and Trustee, Lahey Clinic
Foundation, Inc.
- -------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty;
5916 Penn Mall Chairman, Meritcare, Inc.; Director Eat 'N Park
Pittsburgh, PA Restaurants, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
- -------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace,
Learning RAND Corporation, Online Computer Library Center,
University of Pittsburgh Inc., and U.S. Space Foundation; Chairman, Czecho
Pittsburgh, PA Slovak Management Center; Director, Trustee, or
Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for
Environmental Policy and Technology.
- ------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director,
4905 Bayard Street Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and
Tower Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; President and Director, Federated
Administrative Services; President or Vice President
of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, Chairman and Trustee of the
Trust.
- ------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated
Federated Investors Investors; Chairman and Director, Federated
Tower Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
- ------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and
Federated Investors Trustee, Federated Investors; Vice President,
Tower Secretary, and Trustee, Federated Advisers;
Pittsburgh, PA Federated Management, and Federated Research;
Trustee, Federated Services Company; Executive Vice
President, Secretary, and Director, Federated
Administrative Services; Director and Executive Vice
President, Federated Securities Corp.; Vice
President and Secretary of the Fund.
- ------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors;
Federated Investors Executive Vice President, Federated Securities
Tower Corp.; President and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Vice
President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire
Insurance Company and President of its Federated
Research Division.
- ------------------------------------------------------------------------------------------------
Jeffrey W. Sterling Vice President Vice President, Federated Administrative Services;
Federated Investors and Assistant Vice President and Assistant Treasurer of some of
Tower Treasurer the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
+ Member of the Trust's Executive Committee. The Executive Committee of
the Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 111 Corcoran Funds; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; and Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of January 6, 1994, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: First National Bank of Des Plaines (a
subsidiary of Boulevard Bancorp, Inc.), Des Plaines, IL owned approximately
1,517,090 shares (20.57%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will only be liable
for their own willful defaults. If reasonable care has been exercised in the
selection of officers, agents, employees, or investment advisers, a Trustee
shall not be liable for any neglect or wrongdoing of any such person. However,
they are not protected against any liability to which they would otherwise be
subject by reason of their willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Boulevard Bank National Association (the
"Adviser" or "Boulevard Bank"), a wholly-owned subsidiary of Boulevard Bancorp,
Inc.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the selection, 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
Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
For the period from November 17, 1992, (start of business) to November 30,
1993, the Adviser earned advisory fees of $396,467, of which $198,233 was
voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the
next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the Adviser will reimburse the Fund, up to
the full amount of its investment advisory fee, for the Fund's expenses
over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
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Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee set forth
in the prospectus. For the period from November 17, 1992 (start of business) to
November 30, 1993, Federated Administrative Services earned administrative fees
of $84,957, of which $40,782 was voluntarily waived.
John A. Staley, IV, an officer of the Fund, holds approximately 15% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services. For the fiscal year ended November 30, 1993, Federated
Administrative Services paid approximately $164,324 for services provided by
Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
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The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser exercises reasonable business judgement in selecting brokers who
offer brokerage and research services to execute securities transactions and
determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research sevices provided by brokers may be used by the Adviser in advising the
Fund and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser might otherwise have paid, it would
tend to reduce its expenses.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in a manner
believed by the Adviser to be equitable to each. In some cases, this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund. In other cases, however, it is
believed that coordination and the ability to participate in volume
transactions will be to the benefit of the Fund.
PURCHASING SHARES
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Shares of the Fund are sold at their net asset value next determined after an
order is received, plus a sales charge as described in the prospectus, on days
the New York Stock Exchange and Federal Reserve Wire System are open for
business. The procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a distribution plan pursuant to
Rule 12b-1 which was promulgated by the SEC pursuant to the Investment Company
Act of 1940 (the "Plan"). The Plan provides for payment of fees to Federated
Securities Corp. to finance any activity which is principally intended to
result in the sale of the Fund's shares subject to the Plan. Such activities
may include the advertising and marketing of shares of the Fund; preparing,
printing, and distributing prospectuses and sales literature to prospective
shareholders, brokers, or administrators; and
implementing and operating the Plan. Pursuant to the Plan, Federated Securities
Corp. may pay fees to financial institutions, fiduciaries, custodians for
public funds, investment advisors, and brokers for distribution and
administrative services and to administrators for administrative services
provided to the Fund. The administrative services are provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals, and include, but are not limited to: communicating account openings;
communicating account closings; entering purchase transactions; entering
redemption transactions; providing or arranging to provide accounting support
for all transactions; wiring funds and receiving funds for purchases and
redemptions of Fund shares; confirming and reconciling all transactions;
reviewing the activity in Fund accounts and providing training and supervision
of broker personnel; posting and reinvesting dividends to Fund accounts or
arranging for this service to be performed by the Fund's transfer agent; and
maintaining and distributing current copies of prospectuses and shareholder
reports to the beneficial owners of Fund shares and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking
to achieve its investment objective.
