SUNBURST
SHORT-INTERMEDIATE
GOVERNMENT
BOND FUND
ANNUAL REPORT
(Dated September 30, 1994)
MUTUAL FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS, ARE NOT
GUARANTEED BY ANY BANK, AND ARE
NOT INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY.
INVESTMENT IN MUTUAL FUNDS
INVOLVES INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
This fund is made available to you
through Sunburst Bank.
Federated Securities Corp.
is the distributor of the fund.
867094104
006832 (11/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the first Annual Report for Sunburst Short-Intermediate
Government Bond Fund (the "Fund"). The report provides you with commentary from
the Fund's portfolio manager, a complete listing of Fund holdings, and financial
activity for the period from November 15, 1993 through September 30, 1994.
In the current volatile interest rate environment, the Fund's portfolio manager
is striving to help your money earn an income stream while protecting your
principal. As a result, the Fund's portfolio was invested primarily in U.S.
government agency securities. These securities are relatively safe, because the
government agency guarantees the prompt payment of principal and interest.*
Because bond prices generally fall when interest rates rise, the Fund's share
price declined over the period as interest rates rose. On November 15, 1993, the
share price based on net asset value was $10.00 compared to $9.45 on September
30, 1994. Dividends paid to shareholders over the period totaled $0.35 per
share.
Thank you for your confidence in Sunburst Short-Intermediate Government Bond
Fund. As always, we invite your comments or questions.
Sincerely,
Edward C. Gonzales
President
October 15, 1994
* As with any mutual fund, the value of Fund shares are not guaranteed.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
In November of 1993, the Sunburst Short-Intermediate Government Bond Fund (the
"Fund") began to publicly offer its shares for sale. Its purpose is to offer
investors a government fund in the two to five year sector taking advantage of
the what is currently the steepest part of the yield curve but with the limited
volatility associated with the short to intermediate sector. The Fund may also
invest a limited part of its assets in certain mortgage related asset-backed
securities and corporate securities.
Since October of 1993, the U.S. bond markets have seen a series of dramatic
sell-offs associated with fears of economic growth in excess of non-inflationary
capacity. Some part of the rise in rates should also be associated with the
increase in demand for credit associated with strong economic growth. Inflation
has remained moderate but market expectations are for sizeable increases during
the coming months. While the Fund remained fully invested most of the year, most
purchases were of very short-term securities. The average life of the Fund was
kept below the midpoint of the two to five year range target. Investment
purchases were confined to traditional government and agency issues with minimal
extension and liquidity risk. By maintaining this conservative profile,
deterioration of asset value was minimized.
The Fund's adviser believes the negatives for the bond market associated with a
rapidly growing economy are completely priced into the current levels of all but
short-term interest rates. Increases in values for fixed income securities are
not expected but the steepness of the front-end of the yield curve may provide
investors in this sector total rates of return greater than expected yields in
the money market and very short government sectors.
Because of perceived limited upside price potential in bonds, the Fund's adviser
feels comfortable with the current position of moderate amounts of both callable
and conservatively structured mortgage securities. Opportunities in issues
bearing credit risk are still considered limited because of low-yield spreads.
The Fund's adviser expects to maximize yield by minimizing investment in the
less than one year sector but will continue to target an average life closer to
the short-end than the long-end of the two to five year average life described
in the prospectus. Conservative mortgage products do not offer spreads wide
enough to increase holdings, but the Fund's adviser may increase holdings in
certain agency products when desirable spreads are found.
By continuing to pursue a conservative strategy of investing in simple
instruments in a fairly valued to undervalued short-intermediate sector of the
yield curve, the Fund's adviser will pursue positive performance with moderate
risk to our investors.
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Sunburst Short-Intermediate Government Bond Fund (the "Fund") from November 15,
1993 (start of performance) to September 30, 1994 compared to the Merrill Lynch
3-5 Year Treasury Index+, Lipper Short Government Average++, and Lipper
Intermediate Government Average++.
Graphic representation "A" omitted. See Appendix.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1% ($10,000 investment minus $100 sales charge =
$9,900). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Merrill Lynch 3-5 Year Treasury Index, Lipper Short
Government Average, and Lipper Intermediate Government Average have been
adjusted to reflect reinvestment of dividends on securities in the index and
averages. The index and averages are unmanaged.
+ The Merrill Lynch 3-5 Year Treasury Index is not adjusted to reflect sales
loads, expenses, or other fees that the SEC requires to be reflected in the
Fund's performance.
++ The Lipper Short Government Average and Lipper Intermediate Government
Average are a compilation of a specified categories of mutual fund total
returns reported to Lipper Analytical Services, Inc. and are not adjusted to
reflect any sales loads. However, these total returns are reported net of
expenses or other fees that the SEC requires to be reflected in a fund's
performance.
