1933 Act File No. 33-50635
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. 4 X
PEACHTREE FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on May 27, 1994 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 November 15, 1994; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of PEACHTREE
FUNDS, which consists of five portfolios, (1) Peachtree Bond
Fund; (2) Peachtree Equity Fund; (3) Peachtree Georgia Tax-
Free Income Fund; (4) Peachtree Government Money Market
Fund; and (5) Peachtree Prime Money Market Fund relates to
all of the Funds except Peachtree Georgia Tax-Free Income
Fund and is comprised of the following:
Note: Although this filing does not relate to Peachtree
Georgia Tax-Free Income Fund, the Cross-Reference Sheet
contains information pertaining to all five portfolios. This
will facilitate the cross reference process to the other
portfolios.
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-5) Cover Page
Item 2. Synopsis (1-5) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information (1-5) Performance Information.
Item 4. General Description of
Registrant (1-5) General Information; (1-
5) Investment Information; (1-
5) Investment Objective; (1-5)
Investment Policies; (3,5)
Investment Risks; (1-2)
Foreign Securities; (1-5)
Investment Limitations.
Item 5. Management of the Fund (1-5) Peachtree Funds
Information; (1-5) Management
of the Trust; (1-5)
Administration of the Trust;
(1-5) Administrative Services;
(1-2, 4-5) Brokerage
Transactions; (1-3) Expenses
of the Fund.
Item 6. Capital Stock and Other
Securities (1-3) Dividends and
Distributions; (4-5)
Dividends; (1-5) Shareholder
Information; (1-5) Voting
Rights; (1-5) Massachusetts
Partnership Law; (1-5) Effect
of Banking Laws; (1-5) Tax
Information; (1-5) Federal
Income Tax; (1-2, 4-5) State
and Local Taxes; (3) State of
Georgia Income and Intangible
Taxes; (3) Other State and
Local Taxes.
Item 7. Purchase of Securities Being
Offered (1-5) Net Asset Value; (1-5)
Investing in the Fund; (1-5)
Share Purchases; (1-5) Minimum
Investment Required; (1-5)
What Shares Cost (1-3)
Reducing the Sales Charge; (1-
5) Systematic Investment
Program; (1-5) Distribution of
Fund Shares; (1-5) Exchanging
Securities for Fund Shares; (1-
5) Certificates and
Confirmations; (1-5) Exchange
Privilege.
Item 8. Redemption or Repurchase (1-5) Redeeming Shares; (1-5)
Redemption Before Purchase
Instruments Clear; (1-3)
Systematic Withdrawal Program;
(1-5) Accounts with Low
Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page (1-5) Cover Page.
Item 11. Table of Contents (1-5) Table of Contents.
Item 12. General Information and
History (1-5) General Information
About the Fund.
Item 13. Investment Objectives and
Policies (1-5) Investment Objective and
Policies.
Item 14. Management of the Fund (1-5) Peachtree Funds
Management.
Item 15. Control Persons and Principal
Holders of Securities (1-5) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-5) Investment Advisory
Services; (1-5) Administrative
Services.
Item 17. Brokerage Allocation (1-2, 4-5) Brokerage
Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered (1-5) Purchasing Shares; (1-5)
Determining Net Asset Value;
(1-5) Exchange Privilege; (1-
5) Redeeming Shares.
Item 20. Tax Status (1-5) Tax Status.
Item 21. Underwriters (1-5) Distribution Plan.
Item 22. Calculation of Performance
Data (1-5) Yield; (1-3) Total
Return; (4-5) Effective Yield;
(3) Tax-Equivalent Yield; (1-
5) Performance Comparisons.
Item 23. Financial Statements......... Filed in Part A
(Supplement to
Prospectus) (1,2,4,5);
To be filed by Amendment
(3)
[LOGO] BANK SOUTH, N.A. the
INVESTMENT ADVISER PEACHTREE FUNDS
3350 CUMBERLAND CIRCLE
ATLANTA, GA 30339
[LOGO] FEDERATED SECURITIES CORP. BOND
Distributor FUND
A subsidiary of FEDERATED INVESTORS Semi-Annual Report
and Supplement to
FEDERATED INVESTORS TOWER Prospectus Dated
PITTSBURGH, PA 15222-3779 February 28, 1994
4041807 (5/94) May 30, 1994
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Shareholder's Report of the Peachtree Bond Fund (the
"Fund") for the semi-annual period ending March 31, 1994. This report provides
you with complete financial information for the Fund, a list of investments for
the Fund and the financial statements.
Over the reporting period, assets in the Peachtree Bond Fund grew to more than
$75 million. The Fund paid more than $568,000 in dividends, or $0.07 per share.
Thank you for your confidence in the Peachtree Bond Fund as a way to put your
money to work earning income. We will continue to keep you informed about your
investment as we remain committed to delivering the highest level of personal
service.
Sincerely,
Edward C. Gonzales
President
May 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The first quarter of 1994 was, to say the least, a very interesting period of
time to be an investor in the bond markets. Interest rates continued the rise
that began during October 1993. Rates began to accelerate their upward climb
after the Federal Reserve raised Federal Funds rates beginning February 4th.
Since mid-October, rates on 30 year U.S. Treasury bonds are up approximately 140
basis points, 10 year note yields are up approximately 175 basis points, and 3
and 5 year note yields are up approximately 195 basis points. There are,
however, some signs that the longer-term interest rates may be peaking.
Commodity prices have declined somewhat and there is evidence of the economy
experiencing slower growth. Utility stocks, which are usually a leading
indicator for bonds (and the stock market) may have bottomed and turned up
slightly over the past few weeks.
The total return for the period from the Fund's inception through the calendar
quarter ended March 31, 1994, was -2.53% based on net asset value, and -5.00%
based on offering price, which includes the sales load.*
The Fund had approximately 44% of its total assets invested in U.S. Treasury and
Agency issues at the end of the quarter. Corporate bonds made up an additional
51% of the total, with the remainder invested in instruments maturing daily.
- ---------
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
PEACHTREE BOND FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 28, 1994
A. Any requests for information, inquiries, purchases, redemptions or
exchanges should be directed to Peachtree Funds Service Center, MC684,
P.O. 4387, Atlanta, Georgia 30302, or telephone 1-404-989-6200 or 1-800-
621-8969.
B. Please insert the following "Financial Highlights" table as page 2
following the "Summary of Fund Expenses" and before the section entitled
"General Information." In addition, please add the heading "Financial
Highlights" to the Table of Contents on page I following the heading
"Summary of Fund Expenses."
PEACHTREE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------
Net investment income 0.07
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.33)
- ------------------------------------------------------------------------------------------------- -----------------
Total from investment operations (0.26)
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.07)
- -------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.00)(c)
- ------------------------------------------------------------------------------------------------- -----------------
Total distributions (0.07)
- ------------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 9.67
- ------------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN** (2.53%)
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------------
Expenses 0.79%(b)
- -------------------------------------------------------------------------------------------------
Net investment income 6.14%(b)
- -------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.23%(b)
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $75,034
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 3 %
- -------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 11, 1994 (start of
performance) to March 31, 1994 (unaudited).
** ]Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(c) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(See Notes which are an integral part of the Financial Statements)
C. Please delete the third sentence under the section entitled "Peachtree Funds
Information-- Adviser's Background" on page 9 and replace it with the
following:
"The principal executive offices of the Adviser are located at 3350 Cumberland
Circle, Atlanta, GA 30339."
D. Please delete the second sentence under the section entitled "Investing in
the Fund--By Telephone" on page 12 and replace with the following:
"Texas residents must purchase shares of the Fund through Bank South Securities
Corporation at 1-404-989-6181 or 1-800-621-8967."
E. Please delete the third and fourth sentences under the section entitled
"Investing in the Fund-- Sales Charge Reallowance" on page 13 and replace
with the following:
"However, the Distributor will, periodically, uniformly offer to pay additional
amounts in the form of cash, or promotional incentives consisting of trips to
sales seminars at luxury resorts, tickets or other items, to all dealers selling
shares of the Fund. Such payments, all or a portion of which may be paid from
the sales charge the Distributor normally retains or any other source available
to it, will be predicated upon the amount of shares of the Fund that are sold by
the dealer."
F. Please delete the last sentence under the section entitled "Redeeming
Shares--By Mail" on page 17 and replace with the following:
"Shareholders should call the Peachtree Funds Service Center at 1-404-989-6200
or 1-800-621-8969 for assistance in redeeming shares by mail."
G. Please insert the following as the last sentence of the first paragraph of
the section entitled "Voting Rights" on page 19 of the prospectus:
"As of May 10, 1994 Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
7,904,737 shares (99.85%) of the Fund, and therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders."
H. Please insert the following financial statements at the end of the
prospectus beginning on page 21. In addition, please add the heading
"Financial Statements" to the Table of Contents on page I, immediately
before "Addresses."
PEACHTREE BOND FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--51.1%
- ---------------------------------------------------------------------------------------------------
AEROSPACE--4.0%
-------------------------------------------------------------------------------------
$ 1,000,000 Boeing Co., 6.35%, 6/15/2003 $ 947,660
-------------------------------------------------------------------------------------
1,000,000 Rockwell International Corp., 8.375%, 2/15/2001 1,067,310
-------------------------------------------------------------------------------------
1,000,000 Rockwell International Corp., 6.75%, 9/15/2002 983,940
------------------------------------------------------------------------------------- -------------
Total 2,998,910
------------------------------------------------------------------------------------- -------------
BANKING--2.9%
-------------------------------------------------------------------------------------
1,000,000 Security Pacific Corp., 6.875%, 2/15/95 1,016,660
-------------------------------------------------------------------------------------
500,000 Suntrust Banks, Inc., 8.875%, 2/1/98 538,195
-------------------------------------------------------------------------------------
650,000 Wachovia Bank Medium Term Notes, 4.25%, 9/20/96 633,470
------------------------------------------------------------------------------------- -------------
Total 2,188,325
------------------------------------------------------------------------------------- -------------
BEVERAGE--0.7%
-------------------------------------------------------------------------------------
500,000 PepsiCo, Inc., 7.75%, 10/1/98 518,575
------------------------------------------------------------------------------------- -------------
CHEMICALS--0.7%
-------------------------------------------------------------------------------------
500,000 du Pont (E.I.) de Nemours & Co., 8.45%, 10/15/96 531,920
------------------------------------------------------------------------------------- -------------
DATA PROCESSING--1.3%
-------------------------------------------------------------------------------------
1,000,000 International Business Machine, 6.375%, 6/15/2000 959,380
------------------------------------------------------------------------------------- -------------
ENERGY--0.7%
-------------------------------------------------------------------------------------
500,000 BP America, Inc., 9.375%, 11/1/2000 557,695
------------------------------------------------------------------------------------- -------------
FINANCE--14.2%
-------------------------------------------------------------------------------------
500,000 American Express Co., 8.75%, 6/15/96 528,980
-------------------------------------------------------------------------------------
1,000,000 Dean Witter, Discover & Co., 6.50%, 11/1/2005 913,400
-------------------------------------------------------------------------------------
1,000,000 Exxon Capital Corp., 7.85%, 8/15/97 1,057,240
-------------------------------------------------------------------------------------
</TABLE>
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FINANCE--CONTINUED
-------------------------------------------------------------------------------------
$ 1,500,000 Ford Motor Credit Co., 6.25%, 2/26/98 $ 1,485,825
-------------------------------------------------------------------------------------
1,000,000 Ford Motor Credit Co., 6.375%, 11/15/2008 908,520
-------------------------------------------------------------------------------------
500,000 General Electric Capital Corp., 8.75%, 11/26/96 538,860
-------------------------------------------------------------------------------------
1,000,000 General Electric Capital Corp., 8.00%, 2/1/97 1,056,930
-------------------------------------------------------------------------------------
1,500,000 International Lease Finance Co., 5.75%, 1/15/96 1,510,500
-------------------------------------------------------------------------------------
1,000,000 Potomac Capital Medium Term Notes, 8.65%, 10/3/98 1,076,790
-------------------------------------------------------------------------------------
1,000,000 Transamerica Finance Corp., 8.125%, 10/15/96 1,048,740
-------------------------------------------------------------------------------------
500,000 U.S. West Capital Funding, Inc., 8.00%, 10/15/96 524,260
------------------------------------------------------------------------------------- -------------
Total 10,650,045
------------------------------------------------------------------------------------- -------------
FOOD--1.4%
-------------------------------------------------------------------------------------
1,000,000 Heinz (H.J.) Co., 6.75%, 10/15/99 1,009,470
------------------------------------------------------------------------------------- -------------
HEALTH CARE--1.3%
-------------------------------------------------------------------------------------
1,000,000 Lilly (Eli) & Co., 6.75%, 11/15/99 1,003,760
------------------------------------------------------------------------------------- -------------
OFFICE EQUIPMENT--1.4%
-------------------------------------------------------------------------------------
1,000,000 Xerox Corp., 8.125%, 4/15/2002 1,048,570
------------------------------------------------------------------------------------- -------------
POLLUTION CONTROL--2.7%
-------------------------------------------------------------------------------------
1,000,000 Waste Management, Inc., 6.25%, 12/15/95 1,013,430
-------------------------------------------------------------------------------------
1,000,000 Waste Management, Inc., 6.375%, 7/1/97 1,011,090
------------------------------------------------------------------------------------- -------------
Total 2,024,520
------------------------------------------------------------------------------------- -------------
PRINTING--0.7%
-------------------------------------------------------------------------------------
500,000 Donnelley R.R. & Sons, 9.125%, 12/1/2000 554,440
------------------------------------------------------------------------------------- -------------
RETAIL--2.8%
-------------------------------------------------------------------------------------
1,000,000 K-Mart Corp., 6.88%, 7/23/99 999,680
-------------------------------------------------------------------------------------
500,000 Wal-Mart Stores, Inc., 9.10%, 7/15/2000 551,305
-------------------------------------------------------------------------------------
500,000 Wal-Mart Stores, Inc., 8.625%, 4/1/2001 546,325
------------------------------------------------------------------------------------- -------------
Total 2,097,310
------------------------------------------------------------------------------------- -------------
</TABLE>
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
SECURITIES--4.8%
-------------------------------------------------------------------------------------
$ 1,500,000 Salomon, Inc., 5.40%, 10/15/98 $ 1,410,720
-------------------------------------------------------------------------------------
2,000,000 Shearson Lehman Hutton Holdings, 8.875%, 11/1/98 2,157,800
------------------------------------------------------------------------------------- -------------
Total 3,568,520
------------------------------------------------------------------------------------- -------------
TOBACCO--2.8%
-------------------------------------------------------------------------------------
500,000 Philip Morris Cos. Inc., 9.75%, 5/1/97 550,165
-------------------------------------------------------------------------------------
1,000,000 Philip Morris Cos. Inc., 7.375%, 2/15/99 1,021,060
-------------------------------------------------------------------------------------
500,000 Philip Morris Cos. Inc., 9.00%, 1/1/2001 549,405
------------------------------------------------------------------------------------- -------------
Total 2,120,630
------------------------------------------------------------------------------------- -------------
U.S. GOVERNMENT--0.7%
-------------------------------------------------------------------------------------
500,000 Gov't. Agency Interest Bearing, 5.312%, 2/25/2024 500,000
------------------------------------------------------------------------------------- -------------
UTILITIES--8.0%
-------------------------------------------------------------------------------------
500,000 Baltimore Gas & Electric Co., 8.40%, 10/15/99 526,930
-------------------------------------------------------------------------------------
100,000 Baltimore Gas & Electric Co., 5.50%, 7/15/2000 93,615
-------------------------------------------------------------------------------------
1,000,000 Florida Power & Light Co., 5.375%, 4/1/2000 932,500
-------------------------------------------------------------------------------------
1,000,000 Hydro Quebec, 7.375%, 2/1/2003 993,680
-------------------------------------------------------------------------------------
1,000,000 Southern California Edison Co., 6.75%, 1/15/2000 997,320
-------------------------------------------------------------------------------------
500,000 Southern California Edison Co., 5.875%, 9/1/2004 452,600
-------------------------------------------------------------------------------------
500,000 Tennessee Valley Authority, 4.60%, 12/15/96 489,640
-------------------------------------------------------------------------------------
1,000,000 Tennessee Valley Authority, 6.25%, 8/1/99 991,700
-------------------------------------------------------------------------------------
500,000 Tennessee Valley Authority, 8.375%, 10/1/99 544,770
------------------------------------------------------------------------------------- -------------
Total 6,022,755
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $39,826,680) 38,354,825
------------------------------------------------------------------------------------- -------------
U.S. GOVERNMENT OBLIGATIONS--14.3%
- ---------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--9.4%
-------------------------------------------------------------------------------------
1,000,000 5.00%, 7/21/97 1,002,400
-------------------------------------------------------------------------------------
1,000,000 5.30%, 3/11/98 1,009,690
-------------------------------------------------------------------------------------
1,000,000 4.38%, 10/23/98 967,600
-------------------------------------------------------------------------------------
</TABLE>
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
U.S. GOVERNMENT OBLIGATIONS--CONTINUED
- ---------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
-------------------------------------------------------------------------------------
$ 1,000,000 9.05%, 4/10/2000 $ 1,115,500
-------------------------------------------------------------------------------------
1,000,000 7.30%, 10/28/2002 995,520
-------------------------------------------------------------------------------------
1,000,000 6.40%, 1/13/2004 935,400
-------------------------------------------------------------------------------------
991,475 7.50%, 11/25/2023 991,475
------------------------------------------------------------------------------------- -------------
Total 7,017,585
------------------------------------------------------------------------------------- -------------
FEDERAL HOME LOAN BANK--1.3%
-------------------------------------------------------------------------------------
1,000,000 5.15%, 3/29/99 1,002,970
------------------------------------------------------------------------------------- -------------
FEDERAL FARM CREDIT BANK--0.7%
-------------------------------------------------------------------------------------
500,000 8.25%, 5/1/2007 515,615
------------------------------------------------------------------------------------- -------------
STUDENT LOAN MARKETING ASSOCIATION--2.9%
-------------------------------------------------------------------------------------
1,500,000 4.625%, 3/2/99 1,474,575
-------------------------------------------------------------------------------------
700,000 3.84%, 3/7/2001 700,847
------------------------------------------------------------------------------------- -------------
Total 2,175,422
------------------------------------------------------------------------------------- -------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST, $10,895,508) 10,711,592
------------------------------------------------------------------------------------- -------------
U.S. TREASURY OBLIGATIONS--30.3%
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES--30.3%
-------------------------------------------------------------------------------------
1,000,000 9.375%, 4/15/96 1,078,180
-------------------------------------------------------------------------------------
1,000,000 7.25%, 8/31/96 1,039,480
-------------------------------------------------------------------------------------
1,000,000 8.00%, 10/15/96 1,058,140
-------------------------------------------------------------------------------------
1,000,000 7.25%, 11/15/96 1,040,680
-------------------------------------------------------------------------------------
3,000,000 8.50%, 5/15/97 3,234,840
-------------------------------------------------------------------------------------
2,000,000 7.875%, 4/15/98 2,130,420
-------------------------------------------------------------------------------------
3,000,000 9.00%, 5/15/98 3,320,910
-------------------------------------------------------------------------------------
100,000 5.00%, 1/31/99 95,017
-------------------------------------------------------------------------------------
3,000,000 8.00%, 8/15/99 3,228,870
-------------------------------------------------------------------------------------
1,000,000 8.50%, 2/15/2000 1,102,060
-------------------------------------------------------------------------------------
2,000,000 8.50%, 11/15/2000 2,210,960
-------------------------------------------------------------------------------------
</TABLE>
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
U.S. TREASURY OBLIGATIONS--CONTINUED
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
-------------------------------------------------------------------------------------
$ 3,000,000 7.75%, 2/15/2001 $ 3,194,820
------------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST, $23,558,025) 22,734,377
------------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENTS--3.1%
- ---------------------------------------------------------------------------------------------------
2,338,106 Cantor Fitzgerald Securities Corp., 3.45%, dated 3/31/94, due 4/5/94
(at amortized cost) (Note 2B) 2,338,106
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $76,618,319) $ 74,138,900
------------------------------------------------------------------------------------- -------------
</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 $76,618,319. The
net unrealized depreciation of investments on a federal tax basis amounts to
$2,479,419, which is comprised of $119,942 appreciation and $2,599,361
depreciation at March 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($75,034,393) at
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, $76,618,319) $ 74,138,900
- ---------------------------------------------------------------------------------------------------
Interest receivable 1,457,960
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 337,001
- --------------------------------------------------------------------------------------------------- -------------
Total assets 75,933,861
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 518,200
- ---------------------------------------------------------------------------------------
Payable to Bank (Note 4) 370,146
- ---------------------------------------------------------------------------------------
Accrued expenses 11,122
- --------------------------------------------------------------------------------------- ----------
Total liabilities 899,468
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 7,758,312 shares of benefical interest outstanding $ 75,034,393
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 77,548,023
- ---------------------------------------------------------------------------------------------------
Unrealized depreciation of investments (2,479,419)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (11,054)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (Note 2C) (23,157)
- --------------------------------------------------------------------------------------------------- -------------
Total $ 75,034,393
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE and Redemption Proceeds Per Share:
($75,034,393 / 7,758,312 shares of beneficial interest outstanding) $9.67
- --------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price:
Offering Price Per Share (100/97.5 of $9.67) $9.92*
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 641,653
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 69,513
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 13,903
- ----------------------------------------------------------------------------------------
Custodian fees (Note 4) 784
- ----------------------------------------------------------------------------------------
Recordkeeper, transfer and dividend disbursing agent fees
and expenses (Note 4) 7,216
- ----------------------------------------------------------------------------------------
Legal fees 883
- ----------------------------------------------------------------------------------------
Printing and postage 867
- ----------------------------------------------------------------------------------------
Insurance premiums 638
- ----------------------------------------------------------------------------------------
Miscellaneous 734
- ---------------------------------------------------------------------------------------- ---------
Total expenses 94,538
- ----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 21,571
- ---------------------------------------------------------------------------------------- ---------
Net expenses 72,967
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 568,686
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (11,054)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (2,479,419)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized loss on investments (2,490,473)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations ($ 1,921,787)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
- --------------------------------------------------------------------------------------------- (UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------
Net investment income $ 568,686
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on investments ($11,054 net loss, as computed for
federal income tax purposes) (11,054)
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (2,479,419)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from operations (1,921,787)
- --------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (568,686)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income (23,157)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from distributions to shareholders (591,843)
- --------------------------------------------------------------------------------------------- -------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------------------------
Proceeds from sales of shares 78,393,227
- ---------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared 591,843
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (1,437,047)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets from Fund share transactions 77,548,023
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets 75,034,393
- ---------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------------- -------------------
End of period $ 75,034,393
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE BOND FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Peachtree 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 five portfolios. The financial statements included herein present
only those of Peachtree Bond Fund (the "Fund"). As of March 31, 1994, Peachtree
Georgia Tax-Free Income Fund was effective but did not have public investment.
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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
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. Corporate bonds (and other fixed income
securities/asset backed securities) are valued at the last sale price
reported on national securities exchanges on that day, if available.
Otherwise, corporate bonds (and other fixed income securities/asset backed
securities) and short-term obligations are valued at the prices 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.
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
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 ("Code"). Distributions to shareholders are
recorded on the ex-dividend date. Distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These distributions do not represent a
return of capital for federal income tax purposes.
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. 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 benefical interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
Shares outstanding, beginning of period --
- ---------------------------------------------------------------------------------------------
Shares sold 7,844,452
- ---------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 60,717
- ---------------------------------------------------------------------------------------------
Shares redeemed (146,857)
- --------------------------------------------------------------------------------------------- -------------------
Shares outstanding, end of period 7,758,312
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Bank South, N.A., the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to .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.
PEACHTREE BOND FUND
- --------------------------------------------------------------------------------
ADMINISTRATION 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 AND SERVICE PLAN--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. 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 shares. The Plan provides that
the Fund may incur distribution expenses up to .75 of 1% of the average daily
net assets of the shares, annually, to compensate FSC.
TRANSFER 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 Fund'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.
The Bank of New York is the Fund's custodian. The fee is based on the level of
the Fund's average net assets for the period plus out-of-pocket expenses.
ORGANIZATION--Organizational expenses incurred by the Trust will be borne
initially by the administrator and are estimated at $40,000. The Trust has
agreed to reimburse the administrator for the organizational expenses during the
five year period following January 7, 1994 (date the Trust first became
effective).
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 76,334,467
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 2,043,199
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
I. Please delete the Investment Adviser's address on the inside back cover
and replace it with the following:
"3350 Cumberland Circle, Atlanta, GA 30339."
PEACHTREE BOND FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
PROSPECTUS
The shares of the Peachtree Bond Fund (the "Fund") offered by this Prospectus
represent interests in a diversified portfolio of Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to achieve current income. The Fund pursues this
objective by investing primarily in a portfolio of long-term bonds and other
fixed income securities.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated February 28,
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 to the Bank South, N.A. (the "Bank") Mutual Funds Center or calling 1-
800-282-6680 extension 4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT ISSUED,
ENDORSED OR GUARANTEED BY, THE BANK OR ANY OF ITS AFFILIATES. SUCH SHARES ARE
NOT ISSUED, INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE BANK IS THE INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.
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.
February 28, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Government Securities 3
Mortgage-Backed Securities 4
ARMS 4
CMOs 5
Asset-Backed Securities 5
Options and Futures 5
Obligations of Foreign Issuers 6
Foreign Government Securities 6
Repurchase Agreements 6
Restricted and Illiquid Securities 6
When-Issued and Delayed Delivery
Transactions 6
Investing in Securities of
Other Investment Companies 6
Lending of Portfolio Securities 7
Average Portfolio Maturity 7
Temporary Investments 7
Foreign Securities Risks 7
Portfolio Turnover 7
Certain Borrowing and Investment Limitations 8
PEACHTREE FUNDS INFORMATION 8
- ------------------------------------------------------
Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 9
Portfolio Manager 9
Distribution of Fund Shares 9
Distribution Plan 9
Administrative Arrangements 10
Administration of the Trust 10
Administrative Services 10
Shareholder Services Plan 10
Custodian 11
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 11
Legal Counsel 11
Independent Auditors 11
Expenses of the Fund 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUND 11
- ------------------------------------------------------
Share Purchases 11
By Telephone 12
By Mail 12
Payment By Check 12
Payment By Wire 12
Minimum Investment Required 12
Systematic Investment Program 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Quantity Discounts and Accumulated
Purchases 13
Letter of Intent 13
Reinvestment Privilege 14
Concurrent Purchases 14
Certificates and Confirmations 14
Dividends and Distributions 14
Purchasing Fund Shares with Securities 14
EXCHANGE PRIVILEGE 15
- ------------------------------------------------------
Peachtree Funds 15
By Telephone 16
REDEEMING SHARES 16
- ------------------------------------------------------
By Telephone 16
By Mail 17
Signatures 17
Receiving Payment 17
Redemption Before Purchase
Instruments Clear 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
Massachusetts Partnership Law 18
EFFECT OF BANKING LAWS 19
- ------------------------------------------------------
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
State and Local Taxes 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
PEACHTREE BOND FUND
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................................... 2.50%
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 Fees (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.......................................................................................... 0.75%
12b-1 Fees(1)........................................................................................... 0.00%
Other Expenses (after waiver)(2)........................................................................ ]0.27%
Total Fund Operating Expenses(3).................................................................... 1.02%
</TABLE>
- ---------
(1) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund can pay up to 0.75% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Fund (which would not have a Rule 12b-1 plan) is created and such
clients' investments in the Fund are converted to such Trust class.
