1933 Act File No. 33-50505
1940 Act File No. 811-7101
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. 1 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X
Amendment No. 2 X
ALEXANDER HAMILTON 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:
X immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on 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 January 15, 1995; 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,
L.L.P.
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 ALEXANDER
HAMILTON FUNDS, which is comprised of three portfolios: (1)
Alexander Hamilton Government Income Fund; (2) Alexander
Hamilton Municipal Income Fund; and (3) Alexander Hamilton
Equity Growth and Income Fund, relates to all three
portfolios, and 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 (1-3).
Item 2. Synopsis Summary of Fund Expenses (1-3).
Item 3. Condensed Financial
Information Financial Highlights (1-3);
Performance Information (1-3).
Item 4. General Description of
Registrant. Highlights (1-3); General
Information (1-3); Investment
Information (1-3); Investment
Objective (1-3); Investment
Policies (1-3); Hedging
Interest Rate Risks (1);
Municipal Securities (2);
Investment Risks (2);
Investment Limitations (1-3).
Item 5. Management of the Fund Trust Information (1-3);
Management of the Trust (1-3);
Distribution of Shares (1-3);
Administration of the Fund (1-
3); Expenses of the Fund (1-3).
Item 6. Capital Stock and Other
Securities Dividends and Distributions (1-
3); Shareholder Information (1-
3); Voting Rights (1-3); Tax
Information (1-3); Federal
Income Tax (1-3); Pennsylvania
Corporate and Personal Property
Taxes (1-3).
Item 7. Purchase of Securities Being
Offered Net Asset Value (1-3); How to
Invest in the Fund (1-3); Share
Purchases (1-3); Minimum
Investment Required (1-3); What
Shares Cost (1-3); Systematic
Investment Plan (1-3);
Certificates and Confirmations
(1-3); Exchange Privilege (1-
3); Reduced Sales Charge (1-3);
Requirements for Exchange (1-
3); Tax Consequences (1-3);
Making an Exchange (1-3).
Item 8. Redemption or Repurchase Redeeming Shares (1-3); Through
an Investment Professionsl (1-
3); Directly From the Fund (1-
3); Systematic Withdrawal Plan
(1-3); Redemption Fee (1-3);
Accounts With Low Balances (1-
3).
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page Cover Page (1-3).
Item 11. Table of Contents Table of Contents (1-3).
Item 12. General Information and
History General Information About the
Fund (1-3).
Item 13. Investment Objectives and
Policies Investment Objective and
Policies (1-3).
Item 14. Management of the Fund Management of the Trust (1-3).
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership (1-3).
Item 16. Investment Advisory and Other
Services Investment Advisory Services (1-
3); Administrative Services (1-
3).
Item 17. Brokerage Allocation Brokerage Transactions (1-3).
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Purchasing Shares (1-3);
Determining Net Asset Value (1-
3); Redeeming Shares (1-3).
Item 20. Tax Status Tax Status (1-3).
Item 21. Underwriters See Part A. Distribution of
Trust Shares.
Item 22. Calculations of Yield
Quotations Total Return (1-3); Yield (1-
3); Tax-Equivalent Yield (2);
Performance Comparisons (1-3).
Item 23. Financial Statements Filed in Part A
ALEXANDER HAMILTON EQUITY GROWTH
AND INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
PROSPECTUS
The Alexander Hamilton Equity Growth and Income Fund (the "Fund") seeks to
achieve growth of capital and income by investing in a professionally managed,
diversified portfolio primarily consisting of common stocks and other securities
of high quality companies.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK OWNED BY HOUSEHOLD INTERNATIONAL, INC., OR ANY OTHER BANK, ARE NOT ENDORSED
OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
Please read this prospectus before investing, and keep it for future reference.
It contains important information, including how the Fund invests and the
services available to shareholders.
The Fund has also filed a Statement of Additional Information dated February 10,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 10, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
ALEXANDER HAMILTON FUNDS 3
- ------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 4
Acceptable Investments 4
Common Stocks 4
Convertible Securities 4
Investment-Grade Bonds 4
Foreign Issuers 4
Zero Coupon Convertible Securities 5
Repurchase Agreements 5
Restricted and Illiquid Securities 5
Lending of Portfolio Securities 5
Investing in Other
Investment Companies 5
Investment Limitations 6
HOW TO INVEST IN THE FUND 6
- ------------------------------------------------------
Share Purchases 6
Through an Investment Professional 6
Directly from the Distributor 6
Directly by Wire 7
Systematic Investment Plan 7
Minimum Investment Required 7
What Shares Cost 8
Dealer Concession 8
Reducing the Sales Charge 8
Quantity Discounts and Accumulated
Purchases 9
Letter of Intent 9
Reinvestment Privilege 10
Purchases with Proceeds from
Redemptions of Unaffiliated
Investment Companies 9
Concurrent Purchases 10
Certificates and Confirmations 10
Dividends and Distributions 10
Retirement Plans 10
EXCHANGE PRIVILEGE 11
- ------------------------------------------------------
Reduced Sales Charge 11
Requirements for Exchange 11
Tax Consequences 11
Making an Exchange 11
Telephone Instructions 11
REDEEMING SHARES 12
- ------------------------------------------------------
Through an Investment Professional 12
Directly from the Fund 12
By Telephone 12
By Mail 13
Signatures 13
Systematic Withdrawal Plan 13
Accounts with Low Balances 14
EXPENSES OF THE FUND 14
- ------------------------------------------------------
NET ASSET VALUE 14
- ------------------------------------------------------
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Sub-Adviser 16
Sub-Adviser's Background 16
Distribution of Shares 16
Distribution Plan 16
Brokerage Transactions 17
Administration of the Fund 17
Administrative Services 17
Custodian 18
Transfer Agent and
Dividend Disbursing Agent 18
Legal Counsel 18
Independent Auditors 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................................................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................................................. None
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, as applicable)............................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee........................................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)...................................................................... 0.11%
12b-1 Fee.............................................................................................. .25%
Total Other Expenses................................................................................... 0.89%
Total Fund Operating Expenses (2)............................................................... 1.25%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser may terminate the
waiver at any time at its sole discretion. The maximum allowable management
fee is .75%.
(2) The total Fund operating expenses are expected to be 1.89% absent the
anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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................................................ $57 $83
</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.
HIGHLIGHTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund seeks growth of capital and income.
STRATEGY
The Fund attempts to achieve its investment objective by investing in a
diversified portfolio of the securities of high quality companies. At least 65%
of the Fund's portfolio will be invested in common stocks. The Fund may also
invest in preferred stocks, convertible securities, and corporate bonds, notes,
and warrants.
RISKS
The value of the Fund's shares will fluctuate. The amount of this fluctuation
depends on the quality and maturity of the securities in the portfolio, as well
as on market conditions. The Fund attempts to minimize such risks by
diversifying its portfolio securities.
INVESTMENT ADVISERS
Alexander Hamilton Capital Management, Inc., a subsidiary of Alexander Hamilton
Life Insurance Company of America, is the investment adviser of the Fund. The
adviser is responsible for overseeing investment research and the purchase and
sale of portfolio securities. The adviser is also responsible for managing
assets of Alexander Hamilton Life Insurance Company of America, which total over
$5 billion. Federated Research, a subsidiary of Federated Investors, is the
sub-adviser of the Fund. Affiliates of Federated Investors manage and administer
over $75 billion in mutual fund assets.
HOW TO INVEST IN THE FUND
You may purchase shares of the Fund through an investment professional, such as
a bank, broker, or other sales agent that has a sales agreement with the
distributor. Shares can be purchased directly from the distributor, and by
various electronic processes. Please refer to "How to Invest in the Fund."
Similarly, you may sell your shares back to the Fund through an investment
professional, directly from the distributor, or electronically. Please refer to
"Redeeming Shares".
MINIMUM PURCHASE
The minimum initial investment required is $1,000, and additional investments
must be in an amount of $100 or more. To open a retirement plan account, only
$250 is required, and additional investments must be in an amount of $50 or
more.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly. Capital gains are distributed at
least once a year. Dividends and capital gains distributions will be reinvested
in additional shares of the Fund unless you specifically request that they be
paid in cash.
SHAREHOLDER SERVICES
The Fund offers a variety of services to make investing in the Fund convenient.
These services include: automatic investment programs, exchange privileges with
other Alexander Hamilton Funds, and retirement plans. There are several methods
of reducing the sales charge.
Various methods of redemption are available to make withdrawing from the Fund
easy and convenient, too, including a systematic withdrawal plan.
Please refer to the appropriate sections in this prospectus for more information
about the shareholder services available.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Alexander Hamilton Funds (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated July 21, 1993. The Fund's
address is Liberty Center, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. 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. This prospectus relates only to the Trust's growth and income
portfolio, known as Alexander Hamilton Equity Growth and Income Fund.
The Fund is designed for individuals and insititutions seeking growth of capital
and income through a professionally managed, diversified portfolio of common
stocks and other securities of high quality companies.
ALEXANDER HAMILTON FUNDS
- --------------------------------------------------------------------------------
As of the date of this prospectus, there are two other portfolios of the Trust.
Alexander Hamilton Municipal Income Fund seeks high current income that is
exempt from federal regular income tax by investing primarily in municipal
securities. Alexander Hamilton Government Income Fund seeks current income by
investing primarily in U.S. government securities. You may obtain further
information and prospectuses for these portfolios by calling the Fund at
1-800-801-2142 or your investment professional.
INFORMATION ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is growth of capital and income. The
investment objective may not be changed without shareholder approval. The Fund
seeks to achieve its investment objective by concentrating the area of
investment decision in the securities of high quality companies. High quality
companies include leading companies in their industries in terms of sales,
earnings, and/or market capitalization. The Fund's investment approach is based
upon the conviction that over the longer term, the economy will continue to
expand and develop and that this economic growth will be reflected in the growth
of major corporations. The Fund pursues this investment objective by investing
at least 65% of its assets in common stocks to achieve growth and income.
Generally, the Fund's management makes portfolio selections utilizing
fundamental analysis, with emphasis on earning power, financial condition, and
growth prospects of the company within an industry. 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.
Unless stated otherwise, the investment policies and limitations described in
this prospectus can be changed by the Board of Trustees ("Trustees") without
approval of shareholders. Shareholders will be notified before any material
changes in these policies become effective.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities of companies
selected by the Fund's investment adviser on the basis of traditional
fundamental research techniques and standards. The securities in which the Fund
invests include, but are not limited to: common stocks, preferred stocks,
convertible securities, securities of foreign issuers, and corporate bonds,
notes, and warrants.
The Fund also may temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.
COMMON STOCKS. The common stocks in which the Fund invests are selected by
the Fund's investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects
and of the risk and volatility of the company's industry. However, other
factors, such as product position, market share, or profitability, will
also be considered by the Fund's investment adviser.
CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the
issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants, or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives. In seeking convertible
securities for the Fund, the Fund's investment adviser evaluates the
investment potential of the underlying security for capital appreciation.
The convertible securities in which the Fund invests will be rated
"investment grade" or of comparable quality at the time of purchase. See
"Investment-Grade Bonds."
INVESTMENT-GRADE BONDS. The bonds in which the Fund invests will be rated
investment grade (i.e., rated Baa or better by Moody's Investors Service,
Inc., or BBB or better by Standard & Poor's Corporation or Fitch Investors
Service, Inc., or, if unrated, deemed to be of comparable quality by the
Fund's investment adviser). Bonds rated BBB by Standard and Poor's
Corporation or Fitch Investors Service, Inc., or Baa by Moody's Investors
Service, Inc., have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher-rated bonds.
If a security's rating is reduced below the required minimum after the Fund
has purchased it, the Fund is not required to sell the security but may
consider doing so. A description of the rating categories is contained in
the Appendix to the Statement of Additional Information. (The Fund intends
to restrict investments to securities rated investment grade in the current
fiscal year. However, the Fund reserves the right, in the future, to invest
in securities rated below investment grade. The Fund will notify
shareholders of such a change in investment policy prior to its
implementation.)
FOREIGN ISSUERS. The Fund may invest in the securities of foreign issuers
which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts. The Fund will
limit its investments in non-ADR foreign obligations to less
than 5% of its assets. Securities of a foreign issuer may present greater
risks in the form of nationalization, confiscation, domestic marketability,
or other national or international restrictions. As a matter of practice,
the Fund will not invest in the securities of a foreign issuer if any such
risk appears to the investment adviser to be substantial.
ZERO COUPON CONVERTIBLE SECURITIES. Zero coupon convertible 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 convertible securities accretes at a
stated yield until the security reaches its face amount at maturity. Zero coupon
convertible securities are convertible into a specific number of shares of the
issuer's common stock. In addition, zero coupon convertible securities usually
have put features that provide the holder with the opportunity to sell the bonds
back to the issuer at a stated price before maturity. Generally, the prices of
zero coupon convertible securities may be more sensitive to market interest rate
fluctuations than conventional convertible securities.
Federal income tax law requires the holder of a zero coupon convertible security
to recognize income from the security prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid liability
of federal income taxes, the Fund will be required to distribute income accrued
from zero coupon convertible securities which it owns, and may have to sell
portfolio securities (perhaps at disadvantageous times) in order to generate
cash to satisfy these distribution requirements.
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund invests may
be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government or other securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and price.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
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. The Fund will limit
investment in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice, to not more than 15% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis 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 investment adviser has determined are creditworthy under
guidelines established by the Fund's Trustees. The Fund will receive collateral
equal to at least 100% of the value of the securities loaned.
INVESTING IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its
assets in securities of other investment companies. It should be noted that
investment companies incur
certain expenses, such as management fees and, therefore, any investment by the
Fund in shares of another investment company would be subject to such duplicate
expenses.
INVESTMENT LIMITATIONS
The Fund limits its borrowing and will not concentrate in any one issuer. 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) except, under
certain circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge up to 15% of the value of those assets to secure such
borrowings.
With respect to 75% of its assets, the Fund will not invest more than 5% of its
total assets in securities of one issuer (except U.S. government securities) or
purchase more than 10% of any class of voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, can 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 5% of its total assets in securities of
issuers that have records of less than three years of continuous operations.
HOW TO INVEST IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
You may purchase shares on the days on which the New York Stock Exchange is
open. Shares may be purchased through an investment professional which has a
sales agreement with Federated Securities Corp., (the "distributor") or directly
from the distributor, once an account has been established. The Fund reserves
the right to reject any purchase request.
THROUGH AN INVESTMENT PROFESSIONAL. You may call your investment professional
to place an order to purchase shares. Texas residents must purchase shares
through a broker registered with the state of Texas or through the distributor
at 1-800-801-2142.
Orders through an investment professional are considered received when the Fund
is notified of the purchase order. Purchase orders made through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted to the Fund before 5:00 p.m. (Eastern time) in order for
shares to be purchased at that day's price. Purchase orders through other
investment professionals must be received by the investment professional and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. It is the investment professional's
responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. You may place an order to purchase shares
directly from the distributor once an account has been established. To do so:
Complete and sign the new account form in the back of this prospectus;
Enclose a check made payable to Alexander Hamilton Equity Growth and
Income Fund; and
Mail both to Alexander Hamilton Equity Growth and Income Fund, P.O. Box
9051, Boston, MA 02205-9917.
Orders by mail are considered received after payment by check is converted by
State Street Bank and Trust Company (the "custodian") into federal funds. This
is generally the next business day after the custodian receives the check.
DIRECTLY BY WIRE. You may purchase shares directly from the distributor by
Federal Reserve wire. The minimum investment required is $2,500 when purchasing
by wire. You must call the Fund at 1-800-801-2142 before wiring funds.
Funds must be wired to:
State Street Bank & Trust Company
Attention: Mutual Fund Servicing Division
For Credit to: Alexander Hamilton Equity Growth and Income Fund;
(title or name of account);
(wire order number and/or account number);
ABA Number 011000028.
Wire purchase is not available for retirement accounts. Shares cannot be
purchased by wire on Columbus Day, Veteran's Day, or Martin Luther King Day.
SYSTEMATIC INVESTMENT PLAN
Once a Fund account has been opened, you may add to your investment on a regular
basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from your bank account and invested in
shares at the offering price next determined after an order is received by the
transfer agent. You may apply for participation in this program through the
distributor or your investment professional.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000 unless the investment is in
a retirement plan, in which case the minimum initial investment is $250.
Subsequent investments must be in amounts of at least $100, except for
retirement plans, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 up to $249,999 3.75% 3.90%
$250,000 up to $499,999 2.50% 2.56%
$500,000 up to $749,999 2.00% 2.04%
$750,000 up to $999,999 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
No sales charge is imposed for shares purchased through bank trust departments
or investment advisers registered under the Investment Advisers Act of 1940.
However, investors who purchase shares through a trust department or investment
adviser may be charged an additional service fee by that institution. No sales
charge is imposed on purchases made by employees including licensed agents, or
retirees of Alexander Hamilton Life Insurance Company of America and their
immediate families. No sales charge is imposed on purchases made by employees of
Household International, Inc. and their immediate families. No sales charge is
imposed on purchases made by employees of broker/dealers with whom the
distributor has selling agreements or branch employees of financial institutions
which market shares of the Fund. No sales charge is imposed on purchases made by
unaffiliated separate accounts of variable insurance contracts. Additionally, no
sales charge is imposed on purchases made by Trustees of the Fund or their
immediate families.
DEALER CONCESSION. For sales of shares, a dealer will normally receive up to
90% of the applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the distributor. However, the distributor,
at its sole discretion, may uniformly offer to pay all dealers selling shares of
the Fund, additional amounts, all or a portion of which may be paid from the
sales charge it normally retains or any other source available to it. Such
additional payments, if accepted by the dealer, may be in the form of cash or
promotional incentives, and will be predicated upon the amount of shares of the
Fund sold by the dealer.
The sales charge for shares sold other than through registered broker/dealers
will be retained by the distributor. The distributor may pay fees to banks out
of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customers in connection with the initiation of
customer accounts and purchases of shares.
REDUCING THE SALES CHARGE
You may reduce the sales charge on the purchase of shares through:
Quantity discounts and accumulated purchases;
A 13-month letter of intent;
The reinvestment privilege;
Purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
Concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the sales charge
table, larger purchases reduce the sales charge paid. The Fund will combine
purchases made on the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if you already own shares
having a current value at the public offering price of $90,000 and you purchase
$10,000 more at the current public offering price, the sales charge on the
additional purchase according to the schedule now in effect would be 3.75%, not
4.50%.
To receive the sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
purchase is made that shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the holdings
or purchases.
LETTER OF INTENT. If you intend to purchase at least $100,000 of shares in the
portfolios of Alexander Hamilton Funds over the next 13 months, the sales charge
may be reduced by signing a letter of intent to that effect. This letter of
intent includes a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a provision for the
custodian to hold 4.50% of the total amount intended to be purchased in escrow
(in shares) until such purchase is completed.
The 4.50% held in escrow will be applied to your Fund account at the end of the
13-month period unless the amount specified in the letter of intent is not
purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate you to purchase shares, but if you do,
each purchase during the period will be at the sales charge applicable to the
total amount intended to be purchased. This letter may be dated as of a prior
date to include any purchases made within the past 90 days towards the dollar
fulfillment of the letter of intent. Prior trade prices will not be adjusted.
REINVESTMENT PRIVILEGE. If shares have been redeemed, you have a one-time
right, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. The distributor must
be notified by the shareholder in writing or by his investment professional of
the reinvestment in order to eliminate a sales charge. If you redeem shares in
the Fund, there may be tax consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
You may purchase shares at net asset value, without a sales charge, with the
proceeds from the redemption of shares of an investment company sold with a
sales charge or commission and not distributed by the distributor. (This does
not include shares of a mutual fund which were or would be subject to a
contingent deferred sales charge upon redemption.) The purchase must be made
within 60 days of the redemption, and the distributor must be notified by the
investor in writing, or by his investment professional, at the time the purchase
is made. The distributor will offer to pay dealers an amount equal to .50 of 1%
of the net asset value of shares purchased by their clients or customers in this
manner. The terms of this offer may change in the future. Such changes may
include the imposition of a fee upon redemption of shares of the Fund purchased
in this manner. Shareholders will be notified before any such change becomes
effective.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
you have the privilege of combining concurrent purchases of two or more
portfolios of Alexander Hamilton Funds, the purchase price of which includes a
sales charge. For example, if you concurrently invested $30,000 in one of the
other Alexander Hamilton Funds with a sales charge, and $70,000 in shares of
this Fund, the sales charge would be reduced from 4.50% to 3.75%.
To receive this sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
CERTIFICATES AND CONFIRMATIONS
The transfer agent for the Fund maintains a share account for each shareholder.
Share certificates are not issued unless requested in writing to the transfer
agent.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Distributions of any net realized long-term capital
gains will be made at least once every twelve months. Dividends and
distributions are automatically reinvested in additional shares on payment dates
at the ex-dividend date net asset value without a sales charge, unless
shareholders request cash payments on the new account form or by writing to the
transfer agent. All shareholders on the record date are entitled to the
dividend. If shares are redeemed or exchanged prior to the record date or
purchased after the record date, those shares are not entitled to that quarter's
dividend.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
your investment professional and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
You may exchange all or some of your shares for shares of other portfolios in
Alexander Hamilton Funds or Treasury Cash Series. Neither the Fund nor any of
the portfolios in Alexander Hamilton Funds or Treasury Cash Series imposes any
additional fees on exchanges. You may also exchange into certain other funds
distributed by the distributor. For more information, please contact your
investment professional. Exchanges are made at net asset value, plus the
difference between the Fund's sales charge already paid and any sales charge of
the fund into which the shares are to be exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction of the sales
charge, the distributor must be notified in writing by the shareholder or by his
investment professional.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
of at least $1,000. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of
modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds and Treasury Cash Series are available by contacting the Fund at
1-800-801-2142 or your investment professional.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee. Please
refer to the section entitled "Signatures" for further information. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other investment professionals during times of drastic economic or market
changes. If you cannot contact your broker or investment professional by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Boston Financial Data Services, Inc., Attention:
Alexander Hamilton Funds/ Federated Division, Two Heritage Drive, North Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form on the new account form
completed by the investor is on file with the transfer agent. If the
instructions are given by your investment professional, a telephone
authorization form completed by the investment professional must be on file with
the transfer agent. Shares may be exchanged between two Alexander Hamilton Funds
or Treasury Cash Series by telephone only if the two funds have identical
shareholder registrations. Telephone exchange instructions may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the transfer agent and deposited to the shareholder's account
before being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the transfer agent before that time
for shares to be exchanged the same day. Shareholders exchanging into a fund
will not receive any dividend that is payable to shareholders of record on that
date. This privilege may be modified or terminated at any time.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund purchases shares from you at their net asset value next determined
after the transfer agent receives the redemption request. Redemptions will be
made on days on which the Fund computes its net asset value. The Fund does not
calculate its net asset value on weekends or certain holidays. Please refer to
the section entitled "Net Asset Value." Redemptions can be made through your
investment professional or directly from the Fund. Redemption requests must be
received in proper form.
THROUGH AN INVESTMENT PROFESSIONAL
You may redeem shares of the Fund by calling your investment professional (such
as a bank, investment dealer, or sales agent) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund receives
the redemption request from your investment professional. Redemption requests
through a registered broker/dealer must be received by the broker before 4:00
p.m. (Eastern time) and must be transmitted by the broker to the Fund before
5:00 p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. Redemption requests through other investment professionals must be
received by the investment professional and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net asset
value. Your investment professional is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The investment professional may charge customary fees and commissions for
this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through an investment
professional may redeem their shares by telephoning the Fund at 1-800-801-2142.
The proceeds will be mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than seven days after the request provided the transfer agent
has received payment for the shares from the shareholder. The minimum amount for
a wire transfer is $1,000. If at any time the Fund shall determine it necessary
to terminate or modify this method of redemption, shareholders would be promptly
notified.
Your new account form authorizing the transfer agent to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from your investment professional or the distributor.
Telephone redemption instructions may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption such as "By Mail," should be considered.
BY MAIL. You may redeem shares by sending a written request to the transfer
agent. The written request should include your name, the Fund name, the account
number, and the share or dollar amount requested, and should be signed exactly
as the shares are registered.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund at 1-800-801-2142 for assistance in redeeming
by mail.
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 with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by a:
Trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
Member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
Savings bank or savings and loan association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which is administered by
the FDIC; or
Other "eligible guarantor institutions," 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.
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 transfer agent has received payment for the shares from the
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
You may receive monthly or quarterly payments of a predetermined amount by
taking advantage of the Systematic Withdrawal Plan. Under this program, shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by you; the minimum withdrawal amount is $100. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to shares, and the fluctuation of the net asset value
of shares redeemed under this program, redemptions may reduce, and eventually
deplete investment in the Fund. For this reason, payments under this program
should not be considered as yield or income on your investment in the Fund. To
be eligible to participate in this program, you must have invested at least
$10,000 in the Fund (at current offering price). You may apply for participation
in this program through the distributor or your investment professional.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,000. This requirement does not apply, however, if the balance falls below
$1,000 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.
EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to : the cost of organizing the Trust and
continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditors' fees; the cost of meetings of
Trustees; legal fees of the Trust; association membership dues; and such
non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to; registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
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 all other assets, less
liabilities, by the number of shares outstanding.
The net asset value is determined at the close of trading on the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or
(iii) the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
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. An 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 Alexander
Hamilton Capital Management, Inc., the Fund's investment adviser, subject to
direction by the Trustees. The adviser continually conducts or oversees
investment research and supervision for the Fund and is responsible for
overseeing the purchase or sale of portfolio instruments, for which it receives
an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The fee paid
by the Fund, while higher than the advisory fee paid by other mutual funds
in general, is comparable to fees paid by many mutual funds with similar
objectives and policies. The investment advisory contract allows for the
voluntary waiver of the investment advisory fee or the reimbursement of
expenses by the adviser from time to time. The adviser can terminate any
voluntary waiver of its fee or reimbursement of expenses at any time at its
sole discretion.
ADVISER'S BACKGROUND. Alexander Hamilton Capital Management, Inc., located
at 33045 Hamilton Boulevard, Farmington Hills, Michigan 48334, was formed
in 1993 as a Michigan corporation and is registered as an investment
adviser under the Investment Advisers Act of 1940. The adviser is a
wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America ("AHLIC"), which is, in turn, a subsidiary of Household Finance
Corporation, Inc. One hundred percent of the common stock of Household
Finance Corporation is owned by Household International, Inc., a $32
billion dollar holding company with its principal subsidiaries engaged in
financial services.
Alexander Hamilton Capital Management, Inc. has an investment advisory
agreement to manage assets of AHLIC. As of June 30, 1993, the book value of
AHLIC assets managed by the adviser was approximately $5.2 billion. The
management and portfolio managers of Alexander Hamilton Capital Management,
Inc. have an average of 13 years of experience in managing investment
portfolios. However, the adviser has no prior experience in managing mutual
funds.
Several other subsidiaries of Household International are in the banking or
lending business. From time to time, these organizations may grant loans to
public companies. The adviser is
prohibited from maintaining knowledge of the lending relationships of their
affiliates by the Glass-Steagall Act and other federal and state laws. 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 an affiliate of the
adviser or its parent company. The lending relationship will not be a
factor in the selection of securities. Because of the internal controls
maintained by the companies to restrict the flow of information, Fund
investments will be made without any knowledge of Household International
affiliates' lending relationships with an issuer.
SUB-ADVISER. Under the terms of a sub-advisory agreement between Federated
Research and Alexander Hamilton Capital Management, Inc., Federated Research
will furnish the adviser such investment advice, including portfolio management
strategies, securities selection recommendations, economic forecasting and other
statistical and factual information as it may require. For the services provided
under the sub-advisory agreement, the adviser will pay the sub-adviser an annual
fee of $125,000, plus one-half of the remaining advisory revenues.
SUB-ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222. It is a wholly-owned subsidiary of
Federated Investors. All of the Class A (voting ) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Research and other subsidiaries of Federated
Investors serve as investment advisers and administrators to a number of
investment companies and private accounts. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $75 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial services industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same clients, individual shareholders also have access to
this same level of investment expertise.
Peter R. Anderson has been the Fund's co-portfolio manager since its
inception. Mr. Anderson joined Federated Investors in 1972 as, and is
presently, a Senior Vice President of the Fund's sub-adviser. Mr. Anderson
is a Chartered Financial Analyst and received his M.B.A. in Finance from
the University of Wisconsin.
Michael P. Donnelly has been the Fund's co-portfolio manager since its
inception. Mr. Donnelly joined Federated Investors in 1989 and has been an
Assistant Vice President of the Fund's sub-adviser since 1992. From 1989
until 1991, Mr. Donnelly acted as an investment analyst for the
sub-adviser. Mr. Donnelly was a Fixed Income Associate at Donaldson, Lufkin
& Jennrette from 1987 until 1989. Mr. Donnelly is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of Virginia.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. 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. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Plan"), the Fund will pay the distributor an amount computed at an annual
rate of .25% of the average daily net asset value of shares to finance any
activity which is principally intended to result in the sale of shares.
