1933 Act File No. 33-49883
1940 Act File No. 811-7073
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. _
Post-Effective Amendment No. 2 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 X
SUNBURST FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
X on January 9, 1995 pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
filed the Notice required by that Rule on
_________________; or
X intends to file the Notice required by that Rule on or
about
November 15,1994; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of Sunburst
Funds, which consists of one portfolio, Sunburst Short-
Intermediate Government Bond Fund, is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Summary of Fund Expenses.
Item 3. Condensed Financial
Information Performance Information.
Item 4. General Description of
Registrant General Information; Investment
Information; Investment
Objectives; Investment
Policies; Investment
Limitations; Debt
Considerations; Duration.
Item 5. Management of the Fund Fund Information; Management of
the Fund; Distribution of Fund
Shares; Administration of the
Fund;.
Item 6. Capital Stock and Other
Securities Dividends and Capital Gains;
Shareholder Information; Voting
Rights; Massachusetts Business
Trusts; Effect of Banking Laws;
Tax Information; Federal Income
Tax.
Item 7. Purchase of Securities Being
Offered Net Asset Value; Investing in
the Fund; Share Purchases;
Minimum Investment Required;
What Shares Cost; Conversion to
Federal Funds; Purchases at Net
Asset Value; Systematic
Investment Program;
Certificates and Confirmations.
Item 8. Redemption or Repurchase Redeeming Shares; Systematic
Withdrawal Program; Accounts
with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information about the
Fund.
Item 13. Investment Objectives and
Policies Investment Objectives and
Policies; Investment
Limitations;
Item 14. Management of the Fund Sunburst Fund Management.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchasing Shares; Determining
Net Asset Value; Exchanging
Securities for Fund Shares;
Redeeming Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data Performance Comparisons.
Item 23. Financial Statements Financial Statements (to be
filed by amendment).
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
(A PORTFOLIO OF SUNBURST FUNDS)
PROSPECTUS
The shares of Sunburst Short-Intermediate Government Bond Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities, which is a portfolio of Sunburst Funds (the "Trust"), an open-end,
diversified management investment company (a mutual fund). The investment
objective of the Fund is current income. The Fund pursues this investment
objective by investing primarily in U.S. government bonds and maintaining a
dollar-weighted average maturity between two and five years. The Fund seeks to
provide current income while also maintaining a relatively stable net asset
value, although there is no assurance that it can do so.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
SUNBURST BANK, MISSISSIPPI, OR ANY OTHER BANK, ARE NOT ENDORSED OR GUARANTEED BY
SUNBURST BANK, MISSISSIPPI, OR ANY OTHER BANK, AND ARE NOT FEDERALLY 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.
The Fund has also filed a Statement of Additional Information dated January 9,
1995, 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
writing or calling the Fund at 1-800-467-2506.
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 9, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
U.S. Government Securities 3
Mortgage-Backed Securities 3
Adjustable Rate Mortgage Securities
("ARMS") 3
Collateralized Mortgage Obligations
("CMOs") 3
Real Estates Mortgage Investment
Conduits ("REMICs") 4
Asset-Backed Securities 4
Corporate Debt Obligations 4
Fixed Rate Corporate Debt Obligations 4
Floating Rate Corporate Debt
Obligations 5
Demand Features 5
Money Market Instruments 5
Repurchase Agreements 5
When-Issued and Delayed
Delivery Transactions 5
Investing in Securities of
Other Investment Companies 6
Lending of Portfolio Securities 6
Covered Call Options 6
Over-the-Counter Options 6
Portfolio Transactions 6
Debt Considerations 6
Duration 7
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Fund Shares 8
Distribution Plan 8
Other Payments to Financial Institutions 8
Administration of the Fund 9
Administrative Services 9
Transfer Agent, Dividend Disbursing
Agent, and Portfolio
Accounting Services 9
Custodian 9
Legal Counsel 9
Independent Auditors 9
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN THE FUND 9
- -----------------------------------------------------
Share Purchases 9
Through Sunburst Financial Group, Inc. 10
Through The Trust Division of
The Sunburst Banks 10
Minimum Investment Required 10
What Shares Cost 10
Sales Charge Reallowance 10
Conversion to Federal Funds 10
Purchases at Net Asset Value 11
Reinvestment Privilege 11
Systematic Investment Program 11
Certificates and Confirmations 11
Dividends and Capital Gains 11
REDEEMING SHARES 11
- ------------------------------------------------------
By Telephone 11
By Mail 12
Signatures 12
Systematic Withdrawal Program 12
Accounts With Low Balances 12
SHAREHOLDER INFORMATION 13
- ------------------------------------------------------
Voting Rights 13
Massachusetts Business Trusts 13
EFFECT OF BANKING LAWS 13
- ------------------------------------------------------
TAX INFORMATION 14
- ------------------------------------------------------
Federal Income Tax 14
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
ADDRESSES 15
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......... 1.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)............................................... None
Redemption Fees (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).................................................... %
12b-1 Fees(2)....................................................................... %
Other Expenses (after waiver)(3).................................................... %
Total Fund Operating Expenses (after waiver and reimbursement)(4).............. %
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the investment advisory fee by the investment adviser. The
investment adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.74%.
(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 for certain institutional investors is created. The Fund can pay up to
0.25% as a 12b-1 fee to the distributor.
(3) Other operating expenses are estimated to be at % absent the anticipated
reimbursement by the investment adviser.
(4) Total Fund Operating Expenses are estimated to be at % absent the
anticipated voluntary waiver and reimbursement by the investment adviser.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Fund Information" and "Investing in the Fund." Wire-transferred redemptions
of less than $5,000 may be subject to additional fees.
<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 and (2) redemption at the end
of each time period. As noted in the table above, the Fund
charges no redemption fees................................. $ $ $ $
</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.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated July 12, 1993. 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. As of the date of this prospectus, the Board of
Trustees ("Trustees") has not established classes of shares of the Fund.
The Fund is designed as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio investing primarily in U.S.
government securities. A minimum initial investment of $1,000 is required,
except for retirement plans, employees of Union Planters Corporation and its
affiliates, and certain other transactions.
Except as noted otherwise in this prospectus, shares of the Fund are currently
sold at net asset value plus an applicable sales charge and are redeemed at net
asset value without a sales charge.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income. 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. The
investment objective cannot be changed without approval of shareholders. Unless
indicated otherwise, the investment policies described below may be changed by
the Trustees without the approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund pursues its investment objective by investing
primarily in a diversified portfolio of U.S. government securities. Under normal
market circumstances, the Fund will invest at least 65% of its total assets in
U.S. government bonds. The Fund will maintain a dollar weighted average
portfolio maturity between two and five years. In seeking current income, the
Fund also strives to maintain a relatively stable net asset value as compared to
other mutual funds that invest in U.S. government bonds with a greater
dollar-weighted average maturity than the Fund. As described in more detail
below, the permitted investments of the Fund include:
- United States government securities, including zero coupon bonds and
certain mortgage-backed securities, adjustable rate mortgage securities
and collateralized mortgage obligations (as described below);
- mortgage-backed securities;
- asset-backed securities;
- domestic issues of corporate debt obligations, including zero coupon
bonds; and
- money market instruments.
Except as otherwise noted, the Fund's corporate investments will be rated, at
the time of purchase, A or better by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), or Fitch Investors
Services ("Fitch"), or, if unrated, will be of comparable quality to securities
having such ratings as determined by the Fund's investment adviser. Downgrades
will be evaluated on a case by case basis by the investment adviser. The
investment adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.
In addition, the Fund may engage in when-issued and delayed delivery
transactions, invest in securities of other investment companies, invest in
restricted and illiquid securities, lend portfolio securities, borrow money, and
write covered call options.
The Fund's investment adviser does not select securities purely to maximize the
current yield of the Fund, but also attempts to maintain a relatively stable net
asset value, as noted above. As a result, the Fund's investment adviser attempts
to manage the Fund's total performance, which includes minimizing changes in
principal value of the Fund's portfolio while seeking interest income earned, to
anticipate the opportunities and risks of changes in market interest rates. When
the Fund's investment adviser expects that market interest rates may decline,
which would cause prices of outstanding debt obligations to rise, it generally
extends the average maturity of the Fund's
portfolio within the maturity parameters described above. When, in the
investment adviser's judgment, market interest rates may rise, which would cause
market prices of outstanding debt obligations to decline, it generally shortens
the average maturity of the Fund's portfolio within the maturity parameters
described above.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which the Fund
invests are either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited, to:
- direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities such as Federal Home Loan Banks, Federal National
Mortgage Association, Government National Mortgage Association, Tennessee
Valley Authority, The Student Loan Marketing Association, Federal Home
Loan Mortgage Corporation, Federal Farm Credit Banks, Small Business
Association, Federal Housing Administration, and Farmers Home
Administration.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, 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 other agencies or instrumentalities, since it is not obligated to do so.
These 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;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
As described below, certain mortgage-backed securities, adjustable rate mortgage
securities and collateralized mortgage obligations may be issued or guaranteed
by U.S. government agencies or instrumentalities, and are included within the
definition of U.S. government securities.
MORTGAGE-BACKED SECURITIES. The Fund may invest in various mortgage-backed
securities. Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property. The Fund may invest in the following types of
mortgage-backed securities: (i) those issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, such as the Government
National Mortgage Association ("Ginnie Mae"), the Federal National Mortgage
Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"); (ii) those issued by private issuers that represent an interest
in or are collateralized by mortgage-backed securities issued or guaranteed by
the U.S. government or one of its agencies or instrumentalities; and (iii) those
issued by private issuers that represent an interest in or are collateralized by
whole loans or mortgage-backed securities without a government guarantee but
usually having some form of private credit enhancement. 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.