(2) Total Other Expenses are estimated to be 0.28% absent the anticipated
voluntary waiver by the transfer agent.
(3) The Total Fund Operating Expenses are estimated to be 1.03% absent the
anticipated voluntary waiver by the transfer agent.
* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending September 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 "PEACHTREE FUNDS INFORMATION" AND "INVESTING IN THE FUND." WIRE
TRANSFER REDEMPTIONS MAY BE SUBJECT TO AN ADDITIONAL FEE.
<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. As noted in the table above, the Fund charges no
redemption fees................................................................................ $35 $57
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING SEPTEMBER
30, 1994.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
1993. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. This Prospectus relates only to the Trust's Peachtree Bond Fund. The
Fund is designed as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio consisting primarily of
government, mortgage-backed, asset-backed and corporate securities, as well as
collateralized mortgage obligations ("CMOs") and adjustable rate mortgage
securities ("ARMS"). A minimum initial investment of $1,000 is required ($500
for Individual Retirement Accounts ("IRAs")) and subsequent investments must be
in amounts of at least $100. See "Investing in the Fund."
Fund shares are sold at net asset value plus a maximum sales charge of 2.50% and
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve current income. The investment
objective cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a portfolio
of U.S. government, mortgage-backed, asset-backed and corporate bonds and other
securities as well as CMOs and ARMS. Under normal market conditions, the Fund
will invest at least 65% of its assets in bonds. The Fund intends to maintain a
dollar-weighted average portfolio maturity of 15 years or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without the
approval of Fund shareholders. Shareholders will be notified before any material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The securities in which the Fund may invest include,
but are not limited to:
domestic issues of corporate debt obligations, so long as such debt
obligations are rated by one or more nationally recognized statistical
rating organizations ("Rating Agencies") in one of the four highest rating
categories at the time of purchase (e.g., AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or
Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's")) or, if unrated, determined by
Bank South, N.A. (the "Adviser") to be of comparable quality to securities
having such ratings;
commercial paper (including asset-backed commercial paper) which matures
in 270 days or less so long as at least two ratings are high quality
ratings by Rating Agencies. Such ratings
would include: A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's, F-1 or
F-2 by Fitch, or Duff-1 or Duff-2 by Duff & Phelps;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. government, or its agencies or instrumentalities ("Government
Securities");
asset-backed securities in one of the two highest ratings categories by a
Rating Agency, or if unrated, of comparable quality in the judgment of the
Adviser;
U.S. dollar denominated debt obligations of foreign issuers;
repurchase agreements;
time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF"),
which are administered by the Federal Deposit Insurance Corporation
("FDIC"), and certificates of deposit and other time deposits issued by
foreign branches of BIF-insured banks;
bankers' acceptances; and
securities of other investment companies.
Securities rated Baa or BBB, while of investment grade, have speculative
characteristics with respect to the issuer's capacity to pay interest and repay
principal. If an investment grade security loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell the
security from its portfolio; however, the Adviser will endeavor to dispose of
the security as soon as practicable thereafter, taking into account existing
market conditions and the cost of such sale, including potential losses. A
credit rating is not a recommendation to buy, sell or hold securities, and is
subject to change and/or withdrawal by the rating agency.
The Adviser attempts to manage the Fund's total performance, which includes both
changes in principal value of the Fund's portfolio and income earned, by
anticipating opportunities in the capital markets and risks of changes in market
interest rates. When the Adviser expects that market interest rates may decline,
which would cause prices of outstanding bonds to rise, it generally extends the
average maturity of the Fund's portfolio. When the Adviser expects that market
interest rates may rise, which would cause prices of outstanding bonds to
decline, it generally shortens the average maturity of the Fund's portfolio.
Further, the Adviser attempts to improve the Fund's total return by weighing the
relative value of alternative bond issues having similar maturities in selecting
portfolio securities. By actively managing the Fund's portfolio in this manner,
the Adviser seeks to provide capital appreciation during periods of falling
interest rates and protection against capital depreciation during periods of
rising rates.
GOVERNMENT SECURITIES. The types of Government Securities in which the Fund may
invest generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by U.S.
government agencies or instrumentalities. These securities are backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation;
Federal Farm Credit Banks;
Student Loan Marketing Association; and
Federal National Mortgage Association.
MORTGAGE-BACKED SECURITIES. Some of the U.S. Government Securities in which the
Fund will invest can represent an undivided interest in a pool of residential
mortgages or may be collateralized by a pool of residential mortgages
("Mortgage-backed securities"). Mortgage-backed securities have yield and
maturity characteristics corresponding to the underlying mortgages.
Distributions to holders of mortgage-backed securities include both interest and
principal payments. Principal payments represent the amortization of the
principal of the underlying mortgages and any prepayments of principal due to
prepayment, refinancing, or foreclosure of the underlying mortgages. Although
maturities of the underlying mortgage loans may range up to 30 years,
amortization and prepayments substantially shorten the effective maturities of
mortgage-backed securities. Due to these features, mortgage-backed securities
are less effective as a means of "locking-in" attractive long-term interest
rates than fixed-income securities which pay only a stated amount of interest
until maturity, when the entire principal amount is returned. Prepayments, which
become more likely as mortgage interest rates decline, create a need to reinvest
distribution of principal at then-current lower rates. Since comparatively high
interest rates cannot be effectively "locked in", mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
Mortgage-backed securities utilizing ARMS may fluctuate less in value and suffer
fewer prepayments than mortgage-backed securities utilizing fixed rate
mortgages.
ARMS. ARMS are mortgage-backed securities representing interests in adjustable
rather than fixed interest rate mortgages. The Fund invests in ARMS issued by
the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC"), and by non-government and private entities and are actively traded.
The underlying mortgages which collateralize ARMS issued by GNMA are fully
guaranteed by the Federal Housing Administration ("FHA") or Veterans
Administration ("VA"), while those collateralizing ARMS issued by FHLMC or FNMA
are typically conventional residential mortgages conforming to strict
underwriting size and maturity constraints.
CMOS. CMOs are debt obligations collateralized by mortgage loans or
mortgage-backed securities. Typically, CMOs are collateralized by GNMA, FNMA or
FHLMC certificates, but may be collateralized by whole loans or private
mortgage-backed securities.
The Fund will only invest in CMOs which are rated AAA by a Rating Agency, and
which may be: (a) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of mortgages
in which payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. Government Securities; (c) securities in
which the proceeds of the issuance are invested in mortgage securities and the
payment of the principal and interest is supported by the credit of an agency or
instrumentality of the U.S. government; or (d) collateralized by pools of
mortgages or mortgage-backed securities not guaranteed by the U.S. government or
any government agency.
ASSET-BACKED SECURITIES. Asset-backed securities are obligations of trusts or
special purpose corporations that directly or indirectly represent a
participation in, or are secured by and payable from various types of assets. At
the present time, automobile and credit card receivables are among the most
common collateral supporting asset-backed securities. In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans
and is less likely to experience substantial prepayments. As with
mortgage-backed securities, asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties and use
similar credit enhancement techniques.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of asset-backed securities backed by automobile receivables permit the
servicers of such receivables to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related asset-backed securities. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of asset-backed
securities backed by automobile receivables may not have a recorded security
interest in all of the obligations backing such receivables. Therefore, there is
a possibility that recoveries on repossessed collateral may not, in some cases,
be available to support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the Adviser considers any rating
given to such securities, the financial strength of the provider of credit
support, the type and extent of credit enhancement provided, as well as the
documentation and structure of the issue itself and the credit support.
OPTIONS AND FUTURES. The Fund may purchase and sell financial futures contracts
and purchase and sell options on financial futures contracts and on its
portfolio securities.
OBLIGATIONS OF FOREIGN ISSUERS. The Fund may invest in debt obligations of
foreign issuers including foreign governments, foreign governmental agencies, or
supranational institutions. In addition, the Fund may invest in high quality
debt securities issued by corporations subject to the credit limitations listed
above.
FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which
the Fund may invest generally consist of obligations supported by national,
state or provincial governments or similar political subdivisions. Foreign
government securities also include debt obligations of supranational
entities, which include international organizations designed or supported
by governmental entities to promote economic reconstruction or development,
international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development
(the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank.
Foreign government securities also include debt securities of
"quasi-governmental agencies". Debt securities of quasi-governmental
agencies are either debt securities issued by entities which are owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit
and general taxing powers. Further, foreign government securities include
mortgage-related securities issued or guaranteed by national, state or
provincial government instrumentalities, including quasi-governmental
agencies.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker-dealers, and other financial institutions sell securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price including interest. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. Repurchase agreements will be collateralized by
securities having a value equal at all times to at least 100% of the amount of
the securities subject to the repurchase agreement.
RESTRICTED AND ILLIQUID SECURITIES. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause the Fund to miss a price or yield considered to be advantageous.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in the aggregate.
The Fund will invest in other investment companies primarily for the purpose of
investing short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incure certain
expenses, and therefore, any investment by the Fund in shares of another
investment Company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.
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 limit the amount of portfolio securities it may lend to not more than 50%
of the value of its total assets at any time. The Fund will only enter into loan
arrangements with broker-dealers, banks, or other institutions which the Adviser
has determined are creditworthy under guidelines established by the Trustees,
and will receive collateral equal to at least 100% of the value of the
securities loaned at all times.
AVERAGE PORTFOLIO MATURITY. Although the Fund will not maintain a stable net
asset value, the Adviser will seek to limit, to the extent consistent with the
Fund's investment objective of current income, the magnitude of fluctuations in
the Fund's net asset value by limiting the dollar-weighted average maturity of
the Fund's portfolio to 15 years or less. Securities with shorter maturities
generally have less price movement than securities of comparable quality with
longer maturities. In periods of anticipated rising interest rates, a greater
portion of the Fund's assets may be invested in shorter term and variable rate
securities, the value of which are believed to be less sensitive to interest
rate changes.
TEMPORARY INVESTMENTS. From time to time for defensive purposes, the Fund may
invest temporarily in the securities described under "Acceptable Investments"
having short-term maturities.
FOREIGN SECURITIES RISKS. Investments in foreign securities, particularly those
of non-governmental issuers, may involve additional risks not ordinarily
associated with investments in domestic issuers. Specifically, such securities
may be affected by the strength of foreign currencies relative to the U.S.
Dollar, possible expropriation or nationalization, or by political, social,
diplomatic or economic developments and the difficulties of assessing economic
trends in foreign countries. Accounting procedures and government supervision
may be less stringent than those applicable to U.S. companies. Financial
information may be unavailable or less detailed, and interpretation of financial
information prepared under foreign accounting standards more difficult than is
the case of domestic issuers. Foreign securities and securities markets may be
less liquid or more volatile than U.S. securities markets and may offer less
protection to investors. 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. Foreign securities may be subject to foreign
taxes or tax withholding, which may reduce yield, and may be less marketable
than comparable U.S. securities. Transaction costs in foreign securities may be
higher. The 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. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held. The Adviser does not anticipate that the Fund's annual
portfolio turnover rate will exceed 200% under normal market conditions. A high
portfolio turnover rate may lead to increased costs and may also result in
higher taxes paid by the Fund's shareholders.
CERTAIN BORROWING AND INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to 33 1/3% of the value of its total assets and secure such
borrowings with up to 15% of the value of those assets at the time of
borrowing; or
with respect to 75% of its total assets, invest more than 5% of the value
of its total assets in securities of any one issuer (other than cash, cash
items, or securities issued or guaranteed by the U.S. government and its
agencies or instrumentalities, and repurchase agreements collateralized by
such securities or acquire more than 10% of the outstanding voting
securities of any one issuer).
The above investment limitations cannot be changed without shareholder approval.
PEACHTREE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Board" or
"Trustees"). The Board is responsible for managing the Trust's business affairs
and for exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board handles various of the
Board's delegable responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by the Bank as
the Fund's investment adviser (the "Adviser"), subject to direction by the
Board. The Adviser conducts investment research and supervision for the Fund and
is responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund's assets. From time to time, to the extent
consistent with the investment objective, policies and restrictions of the Fund,
the Fund may invest in securities of issuers with which the Adviser has a
lending relationship. However, at this time, the Adviser has no intention to
invest in securities of issuers that have a lending relationship with the
investment Adviser or its affiliates.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by certain other mutual
funds, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser has undertaken to reimburse the Fund,
up to the amount of the advisory fee, for operating expenses in excess of
limitations established by certain states. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the
Fund, but reserves the right to terminate such waiver or reimbursement at
any time at its sole discretion.
ADVISER'S BACKGROUND. The Adviser, a national bank headquartered in
Atlanta, Georgia, is a wholly owned subsidiary of Bank South Corporation, a
Georgia corporation which is a registered bank holding company. The Adviser
serves consumers through its network of banking offices with a full range
of deposit and lending products, as well as investment services. The
principal executive offices of the Adviser are located at 55 Marietta
Street, N.W., Atlanta, GA 30303.
The Adviser has managed discretionary assets for its customers since 1931.
As of September 30, 1993 the Adviser managed in excess of $1 billion of
discretionary assets. Prior to the date hereof, the Adviser has not served
as an investment adviser to mutual funds.
PORTFOLIO MANAGER. Mr. J.M. Johnston, Jr. is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Johnston began at the
Adviser in September of 1992. Mr. Johnston directs the investment
management of the employee benefit plans, fixed income fund, and personal
trusts. He is also responsible for securities analysis for various
industries.
Mr. Johnston began his investment career in 1981. Prior to his affiliation
with the Bank, he spent six years with The Citizens & Southern National
Bank, Atlanta, Georgia as a portfolio manager.
Mr. Johnston holds a Bachelor of Science degree from the University of
Alabama and a Master of Business Administration in Finance from Georgia
State University. He is a member of the Atlanta Society of Financial
Analysts.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. (the "Distributor") is the principal distributor for
shares of the Fund. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies. The
Distributor is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in accordance
with Securities and Exchange Commission ("SEC") Rule 12b-1 under the Investment
Company Act of 1940, as amended, the Fund will pay an amount computed at an
annual rate of up to 0.75% of the average daily net asset value of the shares to
finance any activity which is principally intended to result in the sale of
shares subject to the Plan. Certain trust clients of the Bank, including ERISA
plans, will not be affected by the Plan because the Plan will not be activated
unless and until a second, "Trust" class of shares of the Fund (which would not
have a Rule 12b-1 plan) is created and such trust clients' investments in the
Fund are converted to such Trust class.
The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These financial institutions (including
the Bank) will receive fees from the Distributor based upon shares subject to
the Plan and owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Distributor.
The Fund's Plan is a compensation type plan. As such, the Fund pays the
Distributor the fee described above as opposed to reimbursing the Distributor
for actual expenses incurred. Therefore, the Fund does not pay for amounts
expended by the Distributor in excess of amounts received by it from the Fund,
which may include interest, carrying or other financing charges in connection
with excess amounts expended, or the Distributor's overhead expenses. However,
the Distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.
State securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to certain states' laws.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may also pay administrators a fee
based upon the average net asset value of shares of their customers invested in
the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Fund. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$100,000 per Fund. Federated Administrative Services may voluntarily choose to
waive a portion of its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Fund to provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of the shares. In return
for providing these support services, a financial institution may receive
payments from the Fund at a rate not exceeding 0.25% of the average daily net
assets of the shares benefically owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to,
the following functions: providing office space, equipment, telephone
facilities, and various personnel including clerical, supervisory, and computer,
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client inquiries
regarding the Fund; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests. Certain trust clients of the Bank, including ERISA plans,
will not be affected by the Services Plan because the Services Plan will not be
activated unless and until a second, "Trust" class of shares of the Fund (which
would not have a Services Plan) is created and such trust clients' investments
in the Fund are converted to such Trust class.
CUSTODIAN. The Bank of New York, New York, New York is custodian for the
securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent (the "Transfer Agent") for the shares of, and
dividend disbursing agent for, the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and other
Fund documents for shareholders; registering the Trust, the Fund, and shares of
the Fund with federal and state securities authorities; taxes and commissions;
issuing, purchasing, repurchasing, and redeeming shares; fees for custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing, mailing, auditing, accounting, and legal expenses; reports
to shareholders and governmental agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; insurance premiums; association membership
dues; and such nonrecurring 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 other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be purchased
through the Bank. In connection with the sale of shares of the Fund, the
distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
BY TELEPHONE. To place an order to purchase Fund shares, call the Bank South
Mutual Funds Center toll free at 1-800-282-6680 extension 4550. Texas residents
must purchase shares of the Fund through Bank South Securities Corporation at
404-521-7063. Your purchase order will be taken directly over the telephone. The
order must be place by 4:00 p.m. (Eastern time) for shares to be purchased at
that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to the Fund.
PAYMENT BY CHECK. Mail to Peachtree Bond Fund, c/o Bank South Mutual Funds
Center, MC 16, P.O. Box 4387, Atlanta, Georgia 30302.
PAYMENT BY WIRE. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Fund, the Bank, and the Federal Reserve Banks are open for business.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000 ($500 for
IRAs). Subsequent investments must be in amounts of at least $100. The Fund may
choose to waive its minimum investment requirements from time to time and for
accounts which select the Systematic Investment Program.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in a minimum amount of $100, unless waived. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking or other transaction deposit account and invested in Fund shares at the
net asset value next determined after an order is received by the Bank, plus an
applicable sales charge. A shareholder may apply for participation in this
program through the Bank.
WHAT SHARES COST
Shares of the Fund 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 A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED
<S> <C> <C>
Less than $100,000 2.50% 2.56%
$100,000 but less than $250,000 2.00% 2.04%
$250,000 but less than $500,000 1.50% 1.52%
$500,000 but less than $750,000 1.00% 1.01%
$750,000 but less than $1,000,000 0.50% 0.50%
$1,000,000 and more 0.00% 0.00%
</TABLE>
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which changes (if any) in the value of the Fund's
portfolio securities do not materially affect its net asset value; (ii) days
during which no shares are tendered for redemption and no orders to purchase
shares are received; and (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by certain trust customers of the Bank and
current and retired directors, advisory committee members and employees of the
Bank and its affiliates and their spouses and children under 21.
SALES CHARGE REALLOWANCE. The Bank and any authorized dealer or bank will
normally receive up to 85% of the applicable sales charge as a transaction fee
from its customers, and for sales and/or administrative services performed on
behalf of its customers in connection with the initiation of customer accounts
and purchases of Fund shares. Any portion of the sales charge which is not paid
to the Bank or a dealer will be retained by the Distributor. However, the
Distributor, in its sole discretion, may uniformly offer to permit all dealers
and other institutions selling shares of the Fund, to receive all or a portion
of the amount the Distributor normally retains as a sales charge. If accepted by
the dealer, such additional payments may be in the form of cash or other
promotional incentives, and will be predicated upon the amount of shares of the
Fund or other Peachtree Funds sold by the dealer or other institution.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of shares of the Fund through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on the
previous page, larger purchases reduce the sales charge paid. The Fund will
combine purchases of shares made on the same day by the investor, his spouse,
and his 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 a shareholder already owns
shares having a current value at the public offering price of $90,000 and
purchases $10,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 2.00%,
not 2.50%.
To receive the sales charge reduction, the Bank must be notified by the
shareholder in writing 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 purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund 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
up to 2.50% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Bank must be notified by the shareholder in writing or by the shareholder's
financial institution of the reinvestment in order to eliminate a sales charge.
If the shareholder redeems his shares in the Fund, there may be tax
consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.
To receive this sales charge reduction, the Distributor must be notified by the
shareholder in writing or by the Bank at the time the concurrent purchases are
made. The Fund will reduce the sales charge after it confirms the purchases. See
"What Shares Cost" and "Addresses".
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued unless requested in writing from
the Fund or the Transfer Agent.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends are sent to each shareholder.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date.
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months. Dividends and capital gains will be reinvested in additional
shares on payment dates at the ex-dividend date's net asset value without a
sales charge, unless a shareholder makes written request for cash payments to
the Fund or the Bank.
PURCHASING FUND SHARES WITH SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values its assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
PEACHTREE FUNDS
All shareholders of the Fund are shareholders of Peachtree Funds. Peachtree
Funds currently include the Fund, Peachtree Equity Fund, Peachtree Georgia
Tax-Free Income Fund, Peachtree Prime Money Market Fund, and Peachtree
Government Money Market Fund. Shareholders have easy access to each of the
portfolios of Peachtree Funds through a telephone exchange program. All
Peachtree Funds are advised by the Bank and distributed by the Distributor.
Shareholders may exchange shares of the Fund for shares of the other Peachtree
Funds in the Trust. In addition, shares of the Fund may also be exchanged for
certain other funds designated by the Bank which are distributed by the
Distributor, but are not advised by the Bank ("Federated Funds"). For further
information on the availability of Federated Funds for exchanges, please call
the Bank South Mutual Funds Center at 1-800-282-6680 extension 4550. Shares of
funds with a sales charge may be exchanged at net asset value for shares of
other funds with an equal sales charge or no sales charge. Shares of funds with
a sales charge may be exchanged for shares of funds with a higher sales charge
at net asset value, plus the additional sales charge. Shares of funds with no
sales charge, whether acquired by direct purchase, reinvestment of dividends on
such shares, or otherwise, may be exchanged for shares of funds with a sales
charge at net asset value, plus the applicable sales charge.
When an exchange is made from a fund with a sales charge to a fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends or capital gains on such shares retain the character of
the exchanged shares for purposes of exercising further exchange privileges;
thus, an exchange of such shares for shares of a fund with a sales charge would
be at net asset value.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The Fund reserves the right to terminate the exchange privilege at any time on
60 days notice. Shareholders will be notified if this privilege is terminated. A
shareholder may obtain further information on the exchange privilege by calling
the Bank at 1-800-282-6680 extension 4550.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Bank South Mutual Funds Center at
1-800-282-6680 extension 4550; or to the Distributor. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Fund's Transfer Agent by the Bank and deposited to the
shareholder's mutual fund account before being exchanged. See "Addresses".
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information regarding this service are
available from the Bank. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through the Bank during times of drastic economic or
market changes. If a shareholder cannot contact the Bank by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Peachtree Funds, 55 Marietta Street N.W., Atlanta, Georgia 30303.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Bank
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemption
must be received in proper form and can be made through the Bank or directly to
the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by contacting his
account officer or by calling the Bank South Mutual Funds Center to request the
redemption. (Call 1-800-282-6680 extension 4550.) Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the Bank. Redemption requests to the Bank must be received before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value,
and the Bank will promptly submit such redemption requests and provide written
redemption instructions to the Fund. If, at any time, the Fund should determine
it necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.
An authorization form permitting the Fund to accept telephonic redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service are
available from the Bank. Telephone redemption instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
A shareholder may have the redemption proceeds directly deposited by electronic
funds transfer or wired directly to a domestic commercial bank previously
designated by the shareholder. Wire redemption orders will only be accepted on
days on which the Fund, the Bank and the Federal Reserve Wire System are open
for business. Wire-transferred redemptions may be subject to an additional fee.
In the event of extraordinary economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur, it
is recommended that a redemption request be made in writing and be hand
delivered or sent by overnight mail to your account officer at the Bank.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Bank. The written request should include the shareholder's name, the Fund name,
the account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request to the Bank.
Shareholders should call the Bank for assistance in redeeming shares by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption requesting payment to an address other than that on record with the
Fund, or other than to the shareholder of record must make written redemption
requests with signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.
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.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven calendar
days, after receipt of a proper written redemption request, provided that the
Transfer Agent has received payment for shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or through an Automated Clearing House
("ACH"), the proceeds from the redemption of those shares are not available, and
the shares may not be exchanged, until the Bank is reasonably certain that the
check or clearing house funds have cleared, which could take up to 10 calendar
days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments and the
amount of dividends paid with respect to Fund shares, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in the Fund. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through the Bank.
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, due to
shareholder redemptions, the account balance falls below the required minimum of
$1,000.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund entitles shareholders to one vote in Trustee elections
and other matters submitted to shareholders of the Trust for vote. All shares of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular Fund, only shareholders of that Fund are entitled to
vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances.
Any Trustee may be removed by the Board or by the 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 Trust's
outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders of the Fund for such acts
or obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from assets
of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting or
distributing securities. However, such banking laws and regulations do not
prohibit such a holding company affiliate or bank generally from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from acting as agent for their customers in purchasing securities. The Fund's
Adviser, the Bank, is subject to such banking laws and regulations.
The Bank believes, based on the advice of its counsel, that it may perform the
services for the Fund contemplated by its advisory agreement with the Trust
without violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative advisers and means of continuing available
investment services. In such event, changes in the operation of the Fund may
occur, including possible termination of any automatic or other Fund share
investment and redemption services then being provided by the Bank. It is not
expected that existing shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to the Bank is found)
as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
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 may advertise its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated each day by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a 30-day period
by the maximum offering price per share of the Fund on the last day of the
period. This number is then annualized using semi-annual compounding. The yield
does not necessarily reflect income actually earned by the Fund and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
From time to time, the Fund may advertise its performance using certain
reporting services and/ or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Peachtree Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PEACHTREE
BOND FUND
PROSPECTUS
A Diversified Portfolio of
Peachtree Funds, an Open-End
Management Investment Company
(a Mutual Fund)
February 28, 1994
[LOGO] BANK SOUTH, N.A.