The distributor may select investment professionals (such as a broker/dealer or
bank) to provide distribution and/or administrative services as agents for their
clients or customers who beneficially own shares of the Fund. Investment
professionals 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.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the 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.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
BROKERAGE TRANSACTIONS
The adviser and sub-adviser place orders for securities for the Fund with a view
to obtaining the best combination of price and execution. From time to time,
orders may be placed with broker/dealers that are affiliates of the adviser or
sub-adviser. Any such transactions will only be executed in conformance with
applicable laws.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services.
For these services, the Fund pays a fee, computed and payable daily, to
Federated Administrative Services at an annual rate, based on the daily net
assets of the Trust taken as a whole, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% of the first $250 million
.125 of 1% of the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee paid by the Fund during any fiscal year will not be less
than $50,000. Federated Administrative Services may voluntarily choose to waive
a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Box 8604, Boston, Massachusetts
02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, is transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel to the Fund is provided by Houston, Houston &
Donnelly, 2510 Centre City Tower, Pittsburgh, Pennsylvania, 15222. Dickstein,
Shapiro & Morin, 2101 L Street, N.W., Washington, D.C., 20037 provides legal
counsel to the Trustees.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
One Oxford Centre, Pittsburgh, Pennsylvania, 15219.
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. All shares of the portfolios
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or 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 shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies. The
Fund also expects 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 shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other portfolios of the Trust, if any, will not be combined for tax purposes
with those realized by the Fund.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelley, counsel to the Fund:
the Fund is not subject to Pennsylvania corporate or personal property
tax; and
Fund shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that
the portfolio securities in the Fund would be subject to such taxes if
owned directly by residents of those jurisdictions.
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 will advertise its total return and yield.
Yield is a way of showing the rate of net income the Fund earns on its
investments as a percentage of its share price. To calculate yield, the net
investment income per share earned from the portfolio of investments for a
specific one month or 30-day period is expressed as an annualized percentage
rate based on the Fund's maximum offering price at the end of the period. Yield
is an annualized percentage, which means that it is assumed that the Fund
generates the same level of net investment income over a one year period.
The yield does not necessarily reflect income actually earned by shares, and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
Total return is based on the overall dollar or percentage change in value of a
hypothetical investment in the Fund and assumes that all of the Fund's dividends
and capital gain distributions are reinvested. Cumulative total return reflects
the Fund's performance over a stated period of time. Average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual return tends to smooth out
variations in the Fund's returns, you should understand that it is not the same
as actual year-by-year results.
The hypothetical example below assumes that a share has a $10.00 net asset value
on the first day of the performance period, as well as on the day that a $.05
per share dividend is declared. This example also assumes that the net asset
value of a share has appreciated to $10.10 on the last day of the performance
period.
HYPOTHETICAL EXAMPLE OF TOTAL RETURN:
<TABLE>
<S> <C>
Net Asset Value on beginning date............................................................ $10.00
Net Asset Value on Ex-Dividend date.......................................................... $10.00
Ex-Dividend Amount Per Share................................................................. $00.05
Net Asset Value on ending date............................................................... $10.10
TOTAL RETURN............................................................................. 1.50%
</TABLE>
Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges which, if excluded, would increase the total
return and yield.
From time to time the Fund may advertise its performance using certain financial
publications and/or compare its performance to certain indices.
GROWTH OF STOCKS OVER TIME
[INSERT GRAPH HERE]
For more than 69 years stocks and bonds have significantly outperformed Treasury
Bills and the cost of living.
Source: Ibbotson, Roger G. and Rex A. Singuefield, Stocks, Bonds; Bills and
Inflation (SBBI), Stocks, Bonds Bills and Inflation 1992 Yearbook, Ibbotson
Associates, Chicago.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Alexander Hamilton Equity Growth and Federated Investors Tower
Income Fund Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Investment Adviser
Alexander Hamilton Capital 33045 Hamilton Boulevard
Management, Inc. Farmington Hills, Michigan 48334
- -----------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- -----------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- -----------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- -----------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ALEXANDER HAMILTON
EQUITY GROWTH AND
INCOME FUND
PROSPECTUS
A Diversified Portfolio of
Alexander Hamilton Funds,
An Open-End Management
Investment Company
February , 1994
3110202 (2/94)
ALEXANDER
HAMILTON
EQUITY
GROWTH &
INCOME FUND
PROSPECTUS
[LOGO] FEDERATED SECURITIES CORP.
------------------------------
Distributor
ALEXANDER HAMILTON FUNDS
08726 3110203A (2/94) Your foundation for financial freedom
ALEXANDER
HAMILTON
EQUITY
GROWTH &
INCOME FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT
TO THE PROSPECTUS
DATED FEBRUARY 10, 1994
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
------------------------------
Distributor
ALEXANDER HAMILTON FUNDS
08726-A G00281-01 (7/94) Your foundation for financial freedom
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 10, 1994
A. Please delete the "Summary of Fund Expenses" table on page 1 and replace
it with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............................. 4.50%
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) (1)............................................................. 0.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (2)........................................................................ 0.11%
12b-1 Fee................................................................................................ 0.25%
Total Other Expenses (after expense reimbursement) (3)................................................... 0.89%
Total Fund Operating Expenses (4).................................................................. 1.25%
</TABLE>
(1) A contingent deferred sales charge of 0.50% applies only to shares which are
purchased with proceeds from redemptions of shares of an unaffiliated mutual
fund in which a sales load has been paid and which are redeemed within one
year of purchase. For a more complete description, see "Purchases with
Proceeds from Redemptions of Unaffiliated Investment Companies."
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee by the investment
adviser. The adviser can terminate this voluntary waiver at any time at its
sole discretion. The maximum management fee is 0.75%.
(3) Other expenses are estimated to be 2.77% absent the anticipated voluntary
reimbursement of certain other expenses by the adviser. The adviser can
terminate the voluntary reimbursement of expenses at any time at its sole
discretion.
(4) Total Fund operating expenses are estimated to be 3.77% absent the
anticipated voluntary waiver and voluntary reimbursement explained in
footnotes (2) and (3).
* Total Fund operating expenses are estimated based on average expenses
expected to be incurred during the period ending November 30, 1994. During
the course of this period, expenses may be more or less than the average
amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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................................................... $57 $83
You would pay the following expenses on the same investment, assuming no sales load when
purchasing shares of the Fund with proceeds from the redemption of unaffiliated mutual fund
shares.......................................................................................... $13 $40
</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.
B. Please insert the following "Financial Highlights" table as page 2
following the "Summary of Fund Expenses" and before the section entitled
"Highlights". In addition, please add the heading "Financial Highlights"
to the Table of Contents on page I following the heading "Summary of Fund
Expenses."
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------- ------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.05
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.37)
- ---------------------------------------------------------------------------------------- ----------------
Total from investment operations (0.32)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
- ---------------------------------------------------------------------------------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 9.66
- ---------------------------------------------------------------------------------------- ----------------
TOTAL RETURN** (3.21%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.25%(a)
- ----------------------------------------------------------------------------------------
Net investment income 1.75%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 3.40%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,890
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 9%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 14, 1994 (date of initial
public investment) to May 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
C. Please insert the following as the last sentence of the sub-section
"Investment-Grade Bonds" on page 4:
"The price of fixed income securities fluctuates inversely in relation to the
direction of interest rates."
D. Please delete the last sentence of the first paragraph and the second
paragraph and add the following information to the sub-section entitled
"Dealer Concession" on page 8:
"Such payments, which will be predicated upon the amount of Fund shares sold,
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."
E. Please insert the following ]"Other Payments to Financial Institutions"
sub-section following the sub-section entitled "Dealer Concessions" on
page 8. In addition, please add the heading "Other Payments to Financial
Institutions" to the Table of Contents on page I following the heading
"Dealer Concessions."
"OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or
their 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 initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates."
F. Please insert the following information as the second paragraph of the
sub-section entitled "Purchases with Proceeds from Redemptions of
Unaffiliated Investment Companies" which begins on page 9:
"A contingent deferred sales charge is charged in limited circumstances.
Shareholders who purchased shares with the proceeds of a redemption of shares of
an unaffiliated mutual fund sold with a sales charge or commission and which
were not distributed by the distributor will be charged a contingent deferred
sales charge by the Fund's distributor of .50 of 1% for redemptions made within
one year of purchase. The contingent deferred sales charge will be calculated
based upon the lesser of the original price of shares or the net asset value of
the shares when redeemed."
G. Please delete the first sentence of the section entitled "Redeeming
Shares" on page 12 and insert the following:
"The Fund purchases shares from you at their net asset value, less any
applicable contingent deferred sales charge, next determined after the transfer
agent receives the redemption request."
H. Please insert the following "Contingent Deferred Sales Charge" section
following the section entitled "Systematic Withdrawal Plan" which begins
on page 13. In addition, please add the heading "Contingent Deferred Sales
Charge" to the Table of Contents immediately following the heading
"Systematic Withdrawal Plan."
"CONTINGENT DEFERRED SALES CHARGE
No contingent deferred sales charge will be imposed on shares acquired through
reinvestment of dividends or distributions of short-term or long-term capital
gains. Redemptions are deemed to have occurred in the following order: (i)
shares acquired through the reinvestment of dividends and long-term capital
gains; (ii) purchases of shares occurring more than one year before the date of
redemption; (iii) purchases of shares within the previous year without the use
of redemption proceeds as described above; and (iv) purchases of shares within
the previous year through the use of redemption proceeds as described above.
No contingent deferred sales charge will be imposed when a redemption results
from a tax-free return under the following circumstances: (i) a total or partial
distribution from a qualified retirement plan, other than an IRA, Keogh Plan, or
a custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, or other redemptions made for purposes of
reinvestment.
A contingent deferred sales charge will not be charged in connection with
exchanges in other Alexander Hamilton Funds or Treasury Cash Series portfolios
or in connection with redemptions by the Fund of accounts with low balances."
I. Please insert the following information as the last sentence of the
second paragraph of the section entitled "Voting Rights" on page 18:
"As of July 3, 1994, Alexander Hamilton Life Insurance Company may for certain
purposes be deemed to control the Fund because it is owner of record of certain
shares of the Fund."
J. Please delete the sentence immediately following the HYPOTHETICAL EXAMPLE
OF TOTAL RETURN on page 20 in the section entitled "Performance
Information" which begins on page 19 and insert the following:
"Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges, such as the contingent deferred sales charge,
which, if excluded, would increase the total return and yield."
K. Please insert the following financial statements after the "Performance
Information" section which begins on page 19. In addition, please add the
heading "Financial Statements" to the Table of Contents immediately before
"Addresses."
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--88.7%
- ---------------------------------------------------------------------------------------------------
BASIC INDUSTRY--7.7%
-------------------------------------------------------------------------------------
1,900 *FMC Corp. $ 91,675
-------------------------------------------------------------------------------------
1,900 Lubrizol Corp. 65,075
-------------------------------------------------------------------------------------
2,500 Phelps Dodge Corp. 138,750
-------------------------------------------------------------------------------------
4,000 Praxair, Inc. 81,500
------------------------------------------------------------------------------------- -------------
Total 377,000
------------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--7.9%
-------------------------------------------------------------------------------------
1,900 Eastman Kodak Co. 89,063
-------------------------------------------------------------------------------------
1,800 Ford Motor Co. 103,950
-------------------------------------------------------------------------------------
1,200 General Motors Corp. 64,500
-------------------------------------------------------------------------------------
5,000 Mattel, Inc. 131,875
------------------------------------------------------------------------------------- -------------
Total 389,388
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--5.8%
-------------------------------------------------------------------------------------
1,700 Avon Products, Inc. 100,088
-------------------------------------------------------------------------------------
2,100 Philip Morris Cos., Inc. 103,425
-------------------------------------------------------------------------------------
2,500 Reebok International LTD 78,750
------------------------------------------------------------------------------------- -------------
Total 282,263
------------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--6.2%
-------------------------------------------------------------------------------------
4,400 American Stores Co. 110,000
-------------------------------------------------------------------------------------
2,500 Sears Roebuck & Co. 126,563
-------------------------------------------------------------------------------------
3,300 *Tele Communications, Inc. 68,887
------------------------------------------------------------------------------------- -------------
Total 305,450
------------------------------------------------------------------------------------- -------------
ENERGY--10.3%
-------------------------------------------------------------------------------------
3,300 Baker Hughes, Inc. $ 65,587
-------------------------------------------------------------------------------------
1,300 Chevron Corp. 113,100
-------------------------------------------------------------------------------------
1,600 MAPCO, Inc. 100,000
-------------------------------------------------------------------------------------
1,700 Texaco, Inc. 107,950
-------------------------------------------------------------------------------------
3,700 USX Marathon Group 63,363
-------------------------------------------------------------------------------------
1,200 *Western Atlas, Inc. 51,300
------------------------------------------------------------------------------------- -------------
Total 501,300
------------------------------------------------------------------------------------- -------------
FINANCE--15.3%
-------------------------------------------------------------------------------------
1,300 Bankers Trust NY Corp. 91,487
-------------------------------------------------------------------------------------
2,200 Citicorp 86,900
-------------------------------------------------------------------------------------
2,000 Dean Witter Discover & Co. 78,000
-------------------------------------------------------------------------------------
1,500 Federal National Mortgage Association 125,250
-------------------------------------------------------------------------------------
1,300 Mellon Bank Corp. 76,050
-------------------------------------------------------------------------------------
2,900 PNC Bank Corp. 88,813
-------------------------------------------------------------------------------------
500 TIG Holdings, Inc. 10,187
-------------------------------------------------------------------------------------
1,600 Transamerica Corp. 85,400
-------------------------------------------------------------------------------------
3,200 Travelers, Inc. 104,800
------------------------------------------------------------------------------------- -------------
Total 746,887
------------------------------------------------------------------------------------- -------------
HEALTH CARE--7.8%
-------------------------------------------------------------------------------------
2,000 American Home Products Corp. 116,000
-------------------------------------------------------------------------------------
2,000 Becton Dickinson & Co. 76,250
-------------------------------------------------------------------------------------
1,600 Bristol Myers Squibb Co. 87,400
-------------------------------------------------------------------------------------
2,550 US Healthcare, Inc. 102,638
------------------------------------------------------------------------------------- -------------
Total 382,288
------------------------------------------------------------------------------------- -------------
INDUSTRIAL MANUFACTURING--8.3%
-------------------------------------------------------------------------------------
2,400 General Electric Co. 119,100
-------------------------------------------------------------------------------------
1,200 *Litton Industries, Inc. $ 36,750
-------------------------------------------------------------------------------------
1,400 Loews Corp. 124,600
-------------------------------------------------------------------------------------
2,200 Textron, Inc. 123,200
------------------------------------------------------------------------------------- -------------
Total 403,650
------------------------------------------------------------------------------------- -------------
TECHNOLOGY--11.6%
-------------------------------------------------------------------------------------
3,400 General Motors Corp., Class E 119,425
-------------------------------------------------------------------------------------
1,500 Hewlett Packard Co. 117,750
-------------------------------------------------------------------------------------
2,400 Martin Marietta Corp. 104,400
-------------------------------------------------------------------------------------
2,000 Raytheon Co. 124,500
-------------------------------------------------------------------------------------
2,900 Rockwell International Corp. 103,312
------------------------------------------------------------------------------------- -------------
Total 569,387
------------------------------------------------------------------------------------- -------------
TRANSPORTATION--1.8%
-------------------------------------------------------------------------------------
3,600 Ryder Systems, Inc. 86,850
------------------------------------------------------------------------------------- -------------
UTILITIES--6.0%
-------------------------------------------------------------------------------------
1,100 American Telephone and Telegraph Corp. 59,950
-------------------------------------------------------------------------------------
2,100 Detroit Edison Co. 54,075
-------------------------------------------------------------------------------------
1,300 Duke Power Co. 46,800
-------------------------------------------------------------------------------------
2,000 Enron Corp. 61,000
-------------------------------------------------------------------------------------
3,000 MCI Communications Corp. 72,000
------------------------------------------------------------------------------------- -------------
Total 293,825
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $4,504,435) 4,338,288
------------------------------------------------------------------------------------- -------------
CONVERTIBLE PREFERRED STOCKS--3.2%
- ---------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--1.3%
-------------------------------------------------------------------------------------
10,000 *RJR Nabisco Holdings, Conv. Pfd., 6.375% 63,750
------------------------------------------------------------------------------------- -------------
FINANCE--0.8%
-------------------------------------------------------------------------------------
2,000 Citicorp, Conv. Pfd., Series P, 8.25% 39,000
------------------------------------------------------------------------------------- -------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CONVERTIBLE PREFERRED STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--1.1%
-------------------------------------------------------------------------------------
4,000 *Westinghouse Electric Corp., Conv. Pfd., Series C, 9.00% $ 55,448
------------------------------------------------------------------------------------- -------------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $162,880) 158,198
------------------------------------------------------------------------------------- -------------
CONVERTIBLE SECURITIES--2.3%
- ---------------------------------------------------------------------------------------------------
TECHNOLOGY--2.3%
-------------------------------------------------------------------------------------
$ 50,000 Conner Peripherals, Inc., 6.50%, Conv., 3/1/2002 42,250
-------------------------------------------------------------------------------------
50,000 General Instrument Corp., 5.00%, Conv., 6/15/2000 68,500
------------------------------------------------------------------------------------- -------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $116,000) 110,750
------------------------------------------------------------------------------------- -------------
**REPURCHASE AGREEMENT--5.1%
- ---------------------------------------------------------------------------------------------------
250,000 J.P. Morgan Securities, Inc., 4.27%, dated 5/31/94, due 6/1/94
(at amortized cost) (Note 2B) 250,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $5,033,315) $ 4,857,236\
------------------------------------------------------------------------------------- -------------
</TABLE>
* Non-income producing securities.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ The cost of investments for federal tax purposes amounts to $5,033,315. The
net unrealized depreciation of investments on a federal tax basis amounts to
$176,079, which is comprised of $80,316 appreciation and $256,395 depreciation
at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($4,890,034) at May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost $5,033,315) $ 4,857,236
- -----------------------------------------------------------------------------------------------------
Cash 2,985
- -----------------------------------------------------------------------------------------------------
Interest receivable 1,993
- -----------------------------------------------------------------------------------------------------
Dividends receivable 15,566
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 72,117
- -----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 9,535
- -----------------------------------------------------------------------------------------------------
Receivable from Adviser 39,055
- -----------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 11,245
- ----------------------------------------------------------------------------------------------------- -----------
Total assets 5,009,732
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased $ 83,071
- ------------------------------------------------------------------------------------------
Accrued expenses 36,627
- ------------------------------------------------------------------------------------------ ---------
Total liabilities 119,698
- ----------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 506,195 shares of beneficial interest outstanding $ 4,890,034
- ----------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid-in capital $ 5,060,731
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (176,079)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (9,369)
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 14,751
- ----------------------------------------------------------------------------------------------------- -----------
Total Net Assets $ 4,890,034
- ----------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------------------
(net assets of $4,890,034 / 506,195 shares of beneficial interest outstanding) $9.66
- ----------------------------------------------------------------------------------------------------- -----------
COMPUTATION OF OFFERING PRICE:
- -----------------------------------------------------------------------------------------------------
(100/95.5 of $9.66)* $10.12
- ----------------------------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------------
Dividend income $ 33,547
- ---------------------------------------------------------------------------------------------------------
Interest income 8,942
- --------------------------------------------------------------------------------------------------------- ---------
Total income (Note 2C) 42,489
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------
Investment advisory fee** $ 10,610
- ----------------------------------------------------------------------------------------------
Trustees' fees 4,356
- ----------------------------------------------------------------------------------------------
Administrative personnel and services fees** 14,521
- ----------------------------------------------------------------------------------------------
Custodian fees** 6,020
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 4,144
- ----------------------------------------------------------------------------------------------
Legal fees 1,525
- ----------------------------------------------------------------------------------------------
Printing and postage 3,775
- ----------------------------------------------------------------------------------------------
Portfolio accounting fees** 13,497
- ----------------------------------------------------------------------------------------------
Insurance premiums 1,851
- ----------------------------------------------------------------------------------------------
Distribution services fee** 3,537
- ----------------------------------------------------------------------------------------------
Miscellaneous 1,958
- ---------------------------------------------------------------------------------------------- ---------
Total expenses 65,794
- ----------------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 9,054
- -----------------------------------------------------------------------------------
Reimbursement of other operating expenses** 39,055 48,109
- ----------------------------------------------------------------------------------- --------- ---------
Net expenses 17,685
- --------------------------------------------------------------------------------------------------------- ---------
Net investment income 24,804
- --------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (9,369)
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (176,079)
- --------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments (185,448)
- --------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations ($160,644)
- --------------------------------------------------------------------------------------------------------- ---------
</TABLE>
* For the period from February 14, 1994 (date of initial public investment) to
May 31, 1994 (unaudited).
** See Note 4.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 24,804
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($9,369 net loss
as computed for federal income tax purposes) (Note 2D) (9,369)
- -----------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (176,079)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (160,644)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (10,053)
- ----------------------------------------------------------------------------------------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------------------------------
Proceeds from sale of shares 5,050,728
- -----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 10,053
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (50)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets from Fund share transactions 5,060,731
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 4,890,034
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------------- -----------------
End of period (including undistributed net investment income of $14,751) $ 4,890,034
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from February 14, 1994 (date of initial public investment) to
May 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON EQUITY GROWTH AND
INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Alexander Hamilton Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust consists of three diversified portfolios. The financial statements
included herein present only those of the Alexander Hamilton Equity Growth and
Income Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees ("Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended ("Code").
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
Shares sold 505,190
- -----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,010
- -----------------------------------------------------------------------------------------------
Shares redeemed )(5
- ----------------------------------------------------------------------------------------------- -----------------
Net change resulting from Fund share transactions 506,195
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from February 14, 1994 (date of initial public investment) to
May 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Alexander Hamilton Capital Management, Inc., the Fund's
investment adviser ("Adviser"), receives for its services an annual investment
advisory fee equal to 0.75 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and Federated Research,
Federated Research receives an annual fee of $125,000, plus one half of the
remaining advisory revenues.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The fee is based on the
level of average aggregate daily net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION PLAN--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Under the terms of the Plan, the Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The Plan
provides that the Fund may incur distribution expenses up to 0.25 of 1% of the
average daily net assets of the Fund, annually, to compensate FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type and number of accounts
and transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
State Street Bank and Trust Company is the Trust's custodian. The fee is based
on the level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $51,578. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following February 10, 1994 (date the Fund became effective).
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
May 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 5,182,273
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 389,589
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
George A. Cooke, Chairman George A. Cooke
Christopher Bancroft Chief Executive Officer
Frederick L. Blackmon Edward C. Gonzales
William H. T. Bush President and Treasurer
James T. Ponder Margaret P. Tessaro
Martha R. Seger Vice President and Assistant Treasurer
William E. Shelton Robert J. Davison
Vice President
J. Crilley Kelly
Secretary
David M. Di Rita
Assistant Secretary
Melissa A. Moore
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank, nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus, which contains facts concerning its
objective and policies, management fees, expenses and other information.
ALEXANDER HAMILTON EQUITY GROWTH AND INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Alexander Hamilton Equity Growth and Income Fund (the
"Fund") dated February 10, 1994. 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 February 10, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Lending of Portfolio Securities 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Foreign Securities 1
Portfolio Turnover 2
Investment Limitations 2
MANAGEMENT OF THE TRUST 3
- ---------------------------------------------------------------
Officers and Trustees 3
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 5
Sub-Adviser 6
ADMINISTRATIVE SERVICES 6
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 6
- ---------------------------------------------------------------
PURCHASING SHARES 6
- ---------------------------------------------------------------
Distribution Plan 6
Conversion to Federal Funds 7
Purchases by Sales Representatives,
Fund Trustees, and Employees 7
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Determining Market Value of Securities 7
REDEEMING SHARES 7
- ---------------------------------------------------------------
EXCHANGE PRIVILEGE 7
- ---------------------------------------------------------------
Reduced Sales Charge 7
Requirements for Exchange 8
Tax Consequences 8
Making an Exchange 8
TAX STATUS 8
- ---------------------------------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
TOTAL RETURN 8
- ---------------------------------------------------------------
YIELD 8
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
APPENDIX 10
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Alexander Hamilton Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
July 21, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is growth of capital and income. The investment
objective cannot be changed without shareholder approval. The Fund seeks to
achieve its investment objective by concentrating the area of investment
decision in the securities of high quality companies.
TYPES OF INVESTMENTS
The Fund invests at least 65% of its assets in common stocks for growth or
income.
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. The Fund does not have the right to
vote securities on loan, but would terminate the loan and regain the right to
vote if that were considered important with respect to the investment.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks or 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 Board of Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as an institution,
broker, or dealer, in return for a percentage of the instrument's market value
in cash, and agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements may
enable the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
FOREIGN SECURITIES
Investments in foreign securities involve considerations which are not
ordinarily associated with investments in domestic issuers. These considerations
include the possibility of expropriation, the unavailability of financial
information or the difficulty of interpreting financial information prepared
under foreign accounting standards, less liquidity and more volatility in
foreign securities markets, the impact of political, social, or diplomatic
developments, and the difficulty of assessing economic trends in foreign
countries. It may also be more difficult to enforce contractual obligations
abroad than would be the case in the United States because of differences in the
legal systems. Transaction costs in foreign securities may be higher. The Fund's
investment adviser will consider these and other factors before investing in
foreign securities and will not make such investments unless, in its opinion,
such investments will meet the Fund's standards and objectives.
PORTFOLIO TURNOVER
The Fund will not engage in short-term trading but may dispose of securities
held for a short period if, after examination of their value, management
believes such disposition to be advisable. In determining whether or not to sell
portfolio securities, consideration will be given among other factors to the
effect on shareholders of the resultant tax liability. Nevertheless changes will
be made whenever, in the judgment of management, they will contribute to the
attainment of the Fund's investment objective, even though such changes may
result in realization of capital gains. The Fund does not expect to exceed a
portfolio turnover rate of 100% during the current fiscal year.
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.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund, for example, to meet redemption requests
when liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 15% of the value
of its total assets at the time of the pledge.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry. However, the Fund may at times 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.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures contracts and related options.
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
purchase or holding of corporate bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's
investment objective, policies, limitations, and its Declaration of
Trust.
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. Also, the Fund will not 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 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 SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund 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
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open-market transactions
involving only customary broker's commissions. However, these limitations
are not applicable if the securities are acquired in a merger,
consolidation, or acquisition of assets. The Fund will limit its
investment in other investment companies to those with a sales charge of
less than 1% that have investment objectives and policies similar to its
own. While it is the Fund's policy to waive its investment advisory fee
on assets invested in open-end investment companies, it should be noted
that investment companies incur certain expenses such as custodian and
transfer agent fees, and therefore, any investment by the fund in shares
of another investment company would be subject to such duplicate
expenses.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers with a record of less than three years of
continuous operation, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by Trustees. To comply with certain
state restrictions, the Fund will limit these transactions to 5% of its
total assets. (If state restrictions change, this latter restriction may
be revised without shareholder approval or notification.)
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement more
than seven days after notice and certain restricted securities not
determined by the Trustees to be liquid.
In addition, in order to comply with certain state restrictions, the Fund will
not invest in real estate limited partnerships or oil, gas, or other mineral
leases. Also, the Fund will not invest more than 5% of its net assets in
warrants. No more than 2% of the Fund's net assets may be in warrants which are
not listed on the New York Stock Exchange. If state requirements change, these
restrictions may be revised without notice to shareholders.
Except when 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. For purposes of its policies and limitations, the Fund considers
instruments issued by a U.S. branch of a domestic bank having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items".
The Fund does not intend to borrow money or invest in reverse repurchase
agreements in excess of 5% of the value of its assets during the coming fiscal
year.
MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
including any affiliation with Alexander Hamilton Capital Management, Inc.,
Federated Investors, Federated Securities Corp., Federated Research,
and Federated Administrative Services. ("Federated Funds" refers to certain
investment companies distributed, administered and/or advised by subsidiaries or
affiliates of Federated Investors.)
<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE TRUST PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
George A. Cooke*\ Chairman, Chief Senior Vice President and Chief Investment Officer, Treasury
33045 Hamilton Boulevard Executive Officer, and Asset Management, Alexander Hamilton Life Insurance
Farmington Hills, MI and Trustee Company of America; Board of Directors, Bank Capital Markets
Association; Principal and Arbitrator, Municipal Securities
Rulemaking Board; and formerly, Senior Executive Vice
President, Citizens and Southern Corporation.
Christopher Bancroft Trustee President, Bancroft Operations; Secretary and Trustee,
1621 North Elm Street Fountain Valley School; Trustee, Family Trusts; and Trustee,
Denton, TX Dallas Museum of Art.