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
Ginnie Mae, Fannie Mae or Freddie Mac, and are actively traded. The
underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration ("FHA") or Veterans
Administration ("VA"), while those collateralizing ARMS issued by Fannie
Mae or Freddie Mac are typically conventional residential mortgages
conforming to strict underwriting size and maturity constraints.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
Certificates, but may be collateralized by whole loans or private
pass-through securities.
The Fund will only invest in CMOs which are rated AA or higher by a
nationally recognized statistical rating organization or are of comparable
quality as determined by the Fund's investment adviser, and which may be:
(a) 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; (b) 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
(c) collateralized by pools of mortgages without a government guarantee as
to payment of principal and interest, but which have some form of credit
enhancement.
REAL ESTATES 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.
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." To qualify as a
REMIC, substantially all the assets of the entity must be in assets
directly or indirectly secured principally by real property.
ASSET-BACKED SECURITIES. Asset-backed securities have structural
characteristics similar to mortgage-backed securities but have underlying assets
that are not mortgage loans or interests in mortgage loans. The Fund may invest
in asset-backed securities which include, but are not limited to, interests in
pools of receivables, such as motor vehicle installment purchase obligations and
credit card receivables. These securities may be in the form of pass-through
instruments or asset-backed bonds. The securities are issued by nongovernmental
entities and carry no direct or indirect government guarantee.
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 the credit cards, thereby
reducing the balance due. Most issuers of asset-backed securities backed by
motor vehicle installment purchase obligations permit the servicer of such
receivables to retain possession of the underlying obligations. If the servicer
sells these obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
asset-backed securities. Further, if a vehicle is registered in one state and is
then reregistered because the owner and obligor moves to another state, such
reregistration could defeat the original security interest in the vehicle in
certain cases. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee for
the holders of asset-backed securities backed by automobile receivables may not
have a proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities.
CORPORATE DEBT OBLIGATIONS. The Fund may invest in corporate debt obligations,
including corporate bonds, notes, and debentures, which may have fixed or
floating rates of interest.
FIXED RATE CORPORATE DEBT OBLIGATIONS. The Fund may invest in fixed rate
securities with short-term characteristics. Fixed rated securities with
short-term characteristics are long-term debt obligations but are treated
in the market as having short maturities because call features of the
securities may make them callable within a short period of time. A fixed
rate security with short-term characteristics would include a fixed income
security priced close to call or redemption price or a fixed income
security approaching maturity, where the expectation of call or redemption
is high.
Fixed rate securities tend to exhibit more price volatility during times of
rising or falling interest rates than securities with floating rates of
interest. This is because floating rate securities, as described below,
behave like short-term instruments in that the rate of interest they pay is
subject to periodic adjustments based on a designated interest rate index.
Fixed rate securities pay a fixed rate of interest and are more sensitive
to fluctuating interest rates. The prices of fixed rate securities
fluctuate inversely to the direction of interest rates. In periods of
rising interest rates, the value of a fixed rate security is likely to
fall. Fixed rate securities with short-term characteristics are not subject
to the same price volatility as fixed rate securities without such
characteristics. Therefore, they behave more like floating rate securities
with respect to price volatility.
FLOATING RATE CORPORATE DEBT OBLIGATIONS. The Fund may invest in floating
rate corporate debt obligations, including increasing rate securities.
Floating rate securities are generally offered at an initial interest rate
which is at or above prevailing market rates. The interest rate paid on
these securities is then reset periodically (commonly every 90 days) to an
increment over some predetermined interest rate index. Commonly utilized
indices include the three-month Treasury bill rate, the 180-day Treasury
bill rate, the one-month or three-month London Interbank Offered Rate
(LIBOR), the prime rate of a bank, the commercial paper rates, or the
longer-term rates on U.S. Treasury securities.
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 (usually
seven days) 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 may be treated as a form of credit
enhancement.
MONEY MARKET INSTRUMENTS. The Fund may invest in the following money market
instruments:
- certificates of deposit, demand and time deposits, savings shares,
bankers' acceptances, and other instruments of domestic and foreign banks
and savings and loans, which institutions have capital, surplus, and
undivided profits over $100 million, or if the principal amount of the
instrument is insured in full by the Bank Insurance Fund ("BIF"), or by
the Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation ("FDIC"). Bank
instruments may include Eurodollar Certificates of Deposit ("ECDs"),
Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time
Deposits ("ETDs");
- commercial paper (including Canadian Commercial Paper and Europaper)
rated A-1 or better by S&P, Prime-1 by Moody's, or F-1 by Fitch, or, if
unrated, of comparable quality as determined by the Fund's investment
adviser; and
- repurchase agreements.
REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund
invests may be purchased pursuant to repurchase agreements, which 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 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date. The Fund may dispose of a commitment prior to settlement
if the adviser deems it appropriate to do so. In addition, the Fund may enter
into transactions to sell its purchase commitments to third parties at current
market values and simultane-
ously acquire other commitments to purchase similar securities at later dates.
The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest 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 invest
in other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. The Fund
will invest only in other open-end investment companies with a sales charge of
less than 1%. 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, particularly transfer agent and custodian fees. The investment adviser
will waive its investment advisory fee on Fund assets invested in securities of
open-end investment companies.
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,
up to one-third of the value of its total assets to broker/dealers, banks, or
other institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the Fund's
investment 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 102% of the value of the securities
loaned.
COVERED CALL OPTIONS. The Fund may write covered call options on all or a
portion of its portfolio to generate income for the Fund and thereby protect
against price movements in particular securities in the Fund's portfolio. 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. 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. Covered call options generally do not present investment risks different
from those associated with a security purchase. For example, a security may be
sold before it reaches its maximum potential value, or it may be retained even
though its current market price has dropped below its purchase price. Similarly,
a covered call option presents these risks. For example, when the option
purchaser acquires the security at the predetermined exercise price, the Fund
could be giving up any capital appreciation above the exercise price that is not
offset by the option premium paid by the option purchaser to the Fund.
Conversely, if the underlying security decreases in price and the option
purchaser decides not to carry out the transaction, the Fund keeps the premium
and the Fund can sell the security or hold onto it for future price
appreciation.
OVER-THE-COUNTER OPTIONS. The Fund may write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers
of the options when options on the portfolio securities held by the Fund
are not traded on an exchange. The Fund writes 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.
PORTFOLIO TRANSACTIONS. The Fund conducts portfolio transactions to accomplish
its investment objective as interest rates change, to invest new money obtained
from selling its shares, and to meet redemption requests. The Fund may dispose
of portfolio securities at any time if it appears that selling the securities
will help the Fund achieve its investment objective.
DEBT CONSIDERATIONS
In the debt market, prices move inversely to interest rates. A decline in market
interest rates results in a rise in the market prices of outstanding debt
obligations. Conversely, an increase in market interest rates results in a
decline in market prices. In either case, the amount of change in market prices
of debt obligations in response to changes in market interest rates generally
depends on the maturity of the debt obligations: the debt obligations with the
longest maturities will experience the greatest market price changes.
DURATION
Duration is a commonly used measure of the potential volatility in the price of
a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in the
price of a bond relative to a given change in the market rate of interest.
A bond's price volatility depends on three primary variables: the bond's coupon
rate; maturity date; and the level of market yields of similar fixed income
securities. Generally, bonds with lower coupons or longer maturities will be
more volatile than bonds with higher coupons or shorter maturities. Duration
combines these variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted values of the
cash flows of a bond or bonds, including interest and principal payments, by the
sum of the present values of the cash flows. When the Fund invests in a mortgage
pass-through security, its duration will be calculated in a manner which
requires assumptions to be made regarding future principal prepayments. A more
complete description of this calculation is available upon request from the
Fund.
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 up to one-third of the value of its total assets and pledge,
mortgage or hypothecate up to 15% of the value of those assets to secure
such borrowings; or
- with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in securities of any one issuer (other
than cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities, and
repurchase agreements collateralized by such securities), or acquire more
than 10% of the outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not:
- invest more than 15% of the value of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice, certain over-the-counter options and
certain securities not determined by the Trustees to be liquid.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Fund's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Sunburst
Bank, Mississippi, the Fund's investment adviser (the "Adviser"), subject to
direction by the Trustees. The Adviser continually conducts investment research
and supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .74 of 1% of the Fund's average daily net assets. The investment
advisory contract provides that such fee shall be 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 the Fund for
certain other expenses of the Fund but reserves the right to terminate such
waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Sunburst Bank, Mississippi, is a wholly-owned
subsidiary of Union Planters Corporation ("UPC"), a bank holding company
and savings and loan holding company.
Headquartered in Memphis, Tennessee, UPC is the third largest bank
headquartered in Tennessee and operates banking offices in Tennessee,
Mississippi, Louisiana, Alabama, Arkansas, and Kentucky. UPC had total
assets of approximately $ as of January 1, 1995.
As part of its regular banking operations, Sunburst Bank may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund
to hold or acquire the securities of issuers which are also lending clients
of Sunburst Bank. The lending relationship will not be a factor in the
selection of securities.
Prior to January 1, 1995, Sunburst Bank was a subsidiary of Grenada
Sunburst System Corporation ("GSSC"). On July 1, 1994, GSSC entered into a
definitive Agreement and Plan of Reorganization, whereby GSSC and its
subsidiaries would be acquired by UPC. As a result, effective on the close
of business December 31, 1994, all existing subsidiaries of GSSC, including
the Adviser, became subsidiaries of UPC.
The Fund's portfolio manager is James Plunkett, Senior Vice President in
the funds management division of Sunburst Bank, Mississippi. Prior to his
association with the Adviser, Mr. Plunkett was an institutional financial
consultant with Merrill Lynch, since 1984. Mr. Plunkett received his B.A.
in finance from Baylor University.
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. According to the provisions of a distribution plan adopted
in accordance with Rule 12b-1 under the Investment Company Act of 1940 (the
"Plan"), the Fund may pay to the distributor an amount computed at an annual
rate of .25 of 1% of the average daily net asset value of Fund shares to finance
any activity which is principally intended to result in the sale of Fund shares.