INVESTMENT ADVISER
3350 CUMBERLAND CIRCLE
ATLANTA, GA 30303
3092205A (2/94)
PEACHTREE BOND FUND
(A Portfolio of Peachtree Funds)
- --------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1994
A. Please delete the third sentence of the first paragraph of the cover page
and replace with the following:
"To receive a copy of the prospectus, call Peachtree Funds Service Center
at 1-404-989-6200 or 1-800-621-8969."
B. Please delete the second sentence under the section entitled "Portfolio
Turnover" on page 4 and replace with the following:
"During the period from February 11, 1994 (start of performance) through
March 31, 1994, the Fund's portfolio turnover rate was 3%."
C. Please insert the following as a second paragraph under the section
entitled "Fund Ownership" on page 9:
"As of May 10, 1994 Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
7,904,737 shares (99.85%) of the Fund, and therefore, may, for certain
purposes, be deemed to control the Fund and be able to affect the outcome
of certain matters presented for a vote of shareholders."
D. Please insert the following as the last paragraph in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 9:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Adviser earned $69,513, of which
$21,571 was voluntarily waived."
E. Please insert the following information as the second sentence under the
section entitled "Administrative Services" on page 10:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Fund incurred administrative
service costs of $13,903, none of which was voluntarily waived."
F. Please insert the following as the second paragraph under the section
entitled "Distribution Plan" which begins on page 10:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, there were no distribution fees."
G. Please insert the following information at the end of the section entitled
"Purchasing Shares--Purchasing Fund Shares with Securities on page 11:
"Unless such securities are to be acquired by the Fund in a bona fide
reorganization, statutory merger, or similar transaction, such securities
must meet the investment objective and policies of the Fund, must be
liquid, and must not be subject to restrictions on resale."
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 February 11, 1994 (start of
performance) to March 31, 1994, was (5.00%). Cumulative total return
reflects the Fund's total performance over a specific period of time. This
total return assumes and is reduced by the payment of the maximum sales
load. The Fund's total return is representative of only two months of
investment activity since the Fund's effective date."
I. 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 March 31, 1994 was
4.67%."
May 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
4041807B (5/94)
PEACHTREE BOND FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Peachtree Bond Fund (the "Fund") dated February 28,
1994. This Statement is not a prospectus itself. To receive a copy
of the prospectus, call the Bank South, N.A. (the "Bank") Mutual
Funds Center at
1-800-282-6680 extension 4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE
NOT ISSUED, ENDORSED OR GUARANTEED BY THE BANK OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT
IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE BANK IS INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED
BY FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE
BANK.
Statement dated February 28, 1994
FEDERATED SECURITIES CORP.
--------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
When-Issued and Delayed Delivery
Transactions 1
Futures and Options Transactions 2
Financial Futures Contracts 2
Put Options on Financial Futures Contracts 2
Call Options on Financial Futures Contracts 2
"Margin" in Futures Transactions 3
Purchasing Put Options on Portfolio Securities 3
Writing Covered Call Options on
Portfolio Securities 3
Risks 3
Restricted and Illiquid Securities 3
Lending of Portfolio Securities 4
Weighted Average Portfolio Maturity 4
Portfolio Turnover 4
Investment Limitations 4
PEACHTREE FUNDS MANAGEMENT 7
- ---------------------------------------------------------------
Officers and Trustees 7
The Funds 9
Fund Ownership 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
- ---------------------------------------------------------------
Adviser to the Fund 9
Advisory Fees 9
ADMINISTRATIVE SERVICES 10
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 10
- ---------------------------------------------------------------
PURCHASING SHARES 10
- ---------------------------------------------------------------
Administrative Arrangements 10
Distribution Plan 10
Puchasing Fund Shares with Securities 11
DETERMINING NET ASSET VALUE 11
- ---------------------------------------------------------------
Determining Market Value of Securities 11
EXCHANGE PRIVILEGE 11
- ---------------------------------------------------------------
REDEEMING SHARES 12
- ---------------------------------------------------------------
Redemption in Kind 12
TAX STATUS 12
- ---------------------------------------------------------------
The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12
- ---------------------------------------------------------------
YIELD 12
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 13
- ---------------------------------------------------------------
APPENDIX 14
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Peachtree Bond Fund (the "Fund") is a portfolio in Peachtree Funds (the
"Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated as of September 22, 1993, as amended and restated
dated December 20, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve current income. The investment
objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests primarily in investment grade bonds and other fixed income
securities which include:
domestic issues of corporate debt obligations (rated Baa or better by Moody's
Investors Service, Inc., or BBB or better by Standard & Poor's Corporation,
Fitch Investors Service, Inc. or Duff & Phelps Credit Rating Co.);
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
mortgage-backed securities, which represent an undivided interest in a pool of
residential or other mortgages or may be collateralized by a pool of
residential mortgages;
asset-backed securities, which are obligations of trusts or special purpose
corporations that directly or indirectly represent a participation in, or are
secured by and payable from various types of assets, principally loans, leases
and other receivables and may include asset-backed commercial paper; and
CMOs, which are issued by single-purpose stand-alone finance subsidiaries or
trusts, government agencies, investment banks, or companies related to the
construction industry.
REPURCHASE AGREEMENTS
As collateral for the obligation of the seller to repurchase the securities from
the Fund, the Fund requires its custodian to take possession of the securities
subject to repurchase agreements and these securities are marked to market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that 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 financial
institutions, such as securities broker-dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees ("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash and pledging securities as collateral. In a
reverse repurchase agreement, the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution or broker-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 are maintained until the transaction is settled.
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 its investment objective and policies, not
for investment leverage. 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.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices. No fees or other
expense, 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 securities are
marked to market daily and are maintained until the transaction is settled.
As a matter of policy, the Fund does not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause the segregation of
more than 20% of the total value of its assets at any time.
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 listed put options on futures contracts, and writing call options
on futures contracts. The Fund may also write covered call options on portfolio
securities to attempt to increase its current income. The Fund will maintain its
positions in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An option
position on financial futures contracts may be closed out only on an exchange
which provides a secondary market for options of the same series.
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.
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 could "go long" (agree to
purchase securities in the future at a predetermined price) to hedge against a
decline in market interest rates.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase exchange listed put options on financial futures
contracts. Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price.
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the position.
To do so, it would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in return
for payment of the strike price. If the Fund neither closes out nor exercises an
option, the option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write exchange
listed call options on futures contracts to hedge its portfolio. When the Fund
writes a call option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the fixed
strike price at any time during the life of the option if the option is
exercised. As 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 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 fixed income or indexed 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 substantially offset the decrease in value of the hedged
securities.
The Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not involve the
borrowing of funds by the Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Fund pays or receives
cash, called "variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to market." Variation margin
does not represent a borrowing or loan by the Fund but is instead settlement
between the Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the Fund will
mark to market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect against
price movements in particular securities in its portfolio. A put option gives
the Fund, in return for a premium, the right to sell the underlying security to
the writer (seller) at a specified price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may also write covered call options to generate income. As writer of a
call option, the Fund has the obligation upon exercise of the option during the
option period to deliver the underlying security upon payment of the exercise
price. The Fund may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any additional
consideration).
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 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.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") Staff
position set forth in the adopting release for SEC Rule 144A ("Rule 144A") under
the Securities Act of 1933, as amended (the "1933 Act"). Rule 144A is a
nonexclusive safe-harbor for certain secondary market transactions that provides
an exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. Rule 144A was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
The Fund would 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.
WEIGHTED AVERAGE PORTFOLIO MATURITY
The Fund will determine its dollar-weighted average portfolio maturity by
assigning a "weight" to each portfolio security based upon the pro rata market
value of such portfolio security in comparison to the market value of the entire
portfolio. The remaining maturity of each portfolio security is then multiplied
by its weight, and the results are added together to determine the weighted
average maturity of the portfolio. For purposes of calculating its
dollar-weighted average portfolio maturity, the Fund will treat variable and
floating rate instruments as having a remaining maturity commensurate with the
period remaining until the next scheduled adjustment to the instrument's
interest rate. The Fund limits its dollar-weighted average maturity to 15 years
or less.
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, under normal market conditions, will result in its
annual rate of portfolio turnover exceeding 200%.
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 are necessary for the
clearance of purchases and sales of securities. The deposit or payment by
the Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed, and except to the extent that the Fund may enter into futures
contracts. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permissible borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
For purposes of this limitation, the following are not deemed to be
pledges: margin deposits for the purchase and sale of financial futures
contracts and related options, and segregation or collateral arrangements
made in connection with options activities or the purchase of securities
on a when-issued basis.
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DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if, as a result,
more than 5% of the value of its total assets would be invested in the
securities of that issuer. (For purposes of this limitation, the Fund
considers certificates of deposit and demand and time deposits issued by
a U.S. branch of a domestic bank having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash
items.") Also, the Fund will not acquire more than 10% of the outstanding
voting securities of any one issuer.
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 and its agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase put options
on portfolio securities and on financial futures contracts and related
options as a hedging strategy and not for speculative purposes. In
addition, the Fund reserves the right to hedge the portfolio by entering
into financial futures contracts and to sell calls on financial futures
contracts. The Fund will notify shareholders before such a change in its
operating policies is implemented.
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 which the Fund may purchase
pursuant to 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 the securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or which represent
interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to 50% of the value of its total assets. This shall not prevent the Fund
from purchasing or holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted
by the Fund's investment objective, policies, and limitations or the
Trust's Declaration of Trust.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Except as noted, shareholders will be
notified before any material change in the following limitations becomes
effective.
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 operations of any predecessor.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will not invest more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in the aggregate. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
- --------------------------------------------------------------------------------
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase restricted securities if immediately
thereafter more than 10% of the total assets of the Fund, taken at market
value, would be invested in such securities (except for commercial paper
issued under Section 4(2) of the 1933 Act). See "Restricted and Illiquid
Securities".
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement more than seven days after notice, over-the-counter options,
and certain restricted securities not determined by the Trustees to be
liquid. See "Restricted and Illiquid Securities".
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase the
securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 0.50% of the issuer's securities together own more
than 5% of the issuer's securities.
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 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 net assets would be invested in premiums on open put
option positions.
The Fund has no present intention to borrow money in excess of 5% of the total
value of its net assets during its first fiscal year. The Fund has no present
intention of investing more than 5% of its net assets in foreign securities or
options and fixtures.
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.
Each fund of the Trust has the ability to issue more than one class of shares.
The Fund does not consider the issuance of separate classes of shares to
constitute an issue of "senior securities" within the meaning of the investment
limitations set forth below.
To comply with registration requirements in certain states, the Fund (1) will
limit the aggregate value of the assets underlying covered call options or put
options written by the Fund to not more than 25% of its net assets, (2) will
limit the premiums paid for options purchased by the Fund to 20% of its net
assets, and (3) will limit the margin deposits on futures contracts entered into
by the Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification.)
PEACHTREE FUNDS MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Bank South, Federated
Investors, Federated Securities Corp., Federated Services Company, Federated
Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Trustee Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director AEtna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company. Mr. Donahue is the father
of J. Christopher Donahue, Vice President of the Trust.
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee or Managing
Associates, Inc., Realtors General Partner of the Funds; formerly President, Naples Property
3255 Tamiami Trail North Management, Inc.
Naples, FL
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc. (an
One PNC Plaza-23rd Floor engineering firm); Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; formerly, Vice Chairman and Director, PNC Bank, N.A. and PNC Bank
Corp. and Director, Ryan Homes, Inc.
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
Edward L. Flaherty, Jr. Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower Treasurer President and Treasurer, Federated Advisers, Federated Management and
Pittsburgh, PA and Trustee Federated Research; Trustee, Federated Services Company; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of the Funds.
</TABLE>
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<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace and RAND Corporation, Online Computer
Learning Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
Charles L. Davis, Jr. Vice President Vice President, Federated Administrative Services; Vice President and
Federated Investors Tower and Assistant Assistant Treasurer of some of the Funds; formerly Vice President and
Pittsburgh, PA Treasurer Director of Investor Relations, MNC Financial, Inc. and Vice President,
Product Management, MNC Financial, Inc.
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Tower Federated Management, and Federated Research; Trustee, Federated
Pittsburgh, PA Services Company; President and Director, Federated Administrative
Services; President or Vice President of the Funds; Director, Trustee,
or Managing General Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director, Federated Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
John W. McGonigle Vice President and Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Tower Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Director,
Federated Administrative Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance Com-
pany and President of its Federated Research Division.
</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 Board's Executive Committee. The Executive Committee of the Board
of Trustees handles various of the delegable responsibilities of the Board of
Trustees between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
FT Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Intermediate Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term Trust,
Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management; Money Market
Obligations; Money Market Trust; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet
Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
Peachtree Funds' Declaration of Trust provides that the Trustees are not liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Bank serves as the Fund's investment adviser (the "Adviser"). 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 Trust.
- --------------------------------------------------------------------------------
ADVISORY FEES
For its advisory services, the Adviser 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
2.50% per year of the first $30 million of average net assets, 2.00% per
year of the next $70 million of average net assets, and 1.50% 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 expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. John A. Staley, IV, an officer of the Trust, holds approximately 15%
of the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser and other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their offering price on days on which the New York Stock
Exchange and Federal Reserve Wire System are open for business. The procedure
for purchasing shares of the Fund is explained in the prospectus under
"Investing in the Fund."
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Fund, assist
clients in changing dividend options, account designations, and addresses, and
providing such other services as the Fund may reasonably request.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule 12b-1
which was promulgated by the SEC pursuant to the Investment Company Act of 1940,
as amended (the "Act"). The Plan provides for payment of fees to the Distributor
to finance any activity which is principally intended to result in the sale of
the Fund's shares subject to the Plan. Such activities may include the
advertising and marketing of shares of the Fund; preparing, printing, and
distributing prospectuses and sales literature to prospective shareholders,
brokers, or administrators; and implementing and operating the Plan. Pursuant to
the Plan, the Distributor may pay fees to brokers and others for such services.
The Trustees expect that the adoption of the Plan will assist the Fund in
selling 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 thereby assist the
Fund in seeking to achieve its investment objective.
PURCHASING FUND SHARES WITH SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values it assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities, other than options, are
determined as follows:
as provided by an independent pricing service;
for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service; or
at fair value as determined in good faith by the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices.
Pricing services may consider:
yield;
quality;
coupon rate;
maturity;
type of issue;
trading characteristics; and
other market data.
The Fund will value futures contracts, options, put options on futures and
financial futures at their market values established by the exchanges at the
close of option trading on such exchanges unless the Trustees determine in good
faith that another method of valuing option positions is necessary to appraise
their fair value.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders of the Fund may exchange shares of the Fund for shares of other
funds advised by the Bank and certain other funds designated by the Bank and
distributed by the Distributor, subject to certain conditions. Exchange
procedures are explained in the Prospectus under "Exchange Privilege."
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."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by SEC Rule 18f-1 under the Act under which
each fund is obligated to redeem shares for any one shareholder in cash only up
to the lesser of $250,000 or 1% of the Fund's net asset value during any 90-day
period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
derive less than 30% of its gross income from 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
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders 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 monthly
reinvestment of all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a 30-day period by the maximum offering price per share of the Fund on the
last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The 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 offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return. From
time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices. These may include
the following:
LIPPER ANALYTICAL SERVICES, INC., ranks funds in various categories by making
comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in offering price over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "U.S. government
funds" category in advertising and sales literature.
SHEARSON LEHMAN GOVERNMENT/CORPORATE (Total) index is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly issued
by the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and publicly issued, fixed-rate,
non-convertible domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine years. Tracked
by Shearson Lehman Hutton, Inc., the index calculates total returns for one-
month, three-month, twelve-month, and ten-year periods, and year-to-date.
SALOMON BROTHERS AAA-AA CORPORATE INDEX calculates total returns of
approximately 775 issues which include long-term high grade domestic corporate
taxable bonds, rated AAA-AA with maturities of twelve years or more and
companies in industry, public utilities, and finance.
MERRILL LYNCH CORPORATE & GOVERNMENT MASTER INDEX is an unmanaged index
comprised of approximately 4,821 issues which include corporate debt
obligations rated BBB or better and publicly issued, non-convertible domestic
debt of the U.S. government or any agency thereof. These quality parameters are
based on composites of ratings assigned by Standard and Poor's Corp. and
Moody's Investors Service. Only bonds with a minimum maturity of one year are
included.
MERRILL LYNCH CORPORATE MASTER INDEX is an unmanaged index comprised of
approximately 4,356 corporate debt obligations rated BBB or better. These
quality parameters are based on composites of ratings assigned by Standard and
Poor's Corp. and Moody's Investors Service. Only bonds with a minimum maturity
of one year are included.
SALOMON BROTHERS BROAD INVESTMENT-GRADE ("BIG") BOND INDEX is designed to
provide the investment-grade bond manager with an all-inclusive universe of
institutionally traded U.S. Treasury, agency, mortgage and corporate securities
which can be used as a benchmark. The BIG Index is market
capitalization-weighted and includes all fixed rate bonds with a maturity of
one year or longer and a minimum of $50-million amount outstanding at entry
($200 million for mortgage coupons) and remain in the index until their amount
falls below $25 million.
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.
Investors may use such indices or reporting services in addition to the Fund's
prospectus to obtain a more complete view of the Fund's performance before
investing. Of course, when comparing performance of the Fund to any index,
conditions such as composition of the index and prevailing market conditions
should be considered in assessing the significance of such comparisons.
When comparing funds using reporting services or total return and yield,
investors should take into consideration any relevant differences in funds such
as permitted portfolio compositions and methods used to value portfolio
securities and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
NR--Not rated by Moody's.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment.
NR--NR indicates that Fitch does not rate the specific issue.
- --------------------------------------------------------------------------------
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
DUFF & PHELPS CREDIT RATING CO. LONG-TERM DEBT RATINGS
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA--High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
A--Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.
BBB--Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
COMMERCIAL PAPER RATINGS
STANDARD AND POOR'S CORPORATION
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.
P-1--Issuers rated PRIME-1 (for related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1 repayment
capacity will normally be evidenced by the following characteristics:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternative liquidity.
P-2--Issuers rated PRIME-2 (for related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
FITCH INVESTORS SERVICE, INC.
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
DUFF & PHELPS CREDIT RATING CO.
DUFF 1+--Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
DUFF 1--Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1---High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
GOOD GRADE
DUFF 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
A CREDIT RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD SECURITIES, AND IS
SUBJECT TO CHANGE AND/OR WITHDRAWAL BY THE RATING AGENCY.
3092205B (1/94)
[LOGO] BANK SOUTH, N.A. the
INVESTMENT ADVISER PEACHTREE FUNDS
3350 CUMBERLAND CIRCLE
ATLANTA, GA 30339
[LOGO] FEDERATED SECURITIES CORP. EQUITY
Distributor FUND
A subsidiary of FEDERATED INVESTORS Semi-Annual Report
and Supplement to
FEDERATED INVESTORS TOWER Prospectus Dated
PITTSBURGH, PA 15222-3779 February 28, 1994
4041808 (5/94) May 30, 1994
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Shareholder's Report of the Peachtree Equity Fund
(the "Fund") for the semi-annual period ending March 31, 1994. This report
provides you with complete financial information for the Fund, a list of
investments for the Fund and the financial statements.
Over the reporting period, assets in the Peachtree Equity Fund grew to more than
$71 million. The Fund paid more than $207,000 in dividends, or $0.03 per share.
Thank you for your confidence in the Peachtree Equity Fund as a way to take
advantage of the long-term growth potential of stocks. We will continue to keep
you informed about your investment as we remain committed to delivering the
highest level of personal service.
Sincerely,
Edward C. Gonzales
President
May 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Since this Fund's inception on February 14, 1994, the equity market has been
under pressure as the Federal Reserve began a series of Federal Funds and
Discount Rate increases on February 4, 1994. The economy in general has shown
good strength; inflation, however, has not shown a significant increase as
evidenced by the most recent release of the Consumer Price Index at a 1.2%
annualized rate. We believe it will not be necessary for the Fed to continue its
aggressive approach of increasing short term rates. The equity market, after
correcting 8%-10%, could do somewhat better in the near term although we remain
cautious with respect to the investment of new capital.
The total return, for the period from the Fund's inception through the calendar
quarter ended March 31, 1994, was -4.33% based on net asset value and -7.92%
based on offering price, which includes the sales load.*
The investments made by the Fund were represented by 68 stocks diversified
throughout 20 industry segments. Stocks in the cyclical industries have done
well such as the Fund's largest holding, Caterpillar, Inc. More recently the
portfolio managers have emphasized the energy, health care and finance sectors.
Finally, the technology and telecommunications areas are beginning to look
attractive and will be increased should they continue to become more reasonably
priced.
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
PEACHTREE EQUITY FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 28, 1994
A. Any requests for information, inquiries, purchases, redemptions or
exchanges should be directed to Peachtree Funds Service Center, MC 684,
P.O. Box 4387, Atlanta, Georgia 30302, or telephone 1-404-989-6200
or 1-800-621-8969.
B. Please insert the following "Financial Highlights" table as page 2
following the "Summary of Fund Expenses" and before the section entitled
"General Information." In addition, please add the heading "Financial
Highlights" to the Table of Contents on page I following the heading
"Summary of Fund Expenses."
PEACHTREE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income 0.03
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.46)
- --------------------------------------------------------------------------------------------- ---------------------
Total from investment operations (0.43)
- --------------------------------------------------------------------------------------------- ---------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.00)(c)
- --------------------------------------------------------------------------------------------- ---------------------
Total distributions (0.03)
- --------------------------------------------------------------------------------------------- ---------------------
NET ASSET VALUE, END OF PERIOD $ 9.54
- --------------------------------------------------------------------------------------------- ---------------------
TOTAL RETURN** (4.33%)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------
Expenses 0.77%(b)
- ---------------------------------------------------------------------------------------------
Net investment income 2.16%(b)
- ---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.23%(b)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $71,397
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 0%
- ---------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 11, 1994 (start of
performance) to March 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(c) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(See Notes which are an integral part of the Financial Statements)
C. Please delete the third sentence under the section entitled "Peachtree
Funds Information-- Adviser's Background" on page 5 and replace it with
the following:
"The principal executive offices of the Adviser are located at 3350 Cumberland
Circle, Atlanta, GA 30339."
D. Please delete the second sentence under the section entitled "Investing
in the Fund--By Telephone" on page 9 and replace with the following:
"Texas residents must purchase shares of the Fund through Bank South Securities
Corporation at 1-404-989-6181 or 1-800-621-8967."
E. Please delete the third and fourth sentence under the section entitled
"Investing in the Fund-- Sales Charge Reallowance" on page 10 and replace
with the following:
"However, the Distributor will, periodically, uniformly offer to pay additional
amounts in the form of cash or promotional incentives consisting of trips to
sales seminars at luxury resorts, tickets or other items, to all dealers selling
shares of the Fund. Such payments, all or a portion of which may be paid from
the sales charge the Distributor normally retains or any other source available
to it, will be predicated upon the amount of shares of the Fund that are sold by
the dealer."
F. Please delete the last sentence under the section entitled "Redeeming
Shares--By Mail" on page 14 and replace with the following:
"Shareholders should call the Peachtree Funds Service Center at 1-404-989-6200
or 1-800-621-8969 for assistance in redeeming shares by mail."
G. Please insert the following as the last sentence of the first paragraph
of the section entitled "Voting Rights" on page 16 of the prospectus:
"As of May 10, 1994 Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
8,152,237 shares (99.82%) of the Fund, and therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders."
H. Please insert the following financial statements at the end of the
prospectus beginning on page 18. In addition, please add the heading
"Financial Statements" to the Table of Contents on page I, immediately
before "Addresses."