Frederick L. Blackmon*\ Trustee Executive Vice President and Chief Financial Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America;
Farmington Hills, MI Director, Alexander Hamilton Life Insurance Company of
America; Director, Treasurer and Chairman of Finance
Committee, Providence Hospital Foundation; Regent, Eastern
Michigan University; and Director, Michigan Chamber of
Commerce.
William H. T. Bush Trustee President, Bush-O'Donnell & Company; Member, Board of
101 South Hanley Directors, Clark and Sullivan, Inc.; Member, Board of
Suite 1025 Directors, Blue Cross/Blue Shield of Missouri; Member, Board
St. Louis, MO of Directors, St. Maritz Inc.; Member, Board of Directors,
Southwest Bank; Member, Board of Directors, National Elevator
Inspection Services; and Member, Board of Directors, Ivy
Insurance Group, Inc.
James T. Ponder*\ Trustee Executive Vice President and Chief Marketing Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America; and
Farmington Hills, MI formerly, Senior Vice President and Chief Financial Officer,
Alexander Hamilton Life Insurance Company of America.
Dr. Martha R. Seger Trustee Distinguished Visiting Professor of Finance, Central Michigan
1195 Rolling Hills University; formerly, John M. Olin Distinguished Fellow in
Bloomfield Hills, MI the Eller Center for the Study of Private Market Economy,
University of Arizona, Tucson; and formerly, Governor,
Federal Reserve Board.
Dr. William E. Shelton\ Trustee President, Eastern Michigan University; Member, National
Eastern Michigan Education Commission on Time and Learning; Member, NCAA
University Presidents Commission and NCAA Budget Subcommittee; Member,
202 Weich Hall Oakwood United Hospitals, Inc. Board of Trustees; and Member,
Ypsilanti, MI Michigan's Children Board of
Trustees.
Edward C. Gonzales President Vice President, Treasurer, and Trustee, Federated Investors;
Federated Investors Towers and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and
Director, Federated Administrative Services/ Federated
Administrative Services, Inc.; Trustee or Director of some of
the Federated Funds; Vice President and Treasurer of the
Federated Funds.
Robert J. Davison Vice President Vice President, Alexander Hamilton Life Insurance Company of
33045 Hamilton Boulevard America.
Farmington Hills, MI
Margaret P. Demski Vice President Vice President, Federated Administrative, Inc./Federated
Federated Investor Tower Administrative Services; and Vice President and Assistant
Pittsburgh, PA Treasurer of some of the Federated Funds.
J. Crilley Kelly Secretary Corporate Counsel, Federated Investors.
Federated Investors Tower
Pittsburgh, PA
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
\ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Alexander Hamilton Capital Management, Inc. It
is a wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America, which, in turn, is a wholly-owned subsidiary of Household
International, Inc.
The adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the 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 Fund.
ADVISORY FEES
For its advisory services, Alexander Hamilton Capital Management, Inc. receives
an annual investment advisory fee as described in the prospectus.
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 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.
SUB-ADVISER
Under the terms of a sub-advisory agreement between Federated Research and
Alexander Hamilton Capital Management, Inc., Federated Research will furnish the
adviser such investment advice, including portfolio management strategies,
securities selection recommendations, economic forecasting and other statistical
and factual information as it may require.
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.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the adviser and sub-adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. The adviser and sub-adviser make decisions on portfolio
transactions and select brokers and dealers subject to review by the Board of
Trustees.
The adviser and sub-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 sub-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 may be used by the adviser, sub-adviser or
by affiliates of Federated Investors in advising Federated Funds 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
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus an applicable sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing shares is
explained in the prospectus under "How to Invest in the Fund."
DISTRIBUTION PLAN
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Plan provides for payment of fees to Federated Securities Corp., the principal
distributor for shares of the Fund, to finance any activity which is primarily
intended to result in the sale of shares. Such activities may include the
advertising and marketing of shares; preparing, printing, and distributing
prospectuses and sales literature to prospective shareholders, brokers, or
administrators; and implementing and operating the Plan. Pursuant to the Plan,
the distributor may pay fees to brokers for distribution and administrative
services and to administrators for administrative services as to shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for share purchases and redemptions, confirming and reconciling
all transactions; reviewing the activity in Fund accounts, and providing
training and supervision of broker personnel; posting and reinvesting dividends
to Fund accounts or arranging for the service to be performed by the Fund's
transfer agent; and maintaining and distributing current copies of prospectuses
and shareholder reports to the beneficial owners of shares and prospective
shareholders.
The Board of Trustees expects 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.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. State Street Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND TRUSTEES, AND EMPLOYEES
Trustees, employees, and sales representatives of the Fund, Federated Research,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., and their spouses and
children under 21, may buy shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons, as well as the other parties identified
in the prospectus.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
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:
.According to the last sale price on a national securities exchange, if
available; in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices and for bonds and other
fixed income securities, as determined by an independent pricing service; or
for short-term obligations according to the prices as furnished by an
independent pricing service or for short-term obligations with maturities of
less than 60 days, at amortized cost, or at fair value as determined in good
faith by the Board of Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares". Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange all or some of their shares for shares of other
portfolios in the Alexander Hamilton Funds or Treasury Cash Series. These
exchanges are made at net asset value plus the difference between the Fund's
sales charge already paid and the sales charge of the fund into which the shares
are to be exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp. or State Street Bank in writing.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made.
This privilege is available to shareholders residing in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds or Treasury Cash Series portfolios are available by calling the
Fund.
TAX CONSEQUENCES
Exercise of this privilege is treated as a sale for federal income tax purposes.
Depending upon the circumstances, a short or long-term capital gain or loss may
be realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds or Treasury Cash Series
portfolios may be given in writing or by telephone by the shareholder. Written
instructions may require a signature guarantee.
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.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the quarterly
reinvestment of all dividends and distributions. Any applicable redemption fee
is deducted from the ending value of the investment based on the lesser of the
original purchase price or the net asset value of shares redeemed. Occasionally,
total return which does not reflect the effect of the sales load may be quoted
in advertising.
YIELD
- --------------------------------------------------------------------------------
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 then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-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 the 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,
the performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
.Portfolio quality;
.Average portfolio maturity;
.Type of instruments in which the portfolio is invested;
.Changes in interest rates and market value of portfolio securities;
.Changes in the Fund's expenses; and
.Various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value 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 perfomance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio comparisons 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:
.LIPPER ANALYTICAL SERVICES, INC.--ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "growth and income
funds" category in advertising and sales literature.
.DOW JONES INDUSTRIAL AVERAGE ("DJIA")--represents share prices of selected
blue-chip industrial corporations as well as public utility and transportation
companies. The DJIA indicates daily changes in the average price of stocks in
any of its categories. It also reports total sales for each group of
industries. Because it represents the top corporations of America, the DJIA
index is a leading economic indicator for the stock market as a whole.
.STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS--a composite
index of common stocks in industry, transportation, and financial and public
utility companies, compares total returns of funds whose portfolios are
invested primarily in common stocks. In addition, the Standard & Poor's index
assumes reinvestment of all dividends paid by stocks listed on the index. Taxes
due on any of these distributions are not included, nor are brokerage or other
fees calculated in the Standard & Poor's figures.
.MORNINGSTAR, INC.--an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and 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
quarterly reinvestment of dividends over a specified period of time.
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 and to
money market funds using the Lipper Analytical Services money market instruments
average.
The Fund may quote various general mutual fund industry statistics cited in
publications in its sales literature and advertising. Sales literature and
advertising of the Fund may quote certain facts about the adviser and sub-
adviser, including but not limited to numbers of funds and accounts under
management.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic ranking category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA or D categories.
3110202B (2/94)
08726A
ALEXANDER HAMILTON EQUITY GROWTH AND INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
Supplement to Statement of Additional Information dated February
10, 1994
A.Please insert the following sentence as the last sentence in the section
entitled "Portfolio Turnover" on page 2.
"For the period from February 14, 1994 (date of initial public investment),
to May 31, 1994, the Fund's portfolio turnover rate was 9 %."
B.Please insert the following section entitled "Fund Ownership" following
the section "Officers and Trustees" which begins on page 3. In addition,
please add the heading "Fund Ownership" to the Table of
Contents immediately after the heading "Officers and
Trustees":
"Fund Ownership
As of July 3, 1994, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: Alexander Hamilton Insurance
Company, Farmington Hills, MI, acting in various capacities
for numerous accounts, owned of record approximately 503,042
shares (98.92%) of the Fund. "
C.Please insert the following after the last sentence in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 5:
"During the period from February 14, 1994 (date of initial public investment),
through May 31, 1994, the adviser earned $ 10,610, of which $ 9,054
was voluntarily waived. In addition, the adviser
voluntarily reimbursed the Fund $39,055 of other operating
expenses."
D.Please insert the following after the last sentence in the sub-section
entitled "Sub-Adviser" on page 6:
"During the period from February 14 , 1994 (date of initial public
investment), through May 31, 1994, the sub-adviser earned $ 41,667. "
E.Please insert the following after the last sentence in the section entitled
"Administrative Services" on page 6:
"During the period from February 14 , 1994 (date of initial public
investment), through May 31, 1994, Federated Administrative Services
earned $14,521."
F. Please insert the following in
formation as the final paragraph under the sub-section
entitled "Distribution Plan" which begins on page 6:
"During the period from February 14 , 1994 (date of initial public
investment), through May 31, 1994, brokers and administrators (financial
institutions) received fees in the amount of $3,537 pursuant
to the distribution plan.
G.Please insert the following information as the second sentence in the
section entitled
"Redeeming Shares" on page 7:
""Shareholder redemptions may be subject to a contingent deferred sales
charge ."
H.Please insert the following information as the first paragraph under the
section entitled "Total Return" on page 8:
"The Fund's cumulative total return from February 14 , 1994 (date of initial
public investment), to May 31, 1994, was (7.55%). Cumulative total
return reflects the Fund's total performance over a specific
period of time. This total return assumes and is reduced by
payment of the maximum sales load. The Fund's total return
is representative of only four months of Fund activity since
the Fund's effective date."
I.Please delete the fourth sentence of the second paragraph of the section
entitled "Total Return" and insert the following:
"Any applicable contingent deferred sales charge is deducted from the ending
value of the
investment based on the lesser of the original purchase
price or the net asset value of shares redeemed."
J.Please insert the following information as the first paragraph under the
section entitled "Yield" on page 8:
"The Fund's yield for the thirty-day period ended May 31, 1994 was
1.46%."
July 31, 1994
FEDERATED SECURITIES CORP.
Distributor
G00281-02(7/94)
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
PROSPECTUS
The Alexander Hamilton Government Income Fund (the "Fund") seeks current income
by investing in a professionally managed, diversified portfolio primarily
consisting of U.S. government securities and privately issued mortgage-related
securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK OWNED BY HOUSEHOLD INTERNATIONAL, INC., OR ANY OTHER BANK, ARE NOT ENDORSED
OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
Please read this prospectus before investing, and keep it for future reference.
It contains important information, including how the Fund invests and the
services available to shareholders.
The Fund has also filed a Statement of Additional Information dated February 10,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information or make inquiries about the Fund by
writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 10, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
ALEXANDER HAMILTON FUNDS 3
- ------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Collateralized Mortgage Obligations 4
Additional Investments 4
Repurchase Agreements 4
Restricted and Illiquid Securities 5
When-Issued and Delayed Delivery
Transactions 5
Lending of Portfolio Securities 5
Investing in Other Investment Companies 5
Dollar Roll Transactions 5
Stripped Mortgage Securities 5
Real Estate Mortgage Investment Conduits
("REMICs") 6
Hedging Interest Rate Risks 6
Investment Limitation 6
HOW TO INVEST IN THE FUND 7
- ------------------------------------------------------
Share Purchases 7
Through an Investment Professional 7
Directly from the Distributor 7
Directly by Wire 7
Systematic Investment Plan 8
Minimum Investment Required 8
What Shares Cost 8
Dealer Concession 8
Reducing the Sales Charge 9
Quantity Discounts and Accumulated
Purchases 9
Letter of Intent 9
Reinvestment Privilege 10
Purchases with Proceeds from
Redemptions of Unaffiliated
Investment Companies 10
Concurrent Purchases 10
Certificates and Confirmations 10
Dividends and Distributions 10
Retirement Plans 11
EXCHANGE PRIVILEGE 11
- ------------------------------------------------------
Reduced Sales Charge 11
Requirements for Exchange 11
Tax Consequences 11
Making an Exchange 11
Telephone Instructions 12
REDEEMING SHARES 12
- ------------------------------------------------------
Through an Investment Professional 12
Directly from the Fund 13
By Telephone 13
By Mail 13
Signatures 13
Systematic Withdrawal Plan 14
Accounts with Low Balances 14
EXPENSES OF THE FUND 14
- ------------------------------------------------------
NET ASSET VALUE 15
- ------------------------------------------------------
TRUST INFORMATION 15
- ------------------------------------------------------
Management of the Trust 15
Board of Trustees 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Sub-Adviser 16
Sub-Adviser's Background 16
Distribution of Shares 17
Distribution Plan 17
Brokerage Transactions 17
Administration of the Fund 18
Administrative Services 18
Custodian 18
Transfer Agent and Dividend
Disbursing Agent 18
Legal Counsel 18
Independent Auditors 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
Pennsylvania Corporate and
Personal Property Taxes 19
PERFORMANCE INFORMATION 19
- ------------------------------------------------------
APPENDIX 22
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 25
- ------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 26
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, as applicable)................................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)...................................... None
Exchange Fee............................................................................................ None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)....................................................................... 0.12%
12b-1 Fee............................................................................................... 0.25%
Total Other Expenses.................................................................................... 0.63%
Total Fund Operating Expenses (2).............................................................. 1.00%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser may terminate the
waiver at any time at its sole discretion. The maximum allowable management
fee is .60%.
(2) Annual Fund operating expenses are expected to be 1.48% absent the
anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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.................................................. $55 $75
</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.
HIGHLIGHTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund seeks to provide current income.
STRATEGY
The Fund attempts to achieve its investment objective by investing in a
diversified portfolio of U.S. government securities. The Fund may also invest in
mortgage-backed securities and use futures and options to hedge interest rate
risk.
RISKS
The value of the Fund's shares will fluctuate. The amount of this fluctuation
depends on the quality and maturity of the securities in the portfolio, as well
as market conditions. The Fund attempts to minimize such risks by diversifying
its portfolio securities.
INVESTMENT ADVISERS
Alexander Hamilton Capital Management, Inc., a subsidiary of Alexander Hamilton
Life Insurance Company of America, is the investment adviser of the Fund. The
adviser is responsible for overseeing investment research and the purchase and
sale of portfolio securities. The adviser is also responsible for managing
assets of Alexander Hamilton Life Insurance Company of America, which total over
$5 billion. Federated Research, a subsidiary of Federated Investors, is the
sub-adviser of the Fund. Affiliates of Federated Investors manage and administer
over $75 billion in mutual fund assets.
HOW TO INVEST IN THE FUND
You may purchase shares of the Fund through an investment professional, such as
a bank, broker, other sales agent that has a sales agreement with the
distributor. Shares can be purchased directly from the distributor and by
various electronic processes. Please refer to "How to Invest in the Fund".
Similarly, you may sell your shares back to the Fund through an investment
professional, directly from the distributor, or electronically. Please refer to
"Redeeming Shares".
MINIMUM PURCHASE
The minimum initial investment required is $1,000 and additional investments
must be in an amount of $100 or more. To open a retirement plan account, only
$250 is required and additional investments must be in an amount of $50 or more.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Capital gains are distributed at
least once a year. Dividends and capital gains distributions will be reinvested
in additional shares of the Fund unless you specifically request that they be
paid in cash.
SHAREHOLDER SERVICES
The Fund offers a variety of services to make investing in the Fund convenient.
These services include: automatic investment programs, exchange privileges with
other Alexander Hamilton Funds, and retirement plans. There are several methods
of reducing the sales charge.
Various methods of redemption are available to make withdrawing from the Fund
easy and convenient, too, including a systematic withdrawal plan.
Please refer to the appropriate sections in this prospectus for more information
about the shareholder services available.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Alexander Hamilton Funds (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated July 21, 1993. The Fund's
address is Liberty Center, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. 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. This prospectus relates only to the Trust's government income
portfolio, known as Alexander Hamilton Government Income Fund.
The Fund is designed for individuals and institutions seeking current income
through a professionally managed, diversified portfolio of securities which are
guaranteed as to the payment of principal and interest by the U.S. government,
its agencies or instrumentalities. The Fund may invest in privately-issued
mortgage-related securities.
ALEXANDER HAMILTON FUNDS
- --------------------------------------------------------------------------------
As of the date of this prospectus, there are two other portfolios of the Trust.
Alexander Hamilton Equity Growth and Income Fund seeks growth of capital and
income by investing primarily in securities of high quality companies. Alexander
Hamilton Municipal Income Fund seeks current income that is exempt from federal
regular income tax by investing primarily in municipal securities. You may
obtain further information and prospectuses for these portfolios by calling the
Fund at 1-800-801-2142 or your investment professional.
INFORMATION ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. The
investment objective may not be changed without shareholder approval. 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.
Unless stated otherwise, the investment policies and limitations described below
can be changed by the Board of Trustees ("Trustees") without approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests at least 65% of its total assets in
securities which are primary or direct obligations of the U.S. government or its
agencies or instrumentalities or which are guaranteed by the U.S. government,
its agencies, or instrumentalities. In addition, the Fund may invest in certain
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits, and stripped mortgage securities described below. There is no limit to
portfolio maturity. The price of government bonds fluctuates inversely in
relation to the direction of interest rates.
The U.S. government securities in which the Fund invests include:
Direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and
Obligations of U.S. government agencies or instrumentalities such as
Farmers Home Administration, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation ("FHLMC"), Government National Mortgage Association
("GNMA"), and Federal National Mortgage Association ("FNMA").
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association modified
pass-throughs, 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 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
Credit of the agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Fund may invest in CMOs which are
rated AAA by a nationally recognized rating agency and which are issued by
private entities such as investment banking firms and companies related to the
construction industry. A description of the rating categories is contained in
the Appendix to the Statement of Additional Information. The CMOs in which the
Fund may invest may be: (i) privately issued securities which are 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;
(ii) privately issued securities which are 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; and (iii) other
privately issued securities in which the proceeds of the issuance are invested
in mortgage-backed securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S. government.
The mortgage-related securities provide for a periodic payment consisting of
both interest and principal. The interest portion of these payments will be
distributed by the Fund as income and the capital or principal portion will be
reinvested.
Mortgage-backed securities may be subject to certain prepayment risks because
the underlying mortgage loans 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 favorable rates. At the time the Fund reinvests
the proceeds, it may receive a rate of interest which is actually lower than the
rate of interest paid on those securities. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security but may consider doing so.
ADDITIONAL INVESTMENTS
REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government or other securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and price.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
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. The Fund will limit
investment in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice, to not more than 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis, 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
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Trustees and will receive collateral equal to at least
100% of the value of the securities loaned in the form of cash or U.S.
government securities.
INVESTING IN OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its
assets in securities of other investment companies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
would be subject to such duplicate expenses.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Fund may engage in dollar roll transactions with respect
to mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security to a financial institution, such
as a bank or broker-dealer, and simultaneously agrees to repurchase a
substantially similar security (same type, coupon and maturity) from the
institution at a later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools or mortgages with different
prepayment histories. During the period between the sale and repurchase, the
Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any additional
fee income received on the sale, will generate income for the Fund exceeding the
yield. When the Fund enters into a dollar roll transaction, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
STRIPPED MORTGAGE SECURITIES. Stripped mortgage securities are derivative
multiclass mortgage securities, which may be issued by agencies or
instrumentalities of the U.S. government, or by private originators of, or
investors in, mortgage loans, such as savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing organizations. The market volatility of stripped mortgage
securities tends to be greater than the market volatility of the other types of
mortgage securities in which the Fund invests.
Stripped mortgage securities are purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers; however,
stripped mortgage securities were developed relatively recently. Therefore,
established trading markets for stripped mortgage securities have not yet been
fully developed. This generally causes stripped mortgage securities to be
considered illiquid. To the extent that stripped mortgage securities are
considered illiquid, they, together with any other illiquid investments of the
Fund, will not exceed 15% of the Fund's net assets.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations or a segregated pool 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
interest in the REMIC. A REMIC interest must consist of one or more classes of
"regular interests," some of which may offer adjustable rates, and a single
class of "residual interests." To qualify as a REMIC, substantially all of the
assets of the entity must be in assets directly or indirectly secured
principally by real property.
HEDGING INTEREST RATE RISKS
The following securities will only be purchased as hedging devices, and not for
speculative purposes. Use of these instruments in the portfolio incurs certain
risks, including loss of the capital cost of the hedging instrument and
counterparty credit risk. Please see the Appendix in this prospectus for a full
description of the characteristics and risks of these securities:
Put and Call Options
Financial Futures and Options on Futures
Interest Rate Swaps, Caps and Floors
INVESTMENT LIMITATION
The Fund limits its borrowing, and 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
for 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 up to 15% of the value of those assets to secure
such borrowings.
The above investment limitation cannot be changed without shareholder approval.
HOW TO INVEST IN THE FUND
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SHARE PURCHASES
You may purchase shares on days on which the New York Stock Exchange is open.
Shares may be purchased through an investment professional which has a sales
agreement with Federated Securities Corp. (the "distributor"), or directly from
the distributor, once an account has been established. The Fund reserves the
right to reject any purchase request.
THROUGH AN INVESTMENT PROFESSIONAL. You may call your investment professional
to place an order to purchase shares. Texas residents must purchase shares
through a broker registered with the state of Texas or through the distributor
at 1-800-801-2142.
Orders through an investment professional are considered received when the Fund
is notified of the purchase order. Purchase orders made through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted to the Fund before 5:00 p.m. (Eastern time) in order for
shares to be purchased at that day's price. Purchase orders through other
investment professionals must be received by the investment professional and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. It is the investment professional's
responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. You may place an order to purchase shares
directly from the distributor once an account has been established. To do so:
Complete and sign the new account form in the back of this prospectus;
Enclose a check made payable to Alexander Hamilton Government Income Fund;
and
Mail both to Alexander Hamilton Government Income Fund, P.O. Box 9051,
Boston, MA 02205-9917.
Orders by mail are considered received after payment by check is converted by
State Street Bank and Trust Company (the "custodian") into federal funds. This
is generally the next business day after the custodian receives the check.
DIRECTLY BY WIRE. You may purchase shares directly from the distributor by
Federal Reserve wire. The minimum investment required is $2,500 when purchasing
by wire. You must call the Fund at 1-800-801-2142 before wiring funds.
Funds must be wired to:
State Street Bank & Trust Company
Attention: Mutual Fund Servicing Division
For Credit to: Alexander Hamilton Government Income Fund;
(title or name of account);
(wire order number and/or account number);
ABA Number 011000028.
Wire purchase is not available for retirement accounts. Shares cannot be
purchased by wire on Columbus Day, Veteran's Day, or Martin Luther King Day.
SYSTEMATIC INVESTMENT PLAN
Once a Fund account has been opened, you may add to your investment on a regular
basis in a minimum amount of $100. Under this plan, funds may be automatically
withdrawn periodically from your bank account and invested in shares at the
offering price next determined after your order is received by the transfer
agent. You may apply for participation in this plan through the distributor or
your investment professional.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000 unless the investment is in
a retirement plan, in which case the minimum initial investment is $250.
Subsequent investments must be in amounts of at least $100, except for
retirement plans, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<S> <C> <C>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
Less than $100,000 4.50% 4.71%
$100,000 up to $249,999 3.75% 3.90%
$250,000 up to $499,999 2.50% 2.56%
$500,000 up to $749,999 2.00% 2.04%
$750,000 up to $999,999 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
No sales charge is imposed for shares purchased through bank trust departments
or investment advisers registered under the Investment Advisers Act of 1940.
However, investors who purchase shares through a trust department or investment
adviser may be charged an additional service fee by that institution. No sales
charge is imposed on purchases made by employees, including licensed agents, or
retirees of Alexander Hamilton Life Insurance Company of America and their
immediate families. No sales charge is imposed on purchases made by employees of
Household International, Inc. and their immediate families. No sales charge is
imposed on purchases made by employees of broker/dealers with whom the
distributor has selling agreements or branch employees of financial institutions
which market shares of the Fund. No sales charge is imposed on purchases made by
unaffiliated separate accounts of variable insurance contracts. Additionally, no
sales charge is imposed on purchases made by Trustees of the Fund or their
immediate families.
DEALER CONCESSION. For sales of shares, a dealer will normally receive up to
90% of the applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the distributor. However, the distributor,
at its sole discretion, may uniformly offer to pay all dealers selling shares
additional amounts, all or a portion of which may be paid from the sales charge
it normally retains or any other source available to it. Such additional
payments, if accepted by the dealer, may be in the form of cash or promotional
incentives, and will be predicated upon the amount of shares sold by the dealer.
The sales charge for shares sold other than through registered broker/dealers
will be retained by the distributor. The distributor may pay fees to banks out
of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customers in connection with the initiation of
customer accounts and purchases of shares.
REDUCING THE SALES CHARGE
You may reduce the sales charge on the purchase of shares through:
Quantity discounts and accumulated purchases;
A 13-month letter of intent;
The reinvestment privilege;
Purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
Concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the sales charge
table above, larger purchases reduce the sales charge paid. The Fund will
combine purchases made on the same day by the investor, the investor's spouse,
and the investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if you already own shares
having a current value at the public offering price of $90,000 and you purchase
$10,000 more at the current public offering price, the sales charge on the
additional purchase according to the schedule now in effect would be 3.75%, not
4.50%.
To receive the sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
purchase is made that shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the holdings
or purchases.
LETTER OF INTENT. If you intend to purchase at least $100,000 of shares in the
portfolios of Alexander Hamilton Funds over the next 13 months, the sales charge
may be reduced by signing a letter of intent to that effect. This letter of
intent includes a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a provision for the
custodian to hold 4.50% of the total amount intended to be purchased in escrow
(in shares) until such purchase is completed.
The 4.50% held in escrow will be applied to your account at the end of the
13-month period unless the amount specified in the letter of intent is not
purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate you to purchase shares, but if you do,
each purchase during the period will be at the sales charge applicable to the
total amount intended to be purchased. This letter may be dated as of a prior
date to include any purchases made within the past 90 days towards the dollar
fulfillment of the letter of intent. Prior trade prices will not be adjusted.
REINVESTMENT PRIVILEGE. If shares have been redeemed, you have a one-time
right, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. The distributor must
be notified by the shareholder in writing or by his investment professional of
the reinvestment in order to eliminate a sales charge. If you redeem your shares
in the Fund, there may be tax consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
You may purchase shares at net asset value, without a sales charge, with the
proceeds from the redemption of shares of an investment company sold with a
sales charge or commission and not distributed by the distributor (This does not
include shares of a mutual fund which were or would be subject to a contingent
deferred sales charge upon redemption.) The purchase must be made within 60 days
of the redemption, and the distributor must be notified by the investor in
writing, or by his investment professional, at the time the purchase is made.
The distributor will offer to pay dealers an amount equal to .50 of 1% of the
net asset value of shares purchased by their clients or customers in this
manner. The terms of this offer may change in the future. Such changes may
enclude the imposition of a fee upon redemption of shares of the Fund purchased
in this manner. Shareholders will be notified before any such change becomes
effective.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
you have the privilege of combining concurrent purchases of two or more
portfolios in the Alexander Hamilton Funds, the purchase price of which includes
a sales charge. For example, if you concurrently invested $30,000 in one of the
other Alexander Hamilton Funds with a sales charge, and $70,000 in shares of
this Fund, the sales charge would be reduced from 4.50% to 3.75%.
To receive this sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
CERTIFICATES AND CONFIRMATIONS
The transfer agent for the Fund maintains a share account for each shareholder.
Share certificates are not issued unless requested in writing to the transfer
agent.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly.Capital gains realized by the
Fund, if any, will be distributed at least once every twelve months. Dividends
and distributions will automatically be reinvested in additional shares on
payment dates at net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
your investment professional and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
You may exchange all or some of your shares for shares of other portfolios in
the Alexander Hamilton Funds or Treasury Cash Series. Neither the Fund nor any
of the portfolios in Alexander Hamilton Funds or Treasury Cash Series imposes
any additional fees on exchanges. You may also exchange into certain other funds
distributed by the distributor. For more information, please contact your
investment professional. Exchanges are made at net asset value, plus the
difference between the Fund's sales charge already paid and any sales charge of
the fund into which the shares are to be exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction of the sales
charge, the distributor must be notified in writing by the shareholder or by his
investment professional.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
of at least $1,000. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of
modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds and Treasury Cash Series are available by contacting the Fund at
1-800-801-2142 or your investment professional.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee. Please
refer to the section entitled "Signatures" for further information. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other investment professionals during times of drastic economic or market
changes. If you cannot contact your broker or investment professional by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Boston Financial Data Services, Inc., Attention:
Alexander Hamilton Funds/ Federated Division, Two Heritage Drive, North Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form on the new account form
completed by the investor is on file with the transfer agent. If the
instructions are given by your investment professional, a telephone
authorization form completed by the investment professional must be on file with
the transfer agent. Shares may be exchanged between two Alexander Hamilton Funds
or Treasury Cash Series by telephone only if the two funds have identical
shareholder registrations. Telephone exchange instructions may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the transfer agent and deposited to the shareholder's account
before being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the transfer agent before that time
for shares to be exchanged the same day. Shareholders exchanging into a fund
will not receive any dividend that is payable to shareholders of record on that
date. This privilege may be modified or terminated at any time.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund purchases shares from you at their net asset value next determined
after the transfer agent receives the redemption request. Redemptions will be
made on days on which the Fund computes its net asset value. The Fund does not
calculate its net asset value on weekends or certain holidays. Please refer to
the section entitled "Net Asset Value". Redemptions can be made through your
investment professional or directly from the Fund. Redemption requests must be
received in proper form.