The Fund has no present intention of paying or accruing fees under the Plan for
the fiscal year ending September 30, 1995.
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 Fund shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions, such as banks and
broker/dealers, to provide sales and/or administrative services as agents for
holders of shares of the Fund. 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 regarding the Fund; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests.
Financial institutions will receive fees from the distributor based upon shares
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.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay
financial institutions a fee based on the average net asset value of shares of
their customers invested in the Fund for providing administrative services. This
fee is in addition to the amounts paid under the Plan for administrative
services, and, if paid, will be reimbursed by the Adviser and not the Fund.
The Adviser or its affiliates may also offer to pay a fee from their own assets
to financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of shares the dealer
sells or may sell, and/or upon the type and nature of sales or operational
support furnished by the financial institution. These payments will be made by
the Adviser and will not be made from the assets of the Fund.
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 law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with certain administrative personnel and
services necessary to operate the Fund. Such services include certain
shareholder servicing, 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% of the first $250 million
.125 of 1% of the next $250 million
.100 of 1% of the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$120,000 for the Fund. Federated Administrative Services may choose voluntarily
to reimburse a portion of its fee at any time.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent for the shares of the Fund, and dividend disbursing
agent for the Fund. Federated Services Company also provides certain accounting
and recordkeeping services with respect to the Fund's portfolio investments.
CUSTODIAN. The Fifth Third Bank, Cincinnati, Ohio, is custodian for the
securities and cash of the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro and Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are KPMG Peat
Marwick, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets of the Fund, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange, the Federal
Reserve Wire System and Sunburst Bank, Mississippi, are open for business.
Shares may be purchased through the Trust Divisions of Sunburst Bank,
Mississippi, or Sunburst Bank, Louisiana (individually, "Sunburst Bank" or
collectively "Sunburst Banks") or through Sunburst Financial Group, Inc. 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. Purchase orders
must be received by the Fund by 3:00 p.m. (Central time) in order for shares to
be purchased at that day's public offering price.
The Fund and the distributor reserve the right to reject any purchase request.
Texas residents must purchase, exchange, and redeem shares through Sunburst
Financial Group, Inc. at 1-800-467-2506.
THROUGH SUNBURST FINANCIAL GROUP, INC. Customers of Sunburst Financial Group,
Inc. may place an order to purchase shares by telephoning 1-800-467-2506,
sending written instructions, or placing an order in person. Payment may be made
by check, by wire of federal funds (the customer's bank sends money through the
Federal Reserve Wire System) or by debiting a customer's account at Sunburst
Financial Group, Inc. Purchase orders must be communicated to Sunburst Financial
Group, Inc. before 3:00 p.m. (Central time).
Shares of the Fund cannot be purchased by wire on any day on which the Sunburst
Banks, the New York Stock Exchange, or the Federal Reserve Wire System is not
open for business.
THROUGH THE TRUST DIVISION OF THE SUNBURST BANKS. Trust customers of Sunburst
Banks may place an order to purchase shares of the Fund by telephoning, sending
written instructions, or placing the order in person with their trust account
officer in accordance with the procedures established by the Sunburst Banks and
as set forth in the relevant account agreement.
Payment may be made to the Sunburst Banks by check, by wire of federal funds, or
by debiting a customer's account with Sunburst Banks. When payment is made with
federal funds, the order is considered received when federal funds are received
by Sunburst Banks or available in the customer's account. Purchase orders must
be communicated to Sunburst Banks by 3:00 p.m. (Central time). Shares of the
Fund cannot be purchased by wire on any day which Sunburst Banks, the New York
Stock Exchange or the Federal Reserve Wire System is not open for business.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment amount in the Fund is $1,000, and the minimum
subsequent investment amount is $100. However, the minimum initial and
subsequent investment amounts for an IRA account are $250 and $50, respectively.
In addition, there are no minimum investment amounts for purchases by directors
and employees of UPC and its affiliates.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1.00% of the public offering price (1.01% of
the net amount invested).
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 such 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; and (iii) the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, a dealer will
normally receive up to 85% of the applicable sales charges, although in certain
circumstances, up to 90% of a sales charge may be paid. Any portion of the sales
charge which is not paid to a dealer 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, all or a portion of the sales charge it
normally retains. If accepted by the dealer, such additional payments will be
predicated upon the amount of Fund shares sold. Such payment may take the form
of cash or promotional incentives, such as payment of certain expenses of
qualified employees and their spouses to attend informational meetings about the
Fund or other special events at recreational facilities, or items of material
value. In some instances, these incentives will be made available only to
dealers whose employees have sold or may sell significant amounts of shares.
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.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
Federal Funds or converted into Federal Funds before shareholders begin to earn
dividends. Sunburst Banks will act as the shareholder's agent in depositing
checks and converting them to Federal Funds.
PURCHASES AT NET ASSET VALUE
Shareholders who are trust fiduciary customers of Sunburst Bank, Mississippi, or
Sunburst Bank, Louisiana, may purchase Fund shares at net asset value, without a
sales charge. These institutions, however, may charge fees for services provided
which may relate to the ownership of Fund shares. This Prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to services provided and the fees charged for these
services. In addition, directors and employees of UPC and its affiliates may
also purchase shares of the Fund at net asset value, without a sales charge.
Shares of the Fund may be purchased at net asset value, without a sales charge,
with redemption proceeds from shares of another mutual fund for which the
investor paid a sales charge. Redemptions of mutual fund shares that are
distributed by Federated Securities Corp. or are subject to a contingent
deferral sales charge are not eligible to purchase Fund shares under this
method. You must notify the Fund, Sunburst Banks or Sunburst Financial Group,
Inc. of your eligibility at the time you place your purchase order for Fund
shares.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Sunburst Financial Group, Inc. must be notified by the shareholder in writing or
by the shareholder's financial institution of the reinvestment in order to
eliminate the sales charge. If the shareholder redeems his or her shares in the
Fund, there may be tax consequences. Shareholders contemplating such
transactions should consult their own tax advisers.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund 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 shares at the net asset value next determined after an order is
received by the Fund plus any applicable sales charges. A shareholder may apply
for participation in this program through Sunburst Banks, Sunburst Financial
Group, Inc. or the distributor.
CERTIFICATES AND CONFIRMATIONS
Share certificates are not issued. Detailed confirmations of each purchase or
redemption are sent to each shareholder. Monthly confirmations are sent to
report dividends paid during the month.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared daily and paid monthly. Capital gains realized by the
Fund, if any, will be distributed at least once every 12 months. Dividends are
declared just prior to determining net asset value. Dividends and capital gains
are automatically reinvested in additional shares on payment dates at the
ex-dividend date net asset value, unless cash payments are requested by writing
to Sunburst Banks, Sunburst Financial Group, Inc. or the distributor.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after Sunburst
Banks, Sunburst Financial Group, Inc., or the distributor receives the
redemption request. Redemptions will be made on days on which the Fund computes
its net asset value. Redemption requests must be received in proper form, and
can be made by a shareholder in person, by telephone, or by writing. If at any
time the Fund shall determine it necessary to terminate or modify any of these
methods of redemption, shareholders would be promptly notified.
BY TELEPHONE. A shareholder who is a customer of Sunburst Financial Group, Inc.
may redeem shares of the Fund by telephoning Sunburst Financial Group, Inc. at
1-800-467-2506. Shareholders wishing to redeem by phone will be required to
complete a telephone redemption authorization form available through Sunburst
Financial Group, Inc. Telephone redemption instructions may be recorded.
A shareholder who is a customer of the Trust Division of one of the Sunburst
Banks and whose account agreement with such Sunburst Bank permits telephone
redemption may redeem shares of the Fund by telephone. The shareholder should
contact their trust account officer for instructions.
Shares will be redeemed at the net asset value next determined after the Fund
receives the redemption request. Redemption requests must be received by 3:00
p.m. (Central time) in order for shares to be redeemed at that day's net asset
value. In no event will proceeds be credited more than seven days after a proper
request for redemption has been received.
Telephone redemptions will be verified by reasonable procedures to confirm the
identity of the shareholder. If reasonable procedures are not followed by the
Fund, it may be liable for losses due to unauthorized or fraudulent telephone
instructions. Authorization forms and information on this service are available
from the Sunburst Banks, Sunburst Financial Group, Inc. or the distributor.
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, such as written requests, should be considered.
BY MAIL. A shareholder who is a customer of Sunburst Financial Group, Inc. may
redeem shares of the Fund by sending a written request to Sunburst Financial
Group, Inc. The written request should include the shareholder's name and
address, the Fund name, the brokerage account number, and the share or dollar
amount requested. Shareholders should call Sunburst Financial Group, Inc. for
assistance in redeeming by mail.
A shareholder who is a customer of the Trust Division of one of the Sunburst
Banks may redeem shares of the Fund by sending a written request to the
shareholder's trust account officer. The written request should include the
shareholder's name and address, the Fund name, the trust account number and the
share or dollar amount requested. Shareholders should call their trust account
officer at Sunburst Banks for assistance in redeeming by mail.
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, provided The Fifth Third Bank has received payment for shares from its
shareholders.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record 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 BIF,
which is administered by the 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 the SAIF, which is 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 its transfer agent 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 its transfer agent reserve the right
to amend these standards at any time without notice.
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, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed under
this program, redemptions may reduce, and eventually use up, 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. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through Sunburst Banks, Sunburst Financial Group, Inc., or the
distributor. Due to the fact that shares are sold subject to a sales charge, it
is not advisable for shareholders to be purchasing shares subject to a sales
charge 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 a required minimum value of $1,000 ($250 in the case
of IRA accounts) due to shareholder redemptions. This requirement does not
apply, however, if the balance falls below $1,000 ($250 in the case of IRA
accounts) because of changes in the Fund's net asset value.