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--1.8%
- -----------------------------------------------------------------------------------
$ 150,000 Federal Farm Credit Bank, Discount Note, 4.68%, 10/28/94 $ 149,474
-------------------------------------------------------------------
75,000 Federal Farm Credit Bank, Discount Note, 4.86%, 10/14/94 74,869
------------------------------------------------------------------- -----------
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS
(AT AMORTIZED COST) 224,343
------------------------------------------------------------------- -----------
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--96.3%
- -----------------------------------------------------------------------------------
1,500,000 Federal Home Loan Bank, 4.74%, 10/5/98 1,366,170
-------------------------------------------------------------------
500,000 Federal Home Loan Bank, 5.035%, 1/19/99 456,805
-------------------------------------------------------------------
1,250,000 Federal Home Loan Bank, 6.10%, 5/24/96 1,237,150
-------------------------------------------------------------------
472,861 Federal Home Loan Mortgage Corp., 6.00%, 2/1/99 455,422
-------------------------------------------------------------------
565,933 Federal National Mortgage Association, 5.50%, 10/1/2000, Pool
#217756 520,834
-------------------------------------------------------------------
921,878 Federal National Mortgage Association, 5.50%, 10/1/2000, Pool
#243738 848,413
-------------------------------------------------------------------
495,000 Prince Georges County Maryland, 4.57%, 8/1/95 488,921
-------------------------------------------------------------------
1,000,000 Tennessee Valley Authority, 4.375%, Series A, 3/4/96 969,500
-------------------------------------------------------------------
500,000 Tennessee Valley Authority, 4.60%, Series 1993E, 12/15/96 477,245
-------------------------------------------------------------------
5,200,000 U.S. Treasury Notes, 4.625%-6.00%, 2/15/96-10/15/99 5,016,928
------------------------------------------------------------------- -----------
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST, $12,463,471) 11,837,388
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $12,687,814) $12,061,731+
------------------------------------------------------------------- -----------
</TABLE>
+ The cost for federal tax purposes amounts to $12,687,814. The net unrealized
depreciation of investments on a federal tax basis amounts to $626,083 and is
comprised of all depreciation at September 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($12,295,512) at September 30, 1994.
(See Notes which are an integral part of the Financial Statements)
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------
Investments in securities, at value and amortized cost (identified and tax cost
$12,687,814) $12,061,731
- -------------------------------------------------------------------------------------
Cash 134,983
- -------------------------------------------------------------------------------------
Interest receivable 176,459
- -------------------------------------------------------------------------------------
Deferred expenses 10,994
- ------------------------------------------------------------------------------------- -----------
Total assets 12,384,167
- -------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Dividends payable $38,738
- ---------------------------------------------------------------------------
Payable for Fund shares repurchased 10,867
- ---------------------------------------------------------------------------
Accrued expenses 39,050
- --------------------------------------------------------------------------- -------
Total liabilities 88,655
- ------------------------------------------------------------------------------------- -----------
NET ASSETS for 1,300,899 shares of beneficial interest outstanding $12,295,512
- ------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------
Paid-in capital $12,941,535
- -------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (626,083)
- -------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (19,940)
- ------------------------------------------------------------------------------------- -----------
Total Net Assets $12,295,512
- ------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, and Redemption Proceeds Per Share
($12,295,512 / 1,300,899 shares of beneficial interest outstanding) $9.45
- ------------------------------------------------------------------------------------- -----------
Computation of Offering Price: Offering Price Per Share (100/99 of $9.45)* $9.55
- ------------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income $ 513,942
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 74,167
- ------------------------------------------------------------------------
Administrative personnel and services fees 105,205
- ------------------------------------------------------------------------
Custodian fees 4,037
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 21,478
- ------------------------------------------------------------------------
Legal fees 5,025
- ------------------------------------------------------------------------
Printing and postage 5,517
- ------------------------------------------------------------------------
Portfolio accounting fees 45,705
- ------------------------------------------------------------------------
Insurance premiums 5,052
- ------------------------------------------------------------------------
Miscellaneous 6,045
- ------------------------------------------------------------------------ --------
Total expenses 272,231
- ------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------
Waiver of investment advisory fee $74,167
- --------------------------------------------------------------
Waiver of administrative personnel and services fees 49,350
- --------------------------------------------------------------
Reimbursement of other operating expenses 53,500 177,017
- -------------------------------------------------------------- ------- --------
Net expenses 95,214
- ------------------------------------------------------------------------------------ ---------
Net investment income 418,728
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (19,940)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (626,083)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain (loss) on investments (646,023)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $(227,295)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from September 16, 1993 (start of business) to September 30,
1994.