THROUGH AN INVESTMENT PROFESSIONAL
You may redeem shares of the Fund by calling your investment professional (such
as a bank, investment dealer, or sales agent) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund receives
the redemption request from your investment professional. Redemption requests
through a registered broker/dealer must be received by the broker before 4:00
p.m. (Eastern time) and must be transmitted by the broker to the Fund before
5:00 p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. Redemption requests through other investment professionals must be
received by the investment professional and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net asset
value. Your investment professional is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The investment professional may charge customary fees and commissions for
this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through an investment
professional may redeem their shares by telephoning the Fund at 1-800-801-2142.
The proceeds will be mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than seven days after the request provided the transfer agent
has received payment for the shares from the shareholder. The minimum amount for
a wire transfer is $1,000. If at any time the Fund shall determine it necessary
to terminate or modify this method of redemption, shareholders would be promptly
notified.
Your new account form authorizing the transfer agent to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from the distributor. Telephone redemption instructions
may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY MAIL. You may redeem shares by sending a written request to the transfer
agent. The written request should include the shareholder's name, the Fund name,
the account number, the share or dollar amount requested, and should be signed
exactly as the shares are registered.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund at 1-800-801-2142 for assistance in redeeming
by mail.
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 with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by a:
Trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
Member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
Savings bank or savings and loan association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which is administered by
the FDIC; or
Other "eligible guarantor institutions," 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.
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 transfer agent has received payment for the shares from the
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
You may receive monthly or quarterly payments of a predetermined amount by
taking advantage of the Systematic Withdrawal Plan. Under this program, shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by you; the minimum withdrawal amount is $100. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to shares, and the fluctuation of the net asset value
of shares redeemed under this program, redemptions may reduce, and eventually
deplete, your investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on your investment in the
Fund. To be eligible to participate in this program, you must have invested at
least $10,000 in the Fund (at current offering price). You may apply for
participation in this program through the distributor or your investment
professional.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,000. This requirement does not apply, however, if the balance falls below
$1,000 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.
EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to; registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
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 all other assets, less
liabilities, by the number of shares outstanding.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
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. An 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 Alexander
Hamilton Capital Management, Inc., the Fund's investment adviser, subject to
direction by the Trustees. The adviser continually conducts or oversees
investment research and supervision for the Fund and is responsible for
overseeing the purchase or sale of portfolio instruments, for which it receives
an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The
investment advisory contract allows for the voluntary waiver of the
investment advisory fee or the reimbursement of expenses by the adviser
from time to time. The adviser can terminate any voluntary waiver of its
fee or reimbursement of expenses at any time at its sole discretion.
ADVISER'S BACKGROUND. Alexander Hamilton Capital Management, Inc., located
at 33045 Hamilton Boulevard, Farmington Hills, Michigan 48334, was formed
in 1993 as a Michigan corporation and is registered as an investment
adviser under the Investment Advisers Act of 1940. The adviser is a
wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America ("AHLIC"), which is, in turn, a subsidiary of Household Finance
Corporation, Inc. One hundred percent of the common stock of Household
Finance Corporation is owned by Household International, Inc., a $32
billion dollar holding company with its principal subsidiaries engaged in
financial services.
Alexander Hamilton Capital Management, Inc. has an investment advisory
agreement to manage assets of AHLIC. As of June 30, 1993, the book value of
AHLIC assets managed by the adviser was approximately $5.2 billion. The
management and portfolio managers of Alexander Hamilton Capital Management,
Inc. have an average of 13 years of experience in managing investment
portfolios. However, the adviser has no prior experience in managing mutual
funds.
Several other subsidiaries of Household International are in the banking or
lending business. From time to time, these organizations may grant loans to
public companies. The adviser is prohibited from maintaining knowledge of
the lending relationships of their affiliates by the Glass-Steagall Act and
other federal and state laws. 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 an affiliate of the adviser or its parent company. The
lending relationship will not be a factor in the selection of securities.
Because of the internal controls maintained by the companies to restrict
the flow of information, Fund investments will be made without any
knowledge of Household International affiliates' lending relationships with
an issuer.
SUB-ADVISER. Under the terms of a sub-advisory agreement between Federated
Research and Alexander Hamilton Capital Management, Inc., Federated Research
will furnish the adviser such investment advice, including portfolio management
strategies, securities selection recommendations, economic forecasting and other
statistical and factual information as it may require. For the services provided
under the sub-advisory agreement, the adviser will pay the sub-adviser an annual
fee of $125,000, plus one-half of the remaining advisory revenues.
SUB-ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222. It is a wholly-owned subsidiary of
Federated Investors. All of the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Research and other subsidiaries of Federated
Investors serve as investment advisers and administrators to a number of
investment companies and private accounts. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $75 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial services industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same clients, individual shareholders also have access to
this same level of investment expertise.
Susan M. Nason has been the Fund's co-portfolio manager since its
inception. Ms. Nason joined Federated Investors in 1987 and has been a Vice
President of the Fund's sub-adviser since 1993. Ms. Nason served as an
Assistant Vice President of the sub-adviser from 1990 until 1992, and from
1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University.
Kathleen M. Foody-Malus has been the Fund's co-portfolio manager since its
inception. Ms. Foody-Malus joined Federated Investors in 1983 and has been
a Vice President of the Fund's sub-adviser since 1993. Ms. Foody-Malus
served as an Assistant Vice President of the sub-adviser from 1990 until
1992, and from 1986 until 1989 she acted as an investment analyst. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University
of Pittsburgh.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. 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. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Plan"), the Fund will pay the distributor an amount computed at an annual
rate of .25% of the average daily net asset value of shares to finance any
activity which is principally intended to result in the sale of shares.
The distributor may select investment professionals (such as a broker/dealer,
bank, or sales agent) to provide distribution and/or administrative services as
agents for their clients or customers who beneficially own shares of the Fund.
Investment professionals 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.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the 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.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
BROKERAGE TRANSACTIONS
The adviser and sub-adviser place orders for securities for the Fund with a view
to obtaining the best combination of price and execution. From time to time,
orders may be placed with broker/dealers that are affiliates of the adviser or
sub-adviser. Any such transactions will only be executed in conformance with
applicable laws.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services.
For these services, the Fund pays a fee, computed and payable daily, to
Federated Administrative Services at an annual rate, based on the daily net
assets of the Trust taken as a whole, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% of the first $250 million
.125 of 1% of the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee paid by the Fund during any fiscal year will not be less
than $50,000. Federated Administrative Services may voluntarily choose to waive
a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, is transfer
agent for shares of the Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel to the Fund is provided by Houston, Houston &
Donnelly, 2510 Centre City Tower, Pittsburgh, Pennsylvania, 15222. Dickstein,
Shapiro & Morin, 2101 L Street, N.W., Washington, D.C., 20037 provides legal
counsel to the Trustees.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
One Oxford Centre, Pittsburgh, Pennsylvania, 15219.
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. All shares of the portfolios
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or 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 shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies. The
Fund also expects to receive the special tax treatment afforded to such
companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
The Fund is not subject to Pennsylvania corporate or personal property
tax; and
Fund shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that
the portfolio securities in the Fund would be subject to such taxes if
owned directly by residents of those jurisdictions.
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 will advertise its total return and yield.
Yield is a way of showing the rate of net income the Fund earns on its
investments as a percentage of its share price. To calculate yield, the net
investment income per share earned from the portfolio of investments for a
specific one month or 30-day period is expressed as an annualized percentage
rate based on the Fund's maximum offering price at the end of the period. Yield
is an annualized percentage, which means that it is assumed that the Fund
generates the same level of net investment income over a one year period.
The yield does not necessarily reflect income actually earned by shares, and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
Total return is based on the overall dollar or percentage change in value of a
hypothetical investment in the Fund and assumes that all of the Fund's dividends
and capital gain distributions are reinvested. Cumulative total return reflects
the Fund's performance over a stated period of time. Average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual return tends to smooth out
variations in the Fund's returns, you should understand that it is not the same
as actual year-by-year results.
The hypothetical example below assumes that a share has a $10.00 net asset value
on the first day of the performance period, as well as on the day that a $.05
per share dividend is declared. This example also assumes that the net asset
value of a share has appreciated to $10.10 on the last day of the performance
period.
HYPOTHETICAL EXAMPLE OF TOTAL RETURN:
<TABLE>
<S> <C>
Net Asset Value on beginning date............................................................ $10.00
Net Asset Value on Ex-Dividend date.......................................................... $10.00
Ex-Dividend Amount Per Share................................................................. $00.05
Net Asset Value on ending date............................................................... $10.10
TOTAL RETURN............................................................................. 1.50%
</TABLE>
Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges which, if excluded, would increase the total
return and yield.
From time to time the Fund may advertise its performance using certain financial
publications and/or compare its performance to certain indices.
U.S. GOVERNMENT SECURITIES VS. INFLATION
[INSERT GRAPH HERE]
This chart consists of a $10,000 hypothetical investment using total returns.
Source: The Wall Street Journal for both Long-Term and Intermediate-Term
Government Securities and the Consumer Price Index.
APPENDIX
- --------------------------------------------------------------------------------
PUT AND CALL OPTIONS. The Fund may purchase put and call options on its
portfolio securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds, or will be purchasing, against
decreases or increases in value. The Fund may write (sell) put and call options
on all or any portion of its portfolio to generate income for the Fund. The Fund
will write call options on securities either held in its portfolio or for which
it has the right to obtain without payment of further consideration or for which
it has segregated cash in the amount of any additional consideration. In the
case of put options, the Fund will segregate cash or U.S. Treasury obligations
with a value equal to or greater than the exercise price of the underlying
securities.
The Fund may generally purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the options
since options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and 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.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government at a certain time in the future. The seller of the contract
agrees to make delivery of the type of instrument named in the contract and the
buyer agrees to take delivery of the instrument at the specified future time.
The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.
The Fund may write put options and purchase call options on financial futures
contracts as a hedge against rising purchase prices of portfolio securities
resulting from anticipated decreases in market interest rates. The Fund will use
these transactions to attempt to protect its ability to purchase portfolio
securities in the future at price levels existing at the time it enters into the
transactions. When the Fund writes a put option on a futures contract, it is
undertaking to buy a particular futures contract at a fixed price at any time
during a specified period if the option is exercised. As a purchaser of a call
option on a futures contract, the Fund is entitled (but not obligated) to
purchase a futures contract at a fixed price at any time during the life of the
option. The Fund may not purchase or sell futures contracts or related options
if immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly
with the prices of the securities in the Fund's portfolio. This may cause
the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest rate movements. In these events,
the Fund may lose money on the futures contract or option. It is not
certain that a secondary market for positions in futures contracts or for
options will exist at all times. Although the investment adviser will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on
this secondary market.
INTEREST RATE SWAPS, CAPS AND FLOORS. The Fund may enter into interest rate
swaps and may purchase or sell (i.e., write) interest rate caps and floors.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed-rate payments) on a notional principal amount. The
principal amount of an interest rate swap is notional in that it only provides
the basis for determining the amount of interest payments under the swap
agreement, and does not represent an actual loan. For example, a $10 million
LIBOR swap would require one party to pay the equivalent of the London Interbank
Offer Rate on $10 million principal amount in exchange for the right to receive
the equivalent of a fixed rate of interest on $10 million principal amount.
Neither party to the swap would actually advance $10 million to the other.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
the amount of excess interest on a notional principal amount from the party
selling the interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of the amount of the interest shortfall on a
notional principal amount from the party selling the interest rate floor.
The Fund expects to enter into interest rate transactions primarily to hedge
against changes in the price of other portfolio securities. For example, the
Fund may hedge against changes in the market value of a fixed rate note by
entering into a concurrent swap that requires the Fund to pay the same or a
lower fixed rate of interest on a notional principal amount equal to the
principal amount of the note in exchange for a variable rate of interest based
on a market index.
Interest accrued on the hedged note would then equal or exceed the Fund's
obligations under the swap, while changes in the market value of the swap would
largely offset any changes in the market value of the note. The Fund may also
enter into swaps and caps to preserve or enhance a return or spread on a
portfolio security. The Fund does not intend to use these transactions in a
speculative manner.
The Fund will usually enter into interest rate swaps on a net basis (i.e., the
two payment streams are netted out), with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis, and the Fund will
segregate liquid assets in an aggregate net asset value at least equal to the
accrued excess, if any, on each business day. If the Fund enters into an
interest rate swap on other than a net basis, the Fund will segregate liquid
assets in the full amount accrued on a daily basis of the Fund's obligations
with respect to the swap. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and agents
utilizing standardized swap documentation. The Fund's investment adviser has
determined that, as a result, the swap market has become relatively liquid. Caps
and floors are more recent innovations for which standardized documentation has
not yet been developed and, accordingly, they are less liquid than swaps. To the
extent interest rate swaps, caps or floors are determined by the investment
adviser to be illiquid, they will be included in the Fund's limitation on
investments in illiquid securities. To the extent the Fund sells caps and
floors, it will maintain in a segregated account cash and/or U.S. government
securities having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Fund's obligations with respect to the
caps or floors.
The use of interest rate swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Fund's investment adviser is incorrect
in its forecasts of market values, interest rates and other applicable factors,
the investment performance of the Fund would diminish compared with what it
would have been if these investment techniques were not utilized. Moreover, even
if the Fund's investment adviser is correct in its forecasts, there is a risk
that the swap position may correlate imperfectly with the price of the portfolio
security being hedged.
There is no limit on the amount of interest rate swap transactions that may be
entered into by the Fund. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to a default on an interest rate swap is limited to the net
asset value of the swap together with the net amount of interest payments owed
to the Fund by the defaulting party. A default on a portfolio security hedged by
an interest rate swap would expose the Fund to the risk of having to cover its
net obligations under the swap with income from other portfolio securities. The
Fund may purchase and sell caps and floors without limitation, subject to the
segregated account requirement described above.
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 23, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Cash $ 100,000
- ------------------------------------------------------------------------------------------------------ ----------
LIABILITIES:
- ------------------------------------------------------------------------------------------------------
NET ASSETS for 10,000 shares of beneficial interest outstanding $ 100,000
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, and Redemption Price Per Share
($100,000 / 10,000 shares of beneficial interest outstanding) $10.00
- ------------------------------------------------------------------------------------------------------ ----------
Computation of Offering Price: Offering Price per share (100/95.5 of $10.00)* $10.47
- ------------------------------------------------------------------------------------------------------ ----------
</TABLE>
*On sales of $100,000 or more, the offering price is reduced as stated under
"What Shares Cost" in the prospectus.
NOTES:
(1) Alexander Hamilton Funds (the "Trust"), which includes the Alexander
Hamilton Government Income Fund (the "Fund"), was established as a
Massachusetts business trust under a Declaration of Trust dated July 21,
1993. The Fund had no operations since that date other than those relating
to organizational matters, including the issuance on November 23, 1993, of
10,000 shares at $10.00 per share to Federated Administrative Services, the
Administrator to the Fund. Expenses of organization incurred by the Fund,
estimated at $33,050 were borne initially by the Administrator. The Fund has
agreed to reimburse the Administrator for the organization expenses
initially borne by the Administrator during the five-year period following
the date the Fund's registration statement first became effective.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
ALEXANDER HAMILTON FUNDS:
We have audited the accompanying statement of assets and liabilities of
Alexander Hamilton Government Income Fund as of November 23, 1993. This
statement of assets and liabilities is the responsibility of the Trust's
management. Our responsibility is to express an opinion on this statement of
assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities presents fairly, in all
material respects, the net assets of the Alexander Hamilton Government Income
Fund as of November 23, 1993 in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
November 24, 1993
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Alexander Hamilton Government Federated Investors Tower
Income Fund Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Alexander Hamilton Capital 33045 Hamilton Boulevard
Management, Inc. Farmington Hills, Michigan 48334
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ALEXANDER HAMILTON
GOVERNMENT INCOME FUND
PROSPECTUS
A Diversified Portfolio of
Alexander Hamilton Funds,
An Open-End Management
Investment Company
February , 1994
3110203 (2/94)
ALEXANDER
HAMILTON
GOVERNMENT
INCOME FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT
TO THE PROSPECTUS
DATED FEBRUARY 10, 1994
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
------------------------------
Distributor
ALEXANDER HAMILTON FUNDS
08626-A G00282-01 (7/94) Your foundation for financial freedom
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 10, 1994
A. Please delete the "Summary of Fund Expenses" table on page 1 and replace
it with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................................................... 4.50%
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) (1)............................................................. 0.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (2)........................................................................ 0.12%
12b-1 Fee................................................................................................ 0.25%
Total Other Expenses (after expense reimbursement) (3)................................................... 0.63%
Total Fund Operating Expenses (4).................................................................. 1.00%
</TABLE>
(1) A contingent deferred sales charge of 0.50% applies only to shares which are
purchased with proceeds from redemptions of shares of an unaffiliated mutual
fund in which a sales load has been paid and which are redeemed within one
year of purchase. For a more complete description, see "Purchases with
Proceeds from Redemptions of Unaffiliated Investment Companies."
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee by the investment
adviser. The adviser can terminate this voluntary waiver at any time at its
sole discretion. The maximum management fee is 0.60%.
(3) Other expenses are estimated to be 2.09% absent the anticipated voluntary
reimbursement of certain other expenses by the adviser. The adviser can
terminate the voluntary reimbursement of expenses at any time at its sole
discretion.
(4) Total Fund operating expenses are estimated to be 2.94% absent the
anticipated voluntary waiver and voluntary reimbursement explained in
footnotes (2) and (3).
* Total Fund operating expenses are estimated based on average expenses
expected to be incurred during the period ending November 30, 1994. During
the course of this period, expenses may be more or less than the average
amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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.......................... $55 $75
You would pay the following expenses on the same investment, assuming no sales load when
purchasing shares of the Fund with proceeds from the redemption of unaffiliated mutual fund
shares.......................................................................................... $10 $32
</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.
B. Please insert the following "Financial Highlights" table as page 2
following the "Summary of Fund Expenses" and before the section entitled
"Highlights." In addition, please add the heading "Financial Highlights"
to the Table of Contents on page I following the heading "Summary of Fund
Expenses."
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.16
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.69)
- ---------------------------------------------------------------------------------------- ----------------
Total from investment operations (0.53)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- ---------------------------------------------------------------------------------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 9.31
- ---------------------------------------------------------------------------------------- ----------------
TOTAL RETURN** (5.26%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 0.96%(a)
- ----------------------------------------------------------------------------------------
Net investment income 6.24%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 4.24%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,835
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 77%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 17, 1994 (date of initial
public investment) to May 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
C. Please delete the sub-section entitled "Dollar Roll Transactions" on page
5. In addition, please delete the sub-heading from the Table of
Contents.
D. Please delete the last sentence of the first paragraph and the entire
second paragraph and add the following information to the sub-section
entitled "Dealer Concession" which begins on page 8:
"Such payments, which will be predicated upon the amount of Fund shares sold,
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."
E. Please insert the following "Other Payments to Financial Institutions"
sub-section following the sub-section entitled "Dealer Concessions" which
begins on page 8. In addition, please add the heading "Other Payments to
Financial Institutions" to the Table of Contents on page I following the
heading "Dealer Concessions."
"Other Payments to Financial Institutions. The distributor, the Adviser, or
their 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 initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
F. Please insert the following information as the second paragraph of the
sub-section entitled "Purchases with Proceeds from Redemptions of
Unaffiliated Investment Companies" on page 10:
"A contingent deferred sales charge is charged in limited circumstances.
Shareholders who purchased shares with the proceeds of a redemption of shares of
an unaffiliated mutual fund sold with a sales charge or commission and which
were not distributed by the distributor will be charged a contingent deferred
sales charge by the Fund's distributor of .50 of 1% for redemptions made within
one year of purchase. The contingent deferred sales charge will be calculated
based upon the lesser of the original price of shares or the net asset value of
the shares when redeemed."
G. Please delete the first sentence of the section entitled "Redeeming
Shares" on page 12 and insert the following:
"The Fund purchases shares from you at their net asset value, less any
applicable contingent deferred sales charge, next determined after the transfer
agent receives the redemption request."
H. Please insert the following "Contingent Deferred Sales Charge" section
following the section entitled "Systematic Withdrawal Plan" on page 14. In
addition, please add the heading "Contingent Deferred Sales Charge" to the
Table of Contents immediately following the heading "Systematic Withdrawal
Plan."
"CONTINGENT DEFERRED SALES CHARGE
No contingent deferred sales charge will be imposed on shares acquired through
reinvestment of dividends or distributions of short-term or long-term capital
gains. Redemptions are deemed to have occurred in the following order: (i)
shares acquired through the reinvestment of dividends and long-term capital
gains; (ii) purchases of shares occurring more than one year before the date of
redemption; (iii) purchases of shares within the previous year without the use
of redemption proceeds as described above; and (iv) purchases of shares within
the previous year through the use of redemption proceeds as described above.
No contingent deferred sales charge will be imposed when a redemption results
from a tax-free return under the following circumstances: (i) a total or partial
distribution from a qualified retirement plan, other than an IRA, Keogh Plan, or
a custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, or other redemptions made for purposes of
reinvestment.
A contingent deferred sales charge will not be charged in connection with
exchanges in other Alexander Hamilton Funds or Treasury Cash Series portfolios
or in connection with redemptions by the Fund of accounts with low balances."
I. Please delete the second paragraph under the sub-section "Sub-Adviser's
Background" on page 16 and replace it with the following:
"Gary J. Madich has been the Fund's co-portfolio manager since July 26, 1994.
Mr. Madich joined Federated Investors in 1984 and has been a Senior Vice
President of the Fund's sub-adviser since 1993. Mr. Madich served as a Vice
President of the Fund's sub-adviser from 1988 until 1993. Mr. Madich is a
Chartered Financial Analyst and received his M.B.A. in Public Finance from the
University of Pittsburgh."
J. Please insert the following information as the last sentence of the
second paragraph of the section entitled "Voting Rights" which begins on
page 18:
"As of July 3, 1994, Alexander Hamilton Life Insurance Company may for certain
purposes be deemed to control the Fund because it is owner of record of certain
shares of the Fund."
K. Please delete the sentence immediately following the HYPOTHETICAL EXAMPLE
OF TOTAL RETURN on page 20 in the section entitled "Performance
Information" which begins on page 19 and insert the following:
"Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges, such as the contingent deferred sales charge,
which, if excluded, would increase the total return and yield."
L. Please insert the following financial statements after the "Performance
Information" section which begins on page 19. In addition, please add the
heading "Financial Statements" to the Table of Contents immediately
following "Performance Information."
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
LONG-TERM GOVERNMENT OBLIGATIONS--97.7%
- ------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--77.2%
---------------------------------------------------------------------------------
$ 2,203,996 8.00%, 6/15/2023 $ 2,189,515
---------------------------------------------------------------------------------
1,596,295 7.50%, 1/15/2024 1,542,420
--------------------------------------------------------------------------------- ---------------
Total 3,731,935
--------------------------------------------------------------------------------- ---------------
U.S. TREASURY NOTES--20.5%
---------------------------------------------------------------------------------
1,000,000 5.50%, 4/30/96 991,470
--------------------------------------------------------------------------------- ---------------
TOTAL LONG-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $4,959,381) 4,723,405
--------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENT--1.1%
- ------------------------------------------------------------------------------------------------
55,000 J.P. Morgan Securities, Inc., 4.27%, dated 5/31/94, due 6/1/94
(at amortized cost) (Note 2B) 55,000
--------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST, $5,014,381) $ 4,778,405\
--------------------------------------------------------------------------------- ---------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ The cost of investments for federal tax purposes amounts to $5,014,381. The
net unrealized depreciation on investments on a federal tax basis amounts to
$235,976, which is comprised of $0 appreciation and $235,976 depreciation at
May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($4,834,914) at May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A & 2B)
(identified and tax cost $5,014,381) $ 4,778,405
- ---------------------------------------------------------------------------------------------------
Cash 4,595
- ---------------------------------------------------------------------------------------------------
Interest receivable 29,160
- ---------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 40,415
- --------------------------------------------------------------------------------------------------- -------------
Total assets 4,852,575
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Dividends payable $ 490
- ----------------------------------------------------------------------------------------
Accrued expenses 17,171
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 17,661
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 519,485 shares of beneficial interest outstanding $ 4,834,914
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 5,189,625
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (235,976)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (118,735)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 4,834,914
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
(net assets of $4,834,914 / 519,485 SHARES OF BENEFICIAL INTEREST OUTSTANDING) $9.31
- --------------------------------------------------------------------------------------------------- -------------
COMPUTATION OF OFFERING PRICE (100/95.5 OF $9.31)* $9.75
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 98,972
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee** $ 7,921
- ----------------------------------------------------------------------------------------
Trustees' fees 4,213
- ----------------------------------------------------------------------------------------
Administrative personnel and services fees** 13,562
- ----------------------------------------------------------------------------------------
Custodian fees** 10,137
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 5,479
- ----------------------------------------------------------------------------------------
Legal fees 2,142
- ----------------------------------------------------------------------------------------
Printing and postage 4,494
- ----------------------------------------------------------------------------------------
Portfolio accounting fees** 15,930
- ----------------------------------------------------------------------------------------
Insurance premiums 1,931
- ----------------------------------------------------------------------------------------
Distribution services fee** 3,300
- ----------------------------------------------------------------------------------------
Miscellaneous 2,470
- ---------------------------------------------------------------------------------------- ---------
Total expenses 71,579
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 6,337
- -----------------------------------------------------------------------------
Reimbursement of other operating expenses** 52,041 58,378
- ----------------------------------------------------------------------------- --------- ---------
Net expenses 13,201
- --------------------------------------------------------------------------------------------------- -----------
Net investment income 85,771
- --------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (118,735)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (235,976)
- --------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (354,711)
- --------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations ($ 268,940)
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from November 23, 1993 (start of business) to May 31, 1994
(unaudited).
** See Note 4.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 85,771
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($118,735 net loss
as computed for federal income tax purposes) (Note 2D) (118,735)
- -----------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (235,976)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (268,940)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (85,771)
- ----------------------------------------------------------------------------------------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------------------------------
Proceeds from sales of shares 5,106,200
- -----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 83,475
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (50)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets from Fund share transactions 5,189,625
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 4,834,914
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------------- -----------------
End of period $ 4,834,914
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from November 23, 1993 (start of business) to May 31, 1994
(unaudited).
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Alexander Hamilton Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust consists of three diversified portfolios. The financial statements
included herein present only those of the Alexander Hamilton Government Income
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees ("Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by
the Internal Revenue Code, as amended ("Code"). Distributions to
shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
Shares sold 510,631
- -----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 8,859
- -----------------------------------------------------------------------------------------------
Shares redeemed (5)
- ----------------------------------------------------------------------------------------------- -----------------
Net change resulting from Fund share transactions 519,485
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from November 23, 1993 (start of business) to May 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Alexander Hamilton Capital Management, Inc., the Fund's
investment adviser ("Adviser"), receives for its services an annual investment
advisory fee equal to 0.60 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and Federated Research,
Federated Research receives an annual fee of $125,000, plus one half of the
remaining advisory revenues.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The fee is based on the
level of average aggregate daily net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION PLAN--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Under the terms of the Plan, the Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The Plan
provides that the Fund may incur distribution expenses up to 0.25 of 1% of the
average daily net assets of the Fund, annually, to compensate FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type and number of accounts
and transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
State Street Bank and Trust Company is the Trust's custodian. The fee is based
on the level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $54,642. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following February 10, 1994 (date the Fund became effective).
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
May 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 8,408,859
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 3,330,742
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
M. Please delete the "Statement of Assets and Liabilities" and "Report of
Independent Auditors" appearing on pages 25 and 26.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
George A. Cooke George A. Cooke
Chairman Chief Executive Officer
Christopher Bancroft Edward C. Gonzales
Frederick L. Blackmon President and Treasurer
William H. T. Bush Margaret P. Tessaro
James T. Ponder Vice President and Assistant Treasurer
Martha R. Seger Robert J. Davison
William E. Shelton Vice President
J. Crilley Kelly
Secretary
David M. Di Rita
Assistant Secretary
Melissa A. Moore
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank, nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus, which contains facts concerning its
objective and policies, management fees, expenses and other information.