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 for vote. As a Massachusetts business
trust, the Fund is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Fund's operation and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by 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 the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Fund or the Trust. To protect
the shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or obligations of
the Fund or the Trust. These documents require notice of this disclaimer to be
given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of the the Fund, the Trust is required to use its property
of the Fund to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder of the Fund for
any act or obligation of the Trust on behalf of the Fund. Therefore, financial
loss resulting from liability as a shareholder of the Fund will occur only if
the Fund cannot meet its obligations to indemnify shareholders and pay judgments
against them from the assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the federal Bank Holding Company Act of
1956 or any bank or non-bank affiliate thereof from sponsoring, organizing,
controlling or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting or distributing securities. However, such
banking laws and regulations do not prohibit such a holding company or its bank
and non-bank affiliates generally from acting as investment adviser to such an
investment company or from purchasing shares of such a company as agent for and
upon the order of their customers. The Adviser and its affiliate banks are
subject to such banking laws and regulations.
The Adviser believes that it may perform the services for the Fund contemplated
by its investment advisory contract with the Trust without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. 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 the Adviser from continuing to perform
all or a part of the above services for its customers and/or the Fund. If it
were prohibited from engaging in these customer-related activities, the Trustees
would consider alternative service providers and means of continuing available
investment services. In such event, changes in the operation of the Fund may
occur, including the possible termination of any automatic or other Fund share
investment and redemption services then being provided by the Adviser. It is not
expected that existing Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to the Adviser is
found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Fund shares. The Fund will provide detailed tax information for
reporting purposes.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under 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 gain
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 normally reflects the effect of the maximum sales
load which, if excluded, would increase the total return and yield.
Occasionally, performance information which does not reflect the effect of the
sales load may be quoted in advertising.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
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<TABLE>
<S> <C> <C>
Sunburst Short-Intermediate Federated Investors Tower
Government Bond Fund Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Sunburst Bank, Mississippi 2000 Gateway, P.O. Box 947
Grenada, Mississippi 38901
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Transfer Agent, Dividend Disbursing Agent and
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Custodian
The Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45202
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Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
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Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
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Independent Auditor
KPMG Peat Marwick One Mellon Bank Center
Pittsburgh, Pennsylvania 15219
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</TABLE>
SUNBURST
SHORT-INTERMEDIATE GOVERNMENT
BOND FUND
PROSPECTUS
A Diversified Portfolio of Sunburst
Funds, an Open-End, Management
Investment Company
Prospectus dated January 9, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
This fund is made available to you through
Sunburst Bank. Federated Securities Corp.
is the distributor of the fund.
867094104
3080603A (1/95)
Sunburst
Funds
Prospectus
Short-
Intermediate
Government
Bond Fund
January 9, 1995
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Sunburst Short-Intermediate Government Bond Fund (the "Fund"), a portfolio of
Sunburst Funds (the "Trust") dated January 9, 1995. This Statement is not a
prospectus itself. To receive a copy of the prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 9, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
U.S. Government Obligations 1
Privately-Issued Mortgage-Related Securities 1
Repurchase Agreements 1
When-Issued and Delayed
Delivery Transactions 1
Restricted and Illiquid Securities 1
Futures and Options Transactions 2
Warrants 2
Lending of Portfolio Securities 2
Zero Coupon Securities 2
Investment Risks 2
Portfolio Turnover 2
Investment Limitations 3
SUNBURST FUND MANAGEMENT 5
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Officers and Trustees 5
Fund Ownership 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 7
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Adviser to the Fund 7
Advisory Fees 8
ADMINISTRATIVE SERVICES 8
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BROKERAGE TRANSACTIONS 8
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PURCHASING SHARES 9
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Distribution Plan 9
DETERMINING NET ASSET VALUE 9
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Determining Market Value of Securities 9
REDEEMING SHARES 9
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Redemption in Kind 9
EXCHANGING SECURITIES FOR FUND SHARES 10
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TAX STATUS 10
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The Fund's Tax Status 10
Shareholders' Tax Status 10
TOTAL RETURN 11
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YIELD 11
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PERFORMANCE COMPARISONS 11
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FINANCIAL STATEMENTS 12
- ---------------------------------------------------------------
APPENDIX 13
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Sunburst Short-Intermediate Government Bond Fund is a portfolio of the Sunburst
Funds, which was established as a Massachusetts business trust under a
Declaration of Trust dated July 12, 1993.
INVESTMENT OBJECTIVE AND POLICIES
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The Fund's investment objective is current income. The investment objective
cannot be changed without the approval of shareholders.
The Fund invests primarily in a professionally-managed and diversified portfolio
of U.S. government bonds. The policies described below may be changed by the
Board of Trustees ("Trustees") without shareholder approval. Shareholders will
be notified before any material change in these policies becomes effective.
U.S. GOVERNMENT OBLIGATIONS
The other types of U.S. government obligations in which the Fund may also invest
may include the following: Banks for Cooperatives (including Central Bank for
Cooperatives); National Credit Union Administration; Federal Land Banks; Federal
Intermediate Credit Banks; Export-Import Bank of the United States; Commodity
Credit Corporation; and Federal Financing Bank.
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES
Privately issued mortgage-related securities generally represent an ownership
interest in federal agency mortgage pass-through securities such as those issued
by Government National Mortgage Association. The terms and characteristics of
the mortgage instruments may vary among pass-through mortgage loan pools. The
market for such mortgage-related securities has expanded considerably since its
inception. The size of the primary issuance market and the active participation
in the secondary market by securities dealers and other investors makes
government-related pools highly liquid.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are 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 deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or 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 on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. However, the Fund will limit investments in illiquid
securities (including certain restricted securities not determined by the
Trustees to be liquid and repurchase agreements providing for settlement in more
than seven days after notice).
The Fund may invest in commercial paper issued in reliance on the exemption from
restriction 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 Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the
- --------------------------------------------------------------------------------
restricted securities which meet the criteria for liquidity established by the
Trustees, including Section 4(2) commercial paper (as determined by the Fund's
adviser), as liquid and not subject to the investment limitation applicable to
illiquid securities. In addition, because Section 4(2) commercial paper is
liquid, the Fund intends to not subject such paper to the limitation applicable
to restricted securities.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund reserves the right to attempt to hedge all or a portion of its
portfolio by buying and selling financial futures contracts, buying put options
on portfolio securities and put options on financial futures contracts, and
writing call options on futures contracts. However, the Fund has no present
intention to engage in any of these transactions for the coming fiscal year. The
Fund may write covered call options on portfolio securities to attempt to
increase its current income. The Fund will maintain its positions in securities,
option rights, and segregated cash subject to calls until the options are
exercised, closed, or have expired.
WARRANTS
The Fund reserves the right to invest in warrants, which are basically options
to purchase a security at a specific price (usually at a premium above the
market value of the optioned security 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 security 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 entity 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 security.
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.
ZERO COUPON SECURITIES
Zero coupon securities are debt securities which are issued at a discount to
their face amount and do not entitle the holder to any periodic payments of
interest prior to maturity. Rather, interest earned on zero coupon securities
accretes at a stated yield until the security reaches its face amount at
maturity. Zero coupon securities usually have put features that provide the
holder with the opportunity to put the bonds back to the issuer at a stated
price before maturity. Generally, the prices of zero coupon securities may be
more sensitive to market interest rate fluctuations than conventional debt
securities.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper and Europaper are subject to
somewhat different risks than domestic obligations of domestic issuers. Examples
of these risks include international, economic, and political developments,
foreign governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholding or other taxes on interest income,
difficulties in obtaining or enforcing a judgment against the issuing bank, and
the possible impact of interruptions in the flow of international currency
transactions. Different risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory requirements that
apply to domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, and recordkeepings, and the public
availability of information. These factors will be carefully considered by the
Fund's adviser in selecting investments for the Fund. At the present time, the
Fund does not intend to invest more than 5% of the Fund's net assets in ECDs,
ETDs, Yankee CDs, Canadian Commercial Paper and Europaper.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in the portfolio will be sold whenever the
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. The investment adviser does not anticipate that the Fund's
portfolio turnover will exceed 100%.
During the period from November 15, 1993 (date of initial public investment),
through September 30, 1994, the Fund's portfolio turnover rate was %.
- --------------------------------------------------------------------------------
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 securities. A 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 in amounts up to
one-third of the value of its total assets including the amounts
borrowed, and except to the extent that the Fund may enter into futures
contracts. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or 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. The Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.
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
15% of the value of 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 of collateral arrangements made in connection
with options activities or the purchase of securities on a when-issued
basis.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
Fund from purchasing or holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted
by the Fund's investment objective, policies, and limitations.
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
financial futures contracts and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, 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 which represent
interests in real estate.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer or if it would own more than 10% of the
outstanding voting securities of such issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest 25% or more of the
value of its total assets in securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, and repurchase agreements
collateralized by such securities.
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.
The 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 ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, certain over-the-counter
options, and certain securities not determined by the Trustees to be
liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor, unless
the issuer is the U.S. government, its agencies or instrumentalities.
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 the Fund's 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 MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase the
securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purpose of
exercising control or management.
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
Exchanges 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 will be valued at the
lower of cost or market, except that warrants acquired by the Fund in
units with or attached to securities may be deemed to be without value.
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. The Fund will not write call options
in excess of 25% of the value of its net assets.
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 not invest 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. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
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 or net assets will not result in a violation of such
restriction.
In order to comply with registration requirements of a certain state, the Fund
has agreed to limit its investments in restricted securities to 10% of its total
assets. If state requirements change, this policy may be changed without notice
to shareholders.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
At the present time, the Fund does not intend to borrow more than 5% of the
Fund's net assets.
SUNBURST FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, present positions with
Sunburst Short-Intermediate Government Bond Fund, and principal occupations.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Fund.
- --------------------------------------------------------------------------------
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
President, Treasurer and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; 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.