(See Notes which are an integral part of the Financial Statements)
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1994*
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net investment income $ 418,728
- -----------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($0 as computed
for federal tax purposes) (19,940)
- -----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (626,083)
- ----------------------------------------------------------------------- -------------
Change in net assets resulting from operations (227,295)
- ----------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (418,728)
- ----------------------------------------------------------------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -----------------------------------------------------------------------
Proceeds from sale of shares 16,827,878
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 57,315
- -----------------------------------------------------------------------
Cost of shares redeemed (4,043,658)
- ----------------------------------------------------------------------- -------------
Change in net assets from Fund share transactions 12,841,535
- ----------------------------------------------------------------------- -------------
Change in net assets 12,195,512
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period 100,000
- ----------------------------------------------------------------------- ------------
End of period $12,295,512
- ----------------------------------------------------------------------- ------------
</TABLE>
* For the period from September 16, 1993 (start of business) to September 30,
1994.
(See Notes which are an integral part of the Financial Statements)
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1994*
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.35
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.55)
- ---------------------------------------------------------------------- -------
Total from investment operations (0.20)
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.35)
- ---------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $9.45
- ---------------------------------------------------------------------- -------
TOTAL RETURN** (1.99%)
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.95%(b)
- ----------------------------------------------------------------------
Net investment income 4.17%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.77%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,296
- ----------------------------------------------------------------------
Portfolio turnover rate 68%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 15, 1993 (date of initial
public investment) to September 30, 1994.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
<TABLE>
<C> <S>
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios
shown above.
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Sunburst Short-Intermediate Government Bond Fund (the "Fund") is a diversified
portfolio of the Sunburst Funds (the "Trust"). The Trust is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end,
management investment company.
(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.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Short- term securities with remaining maturities of sixty days or less, at the
time of purchase, may be stated at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral 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 collateral to ensure that the value of the collateral at least
equals the principal amount of the repurchase agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as brokers/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to the guidelines established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
Additionally, net capital losses of $19,940 attributable to security transactions
incurred after October 31, 1993 are treated as arising on the first day of the Fund's
next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are
</TABLE>
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
being amortized using the straight-line method not to exceed a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) 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
SEPTEMBER 30, 1994*
-------------------
<S> <C>
- -----------------------------------------------------------------------
Shares sold 1,700,669
- -----------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,947
- -----------------------------------------------------------------------
Shares redeemed (415,717)
- ----------------------------------------------------------------------- ---------
Net change resulting from Fund share transactions 1,290,899
- ----------------------------------------------------------------------- ---------
</TABLE>
* For the period from September 16, 1993 (start of business) to September 30,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Sunburst Bank, Mississippi, the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.74 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate
this voluntary waiver and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Fund for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT AND ACCOUNTING FEES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The FServ fee is based on
the level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($37,189) were borne initially
by FAS. The Fund has agreed to reimburse FAS for organizational expenses during
the five year period following October 28, 1993 (date the Fund first became
effective). For the period ended September 30, 1994, the Fund paid $2,510
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended September 30, 1994, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Purchases $19,622,751
- ------------------------------------------------------------------------------- -----------
Sales $ 7,245,420
- ------------------------------------------------------------------------------- -----------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The Trustees and Shareholders
SUNBURST SHORT-INTERMEDIATE GOVERNMENT
BOND FUND:
We have audited the statement of assets and liabilities, including the portfolio
of investments, for Sunburst Short-Intermediate Government Bond Fund as of
September 30, 1994 and the related statements of operations and changes in net
assets, and the financial highlights for the period from September 16, 1993
(commencement of operations) to September 30, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to gain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investment securities held in custody are confirmed to us by the custodian. As
to securities purchased and sold but not received or delivered, we request
confirmations from brokers, and where replies are not received, we carry out
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Sunburst Short-Intermediate Government Bond Fund, as of September 30, 1994, the
results of its operations, changes in its net assets, and the financial
highlights for the period from September 16, 1993 to September 30, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 14, 1994
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Edward C. Gonzales
James E. Dowd President and Treasurer
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Edward C. Gonzales Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts Margaret P. Tessaro
Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
Victor P. Siclari
Assistant Secretary
</TABLE>
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
SRT411028
Appendix
A. The graphic representation here displayed consists of a
legend in the upper right hand corner indicating the components
of the corresponding line graph. Sunburst Short-Intermediate
Government Bond Fund (the "Fund") is represented by a solid line.
The Merrill Lynch 3-5 Year Treasury Index is represented by a
dotted line. The Lipper Short Government Average is represented
by a broken line. The Lipper Intermediate Government Average is
represented by a broken/dotted line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and Merrill Lynch 3-5
Year Treasury Index, Lipper Short Government Average and Lipper
Intermediate Government Average. The "y" axis reflects the cost
of the investment. The "x" axis reflects computation periods
from the Fund's start of performance, November 15, 1993, through
September 30, 1994. The right margin reflects the ending value
of the hypothetical investment in the Fund as compared to the
Merrill Lynch 3-5 Year Treasury Index, the Lipper Short
Government Average and the Lipper Intermediate Government
Average; the ending values are $9,607, $9,753, $9,864 and $9,611,
respectively. There is also a legend directly below the graphic
representation which indicates the Average Annual Total Return
for the period from the Fund's start of performance, November 15,
1993, through September 30, 1994; the Average Annual Total Return
is -2.96%.