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Alexander Hamilton Government Income Fund (the "Fund")
dated February 10, 1994. 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 February 10, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Collateralized Mortgage Obligations (CMOs) 1
Stripped Mortgage-Related Securities 1
Futures and Options Transactions 1
When-Issued and Delayed Delivery
Transactions 4
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Lending of Portfolio Securities 4
Portfolio Turnover 4
Investment Limitations 5
MANAGEMENT OF THE TRUST 6
- ---------------------------------------------------------------
Officers and Trustees 6
INVESTMENT ADVISORY SERVICES 8
- ---------------------------------------------------------------
Adviser to the Fund 8
Advisory Fees 8
Sub-Adviser 9
ADMINISTRATIVE SERVICES 9
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
PURCHASING SHARES 9
- ---------------------------------------------------------------
Distribution Plan 9
Conversion to Federal Funds 10
Purchases by Sales Representatives,
Fund Trustees, and Employees 10
DETERMINING NET ASSET VALUE 10
- ---------------------------------------------------------------
DETERMINING MARKET VALUE OF SECURITIES 10
- ---------------------------------------------------------------
REDEEMING SHARES 10
- ---------------------------------------------------------------
EXCHANGE PRIVILEGE 10
- ---------------------------------------------------------------
Reduced Sales Charge 10
Requirements for Exchange 10
Tax Consequences 11
Making an Exchange 11
TAX STATUS 11
- ---------------------------------------------------------------
The Fund's Tax Status 11
Shareholders' Tax Status 11
TOTAL RETURN 11
- ---------------------------------------------------------------
YIELD 11
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 12
- ---------------------------------------------------------------
APPENDIX 13
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Alexander Hamilton Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
July 21, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income. The investment
objective cannot be changed without approval of shareholders. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities, and short-term
capital gains.
TYPES OF INVESTMENTS
The Fund invests in U.S. government securities which are primary or direct
obligations of the U.S. government or its agencies or instrumentalities or which
are guaranteed by the U.S. government, its agencies or instrumentalities. The
Fund may also without limit invest in certain collateralized mortgage
obligations, real estate mortgage investment conduits, and stripped
mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
Privately issued CMOs, which will not represent more than 35% of the Fund's
assets, 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 CMOs 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 make government-related pools
highly liquid.
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest payments
on mortgage-backed securities (stripped mortgage-backed securities or "SMBSs").
Due to the possibility of prepayments on the underlying mortgages, SMBSs may be
more interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
current income.
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. One common type of stripped mortgage security has one
class that receives some of the principal and most of the interest from the
underlying mortgage assets, while the second class receives most of the
principal and the remainder of the interest from the underlying mortgage assets.
In some situations, a stripped mortgage security has one class that receives all
of the interest from the underlying mortgage assets (the interest-only or "IO"
class), while the second class receives all of the principal (the principal only
or "PO" class). The yield to maturity value of an IO class is extremely
sensitive not only to changes in prevailing interest rates but also to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets. Further, a rapid rate of principal payments may have a materially
adverse effect upon the Fund's yield to maturity. If the mortgage assets which
underlie the stripped mortgage securities were to experience greater than
anticipated prepayments of principal, the Fund could fail to fully recoup its
initial investment in these securities, even if they are rated in the highest
rating categories (e.g., AAA or Aaa By Standard & Poor's Corporation or Moody's
Investors Service, respectively).
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, the Fund may buy and sell call and put options on U.S. government
securities.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties, the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. Financial
futures contracts call for the delivery of particular debt securities
issued or guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts
for U.S. government securities. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
The Fund would purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio
securities decrease in value during the term of an option, the related
futures contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally close out its
option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be
large enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the
option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in
return for payment of the strike price. If the Fund neither closes out
nor exercises an option, the option will expire on the date provided in
the option contract, and the premium paid for the contract will be lost.
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts for U.S. government securities
to hedge its portfolio against an increase in market interest rates. When
the Fund writes a call option on a futures contract, it is undertaking
the obligation of assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under a call
option on a future (to sell a futures contract) costs less to fulfill,
causing the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the stock
price, the buyer of the option has no reason to exercise the call, so
that the Fund keeps the premium received for the option. This premium can
offset the drop in value of the Fund's fixed income portfolio which is
occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then offset the decrease in value of
the hedged securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts for
U.S. government securities to hedge its portfolio against a decrease in
market interest rates. When the Fund writes a put option on a futures
contract, it receives a premium for undertaking the obligation to assume
a long futures position (buying a futures contract) at a fixed price at
any time during the life of the option. As market interest rates
decrease, the market price of the underlying futures contract normally
increases.
As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the
market. The premium received by the Fund can then be used to offset the
higher prices of portfolio securities to be purchased in the future due
to the decrease in market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of buying the second option will be less
than the premium received by the Fund for the initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call
option on a futures contract, it is purchasing the right (not the
obligation) to assume a long futures position (buy a futures contract) at
a fixed price at any time during the life of the option. As market
interest rates fall, the value of the underlying futures contract will
normally increase, resulting in an increase in value of the Fund's option
position. When the market price of the underlying futures contract
increases above the stock price plus premium paid, the Fund could
exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option, the Fund could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that futures
contract initial margin does not involve the borrowing of funds by the
Fund to finance the transactions. Initial margin is in the nature of a
performance bond or good-faith deposit on the contract which is returned
to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may purchase put and call options on U.S. government securities
to protect against price movements in particular securities. A put option
gives the Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of
the option. A call option gives the Fund, in return for a premium, the
right to buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. As a writer of a put option, the Fund has
the obligation to purchase a security from the purchaser of the option
upon the exercise of the option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund
will segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. As a matter of investment practice which may be
changed without shareholder approval, settlement dates will occur within 120
days after entering into these transactions. The market values of the securities
purchased may vary from the purchase prices.
No fees or others expenses, other than normal transactions costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as an institution,
broker, or dealer, in return for a percentage of the instrument's market value
in cash, and agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements may
enable the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any 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.
PORTFOLIO TURNOVER
The Fund's policy of managing its portfolio of U.S. government securities,
including the sale of securities held for a short period of time, to achieve its
investment objective of current income may result in high portfolio turnover.
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. The Fund does not expect to exceed a portfolio
turnover rate of 100% during the current fiscal year.
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.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund, for example, to meet redemption requests
when liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 15% of the value
of its total assets at the time of the pledge.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of its total assets in any one
industry. However, investing in U.S. government obligations shall not be
considered investments in any one industry.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures contracts and related options.
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
investments, bonds, debentures, notes, certificates of indebtedness or
other debt securities, entering into repurchase agreements, or other
transactions which are permitted by the Fund's investment objective,
policies, and limitations, and its Declaration of Trust.
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. Also, the Fund will not 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.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of the
value of the Fund's total assets would be invested in premiums on open
put options.
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 after segregating cash in the
amount of any further payment.
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.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust on the Fund's investment adviser
owning individually more than .5 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund 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
investment company, or invest more than 10% of its
total assets in investment companies in general. The Fund will purchase
securities of closed-end investment companies only in open-market
transactions involving only customary broker's commissions. However,
these limitations are not applicable if the securities are acquired in a
merger, consolidation, or acquisition of assets. The Fund will limit its
investment in other investment companies to those with a sale charge of
less than 1% that have investment objectives and policies similar to its
own. While it is the Fund's policy to waive its investment advisory fee
on assets invested in securities of open-end investment companies, it
should be noted that investment companies incur certain expenses such as
custodian and transfer agent fees, and therefore, any investment by the
Fund in shares of another investment company would be subject to such
duplicate expenses.
In addition, in order to comply with certain state restrictions, the Fund will
not invest in real estate limited partnerships or oil, gas, or other mineral
leases. If state requirements change, these restrictions may be revised without
notice to shareholders. To comply with restrictions of certain states, the Fund
will limit its investment in restricted securities to 10% of its total 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. For purposes of its policies and limitations, the Fund considers
instruments issued by a U.S. branch of a domestic bank having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items".
The Fund does not intend to borrow money or engage in reverse repurchase
agreements in excess of 5% of the value of its assets during the coming fiscal
year.
MANAGEMENT OF THE TRUST
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
including any affiliation with Alexander Hamilton Capital Management, Inc.,
Federated Investors, Federated Securities Corp., Federated Research, and
Federated Administrative Services. ("Federated Funds" refers to certain
investment companies distributed, administered and/or advised by subsidiaries or
affiliates of Federated Investors.)
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<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE TRUST PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
George A. Cooke*\ Chairman, Chief Senior Vice President and Chief Investment Officer, Treasury
33045 Hamilton Boulevard Executive Officer, and Asset Management, Alexander Hamilton Life Insurance
Farmington Hills, MI and Trustee Company of America; Board of Directors, Bank Capital Markets
Association; Principal and Arbitrator, Municipal Securities
Rulemaking Board; and formerly, Senior Executive Vice
President, Citizens and Southern Corporation.
Christopher Bancroft Trustee President, Bancroft Operations; Secretary and Trustee,
1621 North Elm Street Fountain Valley School; Trustee, Family Trusts; and Trustee,
Denton, TX Dallas Museum of Art.
Frederick L. Blackmon*\ Trustee Executive Vice President and Chief Financial Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America;
Farmington Hills, MI Director, Alexander Hamilton Life Insurance Company of
America; Director, Treasurer and Chairman of Finance
Committee, Providence Hospital Foundation; Regent, Eastern
Michigan University; and Director, Michigan Chamber of
Commerce.
William H. T. Bush Trustee President, Bush-O'Donnell & Company; Member, Board of
101 South Hanley Directors, Clark and Sullivan, Inc.; Member, Board of
Suite 1025 Directors, Blue Cross/Blue Shield of Missouri; Member, Board
St. Louis, MO of Directors, St. Maritz Inc.; Member, Board of Directors,
Southwest Bank; Member, Board of Directors, National Elevator
Inspection Services; and Member, Board of Directors, Ivy
Insurance Group, Inc.
James T. Ponder*\ Trustee Executive Vice President and Chief Marketing Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America; and
Farmington Hills, MI formerly, Senior Vice President and Chief Financial Officer,
Alexander Hamilton Life Insurance Company of America.
Dr. Martha R. Seger Trustee Distinguished Visiting Professor of Finance, Central Michigan
1195 Rolling Hills University; formerly, John M. Olin Distinguished Fellow in
Bloomfield Hills, MI the Eller Center for the Study of Private Market Economy,
University of Arizona, Tucson; and formerly, Governor,
Federal Reserve Board.
Dr. William E. Shelton\ Trustee President, Eastern Michigan University; Member, National
Eastern Michigan Education Commission on Time and Learning; Member, NCAA
University Presidents Commission and NCAA Budget Subcommittee; Member,
202 Weich Hall Oakwood United Hospitals, Inc. Board of Trustees; and Member,
Ypsilanti, MI Michigan's Children Board of
Trustees.
Edward C. Gonzales President Vice President, Treasurer, and Trustee, Federated Investors;
Federated Investors Towers and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and
Director, Federated Administrative Services/ Federated
Administrative Services, Inc.; Trustee or Director of some of
the Federated Funds; Vice President and Treasurer of the
Federated Funds.
Robert J. Davison Vice President Vice President, Alexander Hamilton Life Insurance Company of
33045 Hamilton Boulevard America.
Farmington Hills, MI
Margaret P. Demski Vice President Vice President, Federated Administrative, Inc./Federated
Federated Investor Tower Administrative Services; and Vice President and Assistant
Pittsburgh, PA Treasurer of some of the Federated Funds.
J. Crilley Kelly Secretary Corporate Counsel, Federated Investors.
Federated Investors Tower
Pittsburgh, PA
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
\ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Alexander Hamilton Capital Management, Inc. It
is a wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America, which, in turn, is a wholly-owned subsidiary of Household
International, Inc.
The adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the 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 Fund.
ADVISORY FEES
For its advisory services, Alexander Hamilton Capital Management, Inc. receives
an annual investment advisory fee as described in the prospectus.
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.
SUB-ADVISER
Under the terms of a sub-advisory agreement between Federated Research and
Alexander Hamilton Capital Management, Inc., Federated Research will furnish the
adviser such investment advice, including portfolio management strategies,
securities selection recommendations, economic forecasting and other statistical
and factual information as it may require.
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.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the adviser and sub-adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. The adviser and sub-adviser make decisions on portfolio
transactions and select brokers and dealers subject to review by the Board of
Trustees.
The adviser and sub-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 sub-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 may be used by the adviser, sub-adviser or
by affiliates of Federated Investors in advising Federated Funds 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
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus an applicable sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing shares is
explained in the prospectus under "How to Invest in the Fund."
DISTRIBUTION PLAN
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Plan provides for payment of fees to Federated Securities Corp., the principal
distributor for shares of the Fund, to finance any activity which is primarily
intended to result in the sale of shares. Such activities may include the
advertising and marketing of shares; preparing, printing, and distributing
prospectuses and sales literature to prospective shareholders, brokers, or
administrators; and implementing and operating the Plan. Pursuant to the Plan,
the distributor may pay fees to brokers for distribution and administrative
services and to administrators for administrative services as to shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for share purchases and redemptions, confirming and reconciling
all transactions; reviewing the activity in Fund accounts, and providing
training and supervision of broker personnel; posting and reinvesting dividends
to Fund accounts or arranging for the service to be performed by the Fund's
transfer agent; and maintaining and distributing current copies of prospectuses
and shareholder reports to the beneficial owners of shares and prospective
shareholders.
The Board of Trustees expects 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.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. State Street Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND TRUSTEES, AND EMPLOYEES
Trustees, employees, and sales representatives of the Fund or their affiliates,
or any investment dealer who has a sales agreement with Federated Securities
Corp. and their spouses and children under 21, may buy shares at net asset value
without a sales charge. Shares may also be sold without a sales charge to trusts
or pension or profit-sharing plans for these people, as well as the other
parties identified in the prospectus.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
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:
.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 Fund's Board of Trustees; or
.for short-term obligations with maturities of less than 60 days, at amortized
cost unless the Board of Trustees determines that particular circumstances of
the security indicate otherwise.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares". Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders may exchange all or some of their shares for shares of other
portfolios in Alexander Hamilton Funds or Treasury Cash Series. These exchanges
are made at net asset value, plus the difference between the Fund's sales charge
already paid and the sales charge of the fund into which the shares are to be
exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp. or State Street Bank in writing.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made.
This privilege is available to shareholders residing in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds or Treasury Cash Series portfolios are available by calling the
Fund.
TAX CONSEQUENCES
Exercise of this privilege is treated as a sale for federal income tax purposes.
Depending upon the circumstances, a short or long-term capital gain or loss may
be realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds or Treasury Cash Series
portfolios must be given in writing or by telephone by the shareholder. Written
instructions may require a signature guarantee.
TAX STATUS
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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.
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
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
Fund shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the quarterly
reinvestment of all dividends and distributions. Any applicable redemption fee
is deducted from the ending value of the investment based on the lesser of the
original purchase price or the net asset value of shares redeemed. Occasionally,
total return which does not reflect the effect of the sales load may be quoted
in advertising.
YIELD
- --------------------------------------------------------------------------------
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 then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-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 the 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,
the performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
.Portfolio quality;
.Average portfolio maturity;
.Type of instruments in which the portfolio is invested;
.Changes in interest rates and market value of portfolio securities;
.Changes in the Fund's expenses; and
.Various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value 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 suchas the composition of any index used,
prevailing market conditions, portfolio comparisons 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:
.LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "U.S. mortgage
funds" category in advertising and sales literature.
.SALOMON BROTHERS MORTGAGE-BACKED SECURITIES INDEX-15 YEARS includes the average
of all 15-year mortgage securities, which include Federal Home Loan Mortgage
Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae),
and Government National Mortgage Association (Ginnie Mae).
.MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and 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
quarterly reinvestment of dividends over a specified period of time.
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 and to
money market funds using the Lipper Analytical Services money market instruments
average.
The Fund may quote various general mutual fund industry statistics cited in
publications in its sales literature and advertising. Sales literature and
advertisements of the Fund may quote certain facts about the adviser and
sub-adviser, including but not limited to numbers of funds and accounts under
management.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
3110203B (2/94)
08526A
ALEXANDER HAMILTON GOVERNMENT INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
Supplement to Statement of Additional Information dated February
10, 1994
A.Please insert the following sentence as the last sentence in the section
entitled "Portfolio Turnover" on page 4:
"For the period from November 23, 1993 (start of business), to May 31, 1994,
the Fund's portfolio turnover rate was 77%."
B.Please insert the following section entitled "Fund Ownership" following the
section "Officers and Trustees" which begins on page 6. In addition,
please add the heading "Fund Ownership" to the Table of
Contents immediately after the heading "Officers and
Trustees":
"Fund Ownership
As of July 3, 1994, the follo
wing shareholder of record owned 5% or more of the
outstanding shares of the Fund: Alexander Hamilton
Insurance Company, Farmington Hills, MI, acting in various
capacities for numerous accounts, owned of record
approximately 511,544 shares (97.91%) of the Fund. "
C.Please insert the following after the last sentence in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 8:
"During the period from November 23, 1993 (start of business), through
May 31, 1994, the adviser earned $ 7,921, of which $ 6,337 was voluntarily
waived. In addition, the adviser voluntarily reimbursed the
Fund $52,041 of other operating expenses."
D.Please insert the following after the last sentence in the sub-section
entitled "Sub-Adviser" on page 9:
"During the period from November 23, 1993 (start of business), through
May 31, 1994, the sub-adviser earned $41,669. "
E.Please insert the following after the last sentence in the section entitled
"Administrative Services" on page 9:
"During the period from November 23, 1993 (start of business), through
May 31, 1994, Federated Administrative Services earned $ 13,562."
F.Please insert the following information as a final paragraph under the
sub-section entitled "Distribution Plan" which begins on page 9:
"During the period from November 23, 1993 (start of business), through
May 31, 1994, brokers and administrators (financial institutions)
received fees
in the amount of $3,300 pursuant to the distribution plan. "
G.Please insert the following information as the second sentence in the
section entitled
"Redeeming Shares" on page 10:
"Shareholder redemptions may be subject to a contingent deferred sales
charge ."
H.Please insert the following information as the first paragraph under the
section entitled "Total Return" on page 11:
"The Fund's cumulative total return from February 17, 1994 (date of initial
public investment), to May 31, 1994, was (9.51%). Cumulative total return
reflects the Fund's total performance over a specific period
of time. This total return assumes and is reduced by
payment of the maximum sales load. The Fund's total return
is representative of only four months of Fund activity since
the Fund's effective date."
I.Please delete the fourth sentence of the second paragraph of the section
entitled "Total Return" and insert the following:
"Any applicable contingent deferred sales charge is deducted from the ending
value of the
investment based on the lesser of the original purchase
price or the net asset value of shares redeemed."
J.Please insert the following information as the first paragraph under the
section entitled "Yield" on page 11:
"The Fund's yield for the thirty-day period ended May 31, 1994 was
5.84%."
July 31, 1994
FEDERATED SECURITIES CORP.
Distributor
G00282-02 (7/94)
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
PROSPECTUS
The Alexander Hamilton Municipal Income Fund (the "Fund") seeks high current
income which is exempt from federal regular income tax by investing in a
professionally managed, diversified portfolio primarily consisting of municipal
securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK OWNED BY HOUSEHOLD INTERNATIONAL, INC., OR ANY OTHER BANK, ARE NOT ENDORSED
OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
Please read this prospectus before investing, and keep it for future reference.
It contains important information, including how the Fund invests and the
services available to shareholders.
The Fund has also filed a Statement of Additional Information dated February 10,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 10, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
ALEXANDER HAMILTON FUNDS 3
- ------------------------------------------------------
INFORMATION ABOUT YOUR INVESTMENT 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 4
Characteristics 4
High-Yield Debt Obligations 4
Municipal Securities 4
Participation Interests 6
Municipal Leases 6
Industrial Development Bonds 6
Restricted and Illiquid Securities 6
When-Issued and Delayed
Delivery Transactions 7
Futures Contracts and Options
to Buy or Sell Such Contracts 7
Temporary Investments 7
Investment Risks 8
Reducing Risks of Lower-Rated Securities 8
Credit Research 8
Diversification 9
Economic Analysis 9
Investment Limitations 9
HOW TO INVEST IN THE FUND 9
- ------------------------------------------------------
Share Purchases 9
Through an Investment Professional 9
Directly from the Distributor 9
Directly by Wire 10
Systematic Investment Plan 10
Minimum Investment Required 10
What Shares Cost 10
Dealer Concession 11
Reducing the Sales Charge 11
Quantity Discounts and Accumulated
Purchases 11
Letter of Intent 12
Reinvestment Privilege 12
Purchases with Proceeds from Redemptions
of Unaffiliated Investment Companies 12
Concurrent Purchases 12
Certificates and Confirmations 13
Dividends and Distributions 13
EXCHANGE PRIVILEGE 13
- ------------------------------------------------------
Reduced Sales Charge 13
Requirements for Exchange 13
Tax Consequences 14
Making an Exchange 14
Telephone Instructions 14
REDEEMING SHARES 14
- ------------------------------------------------------
Through an Investment Professional 15
Directly from the Fund 15
By Telephone 15
By Mail 15
Signatures 15
Systematic Withdrawal Plan 16
Accounts with Low Balances 16
EXPENSES OF THE FUND 17
- ------------------------------------------------------
NET ASSET VALUE 17
- ------------------------------------------------------
TRUST INFORMATION 17
- ------------------------------------------------------
Management of the Trust 17
Board of Trustees 17
Investment Adviser 17
Advisory Fees 17
Adviser's Background 18
Sub-Adviser 18
Sub-Adviser's Background 18
Distribution of Shares 19
Distribution Plan 19
Brokerage Transactions 20
Administration of the Fund 20
Administrative Services 20
Custodian 20
Transfer Agent and Dividend
Disbursing Agent 20
Legal Counsel 20
Independent Auditors 20
SHAREHOLDER INFORMATION 21
- ------------------------------------------------------
Voting Rights 21
TAX INFORMATION 21
- ------------------------------------------------------
Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 22
PERFORMANCE INFORMATION 22
- ------------------------------------------------------
Tax Equivalency Table 23
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................................................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................................................. None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee........................................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)...................................................................... 0.14%
12b-1 Fee.............................................................................................. 0.25%
Total Other Expenses................................................................................... 0.61%
Total Fund Operating Expenses (2)...................................................................... 1.00%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waivers by the investment adviser. The adviser may terminate the
waiver at any time at its sole discretion. The maximum allowable management
fee is .60%.
(2) The total Fund operating expenses are expected to be 1.46% absent the
anticipated voluntary waiver described above in note (1).
* Expenses in this table are estimated based on average expenses expected to
be incurred during the fiscal year ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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....................... $55 $75
</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.
HIGHLIGHTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund seeks high current income that is exempt from federal regular income
tax.
STRATEGY
The Fund attempts to achieve its investment objective by investing in a
diversified portfolio of securities, at least 65% of which will be invested in
municipal securities. The Fund may also invest in put and call options and
futures contracts for hedging purposes.
RISKS
The value of the Fund's shares will fluctuate. The amount of this fluctuation
depends on the quality and maturity of the securities in the portfolio, as well
as market conditions. The Fund attempts to minimize such risks by diversifying
its portfolio securities.
INVESTMENT ADVISERS
Alexander Hamilton Capital Management, Inc., a subsidiary of Alexander Hamilton
Life Insurance Company of America, is the investment adviser of the Fund. The
adviser is responsible for overseeing investment research and the purchase and
sale of portfolio securities. The adviser is also responsible for managing
assets of Alexander Hamilton Life Insurance Company of America, which total over
$5 billion. Federated Research, a subsidiary of Federated Investors, is the
sub-adviser of the Fund. Affiliates of Federated Investors manage and administer
over $75 billion in mutual fund assets.
HOW TO INVEST IN THE FUND
You may purchase shares of the Fund through an investment professional, such as
a bank, broker, or other sales agent that has a sales agreement with the
distributor. Shares can be purchased directly from the distributor, and by
various electronic processes. Please refer to "How to Invest in the Fund".
Similarly, you may sell your shares back to the Fund through an investment
professional, directly from the distributor, or electronically. Please refer to
"Redeeming Shares".
MINIMUM PURCHASE
The minimum initial investment required is $1,000. The minimum subsequent
investment is $100.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Capital gains are distributed at
least once a year. Dividends and capital gains distributions will be reinvested
in additional shares of the Fund unless you specifically request that they be
paid in cash.
SHAREHOLDER SERVICES
The Fund offers a variety of services to make investing in the Fund convenient.
These services include automatic investment programs and exchange privileges
with other Alexander Hamilton Funds. There are several methods of reducing the
sales charge.
Various methods of redemption are available to make withdrawing from the Fund
easy and convenient, too, including a systematic withdrawal plan.
Please refer to the appropriate sections in this prospectus for more information
about the shareholder services available.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Alexander Hamilton Funds (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated July 21, 1993. The Fund's
address is Liberty Center, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. 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. This prospectus relates only to the Trust's municipal bond portfolio,
known as Alexander Hamilton Municipal Income Fund.
The Fund is designed primarily for individuals and institutions seeking high
current income which is exempt from federal regular income tax through a
professionally managed, diversified portfolio primarily limited to municipal
securities. The Fund is not likely to be a suitable investment for retirement
plans since it intends to invest in municipal securities.
ALEXANDER HAMILTON FUNDS
- --------------------------------------------------------------------------------
As of the date of this prospectus, there are two other portfolios of the Trust.
Alexander Hamilton Equity Growth and Income Fund seeks growth of capital and
income by investing primarily in securities of high quality companies. Alexander
Hamilton Government Income Fund seeks current income by investing primarily in
U.S. government securities. You may obtain further information and prospectuses
for these portfolios by calling the Fund at 1-800-801-2142 or your investment
professional.
INFORMATION ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide high current income which is
exempt from federal regular income tax (federal regular income tax does not
include the federal alternative minimum tax). The investment objective cannot be
changed without approval of shareholders. Interest income of the Fund that is
exempt from federal income tax retains its tax-free status when distributed to
the Fund's shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
Unless indicated otherwise, the Fund's investment policies may be changed by the
Board of Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes effective.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a diversified
portfolio primarily limited to municipal securities. As a matter of investment
policy, which may not be changed without shareholder approval, under normal
circumstances, the Fund will be invested so that at least 80% of the income from
investments will be exempt from federal regular income tax.
ACCEPTABLE INVESTMENTS. Municipal securities are debt obligations issued by or
on behalf of states, territories, and possessions of the United States,
including the District of Columbia, and their political subdivisions, agencies
and instrumentalities, the interest from which is exempt from federal regular
income tax. There is no limit to portfolio maturity. The price of municipal
bonds fluctuates inversely in relation to the direction of interest rates.
The Fund may also engage in put and call options, futures contracts, and options
on futures contracts for hedging purposes, as well as inverse floaters.
CHARACTERISTICS. At least 65% of the municipal securities in which the
Fund invests are rated, at the time of purchase, Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Corporation ("S&P") or Fitch Investors Service ("Fitch"). In certain cases
the Fund's adviser may choose bonds which are unrated if it determines that
such bonds are of comparable quality or have similar characteristics to
investment grade bonds. Bonds rated "BBB" by S&P or "Baa" by Moody's are
investment grade, but have more speculative characteristics than A-rated
bonds. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments
than higher rated bonds. If the Fund purchases an investment grade bond,
and the rating of such bond is subsequently downgraded so that the bond is
no longer classified as investment grade, the Fund is not required to drop
the bond from the portfolio, but will consider whether such action is
appropriate. A description of the rating categories is contained in the
Appendix to the Statement of Additional Information.
HIGH-YIELD DEBT OBLIGATIONS. The lowest-rated securities in which the Fund
may invest are rated BB by S&P or Fitch, or Ba by Moody's, or are not rated
but are determined by the Fund's investment adviser to be of comparable
quality. Debt obligations rated BB or Ba are judged to have speculative
elements and are high-yield, high-risk bonds (i.e., junk bonds), typically
subject to greater market fluctuations and greater risk of loss of income
and principal due to an issuer's default. To a greater extent than
investment grade bonds, lower-rated bonds tend to reflect short-term
corporate, economic and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower-rated bonds
may be more difficult to dispose of or to value than high-rated,
lower-yielding bonds.
The Fund's investment adviser attempts to reduce the risks described above
through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
Municipal securities may carry fixed, floating or inverse floating rates of
interest. Fixed rate securities bear interest at the same rate from issuance
until maturity. The interest rate on floating rate securities is subject to
adjustment based upon changes in market interest rates or indices, such as a
bank's prime rate or a published market index. The interest rate may be adjusted
at specified intervals or immediately upon any change in the applicable index
rate. The interest rate for most floating rate securities varies directly with
changes in the index rate, so that the market value of the security will
approximate its stated value at the time of each adjustment. However, inverse
floating rate securities have interest rates that vary inversely with changes in
the applicable index rate, such that the security's interest rate rises when
market interest rates fall and falls when market interest rates rise. The market
value of floating rate securities is less sensitive than fixed rate securities
to changes in market interest rates. In contrast, the market value of inverse
floating rate securities is more sensitive to market rate changes than fixed or
floating rate securities. Accordingly, inverse floating rate securities tend to
exhibit more volatility and risk than do fixed rate or floating rate securities.