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William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael 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
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
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Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
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Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N 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.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of 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
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, 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
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND 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
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
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J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder 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
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
Margaret P. Tessaro
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and Assistant
Treasurer of some of the Funds.
- --------------------------------------------------------------------------------
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the 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" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D. Jones & Co. Daily Passport Cash Trust; 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 Institutional 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; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The Medalist Funds:
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; 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; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of , the following shareholders of record owned 5% or
more of the outstanding shares of the Fund:
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of 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 Sunburst Bank, Mississippi ("Adviser"), a
subsidiary of Union Planters Corporation.
Prior to January 5, 1995, the Adviser was a wholly-owned subsidiary of Grenada
Sunburst System Corporation ("GSSC"), a multi-bank holding company,
headquartered in Grenada, Mississippi. GSSC was engaged in banking and financial
service activities through its major operating areas, which included Sunburst
Bank, Louisiana; Sunburst Bank,
Mississippi; Sunburst Mortgage Corporation; Sunburst Financial Group Inc., a
registered broker dealer and investment adviser; Sunburst Trust, which provides
asset and investment management; and Rapid Finance, a small loan company. GSSC
provided a full range of banking, financial and trust services to individuals
and small and commercial businesses through its subsidiaries operating in 122
locations throughout Mississippi and Louisiana. GSSC and its affiliates had been
in the banking and financial services business for over 100 years. As of January
1, 1995, GSSC and its subsidiaries were acquired by Union Planters Corporation.
The Adviser shall not be liable to the Fund, or any shareholder of the Fund for
any losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by Sunburst Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of Sunburst Bank's or its affiliates' lending relationships with an
issuer.
From time to time, to the extent consistent with the investment objective,
policies and restrictions of the Fund, the Fund may invest in securities of
issuers with which the Adviser has a lending relationship. However, at this
time, the Adviser has no intention to invest in securities of issuers that have
a lending relationship with the Adviser or its affiliates.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus.
From the Fund's date of initial public investment, November 15, 1993, to
September 30, 1994, the Adviser earned $ , of which $ 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 for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
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 the fee set forth in the
prospectus. From the Fund's date of initial public investment, November 15,
1993, to September 30, 1994, the Fund incurred costs for administrative services
of $ , of which $ was waived.
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 use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Trustees.
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 and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers and dealers 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 or its affiliates might
otherwise have paid, it would tend to reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value plus any applicable sales charge on
days the New York Stock Exchange, the Federal Reserve Wire System and Sunburst
Banks 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.
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.
From the Fund's date of initial public investment, November 15, 1993, to
September 30, 1994, there were no distribution fees.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
- - for bonds and other fixed income securities, at the last sale price on a
national securities exchange if available, otherwise as determined by an
independent pricing service;
- - for short-term obligations, according to the mean between the over-the-counter
bid and asked prices provided by an independent pricing service, if available,
or at fair value as determined in good faith by the Trust's Board of Trustees;
- - for short-term obligations with remaining maturities of 60 days or less at the
time of purchase, at amortized cost unless the Board of Trustees determines
that particular circumstances of the security indicate otherwise; 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 and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value financial futures contracts, options on portfolio
securities, and options on financial futures at their market values established
by the exchanges at the close of trading on such exchanges unless the Board of
Trustees determines in good faith that another method of valuing these positions
is necessary.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the
redemption requests are received. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares solely in cash up to
$250,000 or 1% of the Fund's net asset value per share, whichever is less, for
any one shareholder within a 90-day period.
- --------------------------------------------------------------------------------
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Trust determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
EXCHANGING SECURITIES FOR FUND SHARES
- --------------------------------------------------------------------------------
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value, must be liquid and must
not be subject to restrictions on resale. The market value of any securities
exchanged in an initial investment, plus any cash, must be at least equal to the
minimum investment in the Fund. When Fund shares are purchased by exchange for
securities, the proceeds from the redemption are not available until the Fund's
transfer agent is reasonably certain that the transfer has settled, which can
take up to five business days.
Securities accepted by the Fund will be valued 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 or other rights
attached to the securities become the property of the Fund, along with the
securities.
If an exchange is permitted, it will be treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
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 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.
There are tax uncertainties with respect to whether increasing rate securities
will be treated as having an original issue discount. If it is determined that
the increasing rate securities have original issue discount, a holder will be
required to include as income in each taxable year, in addition to interest paid
on the security for that year, an amount equal to the sum of the daily portions
or original issue discount for each day during the taxable year that such holder
holds the security. There may also be tax uncertainties with respect to whether
an extension of maturity on an increasing rate note will be treated as a taxable
exchange. In the event it is determined that an extension of maturity is a
taxable exchange, a holder will recognize a taxable gain or loss, which will be
a short-term capital gain or loss if he holds the security as a capital asset,
to the extent that the value of the security with an extended maturity differs
from the adjusted basis of the security deemed exchanged therefor.
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 eligible for the dividends received deduction available to
corporations. These dividends, and any short-term capital gains, are taxable as
ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. When
the Fund realizes net long-term capital gains, it will distribute them at
least once every 12 months.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's cumulative total return for the period from November 15, 1993 (date
of initial public investment) through September 30, 1994 was %.
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 cumulative total return is representative of
approximately 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 September 30, 1994 was %.
The yield for the Fund is determined 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 value is 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 Securities and Exchange Commission 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;
- - the relative amount of Fund cash flow; 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 offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - MERRILL LYNCH 3-5 YEAR TREASURY INDEX is an unmanaged index tracking
short-intermediate term U.S. government securities with maturities between 3
and 5 years. The index is produced by Merrill Lynch, Pierce, Fenner & Smith,
Inc.
- - LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is an unmanaged
index comprised of all the bonds issued by the Lehman Brothers
Government/Corporate Bond Index with maturities between 1 and 9.99 years.
Total return is based on price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced monthly by
market capitalization.
- - SALOMON BROTHERS 3-5 YEAR GOVERNMENT INDEX quotes total returns for U.S.
Treasury issues (excluding flower bonds) with maturities of three to five
years. These total returns are year-to-date figures which are calculated each
month following January 1.
- - LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX is an unmanaged index comprised
of all publicly issued, non-convertible domestic debt of the U.S. government
or any agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with minimum
outstanding principal of $1 million and minimum maturity of one year and
maximum maturity of ten years are included.
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various categories by making
comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the "U.S.
government 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
NASDQ-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 also
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products including certificates of deposit and time deposits.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for the period from November 15, 1993 (date of initial
public investment) through September 30, 1994 are incorporated herein by
reference to the Annual Report of
the Fund dated September 30, 1994 (File No. 811-7073). A copy of this report may
be obtained without charge by contacting the Fund at the address listed in the
prospectus.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP ("S&P") CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from 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.
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 "A" 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.("MOODY'S") 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
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through A 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. ("FITCH") 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 of 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.
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 RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- --------------------------------------------------------------------------------
- - Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
- - Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
F-1+--EXCEPTIONALLY STRONG CREDIT QUALITY. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
867094104
3080603B (1/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (to be filed by amendment);
(b) Exhibits:
(1) Conformed Copy of the Declaration of Trust of
Registrant;(1)
(2) Copy of By-Laws of the Registrant;(1)
(3) Not applicable;
(4) Not applicable;
(5) Form of Investment Advisory Contract of the
Registrant;+
(6) (i) Conformed copy of Distributor's
Contract of the Registrant and
conformed copy of Exhibit A to the
Distributor's Contract;(3)
(ii) Conformed copy of Administrative
Agreement;(3)
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the
Registrant;+
(9) Conformed copy of Transfer Agency and Service
Agreement of the Registrant;(3)
(10) Conformed Copy of Opinion and Consent of
Counsel as to legality of shares being
registered;(2)
(11) Not applicable;
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding;(2)
(14) Not applicable;
(15) (i)Copy of Distribution Plan;(3)
(ii) Copy of Dealer Agreement;(1)
(iii) Copy of 12b-1 Agreement;(1)
(16) Schedule for Computation of Fund
Performance Data;(3)
(17) Copy of Financial Data Schedule;+
(18) Not applicable;
(19) Conformed Copy of Power of Attorney;(1)
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of October 27, 1994
Shares of beneficial interest 13
no par value
Item 27. Indemnification: (1)
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 2, 1993.
(File Nos. 33-49883 and 811-7073)
2. Response is incorporated by reference to Registrant's Pre-
Effective
Amendment No.1 on Form N-1A filed October 5, 1993. (File Nos.
33-49883 and 811-7073)
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed May 2, 1994.
(File Nos. 33-49883 and 811-7073)
Item 28. Business and Other Connections of Investment Adviser:
(a) Sunburst Bank, Mississippi, is wholly-owned
subsidiary of Union Planters Corporation ("UPC"), a
Tennessee-chartered corporation, registered as a bank
holding company and a savings and loan holding
company. UPC is the third largest bank headquartered
in Tennessee and operates 233 banking offices in
Tennessee, Mississippi, Alabama, Arkansas and
Kentucky. UPC had total assets of approximately $6.7
billion as of June 30, 1994.
The Officers of the investment adviser are: Benjamin
W. Rawlins, Jr., Chairman, CEO and Director; Jackson
W. Moore, President COO and Director; James A.
Gurley, Executive Vice President; John W. Parker,
Executive Vice President and Chief Financial Officer;
M. Kirk Walters, Senior Vice President, Treasurer,
and Chief Accouting Officer, and J. F. Springfield,
Executive Vice President, Secretary and General
Counsel.
The Directors of the investment adviser are listed
below with their principal occupations: Benjamin W.
Rawlins, Jr., Chairman and CEO, Union Planters
National Bank; Jackson W. Moore, President, and COO,
Union Planters Corporation; Albert M. Austin,
Chairman, Cannon, Austin and Cannon, Inc.; Marvin E.