For the period from November 17, 1992 (start of business) to November 30, 1993,
no costs were incurred pursuant to this agreement.
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records; processing purchase and
redemption transactions; processing automatic investments of client account
cash balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund may reasonably request.
For the period from November 17, 1992 (start of business) to November 30, 1993,
no fees were paid to brokers and administrators.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to invest its assets in securities as fully as possible
so that maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds before
shareholders begin to earn dividends. Boulevard Bank as well as Federated
Services Company act as the shareholder's agent in depositing checks and
converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or they may
exchange a combination of securities and cash for Fund shares. Any securities
to be exchanged must meet the investment objective and policies of the Fund,
must have a readily ascertainable market value, must be liquid, and must not be
subject to restrictions on resale. An investor should forward the securities in
negotiable form with an authorized letter of transmittal to Boulevard Bank. The
Fund will notify the investor of its acceptance and valuation of the securities
within five business days of their receipt by Federated Services Company.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of Fund
shares on the day the securities are valued. One share of the Fund will be
issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
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The net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
Values of the Fund's portfolio securities are determined as follows:
. for bonds and other fixed income securities, as determined by an independent
pricing service;
. for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
. for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
. yield;
. quality;
. coupon rate;
. maturity;
. stability;
. risk;
. type of issue;
. trading characteristics;
. special circumstances of a security or trading market; and
. other market data.
EXCHANGE PRIVILEGE
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REQUIREMENTS FOR EXCHANGING SHARES
Before the exchange, the shareholder must receive a prospectus of the fund of
the Trust for which the exchange is being made. This privilege is available to
shareholders resident in any state in which the fund shares being acquired may
be sold. Upon receipt of proper instructions and required supporting documents,
shares submitted for exchange are redeemed, and the proceeds are invested in
shares of the other fund of the Trust.
REDEEMING SHARES
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Shares of the Fund are redeemed at the next computed net asset value after
Boulevard Bank receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio. Redemption in kind will
be made in conformity with applicable rules of the SEC, taking such securities
at the same value employed in determining net asset value and selecting the
securities in a manner the Trustees determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 pursuant to the Investment
Company Act of 1940 under which the Fund is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
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THE FUND'S TAX STATUS
The Fund expects to pay no federal income tax because it intends to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from gains on the sale of securities
held less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. No portion of any income dividend paid
by the Fund is expected to be eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital gains,
are taxable as ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as long-
term capital gains regardless of how long they have held the shares.
TOTAL RETURN
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The Fund's cumulative total return from December 18, 1992 to November 30, 1993
was 0.76%. Cumulative total return reflects the Fund's total performance over a
specific period of time. This total return assumes and is reduced by the
payment of the maximum sales load. The Fund's total return is representative of
only eleven months of Fund activity since the Fund's date of initial public
investment.
YIELD
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The Fund's yield for the thirty-day period ended November 30, 1993 was 3.66%.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the maximum offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund 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 that financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
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The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute net asset value. The
financial publications and/or indices which the Fund uses in advertising may
include:
. LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any,
and takes into account any change in offering price over a specific period of
time. From time to time, the Fund will quote its Lipper ranking in the "short-
term investment-grade debt funds" category in advertising and sales
literature.
. MORNINGSTAR, INC., an independent rating service, is the publisher of the bi-
weekly Mutual Fund Values. Mutual Fund Values 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.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
represent the change, over a specified period of time, in the value of an
investment in the Fund based on monthly reinvestment of dividends and other
distributions.
Advertisements may quote performance information that does not reflect the
effect of the sales load.
APPENDIX
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STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. 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.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
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
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds 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.
NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
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.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (for 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:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternative liquidity.
P-2--Issuers rated PRIME-2 (for 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.
FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
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.
3120815B (1/94)