The effect of market rate changes on securities depends upon a variety of
factors, including market expectations as to future changes in interest rates
and, in the case of floating and inverse floating rate securities, the frequency
with which the interest rate is adjusted and the multiple of the index rate used
in making the adjustment.
Most municipal securities pay interest in arrears on a semiannual or more
frequent basis. However, certain securities, typically known as capital
appreciation bonds or zero coupon bonds, do not provide for any interest
payments prior to maturity. Such securities are normally sold at a discount from
their stated value, or provide for periodic increases in their stated value to
reflect a compounded interest rate. The market value of these securities is also
more sensitive to changes in market interest rates than securities that provide
for current interest payments.
The Fund will not invest more than 25% of its total assets in any one industry.
Governmental issuers of municipal securities are not considered part of any
"industry." However, municipal securities backed only by the assets and revenues
of nongovernmental users may, for this purpose, be deemed to be related to the
industry in which such nongovernmental users engage, and the 25% limitation
would apply to such obligations. It is nonetheless possible that the Fund may
invest more than 25% of its assets in a broader segment of the municipal
securities market, such as revenue obligations of hospitals and other health
care facilities, housing agency revenue obligations, or airport revenue
obligations. This would be the case only if the Fund determines that
the yields available from obligations in a particular segment of the market
justified the additional risks associated with a large investment in such
segment. Although such obligations could be supported by the credit of
governmental users or by the credit of nongovernmental users engaged in a number
of industries, economic, business, political and other developments generally
affecting the revenues of such users (for example, proposed legislation or
pending court decisions affecting the financing of such projects and market
factors affecting the demand for their services or products) may have a general
adverse effect on all municipal securities in such a market segment.
PARTICIPATION INTERESTS. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings and loan associations
and insurance companies. These participation interests give the Fund an
undivided interest in one or more underlying municipal securities. The financial
institutions from which the Fund purchases participation interests frequently
provide or obtain irrevocable letters of credit or guarantees to attempt to
assure that the participation interests are of high quality. The Trustees will
evaluate whether participation interests meet the prescribed quality standards
for the Fund.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract or a
participation certificate of any of the above.
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease payments by
a governmental or non-profit entity. The lease payments and other rights under
the lease provide for and secure the payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be subject to
periodic appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they became due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment.
INDUSTRIAL DEVELOPMENT BONDS. Industrial development bonds are generally issued
to provide financing aid to acquire sites or construct and equip facilities for
use by privately or publicly owned corporations. Most state and local
governments have the power to permit the issuance of industrial development
bonds to provide financing for such corporations in order to encourage the
corporations to locate within their communities. Industrial development bonds do
not represent a pledge of credit or create any debt of a municipality or a
public authority, and no taxes may be levied for the payment of principal or
interest on these bonds. The principal and interest is payable solely out of
monies generated by the entities using or purchasing the sites or facilities.
These bonds will be considered municipal securities if the interest paid on
them, in the opinion of bond counsel or in the opinion of the officers of the
Fund and/or the adviser of the Fund, is exempt from federal regular income tax.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
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. The Fund will limit
investment in illiquid securities, including certain restricted securities not
determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice, to not more than 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase municipal
securities on a when-issued or delayed delivery basis. In when-issued and
delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
FUTURES CONTRACTS AND OPTIONS TO BUY OR SELL SUCH CONTRACTS
The Fund may utilize bond futures contracts and options to a limited extent for
hedging purposes. Specifically, the Fund may enter into futures contracts
provided that not more than 5% of its assets are required as a futures contract
deposit; in addition, the Fund may enter into futures contracts and options
transactions only to the extent that obligations under such contracts or
transactions represent not more than 20% of the Fund's assets.
Futures contracts and options may be used for several reasons: to maintain cash
reserves while remaining fully invested, to facilitate trading, to reduce
transactions costs, or to seek higher investment returns when a futures contract
is priced more attractively than the underlying municipal security or index. The
Fund may not use futures contracts or options transactions to leverage its
assets.
For example, in order to remain fully invested in bonds, while maintaining
liquidity to meet potential shareholder redemptions, the Fund may invest a
portion of its assets in a bond futures contract. Futures contracts only require
a small initial margin deposit. The Fund is able to maintain a cash reserve to
meet potential redemptions, while at the same time remaining fully invested.
Also, the transactions costs of futures contracts and options may be lower than
the costs of investing in bonds directly. Therefore, it is expected that the use
of futures contracts and options may reduce the Fund's total transactions costs.
The primary risks associated with the use of futures contracts and options are:
(i) imperfect correlation between the change in market value of the bonds held
by the Fund and the prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures position prior to its maturity date. The risk of
imperfect correlation will be minimized by investing only in those contracts
whose price fluctuations are expected to resemble those of the Fund's underlying
securities. The risk that the Fund will be unable to close out a futures
position will be minimized by entering into such transactions on a national
exchange with an active and liquid secondary market. In general, the futures
market is more liquid than the municipal bond market, and so by investing in
futures, liquidity may be improved.
TEMPORARY INVESTMENTS. From time to time, during periods of other than normal
market conditions, the Fund may invest in short-term temporary investments which
may or may not be exempt from federal income tax. These temporary investments
include: tax-exempt variable and floating rate demand notes; tax-free commercial
paper; other temporary municipal securities; obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; other debt securities;
commercial paper; certificates of deposit of domestic branches of U.S. banks;
and repurchase agreements (arrangements in which the organization selling the
Fund a security agrees at the time of sale to repurchase it at a mutually agreed
upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those rated within
the investment grade categories described under "Acceptable
Investments--Characteristics" (if rated) or those which the investment adviser
judges to have the same characteristics as such investment grade securities (if
unrated).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
INVESTMENT RISKS
The value of the Fund's shares will fluctuate. The amount of this fluctuation is
dependent upon the quality and maturity of the municipal bonds in the Fund's
portfolio as well as on market conditions. Generally speaking, the lower
quality, long-term bonds in which the Fund invests have greater fluctuation in
value than high quality, shorter-term bonds.
Municipal bond prices are interest rate sensitive, which means that their value
varies inversely with market interest rates. Thus, if market interest rates have
increased from the time a bond was purchased, the bond, if sold, might be sold
at a price less than its cost. Similarly, if market interest rates have declined
from the time a bond was purchased, the bond, if sold, might be sold at a price
greater than its cost. (In either instance, if the bond was held to maturity, no
loss or gain normally would be realized as a result of interim market
fluctuations.)
Prices of lower grade bonds also fluctuate with changes in the perceived quality
of the credit of their issuers. Lower-rated municipal bonds have speculative
characteristics. Some of the lower-rated or unrated municipal bonds in which the
Fund invests have a greater risk of default in the payment of principal and
interest than that of high quality municipal bonds. Consequently, shares of the
Fund may not be suitable for persons who cannot assume the somewhat greater
risks of capital depreciation associated with higher tax-exempt income yields.
A large portion of the Fund's portfolio may be invested in bonds whose interest
payments are from revenues of similar projects (such as housing or hospitals) or
where issuers share the same geographic location. As a result, the Fund may be
more susceptible to similar economic, political or regulatory developments than
would a portfolio of bonds with a greater geographic and project variety. This
susceptibility may result in greater fluctuations in share price.
REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser
believes that the risks of investing in lower rated securities can be reduced.
The professional portfolio management techniques used by the Fund to attempt to
reduce these risks include:
CREDIT RESEARCH. When purchasing bonds, rated or unrated, the Fund's
investment adviser performs its own credit analysis in addition to using
recognized rating agencies. This credit analysis considers the economic
feasibility of revenue bond project financings and general purpose
borrowings, the financial condition of the issuer or guarantor with respect
to liquidity, cash flow and ability to meet anticipated debt service
requirements, and political developments that may affect credit quality.
DIVERSIFICATION. The Fund invests in securities of many different issuers
to reduce portfolio risks.
ECONOMIC ANALYSIS. The Fund's adviser also considers trends in all
economies, in geographic areas, in various industries, and in the financial
markets.
INVESTMENT LIMITATIONS
The Fund will limit its borrowing, and will not borrow money directly or through
reverse repurchase agreements (arrangements in which the Fund sells a portfolio
investment 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 up
to 15% of the value of those assets to secure such borrowings.
The above investment limitation 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 5% of its total assets in industrial
development bonds when the payment of principal and interest is the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operation of any
predecessor.
HOW TO INVEST IN THE FUND
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SHARE PURCHASES
You may purchase shares on days on which the New York Stock Exchange is open.
Shares may be purchased through an investment professional which has a sales
agreement with Federated Securities Corp. (the "distributor"), or directly from
the distributor, once an account has been established. The Fund reserves the
right to reject any purchase request.
THROUGH AN INVESTMENT PROFESSIONAL. You may call your investment professional
to place an order to purchase shares. Texas residents must purchase shares
through a broker registered with the state of Texas or through the distributor
at 1-800-801-2142.
Orders through an investment professional are considered received when the Fund
is notified of the purchase order. Purchase orders made through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted to the Fund before 5:00 p.m. (Eastern time) in order for
shares to be purchased at that day's price. Purchase orders through other
investment professionals must be received by the investment professional and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. It is the investment professional's
responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. You may place an order to purchase shares
directly from the distributor once an account has been established. To do so:
Complete and sign the new account form in the back of this prospectus;
Enclose a check made payable to Alexander Hamilton Municipal Income Fund;
and
Mail both to Alexander Hamilton Municipal Income Fund, P.O. Box 9051,
Boston, MA 02205-9917.
Orders by mail are considered received after payment by check is converted by
State Street Bank and Trust Company (the "custodian") into federal funds. This
is generally the next business day after the custodian receives the check.
DIRECTLY BY WIRE. You may purchase shares directly from the distributor by
Federal Reserve wire. The minimum investment required is $2,500 when purchasing
by wire. You must call the Fund at
1-800-801-2142 before wiring funds.
Funds must be wired to:
State Street Bank & Trust Company
Attention: Mutual Fund Servicing Divsion
For Credit to: Alexander Hamilton Municipal Income Fund;
(title or name of account);
(wire order number and/or account number);
ABA Number 011000028.
Shares cannot be purchased by wire on Columbus Day, Veteran's Day, or Martin
Luther King Day.
SYSTEMATIC INVESTMENT PLAN
Once a Fund account has been opened, you may add to your investment on a regular
basis in a minimum amount of $100. Under this plan, funds may be automatically
withdrawn periodically from your bank account and invested in shares at the
offering price next determined after your order is received by the transfer
agent. You may apply for participation in this plan through the distributor or
your investment professional.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 up to $249,999 3.75% 3.90%
$250,000 up to $499,999 2.50% 2.56%
$500,000 up to $749,999 2.00% 2.04%
$750,000 up to $999,999 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
No sales charge is imposed for shares purchased through bank trust departments
or investment advisers registered under the Investment Advisers Act of 1940.
However, investors who purchase shares through a trust department or investment
adviser may be charged an additional service fee by that institution. No sales
charge is imposed on purchases made by employees, including licensed agents, or
retirees of Alexander Hamilton Life Insurance Company of America and their
immediate families. No sales charge is imposed on purchases made by employees of
Household International, Inc. and their immediate families. No sales charge is
imposed on purchases made by employees of broker/dealers with whom the
distributor has selling agreements or branch employees of financial institutions
which market shares of the Fund. No sales charge is imposed on purchases made by
unaffiliated separate accounts of variable insurance contracts. Additionally, no
sales charge is imposed on purchases made by Trustees of the Fund or their
immediate families.
DEALER CONCESSION. For sales of shares, a dealer will normally receive up to
90% of the applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the distributor. However, the distributor,
at its sole discretion, may uniformly offer to pay all dealers selling shares
additional amounts, all or a portion of which may be paid from the sales charge
it normally retains or any other source available to it. Such additional
payments, if accepted by the dealer, may be in the form of cash or promotional
incentives, and will be predicated upon the amount of shares sold by the dealer.
The sales charge for shares sold other than through registered broker/dealers
will be retained by the distributor. The distributor may pay fees to banks out
of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customers in connection with the initiation of
customer accounts and purchases of shares.
REDUCING THE SALES CHARGE
You may reduce the sales charge on the purchase of shares through:
Quantity discounts and accumulated purchases;
A 13-month letter of intent;
The reinvestment privilege;
Purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
Concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the sales charge
table, larger purchases reduce the sales charge paid. The Fund will combine
purchases made on the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if you already own shares
having a current value at the public offering price of $90,000 and you purchase
$10,000 more at the current public offering price, the sales charge on the
additional purchase according to the schedule now in effect would be 3.75%, not
4.50%.
To receive the sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
purchase is made that shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the holdings
or purchases.
LETTER OF INTENT. If you intend to purchase at least $100,000 of shares in the
portfolios of Alexander Hamilton Funds over the next 13 months, the sales charge
may be reduced by signing a letter of intent to that effect. This letter of
intent includes a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a provision for the
custodian to hold 4.50% of the total amount intended to be purchased in escrow
(in shares) until such purchase is completed.
The 4.50% held in escrow will be applied to your account at the end of the
13-month period unless the amount specified in the letter of intent is not
purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate you to purchase shares, but if you do,
each purchase during the period will be at the sales charge applicable to the
total amount intended to be purchased. This letter may be dated as of a prior
date to include any purchases made within the past 90 days towards the dollar
fulfillment of the letter of intent. Prior trade prices will not be adjusted.
REINVESTMENT PRIVILEGE. If shares have been redeemed, you have a one-time
right, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. The distributor must
be notified by the shareholder in writing or by his investment professional of
the reinvestment in order to eliminate a sales charge. If you redeem your shares
in the Fund, there may be tax consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
You may purchase shares at net asset value, without a sales charge, with the
proceeds from the redemption of shares of an investment company sold with a
sales charge or commission and not distributed by the distributor. (This does
not include shares of a mutual fund which were or
would be subject to a contingent deferred sales charge upon redemption.) The
purchase must be made within 60 days of the redemption, and the distributor must
be notified by the investor in writing, or by his investment professional, at
the time the purchase is made. The distributor will offer to pay dealers an
amount equal to .50 of 1% of the net asset value of shares purchased by their
clients or customers in this manner. The terms of this offer may change in the
future. Such changes may include the imposition of a fee upon redemption of
shares of the Fund purchased in this manner. Shareholders will be notified
before any such change becomes effective.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
you have the privilege of combining concurrent purchases of two or more
portfolios in Alexander Hamilton Funds, the purchase price of which includes a
sales charge. For example, if you concurrently invested $30,000 in one of the
other Alexander Hamilton Funds with a sales charge, and $70,000 in shares of
this Fund, the sales charge would be reduced from 4.50% to 3.75%.
To receive this sales charge reduction, the distributor must be notified by the
shareholder in writing or by his investment professional at the time the
concurrent purchases are made. The Fund will reduce the sales charge after it
confirms the purchases.
CERTIFICATES AND CONFIRMATIONS
The transfer agent for the Fund maintains a share account for each shareholder.
Share certificates are not issued unless requested in writing to the transfer
agent.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Capital gains realized by the
Fund, if any, will be distributed at least once every twelve months. Dividends
and distributions will automatically be reinvested in additional shares on
payment dates at net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
You may exchange all or some of your shares for shares of other portfolios in
the Alexander Hamilton Funds or Treasury Cash Series. Neither the Fund nor any
of the portfolios in Alexander Hamilton Funds or Treasury Cash Series imposes
any additional fees on exchanges. You may also exchange into certain other funds
distributed by the distributor. For more information, please contact your
investment professional. Exchanges are made at net asset value, plus the
difference between the Fund's sales charge already paid and any sales charge of
the fund into which the shares are to be exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction of the sales
charge, the distributor must be notified in writing by the shareholder or by his
investment professional.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
of at least $1,000. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of
modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds and Treasury Cash Series are available by contacting the Fund at
1-800-801-2142 or your investment professional.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee. Please
refer to the section entitled "Signatures" for further information. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other investment professionals during times of drastic economic or market
changes. If you cannot contact your broker or investment professional by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Boston Financial Data Services, Inc., Attention:
Alexander Hamilton Funds/ Federated Division, Two Heritage Drive, North Quincy,
Massachusetts 02171.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form on the new account form
completed by the investor is on file with the transfer agent. If the
instructions are given by your investment professional, a telephone
authorization form completed by the investment professional must be on file with
the transfer agent. Shares may be exchanged between two Alexander Hamilton Funds
or Treasury Cash Series by telephone only if the two funds have identical
shareholder registrations. Telephone exchange instructions may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the transfer agent and deposited to the shareholder's account
before being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the transfer agent before that time
for shares to be exchanged the same day. Shareholders exchanging into a fund
will not receive any dividend that is payable to shareholders of record on that
date. This privilege may be modified or terminated at any time.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund purchases shares from you at their net asset value next determined
after the transfer agent receives the redemption request. Redemptions will be
made on days on which the Fund computes its net asset value. The Fund does not
calculate its net asset value on weekends or certain holidays. Please refer to
the section entitled "Net Asset Value". Redemptions can be made through your
investment professional or directly from the Fund. Redemption requests must be
received in proper form.
THROUGH AN INVESTMENT PROFESSIONAL
You may redeem shares of the Fund by calling your investment professional (such
as a bank, investment dealer, or sales agent) to request the redemption. Shares
will be redeemed at the net asset value next determined after the Fund receives
the redemption request from your investment professional. Redemption requests
through a registered broker/dealer must be received by the broker before 4:00
p.m. (Eastern time) and must be transmitted by the broker to the Fund before
5:00 p.m. (Eastern time) in order for shares to be redeemed at that day's net
asset value. Redemption requests through other investment professionals must be
received by the investment professional and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for shares to be redeemed at that day's net asset
value. Your investment professional is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
Fund. The investment professional may charge customary fees and commissions for
this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through an investment
professional may redeem their shares by telephoning the Fund at 1-800-801-2142.
The proceeds will be mailed to the shareholder's address of record or wire
transferred to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System, normally within one business day, but in
no event longer than seven days after the request provided the transfer agent
has received payment for the shares from the shareholder. The minimum amount for
a wire transfer is $l,000. If at any time the Fund shall determine it necessary
to terminate or modify this method of redemption, shareholders would be promptly
notified.
Your new account form authorizing the transfer agent to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from the distributor. Telephone redemption instructions
may be recorded.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY MAIL. You may redeem shares by sending a written request to the transfer
agent. The written request should include the shareholder's name, the Fund name,
the account number, the share or dollar amount requested, and should be signed
exactly as the shares are registered.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund at 1-800-801-2142 for assistance in redeeming
by mail.
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 with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by a:
Trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
Member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
Savings bank or savings and loan association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which is administered by
the FDIC; or
Other "eligible guarantor institutions," 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.
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 transfer agent has received payment for the shares from the
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
You may receive monthly or quarterly payments of a predetermined amount by
taking advantage of the Systematic Withdrawal Plan. Under this program, shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by you; the minimum withdrawal amount is $100. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to shares, and the fluctuation of the net asset value
of shares redeemed under this program, redemptions may reduce, and eventually
deplete, your investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on your investment in the
Fund. To be eligible to participate in this program, you must have invested at
least $10,000 in the Fund (at current offering price). You may apply for
participation in this program through the distributor or your investment
professional.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000. This
requirement does not apply, however, if the balance falls below $1,000 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.
EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to; registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
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 all other assets, less
liabilities, by the number of shares outstanding.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
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. An 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 Alexander
Hamilton Capital Management, Inc., the Fund's investment adviser, subject to
direction by the Trustees. The adviser continually conducts or oversees
investment research and supervision for the Fund and is responsible for
overseeing the purchase or sale of portfolio instruments, for which it receives
an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The
investment advisory contract allows for the voluntary waiver of the
investment advisory fee or the reimbursement of expenses by the adviser
from time to time. The adviser can terminate any voluntary waiver of its
fee or reimbursement of expenses at any time at its sole discretion.
ADVISER'S BACKGROUND. Alexander Hamilton Capital Management, Inc., located
at 33045 Hamilton Boulevard, Farmington Hills, Michigan 48334, was formed
in 1993 as a Michigan corporation and is registered as an investment
adviser under the Investment Advisers Act of 1940. The adviser is a
wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America ("AHLIC"), which is, in turn, a subsidiary of Household Finance
Corporation, Inc. One hundred percent of the common stock of Household
Finance Corporation is owned by Household International, Inc., a $32
billion dollar holding company with its principal subsidiaries engaged in
financial services.
Alexander Hamilton Capital Management, Inc. has an investment advisory
agreement to manage assets of AHLIC. As of June 30, 1993, the book value of
AHLIC assets managed by the adviser was approximately $5.2 billion. The
management and portfolio managers of Alexander Hamilton Capital Management,
Inc. have an average of 13 years of experience in managing investment
portfolios. However, the adviser has no prior experience in managing mutual
funds.
Several other subsidiaries of Household International are in the banking or
lending business. From time to time, these organizations may grant loans to
public companies. The adviser is prohibited from maintaining knowledge of
the lending relationships of their affiliates by the Glass-Steagall Act and
other federal and state laws. 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 an affiliate of the adviser or its parent company. The
lending relationship will not be a factor in the selection of securities.
Because of the internal controls maintained by the companies to restrict
the flow of information, Fund investments will be made without any
knowledge of Household International affiliates' lending relationships with
an issuer.
SUB-ADVISER. Under the terms of a sub-advisory agreement between Federated
Research and Alexander Hamilton Capital Management, Inc., Federated Research
will furnish the adviser such investment advice, including portfolio management
strategies, securities selection recommendations, economic forecasting and other
statistical and factual information as it may require. For the services provided
under the sub-advisory agreement, the adviser will pay the sub-adviser an annual
fee of $125,000, plus one-half of the remaining advisory revenues.
SUB-ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222. It is a
wholly-owned subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees of which
are John F. Donahue, Chairman and Trustee of Federated Investors, Mr.
Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue, who is
President and Trustee of Federated Investors. Federated Research and other
subsidiaries of Federated Investors serve as investment advisers or
administrators to a number of investment companies and private accounts.
Total assets under management or administration by these and other
subsidiaries of Federated Investors are approximately $75 billion.
Federated Investors, which was founded in 1956 as Federated Investors,
Inc., develops and manages mutual funds primarily for the financial
services industry. Federated Investors' track record of competitive
performance and its disciplined, risk-averse investment philosophy serve
approximately 3,500 client institutions nationwide. Through these same
clients, individual shareholders also have access to this same level of
investment expertise.
Jonathan C. Conley has been the Fund's co-portfolio manager since its
inception. Mr. Conley joined Federated Investors in 1979 and has been a
Vice President of the Fund's investment adviser since 1982. Mr. Conley is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Virginia.
James D. Roberge has been the Fund's co-portfolio manager since its
inception. Mr. Roberge joined Federated Investors in 1990 and has been an
Assistant Vice President of the Fund's sub-adviser since 1992. From 1990
until 1992, Mr. Roberge acted as an investment analyst. Mr. Roberge
received his M.B.A. in Finance from Wharton Business School in 1990.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. 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. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Plan"), the Fund will pay the distributor an amount computed at an annual
rate of .25% of the average daily net asset value of shares to finance any
activity which is principally intended to result in the sale of shares.
The distributor may select investment professionals (such as a broker/dealer or
bank) to provide distribution and/or administrative services as agents for their
clients or customers who beneficially own shares of the Fund. Investment
professionals 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.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the 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.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
BROKERAGE TRANSACTIONS
The adviser and sub-adviser place orders for securities for the Fund with a view
to obtaining the best combination of price and execution. From time to time,
orders may be placed with broker/dealers that are affiliates of the adviser or
sub-adviser. Any such transactions will only be executed in conformance with
applicable laws.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services.
For these services, the Fund pays a fee, computed and payable daily, to
Federated Administrative Services at an annual rate, based on the daily net
assets of the Trust taken as a whole, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% of the first $250 million
.125 of 1% of the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee paid by the Fund during any fiscal year will not be less
than $50,000. Federated Administrative Services may voluntarily choose to waive
a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Box 8604, Boston, Massachusetts
02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, is transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel to the Fund is provided by Houston, Houston &
Donnelly, 2510 Centre City Tower, Pittsburgh, Pennsylvania, 15222. Dickstein,
Shapiro & Morin, 2101 L Street, N.W., Washington, D.C., 20037 provides legal
counsel to the Trustees.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
One Oxford Centre, Pittsburgh, Pennsylvania, 15219.
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. All shares of the portfolios
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or 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 shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies. The
Fund also expects to receive the special tax treatment afforded to such
companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay federal income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds. However, under the Tax Reform Act of 1986, dividends representing net
interest income earned on some municipal bonds may be included in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item. Unlike traditional
governmental purpose municipal bonds, which finance roads, schools, libraries,
prisons, and other public facilities, private activity bonds provide benefits to
private parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion of
the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net long-term capital gains realized by the Fund, if
any, will be taxable as long-term capital gains regardless of the length of time
shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is not subject to Pennsylvania corporate or personal property
tax; and
Fund shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that
the portfolio securities in the Fund would be subject to such taxes if
owned directly by residents of those jurisdictions.
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. 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 will advertise its total return, yield, and
tax-equivalent yield.
Yield is a way of showing the rate of net income the Fund earns on its
investments as a percentage of its share price. To calculate yield, the net
investment income per share earned from the portfolio of investments for a
specific one month or 30-day period is expressed as an annualized percentage
rate based on the Fund's maximum offering price at the end of the period. Yield
is an annualized percentage, which means that it is assumed that the Fund
generates the same level of net investment income over a one year period. The
yield does not necessarily reflect income actually earned by shares, and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free from
state and local taxes as well. As the table below indicates, a "tax-free"
investment is an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
- ------------------------------------------------------------------------------------------------
JOINT RETURN: $1-36,900 $36,901-89,150 $89,151-140,000 $140,001-250,000 OVER $250,000
SINGLE RETURN:
$1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 OVER $250,000
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00 3.53 4.17 4.35 4.69 4.97
3.50 4.12 4.86 5.07 5.47 5.79
4.00 4.71 5.56 5.80 6.25 6.62
4.50 5.29 6.25 6.52 7.03 7.45
5.00 5.88 6.94 7.25 7.81 8.28
5.50 6.47 7.64 7.97 8.59 9.11
6.00 7.06 8.33 8.70 9.38 9.93
6.50 7.65 9.03 9.42 10.16 10.76
7.00 8.24 9.72 10.14 10.94 11.59
7.50 8.82 10.42 10.87 11.72 12.42
8.00 9.41 11.11 11.59 12.50 13.25
8.50 10.00 11.81 12.32 13.28 14.07
</TABLE>
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING THE
TAXABLE YIELD EQUIVALENT.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
Total return is based on the overall dollar or percentage change in value of a
hypothetical investment in the Fund and assumes all of the Fund's dividends and
capital gain distributions are reinvested. Cumulative total return reflects the
Fund's performance over a stated period of time. Average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual return tends to smooth out
variations in the Fund's returns, you should understand that it is not the same
as actual year-by-year results.
The hypothetical example below assumes that a share has a $10.00 net asset value
on the first day of the performance period, as well as on the day that a $.05
per share dividend is declared. This example also assumes that the net asset
value of a share has appreciated to $10.10 on the last day of the performance
period.
HYPOTHETICAL EXAMPLE OF TOTAL RETURN:
<TABLE>
<S> <C>
Net Asset Value on beginning date............................................................ $10.00
Net Asset Value on Ex-Dividend date.......................................................... $10.00
Ex-Dividend Amount Per Share................................................................. $00.05
Net Asset Value on ending date............................................................... $10.10
TOTAL RETURN............................................................................. 1.50%
</TABLE>
Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges which, if excluded, would increase the total
return and yield.
From time to time the Fund may advertise its performance using certain financial
publications
and/or compare its performance to certain indices.
COMPARE A TAX-FREE INVESTMENT AGAINST
A TAXABLE INVESTMENT AFTER ANNUAL TAXES
[INSERT GRAPH HERE]
This chart is a hypothetical investment of $10,000 using a set return rate
of 5% compounded monthly and then taxing it at a 33.2% rate annually. One
line shows the investment with a tax-free status.
Source: Information compiled by Federated Investors.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Alexander Hamilton Municipal Federated Investors Tower
Income Fund Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Alexander Hamilton Capital 33045 Hamilton Boulevard
Management, Inc. Farmington Hills, Michigan 48334
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washinton, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ALEXANDER HAMILTON
MUNICIPAL INCOME FUND
PROSPECTUS
A Diversified Portfolio of
Alexander Hamilton Funds,
An Open-End Management
Investment Company
February , 1994
3110204 (2/94)
ALEXANDER
HAMILTON
MUNICIPAL
INCOME FUND
PROSPECTUS
[LOGO] FEDERATED SECURITIES CORP.