PEACHTREE EQUITY FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
SHORT-TERM U.S. GOVERNMENT OBLIGATION--2.4%
- ---------------------------------------------------------------------------------------------------
$ 1,750,000 Federal Home Loan Mortgage Corp., 3.4246%, 4/5/94 (at amortized cost) $ 1,749,335
------------------------------------------------------------------------------------- -------------
COMMON STOCKS--95.6%
- ---------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--4.7%
-------------------------------------------------------------------------------------
30,000 American Express Co. 828,750
-------------------------------------------------------------------------------------
20,000 Hilton Hotels Corp. 1,140,000
-------------------------------------------------------------------------------------
24,000 McDonalds Corp. 1,365,000
------------------------------------------------------------------------------------- -------------
Total 3,333,750
------------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--3.7%
-------------------------------------------------------------------------------------
42,000 Echlin, Inc. 1,239,000
-------------------------------------------------------------------------------------
13,000 General Motors Corp. 702,000
-------------------------------------------------------------------------------------
10,000 General Motors Corp. "H" 330,000
-------------------------------------------------------------------------------------
10,000 Superior Industries International, Inc. 348,750
------------------------------------------------------------------------------------- -------------
Total 2,619,750
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--7.9%
-------------------------------------------------------------------------------------
20,000 Anheuser-Busch Companies, Inc. 1,060,000
-------------------------------------------------------------------------------------
17,000 Gillette Co. 1,075,250
-------------------------------------------------------------------------------------
24,000 Pepsico, Inc. 879,000
-------------------------------------------------------------------------------------
20,000 Philip Morris Companies, Inc. 1,015,000
-------------------------------------------------------------------------------------
20,000 Ralston Purina Co. 910,000
-------------------------------------------------------------------------------------
34,000 Sara Lee Corp. 739,500
------------------------------------------------------------------------------------- -------------
Total 5,678,750
------------------------------------------------------------------------------------- -------------
</TABLE>
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
CONSUMER SERVICES--3.6%
-------------------------------------------------------------------------------------
19,000 Reuters Holdings PLC $ 1,634,000
-------------------------------------------------------------------------------------
30,000 Times Mirror Co. 933,750
------------------------------------------------------------------------------------- -------------
Total 2,567,750
------------------------------------------------------------------------------------- -------------
ELECTRONIC TECHNOLOGY--8.4%
-------------------------------------------------------------------------------------
20,000 Boeing Co. 897,500
-------------------------------------------------------------------------------------
10,000 Hewlett Packard Co. 821,250
-------------------------------------------------------------------------------------
40,000 Loral Corp. 1,500,000
-------------------------------------------------------------------------------------
6,000 Motorola, Inc. 607,500
-------------------------------------------------------------------------------------
28,000 Texas Instruments, Inc. 2,163,000
------------------------------------------------------------------------------------- -------------
Total 5,989,250
------------------------------------------------------------------------------------- -------------
ENERGY--7.3%
-------------------------------------------------------------------------------------
21,000 Amerada Hess Corp. 939,750
-------------------------------------------------------------------------------------
23,000 Amoco Corp. 1,221,875
-------------------------------------------------------------------------------------
20,000 Baker Hughes, Inc. 355,000
-------------------------------------------------------------------------------------
20,000 Mapco, Inc. 1,192,500
-------------------------------------------------------------------------------------
15,000 Royal Dutch Petroleum Co. 1,490,625
------------------------------------------------------------------------------------- -------------
Total 5,199,750
------------------------------------------------------------------------------------- -------------
FINANCIAL--6.6%
-------------------------------------------------------------------------------------
32,000 Barnett Banks, Inc. 1,412,000
-------------------------------------------------------------------------------------
9,000 Chubb Corp. 658,125
-------------------------------------------------------------------------------------
22,000 Morgan (J.P.) & Co., Inc. 1,377,750
-------------------------------------------------------------------------------------
28,000 Suntrust Banks, Inc. 1,249,500
------------------------------------------------------------------------------------- -------------
Total 4,697,375
------------------------------------------------------------------------------------- -------------
FOOD & BEVERAGE--1.4%
-------------------------------------------------------------------------------------
58,000 Flowers Industries, Inc. 986,000
------------------------------------------------------------------------------------- -------------
HEALTH TECHNOLOGY--4.8%
-------------------------------------------------------------------------------------
35,000 Abbott Laboratories 931,875
-------------------------------------------------------------------------------------
</TABLE>
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
HEALTH TECHNOLOGY--CONTINUED
-------------------------------------------------------------------------------------
15,000 Bausch & Lomb, Inc. $ 705,000
-------------------------------------------------------------------------------------
11,000 Bristol-Meyers Squibb Co. 567,875
-------------------------------------------------------------------------------------
25,000 Merck & Co., Inc. 743,750
-------------------------------------------------------------------------------------
9,000 Pfizer, Inc. 486,000
------------------------------------------------------------------------------------- -------------
Total 3,434,500
------------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--2.9%
-------------------------------------------------------------------------------------
32,000 Equitable Resources, Inc. 1,112,000
-------------------------------------------------------------------------------------
18,000 Schlumberger Ltd. 951,750
------------------------------------------------------------------------------------- -------------
Total 2,063,750
------------------------------------------------------------------------------------- -------------
NON-ENERGY MINERALS--4.8%
-------------------------------------------------------------------------------------
16,000 Aluminum Co. of America 1,146,000
-------------------------------------------------------------------------------------
10,000 Nucor Corp. 606,250
-------------------------------------------------------------------------------------
39,000 Weyerhaeuser Co. 1,686,750
------------------------------------------------------------------------------------- -------------
Total 3,439,000
------------------------------------------------------------------------------------- -------------
PROCESS INDUSTRIES--7.9%
-------------------------------------------------------------------------------------
36,000 American Business Products, Inc. 864,000
-------------------------------------------------------------------------------------
25,000 American Cyanamid Co. 1,162,500
-------------------------------------------------------------------------------------
63,000 Archer-Daniels-Midland Co. 1,512,000
-------------------------------------------------------------------------------------
30,000 Avery Dennison Corp. 836,250
-------------------------------------------------------------------------------------
50,000 Smithkline Beecham PLC 1,250,000
------------------------------------------------------------------------------------- -------------
Total 5,624,750
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--15.6%
-------------------------------------------------------------------------------------
20,000 Caterpillar, Inc. 2,247,500
-------------------------------------------------------------------------------------
30,000 Eaton Corp. 1,736,250
-------------------------------------------------------------------------------------
23,000 Emerson Electric Co. 1,365,625
-------------------------------------------------------------------------------------
14,000 General Electric Co. 1,394,750
-------------------------------------------------------------------------------------
18,000 Masco Corp. 567,000
-------------------------------------------------------------------------------------
</TABLE>
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING--CONTINUED
-------------------------------------------------------------------------------------
4,000 Minnesota Mining & Manufacturing Co. $ 396,500
-------------------------------------------------------------------------------------
55,000 Ryland Group, Inc. 1,155,000
-------------------------------------------------------------------------------------
16,000 Scherer R.P. Corp. 586,000
-------------------------------------------------------------------------------------
32,000 Tenneco, Inc. 1,688,000
------------------------------------------------------------------------------------- -------------
Total 11,136,625
------------------------------------------------------------------------------------- -------------
RETAIL TRADE--7.5%
-------------------------------------------------------------------------------------
40,000 Circuit City Stores, Inc. 795,000
-------------------------------------------------------------------------------------
26,000 Home Depot, Inc. 1,059,500
-------------------------------------------------------------------------------------
50,000 K Mart Corp. 906,250
-------------------------------------------------------------------------------------
45,000 Limited, Inc. 939,375
-------------------------------------------------------------------------------------
25,000 Penney (J.C.) Co., Inc. 1,321,875
-------------------------------------------------------------------------------------
10,000 Tandy Corp. 362,500
------------------------------------------------------------------------------------- -------------
Total 5,384,500
------------------------------------------------------------------------------------- -------------
SERVICE--1.3%
-------------------------------------------------------------------------------------
40,000 WMX Technologies 950,000
------------------------------------------------------------------------------------- -------------
TELEPHONE--2.7%
-------------------------------------------------------------------------------------
10,000 LDDS Communications, Inc. 240,000
-------------------------------------------------------------------------------------
28,000 Telefonos De Mexico SA 1,687,000
------------------------------------------------------------------------------------- -------------
Total 1,927,000
------------------------------------------------------------------------------------- -------------
TRANSPORTATION--1.2%
-------------------------------------------------------------------------------------
15,000 Union Pacific Corp. 851,250
------------------------------------------------------------------------------------- -------------
UTILITIES--3.3%
-------------------------------------------------------------------------------------
20,000 American Telephone & Telegraph Co. 1,025,000
-------------------------------------------------------------------------------------
15,000 Duke Power Co. 541,875
-------------------------------------------------------------------------------------
33,000 MCI Communications Corp. 771,375
------------------------------------------------------------------------------------- -------------
Total 2,338,250
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $71,634,283) 68,222,000
------------------------------------------------------------------------------------- -------------
</TABLE>
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENTS--1.6%
- ---------------------------------------------------------------------------------------------------
$ 700,000 Prudential Home Mortgage, 3.45%, dated 3/30/94, due 4/4/94 $ 700,000
-------------------------------------------------------------------------------------
450,000 Cantor, Fitzgerald Securities Corp., 3.45%, dated 3/31/94, due 4/5/94 450,000
------------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) (NOTE 2B) 1,150,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $74,533,618) $ 71,121,335
------------------------------------------------------------------------------------- -------------
</TABLE>
The cost of investments for federal tax purposes amounts to $74,533,618. The
net unrealized depreciation on a federal tax basis amounts to $3,412,283, which
is comprised of $960,606 appreciation and $4,372,889 depreciation at March 31,
1994.
* The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($71,397,157) at
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, 74,533,618) $ 71,121,335
- ---------------------------------------------------------------------------------------------------
Cash 69,164
- ---------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 240,000
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 158,514
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 143,300
- --------------------------------------------------------------------------------------------------- -------------
Total assets 71,732,313
- --------------------------------------------------------------------------------------------------- -------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 260,000
- ---------------------------------------------------------------------------------------
Payable for Fund shares redeemed 66,100
- ---------------------------------------------------------------------------------------
Accrued expenses 9,056
- --------------------------------------------------------------------------------------- ----------
Total liabilities 335,156
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 7,483,771 shares of beneficial interest outstanding $ 71,397,157
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $ 74,829,941
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (3,412,283)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (8,700)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (11,801)
- --------------------------------------------------------------------------------------------------- -------------
Total $ 71,397,157
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, and Redemption Proceeds Per Share:
($71,397,157 / 7,483,771 shares of beneficial interest outstanding) $9.54
- --------------------------------------------------------------------------------------------------- -------------
Computation of Offering Price:
Offering Price Per Shares (100/96.25 of $9.54) $9.91*
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividend income $ 252,309
- ---------------------------------------------------------------------------------------------------
Interest income 13,142
- --------------------------------------------------------------------------------------------------- -------------
Total income (Note 2C) 265,451
- --------------------------------------------------------------------------------------------------- -------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 67,925
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 13,585
- ----------------------------------------------------------------------------------------
Custodian fees (Note 4) 544
- ----------------------------------------------------------------------------------------
Recordkeeper, transfer and dividend disbursing agent fees and expenses (Note 4) 5,825
- ----------------------------------------------------------------------------------------
Insurance premiums 581
- ----------------------------------------------------------------------------------------
Legal fees 723
- ----------------------------------------------------------------------------------------
Printing and postage 710
- ----------------------------------------------------------------------------------------
Miscellaneous 673
- ---------------------------------------------------------------------------------------- ---------
Total expenses 90,566
- ----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 20,981
- ---------------------------------------------------------------------------------------- ---------
Net expenses 69,585
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 195,866
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (8,700)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (3,412,283)
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain (loss) on investments (3,420,983)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (3,225,117)
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------
Net investment income $ 195,866
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on investments ($8,700 net loss,
as computed for federal income tax purposes) (8,700)
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (3,412,283)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from operations (3,225,117)
- --------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (195,866)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income (11,801)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from distributions to shareholders (207,667)
- --------------------------------------------------------------------------------------------- -------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------------------------
Proceeds from sales of shares 75,753,906
- ---------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 207,667
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (1,131,632)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets from Fund share transactions 74,829,941
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets 71,397,157
- ---------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------------- -------------------
End of period $ 71,397,157
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Peachtree Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end, management company. The Trust consists of
five portfolios. The financial statements included herein present only those of
Peachtree Equity Fund (the "Fund"). As of March 31, 1994, Peachtree Georgia
Tax-Free Income Fund was effective but did not have public investment. 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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
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. Listed equity securities are valued at the
last sales price reported on national securities exchanges. Unlisted
securities and bonds are generally valued at prices 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
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
daily. Bond premium and discount, if applicable, are amortized as required
by the Internal Revenue Code ("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 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. 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
MARCH 31, 1994*
<S> <C>
Shares outstanding, beginning of period --
- ---------------------------------------------------------------------------------------------
Shares sold 7,577,073
- ---------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 20,746
- ---------------------------------------------------------------------------------------------
Shares redeemed (114,048)
- --------------------------------------------------------------------------------------------- -------------------
Shares outstanding, end of period 7,483,771
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Bank South, N.A., the Fund's investment adviser (the "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.
ADMINISTRATION 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.
PEACHTREE EQUITY FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. 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 shares. The Plan provides that
the Fund may incur distribution expenses up to 0.75 of 1% of the average daily
net assets of the shares, annually, to compensate FSC.
TRANSFER 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 Fund'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.
The Bank of New York is the Fund's custodian. The fee is based on the level of
the Fund's average net assets for the period plus out-of-pocket expenses.
ORGANIZATION EXPENSES--Organizational expenses incurred by the Trust will be
borne initially by the administrator and are estimated at $40,000. The Trust has
agreed to reimburse the administrator for the organizational expenses during the
five year period following January 7, 1994 (date the Trust first became
effective).
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 71,786,283
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 143,300
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
I. Please delete the Investment Adviser's address on the inside back cover
and replace it with the following:
"3350 Cumberland Circle, Atlanta, GA 30339."
PEACHTREE EQUITY FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
PROSPECTUS
The shares of the Peachtree Equity Fund (the "Fund") offered by this Prospectus
represent interests in a diversified portfolio of Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to achieve long-term growth of capital and income. The
Fund pursues this objective by investing primarily in a portfolio of common
stocks of United States issuers.
This Prospectus contains the information you should read and know before you
invest in the Fund. Keep this Prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated February 28,
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 to the Bank South, N.A. (the "Bank") Mutual Funds Center or calling
1-800-282-6680 extension 4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT ISSUED,
ENDORSED OR GUARANTEED BY, BANK SOUTH, N.A. OR ANY OF ITS AFFILIATES. SUCH
SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
THE BANK IS THE INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.
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.
February 28, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Common Stocks 2
Other Corporate Securities 3
U.S. Government Securities 3
Options and Futures 3
Foreign Securities 3
Repurchase Agreements 3
When-Issued and Delayed Delivery
Transactions 3
Investing in Securities of
Other Investment Companies 3
Lending of Portfolio Securities 4
Temporary Investments 4
Restricted and Illiquid Securities 4
Certain Borrowing and Investment Limitations 4
PEACHTREE FUNDS INFORMATION 5
- ------------------------------------------------------
Management of the Trust 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 5
Adviser's Background 5
Portfolio Manager 6
Distribution of Fund Shares 6
Distribution Plan 6
Administrative Arrangements 7
Administration of the Trust 7
Administrative Services 7
Shareholder Services Plan 7
Custodian 7
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 8
Legal Counsel 8
Independent Auditors 8
Expenses of the Fund 8
Brokerage Transactions 8
NET ASSET VALUE 8
- ------------------------------------------------------
INVESTING IN THE FUND 8
- ------------------------------------------------------
Share Purchases 8
By Telephone 9
By Mail 9
Payment by Check 9
Payment by Wire 9
Minimum Investment Required 9
Systematic Investment Program 9
What Shares Cost 9
Purchases at Net Asset Value 10
Sales Charge Reallowance 10
Reducing the Sales Charge 10
Quantity Discounts and Accumulated
Purchases 10
Letter of Intent 11
Reinvestment Privilege 11
Concurrent Purchases 11
Certificates and Confirmations 11
Dividends and Distributions 12
Purchasing Fund Shares with Securities 12
EXCHANGE PRIVILEGE 12
- ------------------------------------------------------
Peachtree Funds 12
By Telephone 13
REDEEMING SHARES 14
- ------------------------------------------------------
By Telephone 14
By Mail 14
Signatures 14
Receiving Payment 15
Redemption Before Purchase Instruments
Clear 15
Systematic Withdrawal Program 15
Accounts with Low Balances 15
SHAREHOLDER INFORMATION 16
- ------------------------------------------------------
Voting Rights 16
Massachusetts Partnership Law 16
EFFECT OF BANKING LAWS 16
- ------------------------------------------------------
TAX INFORMATION 17
- ------------------------------------------------------
Federal Income Tax 17
State and Local Taxes 17
PERFORMANCE INFORMATION 17
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
PEACHTREE EQUITY FUND
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................................... 3.75%
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 Fees (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.......................................................................................... 0.75%
12b-1 Fees(1)........................................................................................... 0.00%
Other Expenses (after waiver)(2)........................................................................ 0.25%
Total Fund Operating Expenses(3).................................................................... 1.00%
</TABLE>
(1) As of the date of this Prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund can pay up to 0.75% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Fund (which would not have a Rule 12b-1 plan) is created and such trust
clients' investments in the Fund are converted to such Trust class.
(2) Total Other Expenses are estimated to be 0.27% absent the anticipated
voluntary waiver by the transfer agent.
(3) The Total Fund Operating Expenses are estimated to be 1.02% absent the
anticipated voluntary waiver by the transfer agent.
* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending September 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 "PEACHTREE FUNDS INFORMATION" AND "INVESTING IN THE FUND." WIRE
TRANSFER REDEMPTIONS MAY BE SUBJECT TO AN ADDITIONAL FEE.
<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. As noted in the table above, the Fund charges no
redemption fees................................................................................ $47 $68
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING SEPTEMBER
30, 1994.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
1993. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
This Prospectus relates only to the Trust's Peachtree Equity Fund. The Fund is
designed as a convenient means of accumulating an interest in a professionally
managed, diversified portfolio consisting primarily of common stocks of United
States issuers. A minimum initial investment of $1,000 is required ($500 for
Individual Retirement Accounts ("IRAs")), and subsequent investments must be in
amounts of at least $100. See "Investing in the Fund".
Fund shares are sold at net asset value plus a maximum sales charge of 3.75% and
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve long-term growth of capital and
income. The investment objective cannot be changed without the approval of the
Fund's shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in the securities of high
quality companies. Emphasis is placed on stocks where the market price of the
stock appears low when compared to present earnings. The Fund's investment
approach is based on the conviction that, over the long term, the economy will
continue to expand and develop and that this economic growth will be reflected
in the growth of the revenues and earnings of publicly-held corporations. Unless
indicated otherwise, the investment policies of the Fund may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
COMMON STOCKS. The Fund invests primarily in common stocks of companies
selected by the Fund's investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects of
the companies. Ordinarily, these companies will be in the top 30% of their
industries with regard to revenues. However, other factors such as product
position, market share, potential earnings growth, or asset values will be
considered by the investment adviser and may outweigh revenues. At least 65% of
the Fund's portfolio will be invested in common stocks, unless it is in a
defensive position.
OTHER CORPORATE SECURITIES. The Fund may invest in preferred stocks,
convertible securities, notes rated A or better by Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff & Phelps Credit Rating Co. or Fitch
Investors Service, Inc., or securities deemed by the investment adviser to be of
comparable quality to securities having such ratings, and warrants of these
companies. Corporate fixed income securities are subject to market and credit
risks. If any note invested in by the Fund loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell or
otherwise dispose of the security, but may consider doing so.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. government securities
and obligations of U.S. government agencies and instrumentalities.
OPTIONS AND FUTURES. The Fund may purchase and sell financial futures contracts
and purchase and sell options on financial futures contracts and on its
portfolio securities.
FOREIGN SECURITIES. The Fund may invest in foreign securities which are traded
publicly in the United States. Investments in foreign securities, particularly
those of non-governmental issuers, involve considerations which are not
ordinarily associated with investments in domestic issuers. These considerations
include the possibility of expropriation or nationalization, exchange rate
fluctuations, foreign taxation and withholding, 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.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker-dealers and other financial institutions sell securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price including interest. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. Repurchase agreements will be collateralized by
securities having a value equal at all times to at least 100% of the amount of
the securities subject to the repurchase agreement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase portfolio
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause the Fund to miss a price or yield considered to be advantageous.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of total assets in any one investment company, or
invest more than 10% of total assets in investment companies in the aggregate.
The Fund will invest in other investment companies primarily for the purpose of
investing short-term cash which has not yet been invested in other portfolio
instruments. It should be noted that investment companies incur certain
expenses, and therefore, any investment by the Fund in Shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The adviser will waive its investment
advisory fee on assets invested in securities of open-end investment companies.
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 limit the amount of portfolio securities it may lend to not more than 50%
of its total assets at any time. The Fund will only enter into loan arrangements
with broker-dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Board of
Trustees, and will receive collateral equal to at least 100% of the value of the
securities loaned at all times.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest
temporarily in cash and money market instruments during times of unusual market
conditions. These investments include the following:
prime commercial paper, including master demand notes;
instruments of domestic and U.S. dollar denominated foreign banks and
savings and loans (such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances);
securities issued and/or guaranteed as to payment of principal and
interest by the U.S. government, its agencies, or instrumentalities;
repurchase agreements;
securities of other investment companies; and
other short-term money market instruments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law. However, the Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice to 15% of its net assets.
CERTAIN BORROWING AND INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to 33 1/3% of the value of its total assets and secure such
borrowings with up to 15% of the value of those assets at the time of
borrowing;
engage in short sales; or
with respect to 75% of its total assets, invest more than 5% in securities
of any one issuer other than cash, cash items, or securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, or acquire more
than 10% of the outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without Fund shareholder
approval.
PEACHTREE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Board" or
"Trustees"). The Board is responsible for managing the Trust's business affairs
and for exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board handles various of the
Board's delegable responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by the Bank as
the Fund's investment adviser (the "Adviser"), subject to direction by the
Board. The Adviser conducts investment research and supervision for the Fund and
is responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund's assets. From time to time, to the extent
consistent with the investment objective, policies and restrictions of the Fund,
the Fund may invest in securities of issuers with which the Adviser has a
lending relationship. However, at this time, the Adviser has no intention to
invest in securities of issuers that have a lending relationship with the
investment Adviser or its affiliates.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by certain other mutual
funds, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser has undertaken to reimburse the Fund,
up to the amount of the advisory fee, for operating expenses in excess of
limitations established by certain states. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the
Fund, but reserves the right to terminate such waiver or reimbursement at
any time at its sole discretion.
ADVISER'S BACKGROUND. The Adviser, a national bank headquartered in
Atlanta, Georgia, is a wholly owned subsidiary of Bank South Corporation, a
Georgia corporation which is a registered bank holding company. The Adviser
serves consumers through its network of banking offices with a full range
of deposit and lending products, as well as investment services. The
principal executive offices of the Adviser are located at 55 Marietta
Street, N.W., Atlanta, GA 30303.
The Adviser has managed discretionary assets for its customers since 1931.
As of September 30, 1993 the Adviser managed in excess of $1 billion of
discretionary assets. Prior to the date hereof, the Bank has not served as
an investment adviser to mutual funds.
PORTFOLIO MANAGER. Mr. W. Shelton Prince is primarily responsible for the
day-to-day management of the Fund's portfolio. Mr. Prince joined the
Adviser in March of 1968, and was
promoted to Vice President in November 1979, and Senior Investment Manager
in February 1993. He is responsible for the management of large personal
trusts, foundations, and employee benefit accounts as well as the Adviser's
equity and common trust funds for both institutional and personal trusts.
He serves on the Adviser's Portfolio Strategy and Trust Fiduciary
Committees.
Mr. Prince's educational background includes a Bachelor of Science degree
from North Georgia College and a Master of Business Administration in both
Finance and Management from Georgia State University. He is a member of the
Atlanta Society of Financial Analysts.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. (the "Distributor") is the principal distributor for
shares of the Fund. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies. The
Distributor is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in accordance
with Securities and Exchange Commission ("SEC") Rule 12b-1 under the Investment
Company Act of 1940, as amended, the Fund will pay an amount computed at an
annual rate of up to 0.75% of the average daily net asset value of the shares to
finance any activity which is principally intended to result in the sale of
shares subject to the Plan. Certain trust clients of the Bank, including ERISA
plans, will not be affected by the Plan because the Plan will not be activated
unless and until a second, "Trust" class of shares of the Fund (which would not
have a Rule 12b-1 plan) is created and such trust clients' investments in the
Fund are converted to such Trust class.
The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These financial institutions (including
the Bank ) will receive fees from the Distributor based upon shares subject to
the Plan and owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Distributor.
The Fund's Plan is a compensation type plan. As such, the Fund pays the
Distributor the fee described above as opposed to reimbursing the Distributor
for actual expenses incurred. Therefore, the Fund does not pay for amounts
expended by the Distributor in excess of amounts received by it from the Fund,
which may include interest, carrying or other financing charges in connection
with excess amounts expended, or the Distributor's overhead expenses. However,
the Distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.
State securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to certain states' securities laws.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may also pay administrators a fee
based upon the average net asset value of shares of their customers invested in
the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Fund. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$100,000 per Fund. Federated Administrative Services may voluntarily choose to
waive a portion of its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Fund to provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of the shares. In return
for providing these support services, a financial institution may recieve
payments from the Fund at a rate not exceeding 0.25% of the average daily net
assets of the shares beneficially owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Fund; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Fund reasonably requests.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Fund (which would not have a
Services Plan) is created and such trust clients' investments in the Fund are
converted to such Trust class.
CUSTODIAN. The Bank of New York, New York, New York is custodian for the
securities and cash of the Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent for the shares of, and dividend disbursing agent
for the Fund. It also provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. The expenses borne by the Fund include, but are not limited to, the
cost of: organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and other
Fund documents for shareholders; registering the Trust, the Fund, and shares of
the Fund with federal and state securities authorities; taxes and commissions;
issuing, purchasing, repurchasing, and redeeming shares; fees for custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing, mailing, auditing, accounting, and legal expenses; reports
to shareholders and governmental agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; insurance premiums; association membership
dues; and such nonrecurring and extraordinary items as may arise.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Fund's Board.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Fund shares may be purchased
through the Bank. In connection with the sale of shares of the Fund, the
Distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
BY TELEPHONE. To place an order to purchase Fund shares, call Bank South Mutual
Funds Center toll free at 1-800-282-6680 extension 4550. Texas residents must
purchase shares of the Fund through Bank South Securities Corporation at
404-521-7063. Your purchase order will be taken directly over the telephone. The
order must be placed by 4:00 p.m. (Eastern time) for shares to be purchased at
that day's price.
BY MAIL. Provide a letter of instruction to the Fund indicating your purchase
order, including the dollar amount of your order, your account title and/or
name, and your account number, and include a check made payable to the Fund.
PAYMENT BY CHECK. Mail to Peachtree Equity Fund, c/o Bank South Mutual Fund
Center, MC 16, P.O. Box 4387, Atlanta, Georgia 30302.
PAYMENT BY WIRE. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Fund, the Bank and the Federal Reserve Banks are open for business.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000 ($500 for
IRAs). Subsequent investments must be in amounts of at least $100. The Fund may
choose to waive its minimum investment from time to time and for accounts which
select the Systematic Investment Program.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, shareholders may add to their investment on a
regular basis in minimum amounts of $100, unless waived. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking or other transaction deposit account and invested in Fund shares at the
net asset value next determined after an order is received by the Bank, plus an
applicable sales charge. A shareholder may apply for participation in this
program through the Bank.
WHAT SHARES COST
Shares of the Fund 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 A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED
<S> <C> <C>
Less than $100,000 3.75% 3.90%
$100,000 but less than $250,000 3.25% 3.38%
$250,000 but less than $500,000 2.75% 2.83%
$500,000 but less than $750,000 2.25% 2.30%
$750,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 but less than $2,000,000 0.50% 0.50%
$2,000,000 or more 0.00% 0.00%
</TABLE>
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which changes (if any) in the value of the Fund's
portfolio securities do not materially affect its net asset value; (ii) days
during which no shares are tendered for redemption and no orders to purchase
shares are received; and (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by certain trust customers of the Bank and
current and retired directors, advisory committee members and employees of the
Bank and its affiliates and their spouses and children under 21.