Bruce, Retired, TBC Corporation; George W. Bryan,
Senior Vice President, Sara Lee Corporation; Robert
B. Colbert, Jr., Retired, Signal Apparel Co., Inc.;
C. J. Lowrance, III, President, Lowrance Brothers &
Co., Inc.; Stanley D. Overton, Vice Chairman, Union
Planters National Bank; Dr. V. Lane Rawlins,
President, Memphis State University; Mike P.
Sturidvant, President, Duc West Gin Co., Inc.; and
Richard A. Trippeer, Jr., President, R. A. Trippeer,
Inc.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares
of the Registrant, also acts as principal underwriter
for the following open-end investment companies:
Alexander Hamilton Funds; American Leaders Fund,
Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government
Money Trust; BayFunds; The Biltmore Funds; The
Biltmore Municipal Funds; California Municipal Cash
Trust; Cash Trust Series, Inc.; Cash Trust Series II;
DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; 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 Institutional 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; First Union Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fountain
Square Funds; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund,
Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Managed Series Trust;
Marshall Funds, Inc.; Money Market Management, Inc.;
The Medalist Funds; Money Market Obligations Trust;
Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds;
The Shawmut Funds; Short-Term Municipal Trust;
SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Targeted Duration Trust; Tax-Free Instruments
Trust; Tower Mutual Funds; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations;
Vision Fiduciary Funds, Inc.; Vision Group of Funds,
Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment
company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President, Treasurer
Federated Investors Tower President, and Treasurer, and Trustee
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
Sunburst Short-Intermediate Federated Investors Tower
Government Bond Fund Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Accouting Services
Federated Administrative Services Federated Investors Tower
Administrator Pittsburgh, PA 15222-3779
Sunburst Bank 2000 Gateway, P.O. Box 947
Adviser Grenada, Mississippi 38901
The Fifth Third Bank 38 Fountain Square Plaza
Custodian Cincinnati, Ohio 45202
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with respect
to the removal of Trustees and the calling of special
shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of
Registrant's latest annual report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant,
SUNBURST FUNDS, has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 4th day of
November, 1994.
SUNBURST FUNDS
BY: /s/Victor R. Siclari
Victor R. Siclari, Assistant Secretary
Attorney in Fact for John F. Donahue
November 4, 1994
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/Victor R. Siclari
Victor R. Siclari Attorney In Fact November 4, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer
(Principal Financial and
Accounting Officer) and Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of October 1, 1993, by and
between SUNBURST FUNDS, a business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust"), and THE FIFTH
THIRD BANK, a banking company organized under the laws of the
State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of
each of the investment portfolios and any additional portfolios
of the Trust, as each are or will be identified in Exhibit A
hereto (such current investment portfolios and any additional
portfolios individually referred to herein as a "Fund" and
collectively as the "Funds"), be held and administered by the
Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having
the qualifications prescribed in Section 26(a)(i) of the 1940
Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give
Oral Instructions and Written Instructions on behalf of the Trust
and named in Exhibit B hereto or in such resolutions of the Board
of Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time
to time serving under the Trust's Agreement and Declaration of
Trust, dated July 12, 1993, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form
of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Fund computes the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of
Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President,
the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to
have been given by an Authorized Person, (ii) recorded and kept
among the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to
confirm them, the Custodian shall notify the Trust of such
variance but such Oral Instructions will govern unless the
Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of
the Trust, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust
Company and (provided that Custodian shall have received a copy
of a resolution of the Board of Trustees, certified by an
Officer, specifically approving the use of such clearing agency
as a depository for the Trust) any other clearing agency
registered with the Securities and Exchange Commission under
Section 17A of the Securities and Exchange Act of 1934 (the "1934
Act"), which acts as a system for the central handling of
Securities where all Securities of any particular class or series
of an issuer deposited within the system are treated as fungible
and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options,
debentures, notes, bank certificates of deposit, bankers'
acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to
receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities
to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest
issued by the Trust.
1.13 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by
one or more persons as the Board of Trustees shall have from time
to time authorized, or (ii) communications by telex or any other
such system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS),
or any other similar electronic instruction system acceptable to
Custodian and approved by resolutions of the Board of Trustees, a
copy of which, certified by an Officer, shall have been delivered
to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or
in the possession of the Trust at any time during the period of
this Agreement, provided that such Securities or cash at all
times shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment
as such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund, except Securities
maintained in a Securities Depository or Book-Entry System, shall
be physically segregated from other Securities and non-cash
property in the possession of the Custodian and shall be
identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain
in its trust department a custody account in the name of each
Fund, subject only to draft or order of the Custodian, in which
the Custodian shall enter and carry all Securities, cash and
other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the
Custodian may appoint, and at any time remove, any domestic bank
or trust company, which has been approved by the Board of
Trustees and is qualified to act as a custodian under the 1940
Act, as sub-custodian to hold Securities and cash of the Funds
and to carry out such other provisions of this Agreement as it
may determine, and may also open and maintain one or more banking
accounts with such a bank or trust company (any such accounts to
be in the name of the Custodian and subject only to its draft or
order), provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its obligations or
liabilities under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall
deliver, or cause to be delivered, to the Custodian all of the
Fund's Securities, cash and other assets, including (a) all
payments of income, payments of principal and capital
distributions received by the Fund with respect to such
Securities, cash or other assets owned by the Fund at any time
during the period of this Agreement, and (b) all cash received by
the Fund for the issuance, at any time during such period, of
Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in
a Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund
shall deliver to the Custodian a resolution of the
Board of Trustees, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in
connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of
Securities. Any change made to the initial resolution
of the Board of Trustees regarding the use of a
Securities Depository or Book-Entry System for the
deposit of Securities of the Funds shall require the
Trust to deliver a copy thereof, certified by an
Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes
only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian and the Custodian's
account on the books of the Book-Entry System and
Securities Depository as the case may be, with respect
to Securities of a Fund maintained in a Book-Entry
System or Securities Depository shall, by book-entry,
or otherwise identify such Securities as belonging to
the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the
Custodian shall pay for such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of
the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities
has been transferred to the Depository Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of the Fund.
(e) Upon request, the Custodian shall provide the Fund with
copies of any report (obtained by the Custodian from a
Book-Entry System or Securities Depository in which
Securities of the Fund is kept) on the internal
accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-
custodian appointed pursuant to Section 3.3 above or
any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-
Entry System or Securities Depository. At its
election, the Trust shall be subrogated to the rights
of the Custodian with respect to any claim against a
Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from
the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has
been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse
moneys from a Fund Custody Account but only in the following
cases:
(a) For the purchase of Securities for the Fund but only
upon compliance with Section 4.1 of this Agreement and
only (i) in the case of Securities (other than options
on Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or
any sub-custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in
Section 3.9 below in proper form for transfer, or if
the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 3.5
above; (ii) in the case of options on Securities,
against delivery to the Custodian (or such sub-
custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii)
in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such
sub-custodian) of evidence of title thereto in favor of
the Trust or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse
repurchase agreements entered into between the Trust
and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in
U.S. Government securities, against delivery of the
purchased Securities either in certificate form or
through an entry crediting the Custodian's account at a
Book-Entry System or Securities Depository for the
account of the Fund with such Securities;
(b) In connection with the conversion, exchange or
surrender, as set forth in Section 3.7(f) below, of
Securities owned by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as
provided in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Trust, including but not limited to the following
payments for the account of a Fund: interest; taxes;
administration, investment management, investment
advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating
expenses of a Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt,
in addition to Proper Instructions, of a copy of a
resolution of the Trust's Executive Committee or Board
of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such
purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be
made.
3.7 Delivery of Securities from Fund Custody Accounts.
Upon receipt of Proper Instructions, the Custodian shall release
and deliver Securities from a Custody Account but only in the
following cases:
(a) Upon the sale of Securities for the account of a Fund
but only against receipt of payment therefor in cash,
by certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an Offeror's depository agent in connection with
tender or other similar offers for Securities of a
Fund; provided that, in any such case, the cash or
other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer
into the name of the Trust, the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above, or
of any nominee or nominees of any of the foregoing, or
(ii) for exchange for a different number of
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by a Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of a Fund, but only against receipt of such collateral
as the Trust shall have specified to the Custodian in
Proper Instructions;
(j) For delivery as security in connection with any
borrowings by the Trust on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt
by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of
the NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or
other arrangements in connection with transactions by
the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures
Trading Commission and/or any contract market (or any
similar organization or organizations) regarding
account deposits in connection with transactions by the
Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Trust's Executive Committee or
Board of Trustees, certified by an Officer, specifying
the Securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with
respect to all Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Trust is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the
IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar
securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details
in connection with sale, exchange, substitution,
purchase, transfer and other dealings with Securities
and assets of the Fund.
3.9 Registration and Transfer of Securities. All
Securities held for a Fund that are issued or issuable only in
bearer form shall be held by the Custodian in that form, provided
that any such Securities shall be held in a Book-Entry System for
the account of the Trust on behalf of a Fund, if eligible
therefor. All other Securities held for a Fund may be registered
in the name of the Trust on behalf of such Fund, the Custodian,
or any sub-custodian appointed pursuant to Section 3.3 above, or
in the name of any nominee of any of them, or in the name of a
Book-Entry System, Securities Depository or any nominee of either
thereof; provided, however, that such Securities are held
specifically for the account of the Trust on behalf of a Fund.