------------------------------
Distributor
ALEXANDER HAMILTON FUNDS
08526 3110204A (2/94) Your foundation for financial freedom
ALEXANDER
HAMILTON
MUNICIPAL
INCOME FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT
TO THE PROSPECTUS
DATED FEBRUARY 10, 1994
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
------------------------------
Distributor
ALEXANDER HAMILTON FUNDS
08526-A G00283-01 (7/94) Your foundation for financial freedom
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 10, 1994
A. Please delete the "Summary of Fund Expenses" table on page 1 and replace
it with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................................................... 4.50%
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) (1)............................................................. 0.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (2)........................................................................ 0.14%
12b-1 Fee................................................................................................ 0.25%
Total Other Expenses (after expense reimbursement) (3)................................................... 0.61%
Total Fund Operating Expenses (4).................................................................. 1.00%
</TABLE>
(1) A contingent deferred sales charge of 0.50% applies only to shares which are
purchased with proceeds from redemptions of shares of an unaffiliated mutual
fund in which a sales load has been paid and which are redeemed within one
year of purchase. For a more complete description, see "Purchases with
Proceeds from Redemptions of Unaffiliated Investment Companies."
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee by the investment
adviser. The adviser may terminate this voluntary waiver at any time at its
sole discretion. The maximum allowable management fee is 0.60%.
(3) Other expenses are estimated to be 2.14% absent the anticipated voluntary
reimbursements of certain other expenses by the adviser. The adviser can
terminate the voluntary reimbursement of expenses at any time at its sole
discretion.
(4) Total Fund operating expenses are estimated to be 2.99% absent the
anticipated voluntary waiver and voluntary reimbursement explained in
footnotes (2) and (3).
* Total Fund operating expenses are estimated based on average expenses
expected to be incurred during the period ending November 30, 1994. During
the course of this period, expenses may be more or less than the average
amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION" AND "HOW TO INVEST IN THE FUND."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <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.......................... $55 $75
You would pay the following expenses on the same investment, assuming no sales load when
purchasing shares of the Fund with proceeds from the redemption of unaffiliated mutual fund
shares.......................................................................................... $10 $32
</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.
B. Please insert the following "Financial Highlights" table as page 2
following the "Summary of Fund Expenses" and before the section entitled
"Highlights." In addition, please add the heading "Financial Highlights"
to the Table of Contents on page I following the heading "Summary of Fund
Expenses."
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income 0.11
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.71)
- ---------------------------------------------------------------------------------------- --------------
Total from investment operations (0.60)
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.11)
- ---------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, END OF PERIOD $ 9.29
- ---------------------------------------------------------------------------------------- --------------
TOTAL RETURN** (6.00%)
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 1.00%(a)
- ----------------------------------------------------------------------------------------
Net investment income 4.85%(a)
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 7.42%(a)
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,091
- ----------------------------------------------------------------------------------------
Portfolio turnover rate 21%
- ----------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from March 2, 1994 (date of initial
public investment) to May 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
C. Please delete the last sentence of the first paragraph and the entire
second paragraph and add the following information to the sub-section
entitled "Dealer Concession" on page 11:
"Such payments, which will be predicated upon the amount of Fund shares sold,
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."
D. Please insert the following ]"Other Payments to Financial Institutions"
sub-section following the sub-section entitled "Dealer Concessions" on
page 11. In addition, please add the heading "Other Payments to Financial
Institutions" to the Table of Contents on page I following the heading
"Dealer Concessions."
"OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or
their 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 initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates."
E. Please insert the following information as the second paragraph of the
sub-section entitled "Purchases with Proceeds from Redemptions of
Unaffiliated Investment Companies" on page 12:
"A contingent deferred sales charge is charged in limited circumstances.
Shareholders who purchased shares with the proceeds of a redemption of shares of
an unaffiliated mutual fund sold with a sales charge or commission and which
were not distributed by the distributor will be charged a contingent deferred
sales charge by the Fund's distributor of .50 of 1% for redemptions made within
one year of purchase. The contingent deferred sales charge will be calculated
based upon the lesser of the original price of shares or the net asset value of
the shares when redeemed."
F. Please delete the first sentence of the section entitled "Redeeming
Shares" on page 15 and insert the following:
"The Fund purchases shares from you at their net asset value, less any
applicable contingent deferred sales charge, next determined after the transfer
agent receives the redemption request."
G. Please insert the following "Contingent Deferred Sales Charge" section
following the section entitled "Systematic Withdrawal Plan" on page 16. In
addition, please add the heading "Contingent Deferred Sales Charge" to the
Table of Contents immediately following the heading "Systematic Withdrawal
Plan."
"CONTINGENT DEFERRED SALES CHARGE
No contingent deferred sales charge will be imposed on shares acquired through
reinvestment of dividends or distributions of short-term or long-term capital
gains. Redemptions are deemed to have occurred in the following order: (i)
shares acquired through the reinvestment of dividends and long-term capital
gains; (ii) purchases of shares occurring more than one year before the date of
redemption; (iii) purchases of shares within the previous year without the use
of redemption proceeds as described above; and (iv) purchases of shares within
the previous year through the use of redemption proceeds as described above.
No contingent deferred sales charge will be imposed when a redemption results
from a tax-free return under the following circumstances: (i) a total or partial
distribution from a qualified retirement plan, other than an IRA, Keogh Plan, or
a custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, or other redemptions made for purposes of
reinvestment.
A contingent deferred sales charge will not be charged in connection with
exchanges in other Alexander Hamilton Funds or Treasury Cash Series portfolios
or in connection with redemptions by the Fund of accounts with low balances."
H. Please delete the second sentence of the second paragraph in the
sub-section entitled "Sub-Adviser's Background" which begins on page 18
and insert the following information in its place:
"Mr. Conley joined Federated Investors in 1979 and has been a Vice President of
the Fund's sub-adviser since 1982."
I. Please insert the following information as the last sentence of the
second paragraph of the section entitled "Shareholder Information" on
page 21:
"As of July 3, 1994, Alexander Hamilton Life Insurance Company may for certain
purposes be deemed to control the Fund because it is owner of record of certain
shares of the Fund."
J. Please delete the sentence immediately following the HYPOTHETICAL EXAMPLE
OF TOTAL RETURN on page 25 in the section entitled "Performance
Information" which begins on page 22 and insert the following:
"Performance information reflects the effect of the maximum sales load and other
similar non-recurring charges, such as the contingent deferred sales charge,
which, if excluded, would increases the total return and yield."
K. Please insert the following financial statements after the "Performance
Information" section on page 22. In addition, please add the heading
"Financial Statements" to the Table of Contents immediately before
"Addresses."
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT ISSUE OR S&P* VALUE
<C> <S> <C> <C>
- ----------- ------------------------------------------------------------------------- ---------- -------------
SHORT-TERM MUNICIPAL SECURITIES--7.8%
- --------------------------------------------------------------------------------------
KENTUCKY--3.9%
-------------------------------------------------------------------------
$ 200,000 Kentucky State Pollution Abatement & Water Resource Finance Authority,
Daily VRDNs (Toyota Motors Co.)/(Subject to AMT) A-1+ $ 200,000
------------------------------------------------------------------------- -------------
TEXAS--3.9%
-------------------------------------------------------------------------
200,000 Harris County, TX, IDA Daily VRDNs (Yokohama Tire Corp.)/ (Subject to
AMT)/(Industrial Bank of Japan Ltd. LOC) P-1 200,000
------------------------------------------------------------------------- -------------
TOTAL SHORT-TERM MUNICIPAL SECURITIES (AT AMORTIZED COST) 400,000
------------------------------------------------------------------------- -------------
LONG-TERM MUNICIPAL SECURITIES--99.3%
- --------------------------------------------------------------------------------------
ALABAMA--3.5%
-------------------------------------------------------------------------
200,000 Courtland, AL, IDR 5.90% Solid Waste Disposal Revenue
Refunding Bonds (Champion International), 2/1/2017 Baa 178,442
------------------------------------------------------------------------- -------------
CALIFORNIA--3.8%
-------------------------------------------------------------------------
200,000 Santa Cruz, CA, 6.25% Sewer Secondary Wastewater Treatment Revenue Bonds
(Series C), 11/1/2023 A 195,774
------------------------------------------------------------------------- -------------
DISTRICT OF COLUMBIA--4.0%
-------------------------------------------------------------------------
200,000 District of Columbia Hospital, 7.125% Revenue Refunding Bonds
(Midlantic-Washington Hospital Center), 8/15/2019 Baa1 205,546
------------------------------------------------------------------------- -------------
FLORIDA--7.5%
-------------------------------------------------------------------------
200,000 Jacksonville, FL, IDA 6.25% Health Facilities Revenue Bonds (National
Benevolent Association-Cypress), 12/1/2023 Baa1 187,972
-------------------------------------------------------------------------
$ 200,000 Palm Beach County, FL, 6.30% Health Facility Authority Revenue Bonds
(Good Samaritan Health System), 10/1/2022 A- $ 192,382
------------------------------------------------------------------------- -------------
Total 380,354
------------------------------------------------------------------------- -------------
GEORGIA--3.8%
-------------------------------------------------------------------------
200,000 Fulco, GA Hospital Authority, 6.375% Revenue Anticipation Certificates
(Georgia Baptist Health Care), 9/1/2022 A 193,500
------------------------------------------------------------------------- -------------
ILLINOIS--3.9%
-------------------------------------------------------------------------
200,000 Illinois Health Facilities Authority, 7.00% Revenue Bonds
(Trinity Medical Center), 7/1/2012 Baa 199,468
------------------------------------------------------------------------- -------------
INDIANA--3.9%
-------------------------------------------------------------------------
200,000 Indiana State, Health Facilities Financing Authority, 6.625% Revenue
Bonds (Floyd Memorial Hospital Project), 2/15/2022 A 200,146
------------------------------------------------------------------------- -------------
LOUISIANA--8.2%
-------------------------------------------------------------------------
200,000 Lake Charles, LA, 7.75% Harbor & Term District Port Facilities Revenue
Bonds (Trunkline Long Co. Project-Panhandle
Eastern Co.), 8/15/2022 Ba1 214,536
-------------------------------------------------------------------------
200,000 St. Charles Parish, LA, 7.00% Solid Waste Disposal Revenue Bonds
(Louisiana Power & Light)/(Subject to AMT), 12/1/2022 Baa2 202,546
------------------------------------------------------------------------- -------------
Total 417,082
------------------------------------------------------------------------- -------------
MARYLAND--4.0%
-------------------------------------------------------------------------
200,000 Maryland State Community Development Administration, 6.70% Multi Family
Housing Revenue Bonds, 5/15/2027 Aa 202,304
------------------------------------------------------------------------- -------------
MASSACHUSETTS--3.8%
-------------------------------------------------------------------------
200,000 Massachusetts State, 6.50% Health and Education Facilities Authority
Revenue Bonds (Series B)/(Holyoke Hospital), 7/1/2015 Baa1 191,650
------------------------------------------------------------------------- -------------
MINNESOTA--3.9%
-------------------------------------------------------------------------
200,000 Minnesota State, HFA Single Family Revenue Bonds, 6.50% (Subject to AMT),
1/1/2026 Aa 197,082
------------------------------------------------------------------------- -------------
NORTH CAROLINA--4.0%
-------------------------------------------------------------------------
$ 200,000 Martin County, NC, Industrial Facilities & Pollution Financing Authority,
6.80% Solid Waste Disposal Revenue Bond (Weyerhaeuser Co.)/(Subject to
AMT), 5/1/2024 A2 $ 203,248
------------------------------------------------------------------------- -------------
OKLAHOMA--13.7%
-------------------------------------------------------------------------
500,000 Jackson County, OK, Memorial Hospital Authority, 7.30% Revenue Bonds
(Jackson County Memorial Hospital), 8/1/2015 BBB- 496,680
-------------------------------------------------------------------------
200,000 Tulsa, OK, 7.60% Municipal Airport Trust Revenue Bonds
(American Airlines)/(Subject to AMT), 12/1/2030 Baa2 199,964
------------------------------------------------------------------------- -------------
Total 696,644
------------------------------------------------------------------------- -------------
PENNSYLVANIA--11.7%
-------------------------------------------------------------------------
200,000 Latrobe, PA, IDA, 6.75% College Revenue Bonds (Series 1994)/ (St. Vincent
College Project), 5/1/2024 Baa1 196,166
-------------------------------------------------------------------------
200,000 Pennsylvania State, HFA Single Family Mortgage Revenue Bonds, 6.875%
(Series 1994-39B)/(Subject to AMT), 10/1/2024 Aa 201,342
-------------------------------------------------------------------------
200,000 Warren County, PA, Hospital Authority, 7.00% Revenue Bonds (Series
1994)/(Warren General Hospital Project), 4/1/2019 BBB+ 199,108
------------------------------------------------------------------------- -------------
Total 596,616
------------------------------------------------------------------------- -------------
TENNESSEE--4.0%
-------------------------------------------------------------------------
200,000 Memphis-Shelby County, TN, 6.75% Airport Revenue Bonds (Federal Express
Corp.), 9/1/2012 Baa3 201,110
------------------------------------------------------------------------- -------------
TEXAS--4.0%
-------------------------------------------------------------------------
200,000 Travis County, TX, HFC SFM Revenue Bonds, 7.10% (GNMA & FNMA Mortgage
Backed Securities)/(Subject to AMT)/(GNMA/ FNMA Guaranty), 10/1/2027 AAA 203,474
------------------------------------------------------------------------- -------------
VIRGINIA--11.6%
-------------------------------------------------------------------------
200,000 Isle Wight County, VA, IDA 6.55% Solid Waste Disposal (Union Camp
Corp.)/(Subject to AMT), 4/1/2024 A-1 201,284
-------------------------------------------------------------------------
$ 200,000 Peninsula Ports Authority of Virginia, 7.00% Health Care Facilities
Revenue Refunding Bonds (Series 1994)/(Mary Immaculate Project), 8/1/2017 BBB+ $ 198,012
-------------------------------------------------------------------------
200,000 West Point, VA, IDA 6.375% Solid Waste Disposal Revenue Bonds (Series
A)/(Chesapeake Corp. Project)/(Subject to AMT), 3/1/2019 Baa3 192,404
------------------------------------------------------------------------- -------------
Total 591,700
------------------------------------------------------------------------- -------------
TOTAL LONG-TERM MUNICIPAL SECURITIES (IDENTIFIED COST
$5,064,452) 5,054,140
------------------------------------------------------------------------- -------------
TOTAL LNVESTMENTS (IDENTIFIED COST $5,464,452) $ 5,454,140\
------------------------------------------------------------------------- -------------
</TABLE>
\ The cost of investments for federal tax purposes amounts to $5,464,452. The
net unrealized depreciation of investments on a federal tax basis amounts to
$10,312, which is comprised of $35,590 appreciation and $45,902 depreciation
at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($5,090,763) at May 31, 1994.
* Please refer to the Statement of Additional Information for an explanation of
the credit ratings.
The following abbreviations are used in this portfolio.
<TABLE>
<S> <C>
AMT--Alternative Minimum Tax IDA--Industrial Development Authority
FNMA--Federal National Mortgage Association IDR--Industrial Development Revenue
GNMA--Government National Mortgage LOC--Letter of Credit
Association SFM--Single Family Mortgage
HFA--Housing Finance Authority VRDNs--Variable Rate Demand Notes
HFC--Housing Finance Corp.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Note 2A) (identified and tax cost $5,464,452) $ 5,454,140
- ---------------------------------------------------------------------------------------------------
Cash 35,670
- ---------------------------------------------------------------------------------------------------
Interest receivable 81,426
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 197,232
- ---------------------------------------------------------------------------------------------------
Receivable from Adviser 43,778
- ---------------------------------------------------------------------------------------------------
Deferred expenses (Note 2E) 17,497
- --------------------------------------------------------------------------------------------------- -------------
Total assets 5,829,743
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 694,705
- --------------------------------------------------------------------------------------
Dividends payable 133
- --------------------------------------------------------------------------------------
Accrued expenses 44,142
- -------------------------------------------------------------------------------------- -----------
Total liabilities 738,980
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 548,202 shares of beneficial interest outstanding $ 5,090,763
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 5,141,115
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments (10,312)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (40,040)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 5,090,763
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, AND REDEMPTION PROCEEDS PER SHARE:
(net assets of $5,090,763 / 548,202 shares of beneficial interest outstanding) $9.29
- --------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price (100/95.5 of $9.29)* $9.73
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income (Note 2B) $ 36,791
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee** $ 3,775
- -----------------------------------------------------------------------------------------
Trustees' fees 3,806
- -----------------------------------------------------------------------------------------
Administrative personnel and services fees** 11,644
- -----------------------------------------------------------------------------------------
Custodian fees** 5,289
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 4,155
- -----------------------------------------------------------------------------------------
Legal fees 1,935
- -----------------------------------------------------------------------------------------
Printing and postage 4,060
- -----------------------------------------------------------------------------------------
Portfolio accounting fees** 13,535
- -----------------------------------------------------------------------------------------
Insurance premiums 1,744
- -----------------------------------------------------------------------------------------
Distribution services fee** 1,573
- -----------------------------------------------------------------------------------------
Miscellaneous 1,450
- ----------------------------------------------------------------------------------------- ---------
Total expenses 52,966
- -----------------------------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee** $ 2,895
- ------------------------------------------------------------------------------
Reimbursement of other operating expenses** 43,778 46,673
- ------------------------------------------------------------------------------ --------- ---------
Net expenses 6,293
- ---------------------------------------------------------------------------------------------------- ----------
Net investment income 30,498
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (40,040)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (10,312)
- ---------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments (50,352)
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations ($19,854)
- ---------------------------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from March 2, 1994 (date of initial public investment) to May
31, 1994 (unaudited).
** See Note 4.
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 30, 1994*
--------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------------------
Net investment income $ 30,498
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($40,040 net loss as
computed for federal income tax purposes)(Note 2C) (40,040)
- ----------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (10,312)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets resulting from operations (19,854)
- ---------------------------------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (30,498)
- ---------------------------------------------------------------------------------------------- ------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ----------------------------------------------------------------------------------------------
Proceeds from sale of shares 5,111,050
- ----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 30,365
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (300)
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets from Fund share transactions 5,141,115
- ---------------------------------------------------------------------------------------------- ------------------
Change in net assets 5,090,763
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------------- ------------------
End of period $ 5,090,763
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
* For the period from March 2, 1994 (date of initial public investment) to May
31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Alexander Hamilton Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust consists of three diversified portfolios. The financial statements
included herein present only those of the Alexander Hamilton Municipal Income
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service taking into consideration yield, liquidity, risk, credit, quality,
coupon, maturity, type of issue, and any other factors or market data it
deems relevant in determining valuations for normal institutional size
trading units of debt securities. The independent pricing service does not
rely exclusively on quoted prices. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value. Investments in other regulated investment companies are
valued at net asset value.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by
the Internal Revenue Code, as amended ("Code"). Distributions to
shareholders are recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight line method over a period of five years from
the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
- ---------------------------------------------------------------------------------------------- ------------------
Shares sold 544,959
- ----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 3,273
- ----------------------------------------------------------------------------------------------
Shares redeemed (30)
- ---------------------------------------------------------------------------------------------- ------------------
Net change resulting from Fund share transactions 548,202
- ---------------------------------------------------------------------------------------------- ------------------
</TABLE>
* For the period from March 2, 1994 (date of initial public investment) to May
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Alexander Hamilton Capital Management, Inc., the Fund's
investment adviser ("Adviser"), receives for its services an annual investment
advisory fee equal to 0.60 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion. Under the
terms of a sub-advisory agreement between the Adviser and Federated Research,
Federated Research receives an annual fee of $125,000, plus one half of the
remaining advisory revenues.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION PLAN--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended.
Under the terms of the Plan, the Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The Plan
provides that the Fund may incur distribution expenses up to 0.25 of 1% of the
average daily net assets of the Fund, annually to compensate FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Trust's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
- --------------------------------------------------------------------------------
State Street Bank and Trust Company is the Trust's custodian. The fee is based
on the level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $53,302. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following February 10, 1994 (date the Fund became effective).
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
May 31, 1994 were as follows:
<TABLE>
<S> <C>
PURCHASES $ 5,638,572
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 533,878
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
George A. Cooke George A. Cooke
Chairman Chief Executive Officer
Christopher Bancroft Edward C. Gonzales
Frederick L. Blackmon President and Treasurer
William H. T. Bush Margaret P. Tessaro
James T. Ponder Vice President and Assistant Treasurer
Martha R. Seger Robert J. Davison
William E. Shelton Vice President
J. Crilley Kelly
Secretary
David M. Di Rita
Assistant Secretary
Melissa A. Moore
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank, nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus, which contains facts concerning its
objective and policies, management fees, expenses and other information.
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Alexander Hamilton Municipal Income Fund (the "Fund")
dated February 10, 1994. 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 February 10, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Acceptable Investments 1
When-Issued and Delayed
Delivery Transactions 2
Temporary Investments 2
Futures and Options Transactions 2
"Margin" in Futures Transactions 3
Put Options on Financial Futures Contracts 3
Call Options on Financial Futures Contracts 3
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Inverse Floaters 5
Portfolio Turnover 5
Investment Limitations 5
MANAGEMENT OF THE TRUST 7
- ---------------------------------------------------------------
Officers and Trustees 7
INVESTMENT ADVISORY SERVICES 9
- ---------------------------------------------------------------
Adviser to the Fund 9
Advisory Fees 9
Sub-Adviser 9
ADMINISTRATIVE SERVICES 9
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
PURCHASING SHARES 10
- ---------------------------------------------------------------
Distribution Plan 10
Conversion to Federal Funds 10
Purchases by Sales Representatives,
Fund Trustees, and Employees 10
DETERMINING NET ASSET VALUE 10
- ---------------------------------------------------------------
Valuing Municipal Bonds 11
Use of Amortized Cost 11
REDEEMING SHARES 11
- ---------------------------------------------------------------
EXCHANGE PRIVILEGE 11
- ---------------------------------------------------------------
Reduced Sales Charge 11
Requirements for Exchange 11
Tax Consequences 11
Making an Exchange 11
TAX STATUS 11
- ---------------------------------------------------------------
The Fund's Tax Status 11
TOTAL RETURN 12
- ---------------------------------------------------------------
YIELD 12
- ---------------------------------------------------------------
TAX-EQUIVALENT YIELD 12
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 12
- ---------------------------------------------------------------
APPENDIX 14
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Alexander Hamilton Funds (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
July 21, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to provide high current income which is
exempt from federal regular income tax. The investment objective cannot be
changed without approval of shareholders. Interest income of the Fund that is
exempt from federal income tax retains its tax-free status when distributed to
the Fund's shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests in a diversified portfolio primarily limited to municipal
securities.
CHARACTERISTICS
The municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. If ratings made by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P") or Fitch's Investors Service ("Fitch's") change because of
changes in those organizations or in their rating systems, the Fund will
try to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of municipal securities include:
Governmental lease certificates of participation issued by state or
municipal authorities where payment is secured by installment payments
for equipment, buildings, or other facilities being leased by the state
or municipality;
Municipal notes and tax-exempt commercial paper;
Serial bonds;
Tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;
Bond anticipation notes sold in anticipation of the issuance of
long-term bonds;
Pre-refunded municipal bonds whose timely payment of interest and
principal is ensured by an escrow of U.S. government obligations; and
General obligation bonds.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE-RATE MUNICIPAL SECURITIES
Some of the municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily stated as
a percentage of the prime rate of a bank or some similar standard, such
as the 91-day U.S. Treasury bill rate. Variable interest rates are
adjusted on a periodic basis, e.g., every 30 days. The Fund will consider
this adjustment period to be the maturity of the security for purposes of
determining the weighted average maturity of the portfolio.
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable-rate municipal
securities than for fixed-income obligations. Many municipal securities
with variable interest rates purchased by the Fund are subject to
repayment of principal (usually within seven days) on the Fund's demand.
The terms of these variable-rate demand instruments require payment of
principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests, or a guarantor of
either issuer.
Many variable rate municipal securities are subject to repayment of
principal on demand by the Fund (usually in not more than seven days). If
a variable rate municipal security does not have this demand feature, or
the demand feature extends beyond seven days and the Fund's adviser
believes that the security cannot be sold within seven days, the Fund's
adviser may consider the security to be illiquid. However, the Fund's
investment limitations provide that it will not invest more than 15% of
its net
assets in illiquid securities. All variable rate municipal securities
will meet the quality standards for the Fund. The investment adviser has
been instructed by the Fund's Board of Trustees to monitor the pricing,
quality and liquidity of the variable rate municipal securities,
including participation interests, held by the Fund, on the basis of
published financial information and reports of the rating agencies and
other analytical services.
MUNICIPAL LEASES
In determining the liquidity of municipal lease securities, the Fund's
investment adviser, under the authority delegated by the Board of
Trustees, will base its determination on the following factors:
Whether the lease can be terminated by the lessee;
Potential recovery, if any, from a sale of the leased property upon
termination of the lease;
Lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);
Likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential
to its operations (e.g., the potential for an "event of non-
appropriation"); and
Credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. These transactions are made to secure
what is considered to be an advantageous price and yield for the Fund.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices.
No fees or 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 maintained until the transaction is settled.
During the current fiscal year, the Fund does not anticipate investing more than
20% of its total assets in when-issued and delayed delivery transactions.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by buying
and selling financial futures contracts, buying put options on portfolio
securities and put options on financial futures contracts for portfolio
securities, and writing call options on futures contracts. The Fund also may
write covered call options on portfolio securities to attempt to increase its
current income.
The Fund will maintain its position in securities, options and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position may be closed out over-the-counter or on an exchange
which provides a secondary market for options of the same series.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and market conditions without
necessarily buying or selling the securities. The Fund will not engage in
futures transactions for speculative purposes.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future.
For example, in the fixed income securities market, prices move inversely
to interest rates. A rise in rates results in a drop in price.
Conversely, a drop in rates results in a rise in price. In order to hedge
its holdings of fixed income securities against a rise in market interest
rates, the Fund could enter into
contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not involve the
borrowing of funds by the Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Fund pays or receives
cash, called "variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation margin
does not represent a borrowing or loan by the Fund, but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the Fund will
mark to market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.
The Fund will comply with the following restrictions when purchasing and selling
futures contracts. First, the Fund will not participate in futures transactions
if the sum of its initial margin deposits on open contracts will exceed 5% of
the market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts it has entered into. Second,
the Fund will not enter into these contracts for speculative purposes. Third,
since the Fund does not constitute a commodity pool, it will not market itself
as such, or serve as a vehicle for trading in the commodities futures or
commodity options markets. Connected with this, the Fund will disclose to all
prospective investors the limitations on its futures and options transactions,
and make clear that these transactions are entered into only for bona fide
hedging purposes, or other permissible purposes pursuant to regulations
promulgated by the Commodity Futures Trading Commission ("CFTC"). Finally,
because the Fund will submit to the CFTC special calls for information, the Fund
will not register as a commodities pool operator.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts. The
Fund would use these options solely to protect portfolio securities against
decreases in value resulting from market factors such as an anticipated increase
in rates.
Unlike entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at a specified price, the purchase
of a put option on a futures contract entitles (but does not obligate) its
purchaser to decide on or before a future date whether to assume a short
position at the specified price.
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the position.
To do so, it would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in return
for payment of the strike price. If the Fund neither closes out nor exercises an
option, the option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write listed call
options on financial futures contracts or over-the-counter call options on
future contracts to hedge its portfolio against an increase in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As market interest rates rise, causing the
prices of futures to decrease,
the Fund's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's call option
position to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that the
Fund keeps the premium received for the option. This premium can substantially
offset the drop in value of the Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it by the
buyer, the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium income of the Fund
will then substantially offset the realized decrease in value of the hedged
securities.
The Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio, plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
RISKS
When the Fund uses futures and options on futures as hedging devices,
there is a risk that the prices of the securities subject to the futures
contracts may not correlate perfectly with the prices of the securities
in the Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to
market changes. In addition, the Fund's adviser could be incorrect in its
expectations about the direction or extent of market factors such as
securities price movements. In these events, the Fund may lose money on
the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Fund's
adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures
and options positions depends on this secondary market. The inability to
close out these positions could have an adverse effect on the Fund's
ability to effectively hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of cash and
cash equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use
of such futures contract is unleveraged. When the Fund sells futures
contracts, it will either own or have the right to receive the underlying
future or security, or will make deposits to collateralize the position
as discussed above.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund may only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are found by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction is settled.
INVERSE FLOATERS
The Fund may invest in various types of derivative municipal securities whose
interest rates bear an inverse relationship to the interest rate on another
security or the value of an index ("inverse floaters"). Because changes in the
interest rate on the other security or index inversely affect the residual
interest paid on the inverse floater, the value of an inverse floater is
generally more volatile than that of a fixed rate bond. Inverse floaters have
interest rate adjustment formulas which generally reduce or, in the extreme,
eliminate the interest paid to the Fund when short-term interest rates rise, and
increase the interest paid to the Fund when short-term interest rates fall.