SALES CHARGE REALLOWANCE. The Bank and any authorized dealer or bank will
normally receive up to 85% of the applicable sales charge as a transaction fee
from its customers and for sales and/or administrative services performed on
behalf of its customers in connection with the initiation of customer accounts
and purchases of Fund shares. Any portion of the sales charge which is not paid
to the Bank or a dealer will be retained by the Distributor. However, the
Distributor, in its sole discretion, may uniformly offer to permit all dealers
and other institutions selling shares of the Fund, to receive all or a portion
of the amount the Distributor normally retains as a sales charge. If accepted by
the dealer, such additional payments may be in the form of cash or other
promotional incentives, and will be predicated upon the amount of shares of the
Fund or other Peachtree Funds sold by the dealer or other institution.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of shares of the Fund through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on the
previous page, larger purchases reduce the sales charge paid. The Fund will
combine purchases of shares made on the same day by the investor, his spouse,
and his 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 a shareholder already owns
shares having a current value at the public offering price of $90,000 and
purchases $10,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 3.25%,
not 3.75%.
To receive the sales charge reduction, the Bank must be notified by the
shareholder in writing 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 purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund 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
up to 3.75% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Bank must be notified by the shareholder in writing or by the shareholder's
financial institution of the reinvestment in order to eliminate a sales charge.
If the shareholder redeems his shares in the Fund, there may be tax
consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $30,000 in one of the other
funds in the Trust with a sales charge and $70,000 in this Fund, the sales
charge would be reduced.
To receive this sales charge reduction, the Distributor must be notified by the
shareholder in writing or by the Bank at the time the concurrent purchases are
made. The Fund will reduce the sales charge after if confirms the purchases. See
"What Shares Cost" and "Addresses".
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent for the Fund maintains a share account for each shareholder
of record. Share certificates are not issued unless requested in writing from
the Fund or the Transfer Agent.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends are sent to each shareholder.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date.
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months. Dividends and capital gains will be reinvested in additional
shares on payment dates at the ex-dividend date's net asset value without a
sales charge, unless a shareholder makes written request for cash payments to
the Fund or the Bank.
PURCHASING FUND SHARES FOR SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values its assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
PEACHTREE FUNDS
All shareholders of the Fund are shareholders of Peachtree Funds. Peachtree
Funds currently include the Fund, Peachtree Bond Fund, Peachtree Georgia
Tax-Free Income Fund,Peachtree Prime Money Market Fund, and Peachtree Government
Money Market Fund. Shareholders have easy access to each of the portfolios of
Peachtree Funds through a telephone exchange program. All Peachtree Funds are
advised by the Bank and distributed by the Distributor.
Shareholders may exchange shares of the Fund for shares of the other Peachtree
Funds. In addition, shares of the Fund may also be exchanged for certain other
funds designated by the Bank which are distributed by the Distributor but are
not advised by the Bank ("Federated Funds"). For further information on the
availability of Federated Funds for exchanges, please call the Bank South Mutual
Funds Center at 1-800-282-6680 extension 4550. Shares of funds with a sales
charge may be exchanged at net asset value for shares of other funds with an
equal sales charge or no sales charge. Shares of funds with a sales charge may
be exchanged for shares of funds with a higher sales charge at net asset value,
plus the additional sales charge. Shares of funds with no sales charge, whether
acquired by direct purchase, reinvestment of dividends on such shares, or
otherwise, may be exchanged for shares of funds with a sales charge at net asset
value, plus the applicable sales charge.
When an exchange is made from a fund with a sales charge to a fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends or capital gains on such shares retain the character of
the exchanged shares for purposes of exercising further exchange privileges;
thus, an exchange of such shares for shares of a fund with a sales charge would
be at net asset value.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The Fund reserves the right to terminate the exchange privilege at any time on
60 days notice. Shareholders will be notified if this privilege is terminated. A
shareholder may obtain further information on the exchange privilege by calling
the Bank.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Bank South Mutual Funds Center at
1-800-282-6680 extension 4550 or to the Distributor. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Fund's Transfer Agent by the Bank and deposited to the
shareholder's mutual fund account before being exchanged. See "Addresses".
An authorization form permitting the Fund to accept telephone exchanges must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information regarding this service are
available from the Bank. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through the Bank, during times of drastic economic or
market changes. If a shareholder cannot contact the Bank, by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Peachtree Funds, 55 Marietta Street, N.W., Atlanta, Georgia 30303.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Bank
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemption
must be received in proper form and can be made through the Bank, or directly to
the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by contacting his
account officer or by calling the Bank South Mutual Funds Center to request the
redemption. Call 1-800-282-6680 extension 4550). Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the Bank. Redemption requests to the Bank must be received before 4:00 p.m.
(Eastern time) in order for shares to be redeemed at that day's net asset value,
and the Bank will promptly submit such redemption requests and provide written
redemption instructions to the Fund. If, at any time, the Fund should determine
it necessary to terminate or modify this method of redemption, shareholders
would be promptly notified.
An authorization form permitting the Fund to accept telephonic redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service are
available from the Bank. Telephone redemption instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
A shareholder may have the redemption proceeds directly deposited by electronic
funds transfer or wired directly to a domestic commercial bank previously
designated by the shareholder. Wire redemption orders will only be accepted on
days on which the Fund, the Bank and the Federal Reserve Wire System are open
for business. Wire-transferred redemptions may be subject to an additional fee.
In the event of extraordinary economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur, it
is recommended that a redemption request be made in writing and be hand
delivered or sent by overnight mail to your account officer at the Bank.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Bank. The written request should include the shareholder's name, the Fund name,
the account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request to the Bank.
Shareholders should call the Bank for assistance in redeeming shares by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption requesting payment to an address other than that on record with the
Fund, or other than to the shareholder of record must make written redemption
requests with signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.
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.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven calendar
days, after receipt of a proper written redemption request, provided that the
Transfer Agent has received payment for shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check or through an Automated Clearing House
("ACH"), the proceeds from the redemption of those shares are not available, and
the shares may not be exchanged, until the Bank is reasonably certain that the
check or clearing house funds have cleared, which could take up to 10 calendar
days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments and the
amount of dividends paid with respect to Fund shares, redemptions may reduce,
and eventually deplete, the shareholder's investment in the Fund. For this
reason, payments under this program should not be considered as yield or income
on the shareholder's investment in the Fund. To be eligible to participate in
this program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through the Bank.
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, due to
shareholder redemptions, the account balance falls below the required minimum of
$1,000.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund entitles shareholders to one vote in Trustee elections
and other matters submitted to shareholders of the Trust for vote. All shares of
each portfolio in the Trust have equal voting rights except that, in matters
affecting only a particular Fund, only shareholders of that Fund are entitled to
vote. As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances.
Any Trustee may be removed by the Board of Trustees or by the 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
Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders of the Fund for such acts
or obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from assets
of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling, or distributing the
shares of a registered, open-end investment company continuously engaged in the
issuance of its shares, and prohibit banks generally from underwriting or
distributing securities. However, such banking laws and regulations do not
prohibit such a holding company affiliate or banks generally from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from acting as agent for their customers in purchasing securities. The Fund's
Adviser, the Bank, is subject to such banking laws and regulations.
The Bank believes, based on the advice of its counsel, that it may perform the
services for the Fund contemplated by its advisory agreement with the Trust
without violating of the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Fund.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative advisers and means of continuing available
investment services. In such event, changes in the operation of the Fund may
occur, including possible termination of any automatic or other Fund share
investment and redemption services then being provided by the Bank. It is not
expected that existing shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to the Bank is found)
as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal income tax because it intends to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
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 may advertise its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated each day by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a 30-day period
by the maximum offering price per share of the Fund on the last day of the
period. This number is then annualized using semi-annual compounding. The yield
does not necessarily reflect income actually earned by the Fund and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
From time to time, the Fund may advertise its performance using certain
reporting services and/ or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Peachtree Equity Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PEACHTREE
EQUITY FUND
Prospectus
A Diversified Portfolio of
Peachtree Funds, an Open-End
Management Investment Company
(a Mutual Fund)
February 28, 1994
[LOGO] BANK SOUTH, N.A.
INVESTMENT ADVISER
3350 CUMBERLAND CIRCLE
ATLANTA, GA 30303
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3092102A (2/94)
PEACHTREE EQUITY FUND
(A Portfolio of Peachtree Funds)
- --------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1994
A. Please delete the third sentence of the first paragraph of the cover page
and replace with the following:
"To receive a copy of the prospectus, call Peachtree Funds Service Center
at 1-404-989-6200 or
1-800-621-8969."
B. Please delete the second sentence under the section entitled "Portfolio
Turnover" on page 5 and replace with the following:
"During the period from February 11, 1994 (start of performance) through
March 31, 1994, the Fund's portfolio turnover rate was 0%."
C. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 10:
"As of May 10, 1994, Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
8,152,237 shares (99.82%) of the Fund, and therefore, may, for certain
purposes, be deemed to control the Fund and be able to affect the outcome
of certain matters presented for a vote of shareholders."
D. Please insert the following as the last paragraph in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 10:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Adviser earned $67,925, of which
$20,981 was voluntarily waived."
E. Please insert the following information as the second sentence under the
section entitled "Administrative Services" on page 11:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Fund incurred administrative
service costs of $13,585, none of which was voluntarily waived."
F. Please insert the following as the second paragraph under the section
entitled "Distribution Plan" which begins on page 11:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, there were no distribution fees."
G. Please insert the following information as the second paragraph under the
section entitled "Purchasing Shares--Purchasing Fund Shares with
Securities" on page 12:
"Unless such securities are to be acquired by the Fund in a bona fide
reorganization, statutory merger, or similar transaction, such securities
must meet the investment objective and policies of the Fund, must be
liquid, and must not be subject to restrictions on resale."
H. Please insert the following information as the first paragraph under the
section entitled "Total Return" on page 13:
"The Fund's cumulative total return from February 11, 1994 (start of
performance) to March 31, 1994, was (7.92%). Cumulative total return
reflects the Fund's total performance over a specific period of time. This
total return assumes and is reduced by the payment of the maximum sales
load. The Fund's total return is representative of only two months of
investment activity since the Fund's effective date."
I. Please insert the following information as the first paragraph under the
section entitled "Yield" on page 13:
"The Fund's yield for the thirty-day period ended March 31, 1994 was
1.37%."
May 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
4041808B (5/94)
PEACHTREE EQUITY FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Peachtree Equity Fund (the "Fund") dated February 28,
1994. This Statement is not a prospectus itself. To receive a copy of
the prospectus, call the Bank South, N.A. (the "Bank") Mutual Funds
Center at 1-800-282-6680 extension 4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE
NOT ISSUED, ENDORSED OR GUARANTEED BY THE BANK OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE BANK IS INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.
Statement dated February 28, 1994
FEDERATED SECURITIES CORP.
--------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Other Permitted Investments 1
Futures and Options Transactions 1
Temporary Investments 3
When-Issued and Delayed Delivery
Transactions 4
Restricted and Illiquid Securities 4
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Lending of Portfolio Securities 5
Portfolio Turnover 5
Investment Limitations 5
PEACHTREE FUNDS MANAGEMENT 7
- ---------------------------------------------------------------
Officers and Trustees 7
The Funds 10
Fund Ownership 10
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10
- ---------------------------------------------------------------
Adviser to the Fund 10
Advisory Fees 10
ADMINISTRATIVE SERVICES 11
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 11
- ---------------------------------------------------------------
PURCHASING SHARES 11
- ---------------------------------------------------------------
Administrative Arrangements 11
Distribution Plan 11
Purchasing Fund Shares with Securities 12
DETERMINING NET ASSET VALUE 12
- ---------------------------------------------------------------
Determining Market Value of Securities 12
EXCHANGE PRIVILEGE 12
- ---------------------------------------------------------------
REDEEMING SHARES 12
- ---------------------------------------------------------------
Redemption in Kind 12
TAX STATUS 13
- ---------------------------------------------------------------
The Fund's Tax Status 13
Shareholders' Tax Status 13
TOTAL RETURN 13
- ---------------------------------------------------------------
YIELD 13
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 13
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Peachtree Equity Fund (the "Fund") is a portfolio in Peachtree Funds (the
"Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated as of September 22, 1993, as amended and restated
dated December 20, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve long-term growth of capital and
income. The investment objective cannot be changed without shareholder approval.
TYPES OF INVESTMENTS
The Fund invests principally in common stocks of United States issuers. Although
the Fund may invest in other securities and in money market instruments, it is
the Fund's policy under normal market conditions to invest at least 65% of its
portfolio in equity securities.
OTHER PERMITTED INVESTMENTS
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities which may be exchanged
or converted into a predetermined number of shares 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 or units consisting of "usable" bonds and warrants or a
combination of the features of several of these securities. The
investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for different
investment objectives.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in
which, in the investment adviser's opinion, the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objectives. Otherwise, the Fund may hold or
trade convertible securities. In selecting convertible securities for the
Fund, the Fund's adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument, and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible
security, the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the underlying
common stock at the time of the issuance of the warrant) valid for a
specific period of time. Warrants may have a life ranging from less than
a year to twenty years or may be perpetual. However, most warrants have
expiration dates after which they are worthless. In addition, if the
market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the market
price of the underlying common stock.
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 listed put options on futures contracts, and writing call options
on futures contracts. The Fund may also write covered call options on portfolio
securities to attempt to increase its current income. The Fund will maintain its
positions in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An option
position on financial futures contracts may be closed out only on an exchange
which provides a secondary market for options of the same series.
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 may call for the delivery of shares of common
stocks represented in a particular index.
In addition, the Fund reserves the right to hedge the portfolio by
entering into financial futures contracts. The Fund will notify
shareholders before such a change in its operating policies is
implemented.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase exchange listed put options on financial futures
contracts. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures contract
entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
exchange listed call options on futures contracts to hedge its portfolio.
When the Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling
a futures contract) at the fixed strike price at any time during the life
of the option if the option is exercised. As stock prices fall, causing
the prices of futures to go down, the Funds' 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 fixed income or
indexed 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 substantially offset the
decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
"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 in known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. A put
option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during
the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may also write covered call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. The Fund may only sell call options either
on securities held in its portfolio or on securities which it has the
right to obtain without payment of further consideration (or has
segregated cash in the amount of any additional consideration).
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 stock price movements. In
these events, the Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into options
transactions, there is no assurance that a liquid secondary market on an
exchange or otherwise will exist for any particular futures contract or
option at any particular time. The Fund's ability to establish and close
out futures and options positions depends on this secondary market.
TEMPORARY INVESTMENTS
MONEY MARKET INSTRUMENTS
For defensive purposes only, the Fund may invest temporarily in cash and
money market instruments during times of unusual market conditions:
prime commercial paper (rated A-1 by Standard & Poor's Corporation, P-1
by Moody's Investors Service, Inc., F-1 by Fitch Investors Service, or
Duff-1 by Duff & Phelps Credit Rating Co.) and Europaper (rated A-1,
P-1, F-1 or Duff-1 or above). In the case where commercial paper or
Europaper has received different ratings from different rating services,
such commercial paper or Europaper is an acceptable temporary investment
so long as at least one rating is one of the preceding high quality
ratings and provided the Fund's investment adviser has determined that
such investment presents minimal credit risks;
instruments of domestic and foreign banks and savings and loans if they
have capital, surplus, and undivided profits of over $100,000,000
("Eligible Institutions"), or if the principal amount of the instrument
is insured by the Bank Insurance Fund ("BIF") administered by the
Federal Deposit Insurance Corporation ("FDIC") or the Savings
Association Insurance Fund ("SAIF") administered by the FDIC. Such Fund
investments may include Eurodollar Certificates of Deposit ("ECDs"),
Eurodollar Time Deposits ("ETDs"), and Canadian Time Deposits issued by
Eligible Institutions;
obligations of the U.S. government or its agencies or instrumentalities;
repurchase agreements; and
other short-term instruments which are not rated but are determined by
the investment adviser to be of comparable quality to the other
temporary obligations in which the Fund may invest.
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which are permissible
investments which may not always receive financial support from the U.S.
government are:
Federal Farm Credit Banks;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases and sells
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 its investment objective and
policies, not for investment leverage. 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.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These securities are marked to market
daily and maintained until the transaction is settled.
As a matter of policy, the Fund does not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause the segregation of
more than 20% of the total value of its assets at any time.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") Staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933. Rule 144A is a nonexclusive safe-harbor for certain secondary
market transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for resale under Rule 144A. The Fund believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities to the Trustees. The Trustees consider the following
criteria in determining the liquidity of certain restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
REPURCHASE AGREEMENTS
As collateral for the obligations of the seller to repurchase the securities
from the Fund, the Fund or its custodian will take possession of the securities
subject to repurchase agreements and these securities are marked to market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that a defaulting seller filed for bankruptcy
or became insolvent, disposition of 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 financial
institutions, such as securities broker-dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees ("Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash and pledging securities as collateral. In a
reverse repurchase agreement, the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution or broker-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 are maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
The Fund would 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.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is anticipated that, under stable market
conditions, the portfolio trading engaged in by the Fund will not 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 are necessary for
clearance of purchase and sale of securities. The deposit or payment by
the Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
33 1/3% of the value of its total assets, including the amounts borrowed
except to the extent that the Fund may enter into futures contracts. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while borrowings in excess of 5% of its total
assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets, except to
secure permissible borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of the Fund's total assets at the time of
the pledge. For purposes of this limitation, the following are not deemed
to be pledges: margin deposits for the purchase and sale
of financial futures contracts and related options; and segregation or
collateral arrangements made in connection with options activities or the
purchase of securities on a when-issued basis.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer and will not acquire more than 10% of the
outstanding voting securities of any one issuer. (For purposes of this
limitation, the Fund considers certificates of deposit and demand and
time deposits 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".)
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of its total assets in securities of
issuers having their principal business activities in the same industry.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
financial futures contracts and related options.
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 restricted or other securities which the Fund
may purchase pursuant to 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 the securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or which represent
interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to 50% of the value of its total assets. This shall not prevent the Fund
from purchasing or holding U.S. government obligations, money market
instruments, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted
by the Fund's investment objective, policies, and limitations or
Declaration of Trust.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Except as noted, shareholders will be
notified before any material change in the following limitations becomes
effective.
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 FOREIGN SECURITIES
The Fund will not invest more than 15% of its total assets in securities
of foreign issuers.
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase restricted securities if immediately
thereafter more than 10% of the total assets of the Fund, taken at market
value, would be invested in such securities, except for securities which
meet the criteria for liquidity as established by the Trustees. To comply
with certain state restrictions, the Fund will limit these transactions
to 5% of its total assets. (If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.)
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases, other than debentures or
equity stock interests.
- --------------------------------------------------------------------------------
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on New York or American stock
exchanges to 2% of its total assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants will be valued at the
lower of cost or market, except that warrants acquired by the Fund in
units with or attached to securities may be deemed to be without value.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, invest no more than 5% of the total assets in any investment
company, or invest more than 10% of its total assets in investment
companies in the aggregate. However, these limitations are not applicable
if the securities are acquired in a merger, consolidation, or acquisition
of assets.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement more than seven calendar days after notice, over-the-counter
options, and restricted securities not determined by the Trustees to be
liquid.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or the Adviser own individually more
than 0.5% of the issuer's securities or in the aggregate own more than 5%
of such issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.
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 PUT OPTIONS
The Fund will not purchase put options on securities, other than put
options on stock indices, unless the securities are held in the Fund's
portfolio and not more than 5% of the value of the Fund's net assets
would be invested in premiums on open put option positions.
The Fund has no present intention to borrow money in excess of 5% of the total
value of its net assets during the first fiscal year.
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.
Each fund of the Trust has the ability to issue more than one class of shares.
The Fund does not consider the issuance of separate classes of shares to
constitute an issue of "senior securities" within the meaning of the investment
limitations set forth above.
To comply with registration requirements in certain states, the Fund (1) will
limit the aggregate value of the assets underlying covered call options or put
options written by the Fund to not more than 25% of its net assets, (2) will
limit the premiums paid for options purchased by the Fund to 20% of its net
assets, and (3) will limit the margin deposits on futures contracts entered into
by the Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification.)
PEACHTREE FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Bank South, Federated
Investors, Federated Securities Corp., Federated Services Company, Federated
Administrative Services, and the Funds (as defined below).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Trustee Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director tna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President of the Trust.
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee or
Associates, Inc., Realtors Managing General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Property Management, Inc.
Naples, FL
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc. (an
One PNC Plaza-23rd Floor engineering firm); Director, Trustee, or Manag-
Pittsburgh, PA ing General Partner of the Funds; formerly, Vice Chairman and Director,
PNC Bank, N.A. and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds.
Edward L. Flaherty, Jr. Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat 'N Park
5916 Penn Mall Restaurants, Inc, and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower Treasurer and President and Treasurer, Federated Trustee Advisers, Federated
Pittsburgh, PA Trustee Management and Federated Research; Trustee, Federated Services Company;
Executive Vice President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Trustee, Federated Administrative Ser-
vices; Trustee of some of the Funds; Vice President and Treasurer of
the Funds.
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank & Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare,
5916 Penn Mall Inc.; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA formerly, Vice Chairman, Horizon Financial, F.A.
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace and RAND Corporation, Online Computer
Learning Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
University of Pittsburgh Slovak Management Center; Director, Trustee, or Managing General
Pittsburgh, PA Partner of the Funds; President Emeritus, University of Pittsburgh;
formerly, Chairman, National Advisory Council for Environmental Policy
& Technology.
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated
Federated Investors Tower Advisers, Federated Management, and Federated Research; Trustee,
Pittsburgh, PA Federated Services Company; President and Director, Federated
Administrative Services; President or Vice President of the Funds;
Director, Trustee or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Trustee of the
Trust.
Charles L. Davis, Jr. Vice President Vice President, Federated Administrative Services; Vice President and
Federated Investors Tower and Assistant Assistant Treasurer of some of the Funds; formerly Vice President and
Pittsburgh, PA Treasurer Director of Investor Relations, MNC Financial, Inc. and Vice President,
Product Management, MNC Financial, Inc.
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director, Federated Securities Corp.; President or Vice President of
Pittsburgh, PA the Funds; Director or Trustee of some of the Funds.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, and Secretary
Federated Investors Tower Federated Investors; Vice President, Secretary and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Trustee,
Federated Services Company; Executive Vice President, Secretary, and
Director, Federated Administrative Services; Executive Vice President
and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
</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 Board's Executive Committee. The Executive Committee of the Board
of Trustees handles various of the delegable responsibilities of the Board of
Trustees between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
FT Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Intermediate Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term Trust,
Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management; Money Market
Obligations; Money Market Trust; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet
Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding Shares.
TRUSTEE LIABILITY
Peachtree Funds' Declaration of Trust provides that the Trustees are not liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Bank South, N.A., (the "Adviser"). 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 Trust.
- --------------------------------------------------------------------------------
ADVISORY FEES
For its advisory services, the Adviser 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
2.50% per year of the first $30 million of average net assets, 2.00% per
year of the next $70 million of average net assets, and 1.50% 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 expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. John A. Staley, IV, an officer of the Fund, holds approximately 15%
of the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser and other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and Federal Reserve Wire System are open for business. The
procedure for purchasing shares of the Fund is explained in the prospectus under
"Investing in the Fund."
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Fund, assist clients in changing
dividend options, account designations, and addresses, and providing such other
services as the Fund may reasonably request.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission ("SEC") pursuant
to the Investment Company Act of 1940, as amended (the "Act"). The Plan provides
for payment of fees to the Distributor to finance any activity which is
principally intended to result in the sale of the Fund's shares subject to the
Plan. Such activities may include the advertising and marketing of shares of the
Fund; preparing, printing, and distributing prospectuses and sales literature to
prospective shareholders, brokers, or administrators; and implementing and
operating the Plan. Pursuant to the Plan, the Distributor may pay fees to
brokers and others for such services.
The Trustees expect that the adoption of the Plan will assist the Fund in
selling 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 thereby assist the
Fund in seeking to achieve its investment objectives.
PURCHASING FUND SHARES WITH SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values it assets. Investors wishing to use securities to purchase
Fund Shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which the net asset
value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The market values of the Fund's portfolio securities, other than options, are
determined as follows:
for equity securities, according to the last sale price on a national
securities exchange, if available;
in the absence of recorded sales for listed equity securities, according to the
mean between the last closing bid and asked prices;
for unlisted equity securities, the latest bid prices;
for bonds and other fixed income securities, as determined by an independent
pricing service;
for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service; or
for all other securities, at fair value as determined in good faith by the
Trustees.
The Fund will value futures contracts, options, put options on futures and
financial futures at their market values established by the exchanges at the
close of option trading on such exchanges unless the Trustees determines in good
faith that another method of valuing option positions is necessary to appraise
their fair value.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders of the Fund may exchange shares of the Fund for shares of other
funds advised by the Bank and certain other Funds designated by the Bank and
distributed by the Distributor, subject to certain conditions. Exchange
procedures are explained in the prospectus under "Exchange Privilege."
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next determined net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
Prospectus under "Redeeming Shares."
- --------------------------------------------------------------------------------
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by SEC Rule 18f-1 under the Investment
Company Act of 1940 under which each fund is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the fund's
net asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
derive less than 30% of its gross income from 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
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders 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.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The 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 offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return. From
time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices. These may include
the following:
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, financial and public
utility companies. 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.
DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected large
capitalization, well-established 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.
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.
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.
Investors may use such indices or reporting services in addition to the Fund's
prospectus to obtain a more complete view of the Fund's performance before
investing. Of course, when comparing performance of the Fund to any index,
conditions such as composition of the index and prevailing market conditions
should be considered in assessing the significance of such comparisons. When
comparing funds using reporting services, or total return and yield, investors
should take into consideration any relevant differences in funds such as
permitted portfolio compositions and methods used to value portfolio securities
and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.
3092102B (2/94
[LOGO] BANK SOUTH, N.A. the
INVESTMENT ADVISER PEACHTREE FUNDS
3350 CUMBERLAND CIRCLE PRIME MONEY
ATLANTA, GA 30339 MARKET FUND
AND
[LOGO] FEDERATED SECURITIES CORP. GOVERNMENT
Distributor MONEY
MARKET FUND
A subsidiary of FEDERATED INVESTORS
Combined
Semi-Annual Report
FEDERATED INVESTORS TOWER and Supplement to
PITTSBURGH, PA 15222-3779 Prospectus Dated
February 28, 1994
4041810 (5/94) May 30, 1994
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Shareholder's Report of the Peachtree Prime Money
Market Fund and the Peachtree Government Money Market Fund (individually
referred to as a "Fund" and collectively as the "Funds") for the semi-annual
period ending March 31, 1994. This report provides you with complete financial
information for the Funds, including investment reviews by the portfolio
managers, a list of investments for each Fund, and the financial statements.