The Trust shall furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or
Securities Depository, any Securities registered in the name of a
Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund,
complete and accurate records with respect to Securities, cash or
other property held for the Trust, including (i) journals or
other records of original entry containing an itemized daily
record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other
records) reflecting (A) Securities in transfer, (B) Securities in
physical possession, (C) monies and Securities borrowed and
monies and Securities loaned (together with a record of the
collateral therefor and substitutions of such collateral), (D)
dividends and interest received, and (E) dividends receivable and
interest accrued; and (iii) cancelled checks and bank records
related thereto. The Custodian shall keep such other books and
records of the Trust as the Trust shall reasonably request, or as
may be required by the 1940 Act, including, but not limited to
Section 3.1 and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized
officers, employees or agents of the Trust and employees or
agents of the Securities and Exchange Commission, and (iii) if
required to be maintained by Rule 31a-1 under the 1940 Act, be
preserved for the periods prescribed in Rule 31a-2 under the 1940
Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement by Fund and a summary
of all transfers to or from the Custody Account on the day
following such transfers. At least monthly and from time to
time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held for the
Trust under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall
provide the Trust with such reports, as the Trust may reasonably
request from time to time, on the internal accounting controls
and procedures for safeguarding Securities, which are employed by
the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies if any, relating to Securities which are not
registered in the name of a Fund, to be promptly executed by the
registered holder of such Securities, without indication of the
manner in which such proxies are to be voted, and shall include
all other proxy materials, if any, promptly deliver to the Trust
such proxies, all proxy soliciting materials, which should
include all other proxy materials, if any, and all notices to
such Securities.
3.14 Information on Corporate Actions. Custodian will
promptly notify the Trust of corporate actions, limited to those
Securities registered in nominee name and to those Securities
held at a Depository or sub-Custodian acting as agent for
Custodian. Custodian will be responsible only if the notice of
such corporate actions is published by the Financial Daily Card
Service, J.J. Kenny Called Bond Service, DTC, or received by
first class mail from the agent. For market announcements not
yet received and distributed by Custodian's services, Trust will
inform its custody representative with appropriate instructions.
Custodian will, upon receipt of Trusts's response within the
required deadline, affect such action for receipt or payment for
the Trust. For those responses received after the deadline,
Custodian will affect such action for receipt or payment, subject
to the limitations of the agent(s) affecting such actions.
Custodian will promptly notify Trust for put options only if the
notice is received by first class mail from the agent. The Trust
will provide or cause to be provided to Custodian with all
relevant information contained in the prospectus for any security
which has unique put/option provisions and provide Custodian with
specific tender instructions at least ten business days prior to
the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Trust, Written Instructions shall be delivered
to the Custodian, specifying (a) the name of the issuer or writer
of such Securities, and the title or other description thereof,
(b) the number of shares, principal amount (and accrued interest,
if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to
whom such amount is payable. The Custodian shall upon receipt of
such Securities purchased by a Fund pay out of the moneys held
for the account of such Fund the total amount specified in such
Written Instructions to the person named therein. The Custodian
shall not be under any obligation to pay out moneys to cover the
cost of a purchase of Securities for a Fund, if in the relevant
Custody Account there is insufficient cash available to the Fund
for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where payment for
the purchase of Securities for a Fund is made by the Custodian in
advance of receipt for the account of the Fund of the Securities
purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable
to the Fund for such Securities to the same extent as if the
Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by a Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the name of the issuer or writer of
such Securities, and the title or other description thereof, (b)
the number of shares, principal amount (and accrued interest, if
any), or other units sold, (c) the date of sale and settlement
(d) the sale price per unit, (e) the total amount payable upon
such sale, and (f) the person to whom such Securities are to be
delivered. Upon receipt of the total amount payable to the Trust
as specified in such Written Instructions, the Custodian shall
deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the
customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section
4.3 above or any other provision of this Agreement, the
Custodian, when instructed to deliver Securities against payment,
shall be entitled, if in accordance with the customs and
practices prevailing among brokers and dealers in such Securities
on the date of execution of this Agreement, or in accordance with
such lesser customs, if any, as may be approved by the Trust in
Written Instructions or by resolution of the Trust's Executive
Committee or Board of Trustees, to deliver such Securities prior
to actual receipt of final payment therefor. In any such case,
the Trust shall bear the risk that final payment for such
Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have
no liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole
discretion and from time to time, the Custodian may credit the
relevant Custody Account, prior to actual receipt of final
payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the
Trust, and (iii) income from cash, Securities or other assets of
the Trust. Any such credit shall be conditional upon actual
receipt by Custodian of final payment and may be reversed if
final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit the
Trust to use funds so credited to its Custody Account in
anticipation of actual receipt of final payment. Any such funds
shall be repayable immediately upon demand made by the Custodian
at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian
may, in its sole discretion and from time to time, advance funds
to the Trust to facilitate the settlement of the Trust's
transactions on behalf of a Fund in its Custody Account. Any
such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the relevant Custody Account, and upon receipt
of Proper Instructions specifying that the funds are required to
redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such
Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall
not be under any obligation to effect payment or distribution by
any bank designated in Proper Instructions given pursuant to
Section 5.1 above of any amount paid by the Custodian to such
bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall
establish and maintain a segregated account or accounts for and
on behalf of each Fund, into which account or accounts may be
transferred cash and/or Securities, including Securities
maintained in a Depository Account,
(a) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD
(or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the
Commodity Futures Trading commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities
made by a Fund,
(d) for purposes of compliance by the Trust with
requirements under the 1940 Act for the maintenance of
segregated accounts by registered investment companies
in connection with reverse repurchase agreements and
when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of
Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust for
any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages,
cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-
custodian appointed pursuant to Section 3.3 above. The Custodian
shall be entitled to rely on and may act upon advice of counsel
on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The
Custodian shall promptly notify the Trust of any action taken or
omitted by the Custodian pursuant to advice of counsel. The
Custodian shall not be under any obligation at any time to
ascertain whether the Trust is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Trust's charter
documents or by-laws, or its investment objectives and policies
as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be the custodian of, any cash
belonging to the Trust or any money represented by a check, draft
or other instrument for the payment of money, until the Custodian
or its agents actually receive such cash or collect on such
instrument.
7.3 No Responsibility for title, etc. So long as and to
the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received
or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be
required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Trust if such Securities are in default or payment
is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The
Custodian shall be entitled to rely upon any certificate, notice
or other instrument in writing received by it and reasonably
believed by it to be genuine. The Custodian shall be entitled to
rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no
duties or obligations whatsoever except such duties and
obligations as are specifically set forth in this Agreement, and
no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and
supply necessary information, by the Trust, to the entity or
entities appointed by the Trust to keep the books of account of
the Trust and/or compute the value of the assets of the Trust.
The Custodian shall take all such reasonable actions as the Trust
may from time to time request to enable the Trust to obtain, from
year to year, favorable opinions from the Trust's independent
accountants with respect to the Custodian's activities hereunder
in connection with (a) the preparation of the Trust's report on
Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by
the Trust of any other requirements of the Securities and
Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant
to Section 3.3 above, and any nominee of the Custodian or of such
sub-custodian from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
or foreign securities and/or banking laws) or claim arising
directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at
the request or direction of or in reliance on the advice of the
Trust, or (ii) upon Proper Instructions, or (c) generally, from
the performance of its obligations under this Agreement or any
sub-custody agreement with a sub-custodian appointed pursuant to
Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement,
provided that neither the Custodian nor any such sub-custodian
shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the
Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which
may, in the opinion of the custodian, result in the Custodian or
its nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to
the Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any
failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil
or military disturbances; sabotage; strikes; epidemics; riots;
power failures; computer failure and any such circumstances
beyond its reasonable control as may cause interruption, loss or
malfunction of utility, transportation, computer (hardware or
software) or telephone communication service; accidents; labor
disputes, acts of civil or military authority; governmental
actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the
event of a failure or delay shall use its best efforts to
ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become
effective as of the date first set forth above and shall continue
in full force and effect until terminated as hereinafter
provided.
10.2 Termination. Either party hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of the giving of such
notice. If a successor custodian shall have been appointed by
the Board of Trustees, the Custodian shall, upon receipt of a
notice of acceptance by the successor custodian, on such
specified date of termination (a) deliver directly to the
successor custodian all Securities (other than Securities held in
a Book-Entry System or Securities Depository) and cash then owned
by the Trust and held by the Custodian as custodian, and (b)
transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the benefit of the Trust at
the successor custodian, provided that the Trust shall have paid
to the Custodian all fees, expenses and other amounts to the
payment or reimbursement of which it shall then be entitled.
Upon such delivery and transfer, the Custodian shall be relieved
of all obligations under this Agreement. The Trust may at any
time immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening
of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, and (c) is doing business in New York, New
York, all Securities, cash and other property held by Custodian
under this Agreement and to transfer to an account of or for the
Trust at such bank or trust company all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall
be relieved of all obligations under this Agreement. If, after
reasonable inquiry, Custodian cannot find a successor custodian
as contemplated in this Section 10.3, then Custodian shall have
the right to deliver to the Trust all Securities and cash then
owned by the Trust and to transfer any Securities held in a Book-
Entry System or Securities Depository to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own
custodian with respect to the Trust and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed
upon from time to time by the Trust and the Custodian. The fees
and other charges in effect on the date hereof and applicable to
the Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of
Massachusetts, under a Declaration of Trust, to which reference
is hereby made a copy of which is on file at the office of the
Secretary of State of Massachusetts as required by law, and to
any and all amendments thereto so filed or hereafter filed. The
obligations of the Trust entered into in the name of the Trust or
on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, officers, employees, agents
or shareholders of the Trust or the Funds personally, but bind
only the assets of the Trust, and all persons dealing with any of
the Funds of the Trust must look solely to the assets of the
Trust belonging to such Fund for the enforcement of any claims
against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given hereunder
shall be in writing and shall be sent or delivered to The receipt
at the address set forth after its name herein below:
To the Trust:
Sunburst Funds
c/o Federated Investors Tower
Pittsburg, Pennsylvania 15222-3779
Attn: Secretary
Telephone: (412) 288-1900
Facsimile: (412) 288-8141 or 288-1982
To the Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to
the other by notice given in accordance with this Article XIII.
Writing shall include transmission by or through teletype,
facsimile, central processing unit connection, on-line terminal
and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate
any printed matter which contains any reference to Custodian
without the prior written approval of Custodian, excepting
printed matter contained in the prospectus or statement of
additional information or its registration statement for the
Trust and such other printed matter as merely identifies
Custodian as custodian for the Trust. The Trust shall submit
printed matter requiring approval to Custodian in draft form,
allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to
exercise and no delay by such party in exercising, any right
hereunder shall operate as a waiver thereof. The exercise by
either party hereto of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or
in equity.