Inverse floaters have varying degrees of liquidity, and the market for these
securities is new and relatively volatile. These securities tend to underperform
the market for fixed rate bonds in a rising interest rate environment and tend
to fall in value more rapidly, but tend to outperform the market for fixed rate
bonds when interest rates decline and tend to rise in value more rapidly. Shifts
in the relationship between short-term and long-term interest rates may alter
this tendency, however. In return for this volatility, inverse floaters
typically offer the potential for yields exceeding the yields available on fixed
rate bonds with comparable credit quality and maturity. These securities usually
permit the investor to convert the floating rate to a fixed rate (normally
adjusted downward), and this optional conversion feature may provide a partial
hedge against rising interest rates if exercised at an opportune time.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%.
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.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to, for example, meet redemption requests
when liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 15% of the value
of its total assets at the time of the pledge.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in municipal bonds secured
by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures contracts and related options.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire
publicly or non-publicly issued municipal bonds or temporary investments
or enter into repurchase agreements in accordance with its investment
objective, policies, limitations, and its Declaration of Trust.
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. Also, the Fund will not acquire more than 10%
of the outstanding voting securities of any one issuer.
Under this limitation, each governmental subdivision, including states
and the District of Columbia, territories, possessions of the United
States, or their political subdivisions, agencies, authorities,
instrumentalities, or similar entities, will be considered a separate
issuer if its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its own
assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
non-governmental user are considered to be issued solely by that user. If
in the case of an industrial development bond or governmental issued
security, a governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by the guarantor
as well as the other issuer, subject to limited exclusions allowed by the
Investment Company Act of 1940.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Fund or its investment adviser, owning
individually more than 1/2 of 1% of the issuers' securities, together own
more than 5% of the issuer's securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Board of Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities not
determined by the Trustees to be liquid.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of the
value of the Fund's total assets would be invested in premiums on open
put options.
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.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
securities of issuers which invest in or sponsor such programs.
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. For purposes of its policies and limitations, the Fund considers
instruments issued by a U.S. branch of a domestic bank having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items".
The Fund does not intend to borrow money, invest in reverse repurchase
agreements or inverse floaters in excess of 5% of the value of its assets during
the coming fiscal year.
MANAGEMENT OF THE TRUST
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
including any affiliation with Alexander Hamilton Capital Management, Inc.,
Federated Investors, Federated Securities Corp., Federated Research, and
Federated Administrative Services. ("Federated Funds" refers to certain
investment companies distributed, administered and/or advised by subsidaries or
affiliates of Federated Investors.)
<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE TRUST PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
George A. Cooke*\ Chairman, Chief Senior Vice President and Chief Investment Officer, Treasury
33045 Hamilton Boulevard Executive Officer, and Asset Management, Alexander Hamilton Life Insurance
Farmington Hills, MI and Trustee Company of America; Board of Directors, Bank Capital Markets
Association; Principal and Arbitrator, Municipal Securities
Rulemaking Board; and formerly, Senior Executive Vice
President, Citizens and Southern Corporation.
Christopher Bancroft Trustee President, Bancroft Operations; Secretary and Trustee,
1621 North Elm Street Fountain Valley School; Trustee, Family Trusts; and Trustee,
Denton, TX Dallas Museum of Art.
Frederick L. Blackmon*\ Trustee Executive Vice President and Chief Financial Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America;
Farmington Hills, MI Director, Alexander Hamilton Life Insurance Company of
America; Director, Treasurer and Chairman of Finance
Committee, Providence Hospital Foundation; Regent, Eastern
Michigan University; and Director, Michigan Chamber of
Commerce.
William H. T. Bush Trustee President, Bush-O'Donnell & Company; Member, Board of
101 South Hanley Directors, Clark and Sullivan, Inc.; Member, Board of
Suite 1025 Directors, Blue Cross/Blue Shield of Missouri; Member, Board
St. Louis, MO of Directors, St. Maritz Inc.; Member, Board of Directors,
Southwest Bank; Member, Board of Directors, National Elevator
Inspection Services; and Member, Board of Directors, Ivy
Insurance Group, Inc.
James T. Ponder*\ Trustee Executive Vice President and Chief Marketing Officer,
33045 Hamilton Boulevard Alexander Hamilton Life Insurance Company of America; and
Farmington Hills, MI formerly, Senior Vice President and Chief Financial Officer,
Alexander Hamilton Life Insurance Company of America.
Dr. Martha R. Seger Trustee Distinguished Visiting Professor of Finance, Central Michigan
1195 Rolling Hills University; formerly, John M. Olin Distinguished Fellow in
Bloomfield Hills, MI the Eller Center for the Study of Private Market Economy,
University of Arizona, Tucson; and formerly, Governor,
Federal Reserve Board.
Dr. William E. Shelton\ Trustee President, Eastern Michigan University; Member, National
Eastern Michigan Education Commission on Time and Learning; Member, NCAA
University Presidents Commission and NCAA Budget Subcommittee; Member,
202 Weich Hall Oakwood United Hospitals, Inc. Board of Trustees; and Member,
Ypsilanti, MI Michigan's Children Board of
Trustees.
Edward C. Gonzales President Vice President, Treasurer, and Trustee, Federated Investors;
Federated Investors Towers and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and
Director, Federated Administrative Services/ Federated
Administrative Services, Inc.; Trustee or Director of some of
the Federated Funds; Vice President and Treasurer of the
Federated Funds.
Robert J. Davison Vice President Vice President, Alexander Hamilton Life Insurance Company of
33045 Hamilton Boulevard America.
Farmington Hills, MI
Margaret P. Demski Vice President Vice President, Federated Administrative, Inc./Federated
Federated Investor Tower Administrative Services; and Vice President and Assistant
Pittsburgh, PA Treasurer of some of the Federated Funds.
J. Crilley Kelly Secretary Corporate Counsel, Federated Investors.
Federated Investors Tower
Pittsburgh, PA
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
\ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Alexander Hamilton Capital Management, Inc. It
is a wholly-owned subsidiary of Alexander Hamilton Life Insurance Company of
America, which, in turn, is a wholly-owned subsidiary of Household
International, Inc.
The adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the 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 Fund.
ADVISORY FEES
For its advisory services, Alexander Hamilton Capital Management, Inc. receives
an annual investment advisory fee as described in the prospectus.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitation
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.
SUB-ADVISER
Under the terms of a sub-advisory agreement between Federated Research and
Alexander Hamilton Capital Management, Inc., Federated Research will furnish the
adviser such investment advice, including portfolio management strategies,
securities selection recommendations, economic forecasting and other statistical
and factual information as it may require.
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.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the adviser and sub-adviser will
generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. The adviser and sub-adviser make decisions on portfolio
transactions and select brokers and dealers subject to review by the Board of
Trustees.
The adviser and sub-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 sub-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 may be used by the adviser, sub-adviser or
by affiliates of Federated Investors in advising Federated Funds 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
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus an applicable sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing shares is
explained in the prospectus under "How to Invest in the Fund."
DISTRIBUTION PLAN
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Plan provides for payment of fees to Federated Securities Corp., the principal
distributor for shares of the Fund, to finance any activity which is primarily
intended to result in the sale of shares. Such activities may include the
advertising and marketing of shares; preparing, printing, and distributing
prospectuses and sales literature to prospective shareholders, brokers, or
administrators; and implementing and operating the Plan. Pursuant to the Plan,
the distributor may pay fees to brokers for distribution and administrative
services and to administrators for administrative services as to shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for share purchases and redemptions, confirming and reconciling
all transactions; reviewing the activity in Fund accounts, and providing
training and supervision of broker personnel; posting and reinvesting dividends
to Fund accounts or arranging for the service to be performed by the Fund's
transfer agent; and maintaining and distributing current copies of prospectuses
and shareholder reports to the beneficial owners of shares and prospective
shareholders.
The Board of Trustees expects 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.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. State Street Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND TRUSTEES, AND EMPLOYEES
Trustees, employees, and sales representatives of the Fund, Federated Research,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp. and their spouses and
children under 21, may buy shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons, as well as the other parties identified
in the prospectus.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
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.
VALUING MUNICIPAL BONDS
The Board of Trustees uses an independent pricing service to value municipal
bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and any
other factors or market data it considers relevant in determining valuations for
normal institutional size trading units of debt securities, and does not rely
exclusively on quoted prices.
USE OF AMORTIZED COST
The Board of Trustees has decided that the fair value of debt securities
authorized to be purchased by the Fund with remaining maturities of 60 days or
less shall be their amortized cost value, unless the particular circumstances of
the security indicate otherwise. Under this method, portfolio instruments and
assets are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
REDEEMING SHARES
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The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares". Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
EXCHANGE PRIVILEGE
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Shareholders may exchange all or some of their shares for shares of other
portfolios in Alexander Hamilton Funds or Treasury Cash Series. These exchanges
are made at net asset value, plus the difference between the Fund's sales charge
already paid and the sales charge of the fund into which the shares are to be
exchanged, if higher.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp. or State Street Bank in writing.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made.
This privilege is available to shareholders residing in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Further information on the exchange privilege and prospectuses for Alexander
Hamilton Funds or Treasury Cash Series portfolios are available by calling the
Fund.
TAX CONSEQUENCES
Exercise of this privilege is treated as a sale for federal income tax purposes.
Depending upon the circumstances, a short or long-term capital gain or loss may
be realized.
MAKING AN EXCHANGE
Instructions for exchanges for Alexander Hamilton Funds or Treasury Cash Series
portfolios may be given in writing or by telephone by the shareholder. Written
instructions may require a signature guarantee.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
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.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the quarterly
reinvestment of all dividends and distributions. Any applicable redemption fee
is deducted from the ending value of the investment based on the lesser of the
original purchase price or the net asset value of shares redeemed. Occasionally,
total return which does not reflect the effect of the sales load may be quoted
in advertising.
YIELD
- --------------------------------------------------------------------------------
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 then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-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 the 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,
the performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 28% tax rate and assuming that income is 100%
tax-exempt.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
.Portfolio quality;
.Average portfolio maturity;
.Type of instruments in which the portfolio is invested;
.Changes in interest rates and market value of portfolio securities;
.Changes in the Fund's expenses; and
.Various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value 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 comparisons 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:
.LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "general municipal
bond funds" category in advertising and sales literature.
.LEHMAN BROTHERS REVENUE BOND INDEX is a total return performance benchmark for
the long-term, investment grade, revenue bond market. Returns and attributes
for the index are calculated semi-monthly.
.MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according their risk-adjusted returns.
The maximum rating is five stars, and ratings are effective for two weeks.
Advertisements and 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
quarterly reinvestment of dividends over a specified period of time.
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 and to
money market funds using the Lipper Analytical Services money market instruments
average.
The Fund may quote various general mutual fund industry statistics cited in
publications in its sales literature and advertising. Sales literature and
advertising of the Fund may quote certain facts about the adviser and sub-
adviser, including but not limited to numbers of funds and accounts under
management.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
APPENDIX
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STANDARD AND POOR'S CORPORATION MUNICIPAL BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB is regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates a low degree of speculation.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., MUNICIPAL BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its its generic rating category; the
modifier 1 indicates that the security ranks in the higher end of its generic
ranking category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
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 MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC., SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT 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+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (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:
Conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; well established access to a range of
financial markets and assured sources of alternate liquidity.
P-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.
3110204B (2/94)
08526A
ALEXANDER HAMILTON MUNICIPAL INCOME FUND
(A PORTFOLIO OF ALEXANDER HAMILTON FUNDS)
Supplement to Statement of Additional Information dated February
10, 1994
A.Please insert the following sentence as the last sentence in the section
entitled "Portfolio Turnover" on page 5.
"For the period from March 2, 1994 (date of initial public investment), to
May 31, 1994,
the Fund's portfolio turnover rate was 21%."
B.Please insert the following section entitled "Fund Ownership" following the
section "Officers and Trustees" which begins on page 7. In addition,
please add the heading "Fund Ownership" to the Table of
Contents immediately after the heading "Officers and
Trustees":
"Fund Ownership
As of July 3, 1994, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: Alexander Hamilton Insurance
Company, Farmington Hills, MI, acting in various capacities
for numerous accounts, owned of record approximately 539,006
shares (97.80%) of the Fund . "
C. Please insert the following after
the last sentence in the sub-section entitled "Advisory
Fees" under the main section entitled "Investment Advisory
Services" on page 9:
"During the period from March 2 , 1994 (date of initial public investment),
through May 31, 1994, the adviser earned $ 3,775, of which $2,895 was
voluntarily waived. In addition, the adviser voluntarily
reimbursed the Fund $43,778 of other operating expenses."
D.Please insert the following after the last sentence in the sub-section
entitled "Sub-Adviser" on page 9:
"During the period from March 2 , 1994 (date of initial public investment),
through May 31, 1994, the sub-adviser earned $31,250. "
E.Please insert the following after the last sentence in the section entitled
"Administrative Services" on page 9:
"During the period from March 2 , 1994 (date of initial public investment),
through May 31, 1994, Federated Administrative Services earned $3,806."
F.Please insert the following information as a final paragraph under the
sub-section entitled "Distribution Plan" on page 10:
"During the period from March 2, 1994, (date of initial public investment),
through May 31, 1994, brokers and administrators (financial institutions)
received fees in the amount of $1,573."
G.Please insert the following information as the second sentence in the
section entitled
"Redeeming Shares" on page 11:
"Shareholder redemptions may be subject to a contingent deferred sales
charge ."
H.Please insert the following information as the first paragraph under the
section entitled "Total Return" on page 12::
"The Fund's cumulative total return from March 2 , 1994 (date of initial
public investment), to May 31, 1994, was (10.22%). Cumulative total return
reflects the Fund's total performance over a specific period
of time. This total return assumes and is reduced by
payment of the maximum sales load. The Fund's total return
is representative of only four months of Fund activity since
the Fund's effective date."
I.Please delete the fourth sentence of the second paragraph of the section
entitled "Total Return" and insert the following:
"Any applicable contingent deferred sales charge is deducted from the ending
value of the investment based on the lesser of the original purchase
price or the net asset value of shares redeemed."
J.Please insert the following information as the first paragraph under the
section entitled "Yield" on page 12:
"The Fund's yield for the thirty-day period ended May 31, 1994 was
4.70%."
K.Please insert the following information as the first paragraph under the
section entitled "Tax-Equivalent Yield" on page 12:
"The Fund's tax-equivalent yield for the thirty-day period ended
May 31, 1994 was 6.53%, assuming a 28% federal tax bracket."
July 31, 1994
FEDERATED SECURITIES CORP.
Distributor
G00283-02 (7/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements Filed in Part A (Supplement
to Prospecuts)
(b) Exhibits:
(1) Conformed copy of Declaration of Trust of the
Registrant as amended and restated (1.);
(2) Copy of By-Laws of the Registrant as amended
(1.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant (1.);
(5) (i) Conformed copy of Investment
Advisory Contract of the Registrant (1.);
(ii) Conformed copy of Sub-Advisory
Contract of the Registrant (1.);
(6) (i) Conformed copy of
Distributor's Contract of the Registrant
(1.);
(ii) Conformed copy of
Administrative Agreement (1.);
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant (1.);
(9) Conformed copy of Transfer Agency and Service
Agreement of the Registrant (1);
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered (1.);
(11) Conformed copy of Consent of Independent
Auditors; +
(12) Not applicable;
(13) Conformed copy of Initial Capital
Understanding (1.);
(14) Not applicable;
(15) (i) Conformed copy of Distribution Plan
(1.);
(ii) Conformed copy of 12b-1 Agreement (1.);
(16) Schedule for Computation of Fund
Performance Data;
(i) Copy of schedule of Computation of
Performance Data for Alexander Hamilton
Government Income Fund;+
(ii) Copy of schedule of Computation of
Performance Data for Alexander Hamilton
Municipal Income Fund;+
(iii) Copy of schedule of
Computation of Performance Data for
Alexander Hamilton Equity Growth and
Income Fund;+
(17) Conformed copy of Power of Attorney;(1.)
(18) Conformed copy of Opinion and Consent of
counsel as to availability of Rule
485(b);+
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
_________________________________
+All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed December 21,
1993. (File Nos. 811-7101 and 33-50505).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of July 3, 1994
Shares of beneficial interest
(no par value)
Alexander Hamilton Government
Income Fund 8
Alexander Hamilton Municipal
Income Fund 10
Alexander Hamilton Equity Growth
and Income Fund 16
Item 27.Indemnification:(1)
Item 28 Business and Other Connections of Investment Adviser:
(i) Alexander Hamtilton Capital Management,
Inc.
Alexander Hamilton Capital Management, Inc.
is a subsidiary of Alexander Hamilton Life Insurance Company
of America, a $5.0 billion life insurance company.
Alexander Hamilton Life Insurance Company of America is a
subsidiary of Household Finance Corporation, which, in turn,
is wholly owned by the $50 billion Household International,
Inc. a financial services company.
Alexander Hamilton Life Insurance Company
of America distributes life insurance, credit insurance, and
annuities through financial institutions, independent
agents, payroll benefit programs, and various subsidiaries
of Household International.
The principal executive officers of the
Trust's Investment Adviser are set forth in the following
table:
Other Substanital
Position with Business, Profession,
Name the Adviser Vocation or Employment
George A. Cooke Chairman and Chief Chief Investment
Officer,
Executive Officer Senior Vice
President, Alexander
Hamilton Life
Insurance Company of
America
David M. DiRita Secretary and Chief Counsel, Assistant
Compliance Officer Secretary, Alexander
Hamilton Life
Insurance Company of
America
_________________________________
1. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed December 21,
1993. (File Nos. 811-7101 and 33-50505).
William H. Kesler President and Chief Vice President,
Senior
Operations Officer Investment Officer,
Alexander Hamilton
Life Insurance
Company of America
William D. Lang Vice President, CreditVice President,
Alexander Hamilton
Life Insurance
Company of America
Nancy L. Laurin Vice President Manager, Alexander
Hamilton Life
Insurance Company of
America
Karen Milner Vice President, Controller,Alexander
Director Hamilton Life
Insurance Company of
America
Russell E. Peck Treasurer and Chief Vice President,
Financial Officer Controller, Alexander
Hamilton Life
Insurance Company of
America
Steve M. Etherington Vice President Assistant Vice
President,Alexander
Hamilton Life
Insurance Company of
America
(ii) Federated Research
For a description of the other business of
the sub-adviser, Federated Research, see the section
entitled "Trust Information - Management of the Trust" in
Part A. The affiliations with the Registrant of one of the
Officers of the sub-adviser is included in Part B of this
Registration Statement under "Trust Management - Officers
and Trustees." The remaining Trustees of the sub-adviser,
their position with the sub-adviser, and their principal
occupations are as follows:
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
John F. Donahue Trustee and Chairman Chairman and
Trustee, Federated
Investors; Chairman and
Trustee, Federated
Advisers, Federated
Management, and Federated
Research; Director, AEtna
Life and Casualty
Company; Chief Executive
Officer and Director,
Trustee, or Managing
General Partner of other
management investment
companies advised by
affiliates of Federated
Investors; formerly,
Director, The Standard
Fire Insurance Company.
J. Christopher Donahue Trustee President and
Trustee, Federated
Investors; President and
Trustee, Federated
Advisers, Federated
Management, and
Federated
Research;Director and
President, 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.
John W. McGonigle Trustee and Secretary Vice President,
Secretary, General
Counsel, and Trustee,
Federated Investors; Vice
President, Secretary, and
Trustee, Federated
Advisers, Federated
Management, and Federated
Research; Trustee,
Federated Services
Company; Executive Vice
President, Secretary, and
Director, Federated
Administrative Services;
Director and Executive
Vice President, Federated
Securities Corp.; Vice
President and Secretary
of other management
investment companies
advised or affiliated
with Federated Investors.
Mark D. Olson Trustee Partner, Wilson, Halbrook
& Bayard, 107 W. Market
Street, Georgetown,
Delaware 19947.
The remaining Officers of the sub-adviser
are: Mark L. Mallon, Executive Vice President; Henry J.
Gailliot, Senior Vice President-Economist; Peter R.
Anderson, William D. Dawson, III, J. Thomas Madden, Gary J.
Madich, J. Alan Minteer, Senior Vice Presidents; Jonathan C.
Conley, Deborah A. Cunningham, Mark Durbiano, Roger A.
Early, Kathleen M. Foody-Malus, David C. Francis, Thomas M.
Franks, Edward C. Gonzales, Jeff A. Kozemchak, John W.
McGonigle, Gregory M. Melvin, Susan M. Nason, Mary Jo
Ochson, Robert J. Ostrowski, Charles A. Ritter and
Christopher H. Wiles, Vice Presidents; Edward C. Gonzales,
Treasurer; and John W. McGonigle, Secretary. The business
address of each of the Officers and, except as otherwise
noted, Trustees of the sub-adviser is Federated Investors
Tower, Pittsburgh, PA 15222-3779. These individuals are
also officers of other investment advisers affiliated with
Federated Investors.
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:
American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money
Trust; BayFunds; The Biltmore Funds; The Biltmore Municipal
Funds; The Boulevard Funds; California Municipal Cash Trust;
Cambridge Series 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 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; Mark Twain Funds; Marshall Funds,
Inc.; Money Market Management, Inc.; 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; Signet Select Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst Funds;
The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; 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 --
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
and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice --
Federated Investors Tower President, and Assistant
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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
James R. Ball 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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
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
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
(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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
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
Federated Investors Tower Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and Rules 31a-
1 through 31a-3 promulgated thereunder are maintained at one
of the following locations:
Registrant Federated Investors Tower
Pittsburgh, Pennsylania
15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent and Dividend Pittsburgh, Pennsylvania
Disbursing Agent") 15222-3779
Federated Administrative
Services Federated Investors Towers
("Administrator") Pittsburgh, Pennsylvania
15222-3779
State Street Bank and Trust P.O. Box 8604
Company Boston, Massachusetts
("Custodian") 02266-8604
Alexander Hamilton Capital 33045 Hamilton Boulevard
Management, Inc. Farmington Hills, Michigan
("Adviser") 48334-3358
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 to each person
to whom a prospectus is delivered a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
ALEXANDER HAMILTON FUNDS, certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 26th day
of July, 1994.
ALEXANDER HAMILTON FUNDS
BY: /s/Melissa A. Moore
Melissa A. Moore, Assistant Secretary
Attorney in Fact for Edward C. Gonzales
July 26, 1994
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by
the following person in the capacity and on the date
indicated:
NAME TITLE
DATE
By: /s/Melissa A. Moore
Melissa A Moore Attorney In Fact
ASSISTANT SECRETARY For the Persons
Listed Below JULY 26, 1994
NAME TITLE
George A. Cooke* Chairman, Chief Executive
Officer, and Trustee
Frederick L. Blackmon* Trustee and Chief Financial
Officer
James T. Ponder* Trustee
William E. Shelton* Trustee
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF ERNST & YOUNG, INDPENDENT AUDITORS
We consent to the use of our report dated November 24, 1993 on
the statement of assets and liabilities in Post-Effective
Amendment Number 1 to the Registration Statement (Form N-1A
Number 33-50505 and the related Prospectus and the Supplement
to Statement of Additional Information of Alexander Hamilton
Government Income Fund (a Portfolio of Alexander Hamilton
Funds).
By: ERNST & YOUNG
Ernst & Young
Boston, Massachusetts
July 25, 1994
Exhibit 18 under Form N1-A
Exhibit 99 under Reg.601S-K
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTONPITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR.__________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
July 25, 1994
Alexander Hamilton Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Alexander Hamilton Funds ("Fund") we have
reviewed Post-effective Amendment No. 1 to the Fund's
Registration Statement to be filed with the Securities and
Exchange Commission under the Securities Act of 1933 (File No. 33-
50505). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective
pursuant to said Rule immediately upon filing.
Our review also included an examination of other relevant
portions of the amended 1933 Act Registration Statement of the
Fund and such other documents and records deemed appropriate. On
the basis of this review we are of the opinion that Post-
effective Amendment No. 1 does not contain disclosures which
would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation
letter as a part of the Fund's Registration Statement filed with
the Securities and Exchange Commission under the Securities Act
of 1933 and as part of any application or registration statement
filed under the Securities Laws of the States of the United
States.
Very truly yours,
Houston, Houston & Donnelly
By: Thomas J. Donnelly
TJD:heh
Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601 Reg S-K
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Alex. Hamil. Gov't Inc. Price/
Share= $10.47
Return Since Inception
ending 5/31/94 NAV= $10.00
FYE: November 30
<TABLE>
<CAPTION>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
<S> <C> <C> <C> <C> <C> <C> <C>
2/16/94 95.511 0.000000000 0.00000 $10.00 95.511 $10.47 $1,000.00
2/28/94 95.511 0.021573979 0.00000 $9.85 95.720 $9.85 $942.84
3/31/94 95.720 0.048695741 0.00000 $9.44 96.214 $9.44 $908.26
4/30/94 96.214 0.045736539 0.00000 $9.33 96.686 $9.33 $902.08
5/31/94 96.686 0.048932430 0.00000 $9.31 97.194 $9.31 $904.87
</TABLE>
$1,000 (1+T) = End Value
T = -9.51%
Exhibit 16(i) under Form N-1A
Exhibit 99 under Item 601/ Reg S-K
Alex. Hamil. Govt. Income Yield = 2{($28,198.18 - $3,947.91 )+1)^6-1}=
Computation of SEC Yield 516,816 * $9.75 - 0.00000 )
As of: May 31, 1994
SEC Yield = 5.84%
Dividend and/or Interest
Inc for the 30 days ended $28,198.18
Net Expenses for $3,947.91
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 516,816
Maxium offering price $9.75
per share as of 5-31-94
Undistributed net income 0.00000
Exhibit 16(ii) under Form N-1A
Exhibit 99 under Item 601/Reg S-K
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Alex Hamil. Muni Income Price/
Share= $10.47
Return Since Inception
ending 5/31/94 NAV= $10.00
FYE: November 30
<TABLE>
<CAPTION>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
<S> <C> <C> <C> <C> <C> <C> <C>
3/1/94 95.511 0.000000000 0.00000 $10.00 95.511 $10.47 $1,000.00
3/31/94 95.511 0.024863550 0.00000 $9.26 95.767 $9.26 $886.81
4/30/94 95.767 0.043387611 0.00000 $9.26 96.216 $9.26 $890.96
5/31/94 96.216 0.041028106 0.00000 $9.29 96.641 $9.29 $897.80
</TABLE>
$1,000 (1+T) =
T = -10.22%
Exhibit 16(ii) under Form N-1A
Exhibit 99 under Item 601/Reg S-K
Alex Hamil Muni Income Yield = 2{($21,585.64 - $3,613.07 )+1)^6-1}=
Computation of SEC Yield 476,383 * $9.73 - 0.00000 )
As of: May 31, 1994
SEC Yield = 4.70%
Dividend and/or Interest
Inc for the 30 days ended $21,585.64
Net Expenses for $3,613.07
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 476,383
Maxium offering price $9.73
per share as of 5-31-94
Undistributed net income 0.00000
Tax Equivalent Yield
(assumes individual
does not itemize
on Federal Return)
100 % minus the Federal
taxable % (100%-28%=72%)
30 SEC yield / by the tax
equiv % (0.00% / 72.0%)= 6.53%
Exhibit 16(iii) under Form N-1A
Exhibit 99 under Item 601/Reg S-K
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Alex Hamil. EQ & Gro In Price/
Share= $10.47
Return Since Inception
ending 2/11/94 NAV= $10.00
FYE: November 30
<TABLE>
<CAPTION>
Begin Capital Reinvest Ending Total
DECLARED: QUARTERLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: QUARTERLY Dates Shares /Share /Share /Share Shares Price Value
<S> <C> <C> <C> <C> <C> <C> <C>
2/11/94 95.511 0.000000000 0.00000 $10.00 95.511 $10.47 $1,000.00
3/23/94 95.511 0.020000000 0.00000 $9.95 95.703 $9.95 $952.24
4/30/94 95.703 0.000000000 0.00000 $9.53 95.703 $9.53 $912.05
5/31/94 95.703 0.000000000 0.00000 $9.66 95.703 $9.66 $924.49
</TABLE>
$1000(1+T) = End Value
T = -7.55%
Exhibit 16 (iii) under Form N-1A
Exhibit 99 under Item 601/Reg S-K
Alex EQ & Grow. Income Yield = 2{( $11,153.17 - $4,970.38 )+1)^6-1}=
Computation of SEC Yield 505,045 * $10.12 - 0.01520 )
As of: May 31, 1994
SEC Yield = 1.46%
Dividend and/or Interest
Inc for the 30 days ended $11,153.17
Net Expenses for $4,970.38
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 505,045
Maxium offering price $10.12
per share as of 5-31-94
Undistributed net income 0.01520