Assets in the Peachtree Money Market Funds grew to more than $39 million at the
end of the period. Net assets in the Peachtree Government Money Market Fund
reached $13.9 million, while the dividends paid to shareholders totaled $53,859,
or $0.004 per share. Peachtree Prime Money Market Fund assets grew to $25.6
million and the Fund paid dividends of $94,923, or $0.004 per share.
Thank you for your confidence in the Peachtree Money Market Funds as a way to
put your cash to work--every day. We will continue to keep you informed about
your investment as we remain committed to delivering the highest level of
personal service.
Sincerely,
Edward C. Gonzales
President
May 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
For the period from February 11, 1994, the inception date of Peachtree Prime
Money Market Fund and Peachtree Government Money Market Fund, through March 31,
1994, money market fund investors have been the beneficiaries of an increase in
short-term interest rates. In an effort to restrain inflation, the Federal
Reserve raised the federal funds rate (the rate on overnight bank loans) twice
during the first quarter of 1994. On February 4, 1994, the Fed raised the rate
from 3-1/ 4% to 3-1/2%; and, on March 22, 1994, raised the rate again to 3 3/4%.
These increases in the federal funds rate translated into higher rates on
short-term investment vehicles thereby increasing the yield on these money
market funds.
For the period from February 11, 1994, through March 31, 1994, the total return
of Peachtree Prime Money Market Fund was 0.39% and the total return of Peachtree
Government Money Market Fund was 0.43%.*
Peachtree Prime Money Market Fund
The investments made by the Fund are of high quality. The Fund's investments in
corporate debt securities are limited to those issues which are rated in the
highest short-term rating category by two nationally recognized rating service
organizations. The Fund was invested 68% in corporate commercial paper and
corporate bonds and 32% in repurchase agreements (collateralized by United
States Treasury securities). The Fund's average maturity was 51 days on March
31, 1994.
PEACHTREE GOVERNMENT MONEY MARKET FUND
The investments made by the Fund are of very high quality. As of March 31, 1994,
the Fund was invested 64% in United States Government Agency securities and 36%
in repurchase agreements (collateralized by United States Treasury securities).
The average maturity was 49 days on March 31, 1994. In April the Fund revised
its investment policies to limit the Fund's investments to securities either
issued directly by the United States Government or issued by agencies and
instrumentalities of the United States Government and backed by the full faith
and credit of the United States Government. All indirect Government Agency
securities were liquidated in early April, 1994 to comply with the Fund's
revised investment policy.
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There can be no assurance that they will be able to do so. Investments
in mutual funds are neither insured nor guaranteed by the U.S. government.
PEACHTREE PRIME MONEY MARKET FUND
PEACHTREE GOVERNMENT MONEY MARKET FUND
(PORTFOLIOS OF PEACHTREE FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO COMBINED PROSPECTUS DATED FEBRUARY 28, 1994
A. Please insert the following "Financial Highlights--Peachtree Prime Money
Market Fund" table as page 2 and "Financial Highlights--Peachtree
Government Money Market Fund" table as page 3 following the "Summary of
Fund Expenses" and before the section entitled "General Information." In
addition, please add the heading "Financial Highlights--Peachtree Prime
Money Market Fund" and "Financial Highlights--Peachtree Government Money
Market Fund" to the Table of Contents on page I following the heading
"Summary of Fund Expenses."
PEACHTREE PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.004
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.004)
- ---------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.39%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.38%(b)
- ----------------------------------------------------------------------------------------------
Net investment income 3.18%(b)
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.51%(b)
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $25,575
- ----------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 11, 1994 (start of
performance) to March 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income 0.004
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.004)
- --------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- --------------------------------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.43%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------
Expenses 0.21%(b)
- ---------------------------------------------------------------------------------------------
Net investment income 3.31%(b)
- ---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.51%(b)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $13,918
- ---------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 14, 1994 (date of initial
public investment) to March 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the third sentence under the section entitled "Peachtree
Funds Information-- Adviser's Background" on page 8 and replace it with
the following:
"The principal executive offices of the Adviser are located at 3350 Cumberland
Circle, Atlanta, GA 30339."
C. Please delete the fourth sentence under the section entitled "Redeeming
Shares--By Mail" on page 15 and replace with the following:
"Shareholders should call the Peachtree Funds Service Center at 1-404-989-6200
or 1-800-621-8969 for assistance in redeeming shares by mail."
D. Please insert the following as the last sentence of the first paragraph of
the section entitled "Voting Rights" which begins on page 16 of the
prospectus:
"As of May 10, 1994 Bank South, N.A, Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
43,262,929 shares (99.30%) of the Prime Money Market Fund, and 25,396,709 shares
(99.61%) of the Government Money Market Fund and therefore, may for certain
purposes, be deemed to control the Funds and be able to affect the outcome of
certain matters presented for a vote of shareholders."
E. Please delete the Peachtree Government Money Market Fund Statement of
Assets and Liabilities on page 19 and the Report of Ernst & Young,
Independent Auditors on page 20 and insert the following financial
statements at the end of the prospectus beginning on page 19. In addition,
please add the heading "Financial Statements--Peachtree Prime Money Market
Fund" and "Financial Statements--Peachtree Government Money Market Fund"
to the Table of Contents on page I, immediately before "Addresses."
PEACHTREE PRIME MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
*COMMERCIAL PAPER--60.7%
- ---------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.9%
-------------------------------------------------------------------------------------
$ 1,000,000 United Technologies Corp., 3.57%, 4/28/94 $ 997,330
------------------------------------------------------------------------------------- -------------
AUTOMOTIVE & RELATED--3.9%
-------------------------------------------------------------------------------------
1,000,000 Ford Motor Credit Corp., 3.48%, 5/16/94 995,688
------------------------------------------------------------------------------------- -------------
CONSTRUCTION/AG EQUIPMENT--3.1%
-------------------------------------------------------------------------------------
800,000 Deere & Co., 3.63%, 5/2/94 797,506
------------------------------------------------------------------------------------- -------------
</TABLE>
PEACHTREE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
*COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--3.8%
-------------------------------------------------------------------------------------
$ 1,000,000 General Electric Co., 3.72%, 10/12/94 $ 980,438
------------------------------------------------------------------------------------- -------------
ENERGY--9.0%
-------------------------------------------------------------------------------------
1,000,000 Chevron Corp., 3.37%, 4/15/94 998,697
-------------------------------------------------------------------------------------
1,300,000 Texaco, Inc., 3.42%, 4/25/94 1,297,053
------------------------------------------------------------------------------------- -------------
Total 2,295,750
------------------------------------------------------------------------------------- -------------
FINANCIAL--13.6%
-------------------------------------------------------------------------------------
1,200,000 Associate Corp. of North America, 3.50%, 5/16/94 1,194,795
-------------------------------------------------------------------------------------
1,000,000 CIT Group Holdings, Inc., 3.53%, 6/14/94 992,826
-------------------------------------------------------------------------------------
1,300,000 Household Finance Corp., 3.54%, 6/22/94 1,289,636
------------------------------------------------------------------------------------- -------------
Total 3,477,257
------------------------------------------------------------------------------------- -------------
FOOD, BEVERAGES, HOUSEHOLD PRODUCTS--3.9%
-------------------------------------------------------------------------------------
1,000,000 Coca Cola Co., 3.77%, 6/20/94 991,711
------------------------------------------------------------------------------------- -------------
INSURANCE--3.9%
-------------------------------------------------------------------------------------
1,000,000 Prudential Funding Corp., 3.53%, 7/14/94 989,947
------------------------------------------------------------------------------------- -------------
MISCELLANEOUS--3.9%
-------------------------------------------------------------------------------------
1,000,000 ITT Corp., 3.47%, 4/4/94 999,713
------------------------------------------------------------------------------------- -------------
RAILROADS--3.9%
-------------------------------------------------------------------------------------
1,000,000 Union Pacific Corp., 3.58%, 5/5/94 996,638
------------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--3.9%
-------------------------------------------------------------------------------------
1,000,000 AT&T Capital Co., 3.45%, 5/20/94 995,345
------------------------------------------------------------------------------------- -------------
UTILITIES--3.9%
-------------------------------------------------------------------------------------
1,000,000 Florida Power & Light Company, 3.59%, 4/28/94 997,315
------------------------------------------------------------------------------------- -------------
TOTAL COMMERCIAL PAPER 15,514,638
------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--6.8%
- ---------------------------------------------------------------------------------------------------
AUTOMOTIVE & RELATED--0.6%
-------------------------------------------------------------------------------------
150,000 Ford Motor Credit Corp., 8.75%, 1/15/95 155,426
------------------------------------------------------------------------------------- -------------
CONSTRUCTION/AG EQUIPMENT--0.8%
-------------------------------------------------------------------------------------
200,000 Deere (John) Capital Corp., 5.00%, 1/15/95 201,293
------------------------------------------------------------------------------------- -------------
</TABLE>
PEACHTREE PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.8%
-------------------------------------------------------------------------------------
$ 200,000 General Electric Capital Corp., 5.625%-8.60%, 11/15/94-1/15/95 $ 204,776
------------------------------------------------------------------------------------- -------------
FINANCE--2.1%
-------------------------------------------------------------------------------------
150,000 American Express Co., 8.625%, 7/15/94 152,094
-------------------------------------------------------------------------------------
75,000 American General Financial Corp., 9.25%, 7/1/94 76,019
-------------------------------------------------------------------------------------
300,000 IBM Credit Corp., 6.125%--7.32%, 8/12/94--11/15/94 303,798
------------------------------------------------------------------------------------- -------------
Total 531,911
------------------------------------------------------------------------------------- -------------
FOOD, BEVERAGES, HOUSEHOLD PRODUCTS--1.3%
-------------------------------------------------------------------------------------
325,000 Philip Morris Cos., Inc., 8.75%, 11/15/94 334,244
------------------------------------------------------------------------------------- -------------
MISCELLANEOUS--0.2%
-------------------------------------------------------------------------------------
50,000 ITT Financial Corp., 7.125%, 10/1/94 50,767
------------------------------------------------------------------------------------- -------------
POLLUTION CONTROL--0.6%
-------------------------------------------------------------------------------------
150,000 Waste Management, Inc., 7.75%, 2/1/95 154,574
------------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--0.4%
-------------------------------------------------------------------------------------
100,000 AT&T Credit Corp., 8.50%, 11/1/94 102,636
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS 1,735,627
------------------------------------------------------------------------------------- -------------
**REPURCHASE AGREEMENTS--32.4%
- ---------------------------------------------------------------------------------------------------
2,877,670 Prudential Securities, Inc., 3.45%, dated 3/30/94, due 4/4/94 2,877,670
-------------------------------------------------------------------------------------
5,416,613 Cantor, Fitzgerald Securities Corp., 3.45%, dated 3/31/94, due 4/5/94 5,416,613
------------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 8,294,283
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 25,544,548
------------------------------------------------------------------------------------- -------------
</TABLE>
Also represents cost for federal tax purposes.
* Each issue shows the rate of discount at the time of purchase.
** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations, based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($25,575,324) at
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in other securities (Note 2A) $ 17,250,265
- -----------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 8,294,283
- ----------------------------------------------------------------------------------- -------------
Total investments, at amortized cost and value $ 25,544,548
- --------------------------------------------------------------------------------------------------
Cash 61,830
- --------------------------------------------------------------------------------------------------
Interest receivable 39,252
- -------------------------------------------------------------------------------------------------- -------------
Total assets 25,645,630
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Dividends payable 63,232
- -----------------------------------------------------------------------------------
Accrued expenses 7,074
- ----------------------------------------------------------------------------------- -------------
Total liabilities 70,306
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 25,575,324 shares of beneficial interest outstanding $ 25,575,324
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($25,575,324 / 25,575,324 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PEACHTREE PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 106,179
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 14,910
- -------------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 4,473
- -------------------------------------------------------------------------------------------
Custodian fees (Note 4) 410
- -------------------------------------------------------------------------------------------
Recordkeeper, transfer and dividend disbursing agent fees
and expenses (Note 4) 4,488
- -------------------------------------------------------------------------------------------
Legal fees 578
- -------------------------------------------------------------------------------------------
Printing and postage 567
- -------------------------------------------------------------------------------------------
Insurance premiums 464
- -------------------------------------------------------------------------------------------
Miscellaneous 567
- ------------------------------------------------------------------------------------------- ---------
Total expenses 26,457
- -------------------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $ 14,910
- --------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 4) 291 15,201
- -------------------------------------------------------------------------------- --------- ---------
Net expenses 11,256
- ------------------------------------------------------------------------------------------------------ ----------
Net investment income $ 94,923
- ------------------------------------------------------------------------------------------------------ ----------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------
Net investment income $ 94,923
- --------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (94,923)
- --------------------------------------------------------------------------------------------- -------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------------------------
Proceeds from sales of shares 35,572,780
- ---------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 258
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (9,997,714)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets from Fund share transactions 25,575,324
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets 25,575,324
- ---------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------------- -------------------
End of period $ 25,575,324
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
The obligations listed below are issued, guaranteed or insured by the U.S.
government, its agencies or instrumentalities, or secured by such obligations.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------------------------------- -------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--64.2%
- ---------------------------------------------------------------------------------------------------
*FEDERAL FARM CREDIT BANK, DISCOUNT NOTE--10.7%
-------------------------------------------------------------------------------------
$ 1,500,000 3.38%, 5/10/94 $ 1,494,557
-------------------------------------------------------------------------------------
*FEDERAL HOME LOAN BANK, DISCOUNT NOTES--7.2%
-------------------------------------------------------------------------------------
1,000,000 3.38%, 5/23/94 995,161
-------------------------------------------------------------------------------------
*FEDERAL HOME LOAN MORTGAGE ASSOCIATION, DISCOUNT NOTES--32.2%
-------------------------------------------------------------------------------------
4,500,000 3.35%-3.46%, 4/4/94-6/10/94 4,483,746
-------------------------------------------------------------------------------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES--14.1%
-------------------------------------------------------------------------------------
2,000,000 4.04%-4.06%, 9/23/94-10/14/94 1,959,081
------------------------------------------------------------------------------------- -------------
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 8,932,545
------------------------------------------------------------------------------------- -------------
**REPURCHASE AGREEMENTS--35.6%
- ---------------------------------------------------------------------------------------------------
2,599,020 Cantor, Fitzgerald Securities Corp., 3.45%, dated 3/31/94, due 4/5/94 2,599,020
-------------------------------------------------------------------------------------
2,355,576 Prudential Securities, Inc., 3.45%, dated 3/30/94, due 4/4/94 2,355,576
------------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 4,954,596
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $ 13,887,141
------------------------------------------------------------------------------------- -------------
</TABLE>
Also represents cost for federal tax purposes.
* Each issue shows the rate of discount at the time of purchase.
** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations, based on market prices at the date of the portfolio.
Note: The categories of investments are shown as a percentage of net assets
($13,918,468) at
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------
Investments in other securities (Note 2A) $ 8,932,545
- -------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 4,954,596
- ------------------------------------------------------------------------------------- ------------
Total investments, at amortized cost and value $ 13,887,141
- ---------------------------------------------------------------------------------------------------
Cash 68,561
- ---------------------------------------------------------------------------------------------------
Interest reveivable 700
- --------------------------------------------------------------------------------------------------- -------------
Total assets 13,956,402
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Dividends payable 36,877
- -------------------------------------------------------------------------------------
Accrued expenses 1,057
- ------------------------------------------------------------------------------------- ------------
Total liabilities 37,934
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 13,918,468 shares of beneficial interest outstanding $ 13,918,468
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($13,918,468 / 13,918,468 shares of beneficial interest outstanding) $1.00
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an intergral part of the Financial Statements)
PEACHTREE GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 57,278
- --------------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 8,139
- ---------------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 2,442
- ---------------------------------------------------------------------------------------------
Custodian fees (Note 4) 71
- ---------------------------------------------------------------------------------------------
Recordkeeper, transfer and dividend disbursing agent fees
and expenses (Note 4) 621
- ---------------------------------------------------------------------------------------------
Legal fees 85
- ---------------------------------------------------------------------------------------------
Printing and postage 83
- ---------------------------------------------------------------------------------------------
Insurance premiums 90
- ---------------------------------------------------------------------------------------------
Miscellaneous 107
- --------------------------------------------------------------------------------------------- ---------
Total expenses 11,638
- ---------------------------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $ 8,139
- ----------------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 4) 80 8,219
- ---------------------------------------------------------------------------------- --------- ---------
Net expenses 3,419
- -------------------------------------------------------------------------------------------------------- ---------
Net investment income $ 53,859
- -------------------------------------------------------------------------------------------------------- ---------
</TABLE>
*For the period from January 7, 1994 (start of business) to March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------
Net investment income $ 53,859
- --------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income: (53,859)
- --------------------------------------------------------------------------------------------- -------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------------------------
Proceeds from sales of shares 15,505,262
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (1,686,794)
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets from Fund share transactions 13,818,468
- --------------------------------------------------------------------------------------------- -------------------
Change in net assets 13,818,468
- ---------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------
Beginning of period 100,000
- --------------------------------------------------------------------------------------------- -------------------
End of period $ 13,918,468
- --------------------------------------------------------------------------------------------- -------------------
</TABLE>
*For the period from January 7, 1994 (start of business) to March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Peachtree 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 five portfolios. The financial statements included herein present
only those of Peachtree Prime Money Market Fund ("Prime Money Fund") and
Peachtree Government Money Market Fund ("Government Money Fund") (hereinafter
each individually referred to as a "Fund," or collectively as the "Funds"). As
of March 31, 1994, Peachtree Georgia Tax-Free Income Fund was effective but did
not have public investment. 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 Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the
Investment Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds 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 Funds 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 Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Funds' 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 Funds 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 ("Code"). Distributions to shareholders are
recorded on the ex-dividend date.
PEACHTREE FUNDS
- --------------------------------------------------------------------------------
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 Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. 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). At March
31, 1994, capital paid-in for Prime Money Fund and Government Money Fund
aggregated $25,575,324 and $13,918,468, respectively. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
PRIME GOVERNMENT
MONEY FUND MONEY FUND
<S> <C> <C>
PERIOD ENDED PERIOD ENDED
MARCH 31, 1994* MARCH 31, 1994**
Shares outstanding, beginning of period -- 100,000
- -----------------------------------------------------------------------
Shares sold 35,572,780 15,505,262
- -----------------------------------------------------------------------
Shares issued to shareholders in payment
of dividends declared 258 --
- -----------------------------------------------------------------------
Shares redeemed (9,997,714) (1,686,794)
- ----------------------------------------------------------------------- ------------------- --------------------
Shares outstanding, end of period 25,575,324 13,918,468
- ----------------------------------------------------------------------- ------------------- --------------------
</TABLE>
* For the period from February 14, 1994 (date of initial public investment) to
March 31, 1994.
** For the period from January 7, 1994 (start of business) to March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Bank South, N.A., the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to .50 of 1%
of the Funds' average daily net assets. The Adviser may voluntarily choose to
waive a portion of its fee and reimburse certain operating expenses of the
Funds. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
PEACHTREE FUNDS
- --------------------------------------------------------------------------------
ADMINISTRATION 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 AND SERVICE PLAN--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the Plan, the Funds will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Funds to finance
activities intended to result in the sale of the shares. The Plan provides that
the Funds may incur distribution expenses up to .25 of 1% of the average daily
net assets of the shares, annually, to compensate FSC.
TRANSFER AGENT, ACCOUNTING AND CUSTODY FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Funds.
The fee is based on the size, type and number of accounts and transactions made
by shareholders.
FServ also maintains the Funds' accounting records. The fee is based on the
level of the Funds' average net assets for the period plus out-of-pocket
expenses.
The Bank of New York is the Funds' custodian. The fee is based on the level of
the Funds' average net assets for the period plus out-of-pocket expenses.
ORGANIZATION--Organizational expenses incurred by the Trust for Prime Money Fund
and Government Money Fund will be borne initially by the administrator and are
estimated at $40,000 and $41,500, respectively. The Trust has agreed to
reimburse the administrator for the organizational expenses during the five year
period following January 7, 1994 (date the Trust first became effective).
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
F. Please delete the Investment Adviser's address on the inside back cover
and replace it with the following:
"3350 Cumberland Circle, Atlanta, GA 30339."
PEACHTREE PRIME MONEY MARKET FUND
PEACHTREE GOVERNMENT MONEY MARKET FUND
(PORTFOLIOS OF PEACHTREE FUNDS)
COMBINED PROSPECTUS
The Shares of Peachtree Government Money Market Fund (the "Government Money
Fund") and Peachtree Prime Money Market Fund (the "Prime Money Fund")
(individually referred to as a "Fund" and collectively as the "Funds") offered
by this Combined Prospectus represent interests in two separate portfolios of
securities with distinct investment objectives and policies. The Funds are two
of a series of investment portfolios comprising Peachtree Funds (the "Trust"),
an open-end management investment company (a mutual fund).
THE FUNDS ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO DO SO.
This Prospectus contains the information you should read and know before you
invest in the Funds. Keep this prospectus for future reference.
Each Fund has also filed a Statement of Additional Information dated February
28, 1994, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this Combined Prospectus. You may request a copy
of the Statement of Additional Information free of charge, obtain other
information, or make
inquiries about the Funds by contacting the Peachtree Funds Service Center at
1-404-989-6200 or
1-800-621-8969.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE NOT
ISSUED, ENDORSED OR GUARANTEED BY, BANK SOUTH, N.A. (THE "BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES CERTAIN
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE BANK IS THE INVESTMENT ADVISER TO THE FUNDS. THE FUNDS ARE DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.
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.
February 28, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
PRIME MONEY FUND INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Variable Rate Demand Notes 3
Demand Features 3
Bank Instruments 3
Asset-Backed Securities 3
Short-Term Credit Facilities 4
Ratings 4
Restricted and Illiquid Securities 4
Credit Enhancement 5
Investment Risks 5
GOVERNMENT MONEY FUND
INVESTMENT INFORMATION 5
- ------------------------------------------------------
Investment Objective 5
Investment Policies 5
Acceptable Investments 6
INVESTMENTS AND STRATEGIES OF THE FUNDS 6
- ------------------------------------------------------
Repurchase Agreements 6
Lending of Portfolio Securities 6
When-Issued And Delayed Delivery
Transactions 6
Investing in Securities of Other
Investment Companies 7
Certain Borrowing and Investment Limitations 7
Regulatory Compliance 7
PEACHTREE FUNDS INFORMATION 8
- ------------------------------------------------------
Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Shares 8
Distribution Plan 9
Administrative Arrangements 9
Administration of the Trust 9
Administrative Services 9
Shareholder Services Plan 10
Custodian 10
Transfer Agent, Dividend Disbursing Agent
and Portfolio Accounting Services 10
Legal Counsel 10
Independent Auditors 10
Expenses of the Funds 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUNDS 11
- ------------------------------------------------------
Share Purchases 11
By Telephone 11
By Mail 11
Payment by Check 11
Payment by Wire 12
Minimum Investment Required 12
Systematic Investment Program 12
What Shares Cost 12
Certificates and Confirmations 12
Dividends 12
Purchasing Shares of the Funds
with Securities 13
EXCHANGE PRIVILEGE 13
- ------------------------------------------------------
Peachtree Funds 13
By Telephone 14
REDEEMING SHARES 15
- ------------------------------------------------------
By Telephone 15
By Mail 15
Signatures 15
Receiving Payment 16
Systematic Withdrawal Program 16
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
- ------------------------------------------------------
Voting Rights 16
Massachusetts Partnership Law 17
EFFECT OF BANKING LAWS 17
- ------------------------------------------------------
TAX INFORMATION 18
- ------------------------------------------------------
Federal Income Tax 18
State and Local Taxes 18
PERFORMANCE INFORMATION 18
- ------------------------------------------------------
PEACHTREE GOVERNMENT MONEY MARKET
FUND STATEMENT OF ASSETS AND LIABILITIES 19
- ------------------------------------------------------
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 20
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
PEACHTREE PRIME MONEY MARKET FUND
PEACHTREE GOVERNMENT MONEY MARKET FUND
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
PRIME GOVERNMENT
MONEY FUND MONEY FUND
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................... None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................... None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)......................... None None
Redemption Fees (as a percentage of amount redeemed, if applicable)............. None None
Exchange Fee.................................................................... None None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)................................................ 0.29 % 0.30 %
12b-1 Fees(2)................................................................... 0.00 % 0.00 %
Other Expenses (after waiver)(3)................................................ 0.21 % 0.20 %
Total Fund Operating Expenses(4)............................................ 0.50 % 0.50 %
</TABLE>
- ---------
(1) 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 investment adviser can terminate this voluntary waiver at any
time in its sole discretion. The maximum management fee is 0.50%.
(2) As of the date of this prospectus, the Funds are not paying or accruing
12b-1 fees. The Funds can pay up to 0.25% as a 12b-1 fee to the distributor.
Certain trust clients of the Bank or its affiliates, including ERISA plans,
will not be affected by the distribution plan because the distribution plan
will not be activated unless and until a second, "Trust," class of shares of
the Funds (which would not have a Rule 12b-1 plan) is created and such trust
clients' investments in the Funds are converted to such Trust class.
(3) Total Other Expenses are estimated to be 0.23% for Prime Money Fund and
0.21% for Government Money Fund absent the anticipated voluntary waiver by
the transfer agent.
(4) The Total Fund Operating Expenses are estimated to be 0.73% for Prime Money
Fund and 0.71% for Government Money Fund absent the anticipated voluntary
waivers by the adviser and transfer agent.
* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending September 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 FUNDS WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "PEACHTREE FUNDS INFORMATION" AND "INVESTING IN THE FUNDS." WIRE
TRANSFER REDEMPTIONS MAY BE SUBJECT TO AN ADDITIONAL FEE.
<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. As noted in the table above, the Funds charge no
contingent deferred sales charge.
Prime Money Fund........................................................................... $5 $16
Government Money Fund...................................................................... $5 $16
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUNDS' FISCAL YEAR ENDING SEPTEMBER
30, 1994.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 22, 1993, as amended and restated dated December 20,
1993. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. This prospectus relates only to the Trust's Prime Money Fund and
Government Money Fund. A minimum initial investment of $1,000 is required ($500
for Individual Retirement Accounts ("IRAs")), and subsequent investments must be
in amounts of at least $100. See "Investing in the Funds."
The Funds attempt to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price. See "Net Asset Value" on page 11.
PRIME MONEY FUND INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Prime Money Fund's investment objective is to achieve current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the approval of the Prime Money Fund's shareholders.