14.4 Amendments. This Agreement cannot be changed orally
and no amendment to this Agreement shall be effective unless
evidenced by an instrument in writing executed by the parties
hereto.
14.5 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all
of which together shall constitute but one and the same
instrument.
14.6 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by either party
hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement
are for convenience of reference only and shall not affect the
meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed and delivered in its name and on
its behalf by its representatives thereunto duly authorized, all
as of the day and year first above written.
ATTEST: SUNBURST FUNDS
/s/ Victor R. Siclari By: /s/ Edward C.Gonzales
Victor R. Siclari Edward C. Gonzales
Assistant Secretary President and Treasurer
ATTEST: THE FIFTH THIRD BANK
/s/ Fred L. Darlington By: /s/ Tracie D. Hoffman
Fred L. Darlington Tracie Hoffman
Assitant Secretary Vice President
Dated: October 1, 1993
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
SUNBURST FUNDS AND THE FIFTH THIRD BANK
October 1, 1993
Name of Fund Date
Sunburst Short-Intermediate Government Bond Fund
October 1, 1993
SUNBURST FUNDS
By: /s/ Edward C. Gonzales
Edward C. Gonzales
President and Treasurer
THE FIFTH THIRD BANK
By: /s/ Tracie D. Hoffman
Tracie Hoffman
Vice President
Dated: October 1, 1993
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
SUNBURST FUNDS AND THE FIFTH THIRD BANK
October 1, 1993
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the
persons authorized by the Trust to Administer each Custody
Account.
SUNBURST SHORT-INTERMEDIATE GOVERNMENT BOND FUND
Name Signature
James Plunkett /s/ James Plunkett
Thomas O'Brien /s/ Thomas O'Brien
Emily H. Emigh /s/ Emily H. Emigh
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of SUNBURST FUNDS
and any of them, namely the Chairman, President, Vice Presidents,
Secretary and Treasurer, are hereby authorized as signers for the
conduct of business for an on behalf of the Funds with THE FIFTH
THIRD BANK:
John F. Donahue CHAIRMAN /s/ John F. Donahue
Edward C. Gonzales PRESIDENT /s/ Edward C. Gonzales
Margaret P. Demski VICE PRESIDENT /s/ Margaret P. Demski
J. Christopher Donahue VICE PRESIDENT /s/ J. Christopher Donahue
Richard B. Fisher VICE PRESIDENT /s/ Richard B. Fisher
John W. McGonigle VICE PRESIDENT /s/ John W. McGonigle
AND SECRETARY
John A. Staley, IV VICE PRESIDENT /s/ John A. Staley
Edward C. Gonzales TREASURER /s/ Edward C. Gonzales
In addition, the following Assistant Treasurer is authorized to
sign on behalf of the Trust for the purpose of effecting
securities transactions:
David M. Taylor ASSISTANT /s/ David M. Taylor
TREASURER
The undersigned officers of SUNBURST FUNDS hereby certify that
the foregoing is within the parameters of a Resolution adopted by
Trustees of the Trust by unanimous written consent dated July 12,
1993, directing and authorizing preparation of documents and to
do everything necessary to effect the Custody Agreement between
SUNBURST FUNDS and THE FIFTH THIRD BANK.
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Its: President and Treasurer
By: /s/ Victor R. Siclari
Victor R. Siclari
Its: Assistant Secretary
Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SUNBURST FUNDS
FORM OF
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1st day of January, 1995, between
Sunburst Bank, Mississippi, a state-chartered bank having its
principal place of business in Grenada, Mississippi (the
"Adviser"), and Sunburst Funds, a Massachusetts business trust
having its principal place of business in Pittsburgh,
Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment
company as that term is defined in the Investment Company
Act of 1940, as amended, and is registered as such with the
Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser
for each of the portfolios ("Funds") of the Trust which executes
an exhibit to this Contract, and Adviser accepts the
appointments. Subject to the direction of the Trustees of the
Trust, Adviser shall provide investment research and supervision
of the investments of the Funds and conduct a continuous program
of investment evaluation and of appropriate sale or other
disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each
of the Funds will be guided by each of the Fund's investment
objective and policies and the provisions and restrictions
contained in the Declaration of Trust and By-Laws of the Trust
and as set forth in the Registration Statements and exhibits as
may be on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own
expenses and its allocable share of Trust expenses, including,
without limitation, the expenses of organizing the Trust and
continuing its existence; fees and expenses of Trustees and
officers of the Trust; fees for investment advisory services and
administrative personnel and services; expenses incurred in the
distribution of its shares ("Shares"), including expenses of
administrative support services; fees and expenses of preparing
and printing its Registration Statements under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, and
any amendments thereto; expenses of registering and qualifying
the Trust, the Funds, and Shares of the Funds under federal and
state laws and regulations; expenses of preparing, printing, and
distributing prospectuses (and any amendments thereto) to
shareholders; interest expense, taxes, fees, and commissions of
every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares,
including expenses attributable to a program of periodic issue;
charges and expenses of custodians, transfer agents, dividend
disbursing agents, shareholder servicing agents, and registrars;
printing and mailing costs, auditing, accounting, and legal
expenses; reports to shareholders and governmental officers and
commissions; expenses of meetings of Trustees and shareholders
and proxy solicitations therefor; insurance expenses; association
membership dues and such nonrecurring items as may arise,
including all losses and liabilities incurred in administering
the Trust and the Funds. Each Fund will also pay its allocable
share of such extraordinary expenses as may arise including
expenses incurred in connection with litigation, proceedings, and
claims and the legal obligations of the Trust to indemnify its
officers and Trustees and agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all
services rendered to each Fund by Adviser hereunder, the fees set
forth in the exhibits attached hereto.
5. The net asset value of each Fund's Shares as used
herein will be calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods
as it deems appropriate reduce its compensation (and, if
appropriate, assume expenses of one or more of the Funds) to the
extent that any Fund's expenses exceed such lower expense
limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date
of execution of the applicable exhibit and shall continue in
effect with respect to each Fund presently set forth on an
exhibit (and any subsequent Funds added pursuant to an exhibit
during the initial term of this Contract) for two years from the
date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for
termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least
annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party cast in person
at a meeting called for that purpose; and (b) Adviser shall not
have notified a Fund in writing at least sixty (60) days prior to
the anniversary date of this Contract in any year thereafter that
it does not desire such continuation with respect to that Fund.
If a Fund is added after the first approval by the Trustees as
described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Contract by the
Trustees and thereafter for successive periods of one year,
subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may
be terminated at any time with respect to any Fund, without the
payment of any penalty, by the Trustees of the Trust or by a vote
of the shareholders of that Fund on sixty (60) days' written
notice to Adviser.
9. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser
may employ or contract with such other person, persons, Trust, or
Trusts at its own cost and expense as it shall determine in order
to assist it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties
under this Contract on the part of Adviser, Adviser shall not be
liable to the Trust or to any of the Funds or to any shareholder
for any act or omission in the course of or connected in any way
with rendering services or for any losses that may be sustained
in the purchase, holding, or sale of any security.
11. This Contract may be amended at any time by agreement
of the parties provided that the amendment shall be approved both
by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract
or interested persons of any such party to this Contract (other
than as Trustees of the Trust) cast in person at a meeting called
for that purpose, and, where required by Section 15(a)(2) of the
Act, on behalf of a Fund by a majority of the outstanding voting
securities of such Fund as defined in Section 2(a)(42) of the
Act.
12. The Adviser acknowledges that all sales literature for
investment companies (such as the Trust) are subject to strict
regulatory oversight. The Adviser agrees to submit any proposed
sales literature for the Trust (or any Fund) or for itself or its
affiliates which mentions the Trust (or any Fund) to the Trust's
distributor for review and filing with the appropriate regulatory
authorities prior to the public release of any such sales
literature, provided, however, that nothing herein shall be
construed so as to create any obligation or duty on the part of
the Adviser to produce sales literature for the Trust (or any
Fund). The Trust agrees to cause its distributor to promptly
review all such sales literature to ensure compliance with
relevant requirements, to promptly advise Adviser of any
deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to
cause such sales literature to be distributed to prospective
investors in the Trust.
13. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations pursuant to
this Contract of a particular Fund and of the Trust with respect
to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any
such obligation from any other Fund, the shareholders of any
Fund, the Trustees, officers, employees or agents of the Trust,
or any of them.
14. The parties hereto acknowledge that Grenada Sunburst
System Corporation, has reserved the right to grant the non-
exclusive use of the name "Sunburst" or any derivative thereof to
any other investment company, investment company portfolio,
investment adviser, distributor or other business enterprise, and
to withdraw from the Trust and one or more of the Funds the use
of the name "Sunburst." The name "Sunburst" will continue to be
used by the Trust and each Fund so long as such use is mutually
agreeable to Sunburst Bank, Mississippi and the Trust.
15. This Contract shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
16. This Contract will become binding on the parties hereto
upon their execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
Sunburst Short-Intermediate Government Bond Fund
For all services rendered by Adviser hereunder, the above-
named Fund of the Trust shall pay to Adviser and Adviser agrees
to accept as full compensation for all services rendered
hereunder, an annual investment advisory fee equal to 0.74 of 1%
of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net
assets of the Fund shall be accrued daily at the rate of 1/365th
of 0.74 of 1% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser
monthly.
Witness the due execution hereof this 1st day of January,
1995.
Attest: Sunburst Bank, Mississippi
By:
Secretary Executive Vice President
Attest: Sunburst Funds
By:
Assistant Secretary Vice President
<TABLE> <S> <C>
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<PERIOD-END> SEP-30-1994
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