While there is no assurance that the Prime Money Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Prime Money Fund pursues its investment objective by investing in a
portfolio of high quality money market instruments maturing in 13 months or
less. The average maturity of money market instruments in the Prime Money Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Board of
Trustees without the approval of Prime Money Fund shareholders. Shareholders
will be notified before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Prime Money Fund invests in high quality money
market instruments that are either rated in the highest short-term rating
category by one or more nationally recognized statistical rating organizations
("Rating Agencies") or are deemed by the Adviser to be of comparable quality to
securities having such ratings. Examples of these instruments include, but are
not limited to:
domestic issues of corporate debt obligations, including variable rate
demand notes;
commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);
certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other depository
institutions ("Bank Instruments");
short-term credit facilities;
asset-backed securities, including commercial paper;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. Government or one of its agencies or instrumentalities
("Government Securities"); and
other money market instruments.
The Prime Money Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are generally long-term
debt instruments that have variable or floating interest rates and provide the
Prime Money Fund with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par. The
interest rate may float or be adjusted at regular intervals (ranging from daily
to annually), and is normally based on an index or rate such as the prime rate,
LIBOR or another published rate or index. Most variable rate demand notes allow
the Prime Money Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit the Prime Money Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. The Prime Money Fund treats variable rate demand notes as maturing on
the later of the next interest adjustment date or the date on which the Prime
Money Fund may next tender the security for repurchase. See "Demand Features."
DEMAND FEATURES. The Prime Money Fund may acquire securities that are subject
to puts and standby commitments ("demand features") to purchase such securities
at their principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Prime Money Fund. A demand
feature may be issued by the issuer of the underlying securities, a dealer in
the securities, or by another third party, and may not be transferred separately
from the underlying security. The Prime Money Fund uses these arrangements to
provide the Prime Money Fund with liquidity and not to protect against changes
in the market value of the underlying securities. The bankruptcy, receivership,
or default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its exercise,
will adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying security may
be treated as a form of credit enhancement.
BANK INSTRUMENTS. The Prime Money Fund only invests in Bank Instruments either
(i) issued by an institution having capital, surplus and undivided profits over
$100 million (an "Eligible Bank") or (ii) that are insured by the FDIC's Bank
Insurance Fund ("BIF") or Savings Association Insurance Fund ("SAIF"). Bank
Instruments may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs")
issued by Eligible Banks. The Fund will treat securities that are credit
enhanced by an Eligible Bank's irrevocable letter of credit or unconditional
guaranty as Bank Instruments.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
generally by special purpose entities, such as trusts, limited partnerships and
corporations whose primary assets consist of a pool of loans, leases or accounts
receivable (collectively, "Receivables"). The securities may take the form of
debt and other interests in the special purpose entities. Each special purpose
entity will be treated as a separate issuer for diversification purposes.
Although the securities often have some form of credit or liquidity enhancement,
payments on the securities depend predominantly upon collections of the
underlying Receivables and not upon the creditworthiness of the originator or
seller of the Receivables.
SHORT-TERM CREDIT FACILITIES. The Prime Money Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations, often
consisting of either a short-term revolving credit facility or a master note
payable upon demand. Under these arrangements, the borrower may reborrow funds
during the term of the facility. The Prime Money Fund treats any commitments to
provide such advances as a standby commitment to purchase the borrower's notes.
RATINGS. For purposes of the Prime Money Fund, a Rating Agency's highest rating
category is determined without regard for sub-categories and gradations. For
example, securities rated A-1 or A-1+ by Standard & Poor's Corporation ("S&P"),
Prime-1 by Moody's Investors Service, Inc. ("Moody's"), F-1 (+ or -) by Fitch
Investors Service, Inc. ("Fitch"), Duff-1 (+ or -) by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") are all considered rated in the highest short-term
rating category. The Prime Money Fund will follow applicable Securities and
Exchange Commission ("SEC") regulations in determining whether a security rated
by more than one Rating Agency can be treated as being in the highest short-term
rating category; currently, such securities must be rated by two Rating Agencies
in their highest rating categories. See "Regulatory Compliance." A credit rating
is not a recommendation to buy, sell or hold securities, and is subject to
change and/or withdrawal by the rating agency.
RESTRICTED AND ILLIQUID SECURITIES. The Prime Money Fund intends to invest in
restricted securities. Restricted securities are any securities in which the
Prime Money Fund may otherwise invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. However, the Prime Money Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the Board
of Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to 10%
of the Prime Money Fund's net assets.
The Prime Money Fund may invest in commercial paper (including asset-backed
commercial paper) issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). Section 4(2) commercial paper is restricted as to disposition under the
Securities Act, and is generally sold to institutional investors, such as the
Prime Money Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the purchaser
must be in a transaction exempt from Securities Act registration. Section 4(2)
commercial paper is normally resold to other institutional investors like the
Prime Money Fund through or with the assistance of the issuer or investment
dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity. The Prime Money Fund believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees of the Prime Money Fund are quite liquid.
The Prime Money Fund intends, therefore, to treat the restricted securities
which meet the criteria for liquidity established by the Trustees, including
Section 4(2) commercial paper, as determined by the Fund's investment adviser,
as liquid and not subject to the investment limitations applicable to illiquid
securities. In addition, because Section 4(2) commercial paper is liquid, the
Prime Money Fund intends to not subject such paper to the limitation applicable
to restricted securities.
CREDIT ENHANCEMENT. Certain of the Prime Money Fund's acceptable investments
may be credit enhanced by a guaranty, letter of credit, cash collateral
accounts, or insurance. The Prime Money Fund typically evaluates the credit
quality and ratings of credit enhanced securities based upon the
financial condition and ratings of the party providing the credit enhancement
(the "Credit Enhancer"), rather than the issuer. Generally, the Prime Money Fund
will not treat credit enhanced securities as having been issued by the Credit
Enhancer for diversification purposes. However, under certain circumstances,
applicable regulations may require the Prime Money Fund to treat the securities
as having been issued by both the issuer and the Credit Enhancer. Any decline in
the Rating Agency ratings of the Credit Enhancer, or any bankruptcy,
receivership, or default of the Credit Enhancer will adversely affect the
quality, value and marketability of the underlying security.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, CCPs and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. Examples of these risks
include international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding and taxes on interest income, difficulties in obtaining or
enforcing a judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may also
exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping, deposit insurance and the public availability of information.
These factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
GOVERNMENT MONEY FUND INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Government Money Fund's investment objective is to achieve current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without the approval of the Government Money Fund's
shareholders. While there is no assurance that the Government Money Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus.
INVESTMENT POLICIES
The Government Money Fund pursues its investment objective by investing in a
portfolio of short-term securities either issued directly by the U.S. government
or issued by agencies and instrumentalities of the U.S. government and backed by
the full faith and credit of the U.S. government, and, in either case, maturing
in 13 months or less from the date of acquisition unless they are purchased
under a repurchase agreement that provides for repurchase by the seller within
one year from the date of acquisition. The Government Money Fund invests only in
instruments denominated and payable in U.S. dollars. The average maturity of
U.S. government securities in the Government Money Fund's portfolio, computed on
a dollar-weighted basis, will be 90 days or less. Unless indicated otherwise,
the investment policies may be changed by the Board of Trustees without the
approval of shareholders. Shareholders will be notified before any material
changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Government
Money Fund invests are either issued directly by the U.S. government or are
issued by agencies or instrumentalities of the U.S. government and are backed by
the full faith and credit of the U.S. government. These securities include, but
are not limited to:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
notes, bonds, and discount notes of U.S. government agencies and
instrumentalities, such as the Government National Mortgage Association,
the Small Business Administration and the Federal Financing Bank.
INVESTMENTS AND STRATEGIES OF THE FUNDS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Certain securities in which the Funds invest may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
securities broker-dealers, and other financial institutions sell securities to
the Funds and agree at the time of sale to repurchase them at a mutually agreed
upon time and price with interest. As collateral for the obligation of the
seller to repurchase the securities from the Funds, the Funds or their 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 seller
does not repurchase the securities from the Funds, the Funds could receive less
than the repurchase price on any sale of such securities.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Funds may lend their portfolio
securities on a short-term basis to securities broker-dealers, banks, or other
institutional borrowers of securities. The Funds will limit the amount of
portfolio securities they may lend to not more than 50% of their respective
total assets. The Funds 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 Trust's Board of
Trustees, where loaned securities are marked to market daily and where the Funds
receive collateral equal to at least 100% of the value of the securities loaned
at all times. The Government Money Fund does not intend to lend portfolio
securities during its first fiscal year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause the Funds to miss a price or
yield considered to be advantageous.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds may invest in the securities of other investment companies, but will
not own more than 3% of the total outstanding voting stock of any investment
company, invest more than 5% of its total assets in any one investment company,
or invest more than 10% of its total assets in
investment companies in the aggregate. The Funds will only invest in other
investment companies that are money market funds having investment objectives
and policies similar to those of the respective Fund and primarily for the
purpose of investing short-term cash which has not yet been invested in other
portfolio instruments. It should be noted that investment companies incur
certain expenses and therefore, any investment by the Funds in shares of another
investment company would be subject to certain duplicate expenses, particularly
transfer agent and custodian fees. The Adviser will waive its advisory fee on
assets invested in securities of open-end investment companies.
CERTAIN BORROWING AND INVESTMENT LIMITATIONS
The Funds will not borrow money directly or through reverse repurchase
agreements (arrangements in which a Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set date) or
pledge securities except, under certain circumstances, the Funds may borrow up
to 33 1/3% of the value of their respective total assets and secure such
borrowings with up to 15% of the value of their respective total assets at the
time of borrowing.
With respect to 75% of the value of its total assets, Prime Money Fund will not
invest more than 5% of the value of its total assets in securities of any one
issuer (other than cash, cash items or securities issued or guaranteed by the
U.S. government, or its agencies or instrumentalities, and repurchase agreements
collateralized by such securities), or acquire more than 10% of the outstanding
voting securities of any one issuer.
The above limitations cannot be changed without shareholder approval. Both Funds
will limit their investment in restricted and illiquid securities, including
repurchase agreements providing for settlement more than seven days after
notice, to 10% of net assets. See "Restricted and Illiquid Securities."
REGULATORY COMPLIANCE
The Funds may follow non-fundamental operational policies that are more
restrictive than their fundamental investment limitations, as set forth in this
Combined Prospectus and respective Statements of Additional Information, in
order to comply with applicable laws and regulations, including the provisions
of and regulations under the Investment Company Act of 1940, as amended (the
"ICA"). In particular, the Funds will comply with the various requirements of
SEC Rule 2a-7 under the ICA which regulates money market mutual funds. For
example, with limited exceptions, Rule 2a-7 prohibits the investment of more
than 5% of a Fund's total assets in the securities of any one issuer, although
the Prime Money Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Prime Money Fund will
invest more than 5% of its assets in any one issuer only under the circumstances
permitted by Rule 2a-7. The Prime Money Fund will also determine the effective
maturity of its investments, as well as its ability to consider a security as
having received the requisite short-term ratings by the Rating Agencies,
according to Rule 2a-7. The Prime Money Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
PEACHTREE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Board" or
"Trustees"). The Board is responsible for managing the Trust's business affairs
and for exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board handles various of the
Board's delegable responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Funds are made by the Bank, as
the Funds' investment adviser (the "Adviser"), subject to direction by the
Board. The Adviser conducts investment research and supervision for the Funds
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Funds' assets.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to 0.50% of the Funds' average daily net assets. The Adviser has
undertaken to reimburse the Funds, up to the amount of the advisory fee,
for operating expenses in excess of limitations established by certain
states. The Adviser also may voluntarily choose to waive a portion of its
fee or reimburse other expenses of the Funds, but reserves the right to
terminate such waiver or reimbursement at any time at their sole
discretion. See "Summary of Fund Expenses" on page 1.
ADVISER'S BACKGROUND. The Adviser, a national bank headquartered in
Atlanta, Georgia, is a wholly owned subsidiary of Bank South Corporation, a
Georgia corporation which is a registered bank holding company. The Adviser
serves consumers through its network of banking offices with a full range
of deposit and lending products, as well as investment services. The
principal executive offices of the Adviser are located at 3350 Cumberland
Circle, Marietta, GA 30339.
The Adviser has managed discretionary assets for its customers since 1931.
As of December 1, 1993, the Adviser managed in excess of $1 billion of
discretionary assets. Prior to January 1994, the Bank had not served as an
investment adviser to mutual funds.
As part of its regular banking operations, the Bank may make loans to
public companies. Thus, it may be possible, from time to time, for the
Funds to hold or acquire the securities of issuers which are also lending
clients of the Bank. The lending relationship will not be a factor in the
selection of securities.
DISTRIBUTION OF SHARES
Federated Securities Corp. (the "Distributor") is the principal distributor for
shares of the Funds. It is a Pennsylvania corporation organized on November 14,
1969, and is the principal distributor for a number of investment companies. The
Distributor is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Under a distribution plan (the "Plan") adopted in accordance
with SEC Rule 12b-1 under the Investment Company Act of 1940, as amended, each
of the Funds will pay an amount computed at an annual rate of up to 0.25% of the
average daily net asset value of the shares to finance any activity which is
principally intended to result in the sale of shares subject to the Plan.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Plan
because the Plan will not be activated unless and until a second, "Trust" class
of shares of each of the Funds (which would not have a Rule 12b-1 plan) is
created and such trust clients' investments in the Funds are converted to such
Trust class.
The Distributor may select other financial institutions (such as broker-dealers
or banks) to provide sales support services as agents for their clients or
customers who beneficially own shares. These financial institutions (including
the Bank) 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 Funds' Plan is a compensation type plan. As such, each of the Funds pay the
Distributor the fee described above as opposed to reimbursing the Distributor
for actual expenses incurred. Therefore, the Funds do not pay for amounts
expended by the Distributor in excess of amounts received by it from each of the
Funds, which may include 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 Funds under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Trustees
will consider appropriate changes in the services.
State securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to certain states' securities laws.
ADMINISTRATIVE ARRANGEMENTS. The Distributor may also pay administrators a fee
based upon the average net asset value of shares of their customers invested in
the Trust for providing administrative services. This fee, if paid, will be
reimbursed by the Adviser and not the Trust.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides certain
administrative personnel and services necessary to operate the Funds. Such
services include certain legal and accounting services. Federated Administrative
Services provides these at the annual rates specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$100,000 per portfolio. Federated Administrative Services may choose voluntarily
to waive a portion of its fee.
SHAREHOLDER SERVICES PLAN. The Funds have adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares. Under the Services Plan,
financial institutions will enter into shareholder service agreements with the
Funds to provide administrative support services to their customers who from
time to time may be owners of record or beneficial owners of the shares. In
return for providing these support services, a financial institution may receive
payments from the Funds at a rate not exceeding 0.25% of the average daily net
assets of the shares benefically owned by the financial institution's customers
for whom it is holder of record or with whom it has a servicing relationship.
These administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Funds; assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as the Funds reasonably request.
Certain trust clients of the Bank, including ERISA plans, will not be affected
by the Services Plan because the Services Plan will not be activated unless and
until a second, "Trust" class of shares of the Funds (which would not have a
Services Plan) is created and such trust clients' investments in the Funds are
converted to such Trust class.
CUSTODIAN. The Bank of New York, New York, New York is custodian for the
securities and cash of the Funds.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is transfer agent (the "Transfer Agent") for the shares of, and
dividend disbursing agent for, the Funds. It also provides certain accounting
and recordkeeping services with respect to the Funds' portfolio investments.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro & Morin, Washington, DC.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Ernst & Young,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUNDS
The Funds pay all of their own respective expenses and their allocable shares of
the Trust's expenses. The expenses borne by the Funds include, but are not
limited to, the cost of: organizing the Trust and continuing its existence;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering the Trust,
the Funds and shares of the Funds with federal and state securities authorities;
taxes and commissions; issuing, purchasing, repurchasing, and redeeming shares;
fees for custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing, mailing, auditing, accounting, and
legal expenses; reports to shareholders and governmental agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance premiums;
association membership dues; and such nonrecurring and extraordinary items as
may arise.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds attempt to stabilize the net asset value of their respective shares at
$1.00 by valuing the portfolio securities of each Fund using the amortized cost
method. The net asset value per share of each Fund is determined by subtracting
total liabilities from total assets and dividing the remainder by the number of
shares outstanding. The Funds, of course, cannot guarantee that their net asset
value will always remain at $1.00 per share.
INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------
SHARE PURCHASES
The Funds' shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Funds may be
purchased through the Bank. In connection with the sale of Fund shares, the
Distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Funds reserve the right to reject any purchase
request.
BY TELEPHONE. To place an order to purchase shares of the Funds, call the
Peachtree Funds Service Center at 1-404-989-6200 or 1-800-621-8969. Texas
residents must purchase shares of the Funds through Bank South Securities
Corporation at 1-404-989-6181 or 1-800-621-8967. Your purchase order will be
taken directly over the telephone. The order must be placed by 4:00 p.m.
(Eastern time) for shares to be purchased at that day's price.
BY MAIL. Provide a letter of instruction to the appropriate Fund indicating
your purchase order, including the dollar amount of your order, your account
title and/or name, and your account number, and include a check made payable to
the appropriate Fund.
PAYMENT BY CHECK. Mail to Peachtree Prime Money Market Fund or Peachtree
Government Money Market Fund, c/o Peachtree Funds Service Center, MC 684, P.O.
Box 4387, Atlanta, Georgia 30302.
PAYMENT BY WIRE. To purchase shares by Federal Wire, contact your account
officer for wiring instructions. Wire orders will only be accepted on days on
which the Funds, the Bank and the Federal Reserve Banks are open for business.
Payment by federal funds must be received before 12:00 noon (Eastern time) on
the same day as the order to earn dividends for that day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in either of the Funds by an investor is $1,000
($500 for IRA accounts). Subsequent investments in each Fund must be in amounts
of at least $100. The Funds may choose to waive their minimum investment
requirement from time to time and for accounts which select the Systematic
Investment Program.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment in
such Fund on a regular basis in minimum amounts of $100, unless waived. Under
this program, funds may be automatically withdrawn periodically from the
shareholder's checking or other transaction deposit account and invested in Fund
shares at the net asset value next determined after an order is received by the
Bank. A shareholder may apply for participation in this program through the
Bank.
WHAT SHARES COST
Shares of the Funds are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Funds.
The net asset value is determined at 12:00 noon (Eastern time) and 4:00 p.m.
(Eastern time), Monday through Friday, except on: (i) days on which changes (if
any) in the value of the Funds' portfolio securities do not materially affect
its net asset value; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) on the
following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
The Transfer Agent for the Funds maintains a share account for each shareholder.
Share certificates are not issued unless requested in writing from the Funds or
the Transfer Agent.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the appropriate Fund, unless
a shareholder makes a written request for cash payments to the Bank or the
Funds. Shares purchased by wire before 12:00 (Eastern time) begin earning
dividends that day. Shares purchased by check begin earning dividends the day
after the check is converted into available federal funds.
The Funds do not expect to realize any capital gains or losses. If capital gains
or losses were to occur, they could result in an increase or decrease in
dividends. The Funds will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
PURCHASING SHARES OF THE FUNDS WITH SECURITIES
The Funds, in their sole discretion, may sell shares of each Fund to investors
that desire to purchase shares of each Fund with certain securities or a
combination of certain securities and cash. Each Fund reserves the right to
determine the acceptability of securities used to effect such purchases. On the
day securities are accepted by a Fund, they are valued based upon independent
bid and in the same manner as the Fund values its own assets. Investors wishing
to use securities to purchase shares of one or both of these Funds should first
contact the Bank. Any such transfer of securities is treated as a sale of the
securities and will result in the recognition
of any gain or loss for federal income tax purposes by the seller of such
securities, except to the extent the seller is an ERISA plan or similar entity
not subject to tax.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
PEACHTREE FUNDS
All shareholders of the Funds are shareholders of the Peachtree Funds. The
Peachtree Funds currently include the Peachtree Government Money Fund, Peachtree
Prime Money Fund, Peachtree Bond Fund, Peachtree Equity Fund and Peachtree
Georgia Tax-Free Income Fund. Shareholders have easy access to each of the
portfolios of the Peachtree Funds through a telephone exchange program. All
Peachtree Funds are advised by the Bank and distributed by the Distributor.
Shareholders may exchange shares of each Fund for shares of the other Fund and
any other Peachtree Funds. In addition, shares of the Funds may also be
exchanged for certain other funds designated by the Bank which are distributed
by the Distributor, but that are not advised by the Bank ("Federated Funds").
For further information on the availability of Federated Funds for exchanges,
please call the Peachtree Funds Service Center at 1-404-989-6200 or
1-800-621-8969. Shares of funds with a sales charge may be exchanged at net
asset value for shares of other funds with an equal sales charge or no sales
charge. Shares of funds with a sales charge may be exchanged for shares of funds
with a higher sales charge at net asset value, plus the additional sales charge.
Shares of funds with no sales charge, whether acquired by direct purchase,
reinvestment of dividends on such shares, or otherwise, may be exchanged for
shares of funds with a sales charge at net asset value, plus the applicable
sales charge.
When an exchange is made from a fund with a sales charge to a fund with no sales
charge, the shares exchanged and additional shares which have been purchased by
reinvesting dividends or capital gains on such shares retain the character of
the exchanged shares for purposes of exercising further exchange privileges;
thus, an exchange of such shares for shares of a fund with a sales charge would
be at net asset value.
Shareholders who exercise this exchange privilege must exchange shares having a
net asset value of at least $1,000. Prior to any exchange, the shareholder must
receive a copy of the current prospectus of the fund into which an exchange is
to be effected.
The exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may legally be sold. Upon receipt of proper
instructions and all necessary supporting documents, shares submitted for
exchange will be redeemed at the next-determined net asset value for the
applicable fund. Written exchange instructions may require a signature
guarantee. Exercise of this privilege is treated as a sale for federal income
tax purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized.
The Funds reserve the right to terminate the exchange privilege at any time on
60 days notice. Shareholders will be notified if this privilege is terminated. A
shareholder may obtain further information on the exchange privilege by calling
the Peachtree Funds Service Center at 1-404-989-6200 or 1-800-621-8969.
BY TELEPHONE. Instructions for exchanges between funds which are part of the
Trust may be given by telephone to the Peachtree Funds Service Center at
1-404-989-6200 or 1-800-621-8969; or to the Distributor. Shares may be exchanged
by telephone only between fund accounts having identical shareholder
registrations.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to the Funds' Transfer Agent by the Bank and deposited to the
shareholder's mutual fund account before being exchanged. See "Addresses".
An authorization form permitting the Funds to accept telephone exchanges must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information regarding this service are
available from the Bank. Telephone exchange instructions may be recorded. If
reasonable procedures are not followed by the Funds, they may be liable for
losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through the Bank during times of drastic economic or
market changes. If a shareholder cannot contact the Bank by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to Peachtree Funds, 3350 Cumberland Circle, 10th Floor, Marietta, GA 30339.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Funds redeem shares at their net asset value next determined after the Bank
receives the redemption request. Redemptions will be made on days on which the
respective Fund computes its respective net asset value. Telephone or written
requests for redemption must be received in proper form and can be made through
the Bank or directly to the appropriate Fund.
BY TELEPHONE. A shareholder may redeem shares of the Funds by contacting his
account officer or by calling the Peachtree Funds Service Center to request the
redemption. (Call 1-404-989-6200 or
1-800-621-8969.) Shares will be redeemed at the net asset value next determined
after the Funds receive the redemption request from the Bank. Redemption
requests to the Bank must be received before 4:00 p.m. (Eastern time) in order
for shares to be redeemed at that day's net asset value, and the Bank will
promptly submit such redemption requests and provide proper written redemption
instructions to the Funds. If, at any time, the Funds should determine it
necessary to terminate or modify this method of redemption, shareholders would
be promptly notified.
An authorization form permitting the Funds to accept telephonic redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service are
available from the Bank. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Funds, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.
A shareholder may have the redemption proceeds directly deposited by electronic
funds transfer or wired directly to the Bank or another domestic commercial bank
previously designated by the shareholder. Wire redemption orders will only be
accepted on days on which the Funds, the Bank and the Federal Reserve Wire
System are open for business. Wire-transferred redemptions may be subject to an
additional fee.
In the event of extraordinary economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur, it
is recommended that a redemption request be made in writing and be hand
delivered or sent by overnight mail to your account officer at the Bank.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Bank. The written request should include the shareholder's name, the Fund's
name, the account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request to the Bank.
Shareholders should call the Bank at 1-800-282-6680 extension 7066 for
assistance in redeeming shares by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption requesting payment to an address other than that on record with the
Funds, or other than to the shareholder of record must make written redemption
requests with signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by the
FDIC's BIF;
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the FDIC's SAIF; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and their Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and their Transfer Agent reserve the
right to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven calendar
days, after receipt of a proper written redemption request, provided that the
Transfer Agent has received payment for shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares of
the selected Fund or Funds
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments and the
amount of dividends paid with respect to shares of the Funds, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Funds. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Funds. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000. A shareholder may apply for participation in this program through
the Bank.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, each Fund may
redeem shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance in either Fund falls below the
required minimum of $1,000 ($500 for IRAs).
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Funds entitles the shareholders to one vote in Trustee
elections and other matters submitted to shareholders of the Trust for vote. All
shares of each portfolio in the Trust have equal voting rights except that, in
matters affecting only a particular Fund, only shareholders of that Fund are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Funds' operation and for the election
of Trustees under certain circumstances.
Any Trustee may be removed by the Board of Trustees or by the 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
Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders of the Funds for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign on behalf of the Funds.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to indemnify, protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments against it from the
assets of the Funds.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956, as amended or any
affiliate thereof from sponsoring, organizing, controlling or distributing a
registered, open-end investment company continuously engaged in the issuance of
its shares, and prevent banks generally from underwriting or distributing
securities in general. However, such laws and regulations do not prohibit such a
holding company affiliate from acting as investment adviser, transfer agent, or
custodian to such an investment company or from acting as agent for their
customers in purchasing securities. The Funds' Adviser is subject to such
banking laws and regulations.
The Bank believes, based on the advice of its counsel, that it may perform the
services for the Funds contemplated by its advisory agreement with the Trust
without violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their affiliates, as well as
further judicial or administrative decisions or interpretations of present or
future statutes and regulations, could prevent the Bank from continuing to
perform all or a part of the above services for its customers and/or the Funds.
If it were prohibited from engaging in these customer-related activities, the
Trustees would consider alternative investment advisers and means of continuing
available investment services. In such event, changes in the operation of the
Funds may occur, including possible termination of any automatic or other Fund
share investment and redemption services then being provided by the Bank. It is
not expected that shareholders would suffer any adverse financial consequences
(if another adviser with equivalent abilities to the Bank is found) as a result
of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Funds expect to pay no federal income tax because they intend to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each 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 will not be combined for tax purposes with those
realized by either of the Funds.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
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 Funds may advertise their yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized amount of dividends earned during the
period on an investment shown as a percentage of the investment. The effective
yield is calculated similarly to the yield, but when annualized, the income
earned by an investment is assumed to be reinvested daily. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Funds may advertise their performance using certain
financial publications and/or compare their performance to certain indices.
PEACHTREE GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 3, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Cash $100,000
- ------------------------------------------------------------------------------------------------------
LIABILITIES: 1/2
- ------------------------------------------------------------------------------------------------------ ----------
Net Assets for 100,000 shares of beneficial interest outstanding $100,000
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share ($100,000 / 100,000 shares of
beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ ----------
</TABLE>
Notes:
(1) Peachtree Funds (the "Trust"), which includes Peachtree Government Money
Market Fund (the "Fund"), was established as a Massachusetts business trust
under a Declaration of Trust dated September 22, 1993, as amended and
restated dated December 20, 1993. The Fund has had no operations since that
date other than those relating to organizational matters, including the
issuance on January 3, 1994, of 100,000 shares at $1.00 per share to
Federated Administrative Services, the Administrator to the Fund. Expenses
of organization incurred by the Fund, $41,500, 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 ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Peachtree Funds:
We have audited the accompanying statement of assets and liabilities of
Peachtree Government Money Market Fund, as of January 3, 1994. 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 Peachtree Government Money Market Fund
as of January 3, 1994 in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
January 5, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Peachtree Prime Money Market Fund Federated Investors Tower
Peachtree Government Money Market Fund Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Bank South, N.A. MC 16
P.O. Box 4387
Atlanta, Georgia 30302
- ---------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York 48 Wall Street
New York, New York 10286
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] BANK SOUTH, N.A. the
INVESTMENT ADVISER PEACHTREE FUNDS
3350 CUMBERLAND CIRCLE PRIME MONEY
ATLANTA, GA 30339 MARKET FUND
AND
[LOGO] FEDERATED SECURITIES CORP. GOVERNMENT
Distributor MONEY
MARKET FUND
A subsidiary of FEDERATED INVESTORS
Combined
Prospectus
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779 Portfolios of
Peachtree Funds,
an Open-End Management
Investment Company
(a Mutual Fund)
4032924A (4/94) February 28, 1994
PEACHTREE PRIME MONEY MARKET FUND
(A Portfolio of Peachtree Funds)
--------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1994
A. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 6:
"As of May 10, 1994 Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
43,262,929 shares (99.30%) of the Prime Money Market Fund and therefore,
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of
shareholders."
B. Please insert the following as the last paragraph in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 6:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Adviser earned $14,910, all of
which was voluntarily waived."
C. Please insert the following information as the second sentence under
the section entitled "Administrative Services" on page 5:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, the Fund incurred administrative
service costs of $4,473, of which $291 was voluntarily waived."
D. Please insert the following as the second paragraph under the section
entitled "Distribution Plan" on page 7:
"During the period from February 14, 1994 (date of initial public
investment) through March 31, 1994, there were no distribution fees."
E. Please insert the following information at the end of the section
entitled "Purchasing Shares--Purchasing Fund Shares with Securities"
on page 7:
"Unless such securities are to be acquired by the Fund in a bona fide
reorganization, statutory merger, or similar transaction, such securities
must meet the investment objective and policies of the Fund, must be
liquid, and must not be subject to restrictions on resale."
F. Please insert the following information as the first paragraph under
the section entitled "Yield" on page 9:
"The Fund's yield for the seven-day period ended March 31, 1994 was
3.37%."
G. Please insert the following information as the first paragraph under
the section entitled "Effective Yield" on page 10:
"The Fund's effective yield for the seven-day period ended March 31, 1994
was 3.42%."
May 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
4041809B (5/94)
PEACHTREE PRIME MONEY MARKET FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Peachtree Prime Money Market Fund (the "Fund") dated
February 28, 1994. This Statement is not a prospectus itself. To
receive a copy of the prospectus, write or call the Bank South, N.A.
(the "Bank") Mutual Funds Center at 1-800-282-6680 extension 4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE
NOT ISSUED, ENDORSED OR GUARANTEED BY THE BANK OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE BANK IS INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED BY
FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE BANK.
Statement dated February 28, 1994
FEDERATED SECURITIES CORP.
--------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
U.S. Government Obligations 1
Bank Instruments 1
When-Issued and Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 2
Investment Limitations 2
PEACHTREE FUNDS MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Trustees 4
The Funds 6
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 6
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
Administrative Arrangements 7
Distribution Plan 7
Purchasing Fund Shares with Securities 8
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Use of the Amortized Cost Method 8
EXCHANGE PRIVILEGE 9
- ---------------------------------------------------------------
Requirements for Exchange 9
Making an Exchange 9
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 10
YIELD 10
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
APPENDIX 12
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Peachtree Prime Money Market Fund (the "Fund") is a portfolio of Peachtree Funds
(the "Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated as of September 22, 1993, as amended and restated
dated December 20, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in 13 months or less,
and which include, but are not limited to, commercial paper and variable amount
master demand notes, bank instruments, U.S. government obligations, and
repurchase agreements.
The instruments of banks that are members of the Federal Deposit Insurance
Corporation ("FDIC"), such as certificates of deposit, demand and time deposits,
and bankers' acceptances, are not necessarily guaranteed or insured by FDIC's
BIF or SAIF or any other governmental agency.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Federal Farm Credit Banks;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
BANK INSTRUMENTS
In addition to domestic bank obligations, such as certificates of deposit,
demand and time deposits, and bankers' acceptances, the Fund may invest in:
Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks;
Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in foreign
branches of U.S. or foreign banks;
Canadian Time Deposits, which are U.S. dollar-denominated deposits issued by
branches of major Canadian banks located in the United States; and
Yankee Certificates of Deposit, which are U.S. dollar-denominated certificates
of deposit issued by U.S. branches of foreign banks and held in the United
States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and are 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 at any time.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash and pledging securities as collateral. In a
reverse repurchase agreement, the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution or broker-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 assets are marked to market daily and
are maintained until the transaction has been settled.
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 transactions.
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
33 1/3% 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 or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of the pledge.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry. However, the Fund may invest more than 25% of the value
of its total assets in cash or cash items, (for purposes of this
limitation, the Fund considers certificates of deposit and demand and
time deposits issued by a U.S. branch of a domestic bank, savings and
loan association or savings bank having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment), securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or instruments secured by money market instruments,
such as repurchase agreements to be "cash items."
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR COMMODITY FUTURES
CONTRACTS
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
the securities of issuers whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or interest
in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 (the
"Securities Act") in connection with the sale of securities in accordance
with its investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to 50% of the value of its total assets, and except that it may purchase
or hold money market instruments, including repurchase agreements and
variable amount demand master notes, in accordance with its investment
objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its assets, the Fund will not
purchase securities of any one issuer (other than cash, cash items or
securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements
collateralized by U.S. government securities) if as a result more than 5%
of the value of its total assets would be invested in the securities of
that issuer and 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 investment limitations, however, may be changed by the Trust's
Board of Trustees ("Trustees") without shareholder approval. Shareholders will
be notified before any material change in the following limitations become
effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable fixed
time deposits with maturities over seven days, and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase
the securities of issuers which invest in or sponsor such programs.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser
owning individually more than .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 limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will not invest more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in the aggregate. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund has no present intent to borrow money or pledge securities, except as a
temporary, extraordinary, or emergency measure, in excess of 5% of the value of
its net assets in its first fiscal year.
PEACHTREE FUNDS MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees of the Trust are listed with their addresses, principal
occupations, and present positions. Except as listed below, none of the Trustees
or officers are affiliated with the Bank, Federated Investors, Federated
Securities Corp., Federated Services Company, Federated Administrative Services,
or the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Trustee Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director, AEtna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company.
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee, or
Associates, Inc., Realtors Managing General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Naples, Property Management, Inc.
FL
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc. (an
One PNC Plaza-23rd Floor engineering firm); Director, Trustee, or Managing General Partner of
Pittsburgh, PA the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A., and
PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds.
Edward L. Flaherty, Jr. Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower Treasurer, and President and Treasurer, Federated Advisers, Federated Management, and
Pittsburgh, PA Trustee Federated Research; Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated Services Company;
Chairman, Treasurer, and Director, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of the Funds.
</TABLE>
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare,
5916 Penn Mall Inc.; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA formerly, Vice Chairman, Horizon Financial, F.A.
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Learning Endowment for International Peace and RAND Corporation, Online Computer
University of Pittsburgh Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Pittsburgh, PA Slovak Management Center; Director, Trustee, or Managing General
Partner of the Funds; President Emeritus, University of Pittsburgh;
formerly, Chairman, National Advisory Council for Environmental Policy
and Technology.
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; President
Federated Investors Tower and Director, Federated Securities Corp.; President or Vice President
Pittsburgh, PA of the Funds; Director or Trustee of some of the Funds.
Charles L. Davis, Jr. Vice President Vice President, Federated Administrative Services; Vice President and
Federated Investors Tower and Assistant Assistant Treasurer of some of the Funds; formerly Vice President and
Pittsburgh, PA Treasurer Director of Investor Relations, MNC Financial, Inc. and Vice President,
Product Management, MNC Financial, Inc.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Tower and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Director,
Federated Administrative Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
</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 Board's Executive Committee. The Executive Committee of the Board
of Trustees handles various of the delegable responsibilities of the Board of
Trustees between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
FT Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Intermediate Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term Trust,
Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management; Money Market
Obligations; Money Market Trust; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet
Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is the Bank (the "Adviser"). 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 Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the Prospectus.
STATE EXPENSE LIMITATIONS
The Fund 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 2.50% per year of the first $30 million of average net assets,
2.00% per year of the next $70 million of average net assets, and 1.50%
per year of the remaining average net assets, the Adviser has agreed to
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. John A. Staley, IV, an officer of the Trust, holds approximately 15%
of the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. The
Adviser determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers and dealers may be used by the Adviser in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser might otherwise have paid,
it would tend to reduce its expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve Wire System are open for business.
The procedure for purchasing shares of the Fund is explained in the prospectus
under "Investing in the Funds."
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Fund, assist clients in changing
dividend options, account designations, and addresses, and providing such other
services as the Fund may reasonably request.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission ("SEC") pursuant
to the Investment Company Act of 1940, as amended (the "ICA"'). The Plan
provides for payment of fees to Federated Securities Corp. (the "Distributor")
to finance any activity which is principally intended to result in the sale of
the Fund's shares subject to the Plan. Such activities may include the
advertising and marketing of shares; 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 and others for such services.
The Trustees expect that the adoption of the Plan will result in the sale of
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.
PURCHASING FUND SHARES WITH SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values it assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of SEC Rule 2a-7 under the
ICA. Under this Rule, the Trustees must establish procedures reasonably designed
to stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account current
market conditions and the Fund's investment objective.
Under such Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by Rule 2a-7, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party (1) on no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
0.50% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
Rule 2a-7 requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instruments with a remaining maturity of more than 13 months can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset value
is affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders of the Fund may exchange shares of the Fund for shares of other
Funds advised by the Bank and certain other funds designated by the Bank and
distributed by the Distributor, subject to certain conditions. Exchange
procedures are explained in the Prospectus under "Exchange Privilege".
REQUIREMENTS FOR EXCHANGE
Shareholders using the exchange 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. Further information on the
exchange privilege and prospectuses may be obtained by calling the Bank at the
number on the cover of this Statement of Additional Information.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions may
require a signature guarantee.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Bank
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests cannot be executed on
days on which the New York Stock Exchange is closed or on federal holidays
restricting wire transfers. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio. To satisfy registration
requirements in a particular state, redemption in kind will be made in readily
marketable securities to the extent that such securities are available. If such
a state's policy changes, the Fund reserves the right to redeem in kind by
delivering those securities it deems appropriate.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by SEC Rule 18f-1 under the ICA where the
Fund is obligated to redeem shares for any one shareholder in cash only up to
the lesser of $250,000 or 1% of the Fund's net asset value during any 90-day
period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
derive less than 30% of its gross income from 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 received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
- --------------------------------------------------------------------------------
The Fund calculates its yield daily based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
multiplying the base period return by (365/7).
To the extent that financial institutions and brokers/dealers charge fees in
connection with services and provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield is computed by compounding the unannualized base
period return by:
adding 1 to the base period return;
raising the sum of the 365/7th power; and
subtracting 1 from the result.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
portfolio quality;
average portfolio maturity;
type of instruments in which the portfolio is invested;
changes in interest rates on money market instruments;
changes in Fund expenses; and
the relative amount of Fund cash flow.
From time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices. These may include
the following:
LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "money market
instrument funds" category in advertising and sales literature.
MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective) yield.
From time to time, the Fund will quote its Money ranking in advertising and
sales literature.
Investors may use such a reporting service in addition to the Fund's prospectus
to obtain a more complete view of the Fund's performance before investing. Of
course, when comparing Fund performance to any index and reporting service,
factors such as portfolio composition and prevailing market conditions should be
considered in assessing the significance of such comparisons.
When comparing funds using reporting services or total return and yield,
investors should take into consideration any relevant differences in funds, such
as permitted portfolio compositions and methods used to value portfolio
securities and compute offering price.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S CORPORATION CORPORATE BOND RATING DEFINITIONS
AAA_Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA_Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A_Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATING DEFINITIONS
Aaa_Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt 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.
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
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 RATING DEFINITIONS
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.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
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.
DUFF & PHELPS' CREDIT RATING CO. SHORT-TERM DEBT RATING DEFINITIONS
DUFF 1+_Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
DUFF 1_Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1-_High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
DUFF 2_Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
A CREDIT RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD SECURITIES, AND IS
SUBJECT TO CHANGE AND/OR WITHDRAWAL BY THE RATING AGENCY.
3092207B (2/94)
PEACHTREE GOVERNMENT MONEY MARKET FUND
(A Portfolio of Peachtree Funds)
- --------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1994
A. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 5:
"As of May 10, 1994 Bank South, N.A., Atlanta, Georgia, acting in various
capacities for numerous accounts, was the owner of record of approximately
25,396,709 shares (99.61%) of the Government Money Market Fund and
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders."
B. Please insert the following as the last paragraph in the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 5:
"During the period from January 7, 1994 (start of business) through March
31, 1994, the Adviser earned $8,139, all of which was voluntarily waived."
C. Please insert the following information as the second sentence under
the section entitled "Administrative Services" on page 5:
"During the period from January 7, 1994 (start of business) through March
31, 1994, the Fund incurred administrative service costs of $2,442, of
which $80 was voluntarily waived."
D. Please insert the following as the second paragraph under the section
entitled "Distribution Plan" on page 6:
"During the period from January 7, 1994 (start of business) through March
31, 1994, there were no distribution fees."
E. Please insert the following information at the end of the section
entitled "Purchasing Shares--Purchasing Fund Shares with Securities"
on page 6:
"Unless such securities are to be acquired by the Fund in a bona fide
reorganization, statutory merger, or similar transaction, such securities
must meet the investment objective and policies of the Fund, must be
liquid, and must not be subject to restrictions on resale."
F. Please insert the following information as the first paragraph under
the section entitled "Yield" on page 9:
"The Fund's yield for the seven-day period ended March 31, 1994 was
3.31%."
G. Please insert the following information as the first paragraph under
the section entitled "Effective Yield" on page 9:
"The Fund's effective yield for the seven-day period ended March 31, 1994
was 3.37%."
May 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
------------------------------------------------------------------------
Distributor
4041810B (5/94)
PEACHTREE GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Peachtree Government Money Market Fund (the "Fund")
dated February 28, 1994. This Statement is not a prospectus itself.
To receive a copy of the prospectus, write or call the Bank South,
N.A. (the "Bank") Mutual Funds Center at 1-800-282-6680 extension
4550.
SHARES OF THE FUND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, AND ARE
NOT ISSUED, ENDORSED OR GUARANTEED BY THE BANK OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT ISSUED, INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT
IN THE FUND INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE BANK IS INVESTMENT ADVISER TO THE FUND. THE FUND IS DISTRIBUTED
BY FEDERATED SECURITIES CORP., WHICH IS NOT AFFILIATED WITH THE
BANK.
Statement dated February 28, 1994
FEDERATED SECURITIES CORP.
--------------------------------------------
Distributor
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Lending of Portfolio Securities 1
Investment Limitations 2
PEACHTREE FUNDS MANAGEMENT 2
- ---------------------------------------------------------------
Officers and Trustees 2
The Funds 4
Fund Ownership 5
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 5
ADMINISTRATIVE SERVICES 5
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
- ---------------------------------------------------------------
PURCHASING SHARES 6
- ---------------------------------------------------------------
Administrative Arrangements 6
Distribution Plan 6
Purchasing Fund Shares with Securities 6
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Use of the Amortized Cost Method 7
EXCHANGE PRIVILEGE 7
- ---------------------------------------------------------------
Requirements for Exchange 7
Making an Exchange 8
REDEEMING SHARES 8
- ---------------------------------------------------------------
Redemption in Kind 8
TAX STATUS 8
- ---------------------------------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
- ---------------------------------------------------------------
EFFECTIVE YIELD 9
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Peachtree Government Money Market Fund (the "Fund") is a portfolio of Peachtree
Funds (the "Trust") which was established as a Massachusetts business trust
under a Declaration of Trust dated as of September 22, 1993, as amended and
restated dated December 20, 1993.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to achieve current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests in short-term U.S. government securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as the 91-day U.S.
Treasury bill rate.
Variable interest rates will reduce the changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not be
greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and are 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 at any time.
REPURCHASE AGREEMENTS
As collateral for the obligation of the seller to repurchase the securities from
the Fund, the Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked to market
daily. 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 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 enter into reverse repurchase agreements. These transactions are
similar to borrowing cash and pledging securities as collateral. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution or broker-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 disadvantaged
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 assets are marked to market daily and
maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
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 transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
33 1/3% 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 or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to 50% of the value of its total assets. This shall not prevent the Fund
from purchasing or holding bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by the
Fund's investment objective, policies, limitations, or its Declaration of
Trust.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Board of Trustees
without shareholder approval. Shareholders will be notified before any material
change in the following limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will not invest more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in the aggregate. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable fixed
time deposits with maturities over seven calendar days, and certain
restricted securities not determined by the Trustees to be liquid.
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.
The Fund does not expect to borrow money or pledge securities in excess of 5% of
the value of its net assets during its first fiscal year.
PEACHTREE FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees of the Trust are listed with their addresses, principal
occupations, and present positions. Except as listed below, none of the Trustees
or officers are affiliated with Bank South, N.A., Federated Investors, Federated
Securities Corp., Federated Services Company, Federated Administrative Services,
or the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Trustee Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director, tna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company.
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee, or
Associates, Inc., Realtors Managing General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Property Management, Inc.
Naples, FL
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc. (an
One PNC Plaza-23rd Floor engineering firm); Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC
Bank Corp. and
Director, Ryan Homes, Inc.
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
Edward L. Flaherty, Jr. Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Edward C. Gonzales* President, Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower Treasurer President and Treasurer, Federated Advisers, Federated Management, and
Pittsburgh, PA and Trustee Federated Research; Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated Services Company;
Chairman, Treasurer, and Director, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of the Funds.
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
</TABLE>
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace and RAND Corporation, Online Computer
Learning Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director, Federated Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
Charles L. Davis, Jr. Vice President Vice President, Federated Administrative Services; Vice President and
Federated Investors Tower and Assistant Assistant Treasurer of some of the Funds; formerly, Vice President and
Pittsburgh, PA Treasurer Director of Investor Relations, MNC
Financial, Inc. and Vice President, Product Management, MNC Financial,
Inc.
John W. McGonigle Vice President and Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Tower Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Director,
Federated Administrative Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance Com-
pany and President of its Federated Research Division.
</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 Board's Executive Committee. The Executive Committee of the Board
of Trustees handles various of the delegable responsibilities of the Board of
Trustees between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; The Boulevard
Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
FT Series, Inc.; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Intermediate Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term Trust,
Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market Management; Money Market
Obligations; Money Market Trust; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet
Select Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; and Trust for
U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Bank South, N.A. (the "Adviser"). 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 Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the Prospectus.
STATE EXPENSE LIMITATIONS
The Fund 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 2.50% per year of the first $30 million of average net assets,
2.00% per year of the next $70 million of average net assets, and 1.50%
per year of the remaining average net assets, the Adviser has agreed to
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. John A. Staley, IV, an officer of the Trust, holds approximately 15%
of the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser exercises reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. The
Adviser determines in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided.
Research services provided by brokers and dealers may be used by the Adviser in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser might otherwise have paid,
it would tend to reduce its expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve Wire System are open for business.
The procedure for purchasing shares of the Fund is explained in the prospectus
under "Investing in the Funds."
ADMINISTRATIVE ARRANGEMENTS
The administrative services include, but are not limited to, providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as is necessary or beneficial to establish
and maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Fund, assist clients in changing
dividend options, account designations, and addresses, and providing such other
services as the Fund may reasonably request.
DISTRIBUTION PLAN
With respect to the Fund, the Trust has adopted a Plan pursuant to Rule 12b-1
which was promulgated by the Securities and Exchange Commission ("SEC") pursuant
to the Investment Company Act of 1940, as amended (the "Act"). The Plan provides
for payment of fees to the Distributor to finance any activity which is
principally intended to result in the sale of the Fund's shares subject to the
Plan. Such activities may include the advertising and marketing of shares;
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 and others for such services.
The Trustees expect that the adoption of the Plan will result in the sale of
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.
PURCHASING FUND SHARES WITH SECURITIES
The Fund in its sole discretion, may sell Fund shares to investors that desire
to purchase Fund shares with certain securities or a combination of certain
securities and cash. The Fund reserves the right to determine the acceptability
of securities used to effect such purchases. On the day securities are accepted
by the Fund, they are valued based upon independent bid and in the same manner
as the Fund values it assets. Investors wishing to use securities to purchase
Fund shares should first contact the Bank. Any such transfer of securities is
treated as a sale of the securities and will result in the recognition of any
gain or loss for federal income tax purposes by the seller of such securities,
except to the extent the seller is an ERISA plan or similar entity not subject
to tax.
TAX CONSEQUENCES
Exercise of this exchange privilege is currently treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of SEC Rule 2a-7 under the
Act. Under this Rule, the Trustees must establish procedures reasonably designed
to stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account current
market conditions and the Fund's investment objective.
Under such Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by this Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party (1) on no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
0.50% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
Rule 2a-7 requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instruments with a remaining maturity of more than 13 months days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shareholders of the Fund may exchange shares of the Fund for shares of other
Funds advised by the Bank and certain other funds designated by the Bank and
distributed by the Distributor, subject to certain conditions. Exchange
procedures are explained in the Prospectus under "Exchange Privilege".
REQUIREMENTS FOR EXCHANGE
Shareholders using the exchange 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
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 may be obtained by calling the Bank at the
number on the cover of this Statement of Additional Information.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions may
require a signature guarantee.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Bank
receives the redemption request. Redemption will be made on days on which the
Fund computes its net asset value. Redemption requests cannot be executed on
days on which the New York Stock Exchange is closed or on federal holidays
restricting wire transfers. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio. To satisfy registration
requirements in a particular state, redemption in kind will be made in readily
marketable securities to the extent that such securities are available. If such
a state's policy changes, the Fund reserves the right to redeem in kind by
delivering those securities it deems appropriate.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by SEC Rule 18f-1 under the Act under which
the Fund is obligated to redeem shares for any one shareholder in cash only up
to the lesser of $250,000 or 1% of the Fund's net asset value during any 90-day
period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
derive less than 30% of its gross income from 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 received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
- --------------------------------------------------------------------------------
The Fund calculates its yield daily based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
multiplying the base period return by (365/7).
To the extent that financial institutions and brokers/dealers charge fees in
connection with services and provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield is computed by compounding the unannualized base
period return by:
adding 1 to the base period return;
raising the sum of the 365/7th power; and
subtracting 1 from the result.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
portfolio quality;
average portfolio maturity;
type of instruments in which the portfolio is invested;
changes in interest rates on money market instruments;
changes in Fund expenses; and
the relative amount of Fund cash flow.
From time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices. These may include
the following:
LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "short-term
U.S. government funds" category in advertising and sales literature.
MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective) yield.
From time to time, the Fund will quote its Money ranking in advertising and
sales literature.
SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most representative
yields for selected securities, issued by the U.S. Treasury, maturing in 30
days.
Investors may use such indices or reporting services in addition to the Fund's
prospectus to obtain a more complete view of the Fund's performance before
investing. Of course, when comparing Fund performance to any indices and
reporting service factors, such as composition of indices and prevailing market
conditions should be considered in assessing the significance of such
comparisons.
When comparing funds using reporting services or total return and yield,
investors should take into consideration any relevant differences in funds, such
as permitted portfolio compositions and methods used to value portfolio
securities and compute offering price.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
3093003B (2/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Filed in Part A (Supplement
to Prospectus (Portfolios
1,2,4,5); To be filed by
Amendment (Portfolio 3)
(b) Exhibits:
(1) (i) Conformed Copy of Declaration of Trust
of the Registrant (1);
(ii) Conformed Copy of Amended and Restated
Declaration of Trust of the Registrant
(2);
(iii) Conformed Copy of Amendment No. 2
to the Declaration of
Trust (3);
(2) Copy of By-Laws of the Registrant (2);
(3) Not applicable;
(4) a. Copy of Specimen Certificates
for Shares of Beneficial Interest of the
Registrant (2);
(i) BankSouth Select Georgia Tax-Free Income
Fund (2);
(ii) BankSouth Select Government Money Market
Fund (2);
(iii) BankSouth Select Prime Money Market
Fund (2);
(iv) BankSouth Select Bond Fund (2);
(v) BankSouth Select Equity Fund (2);
b. Copy of Revised Specimen
Certificates for Shares of Beneficial
Interest of the Registrant; to be filed
by Amendment;
(5) Conformed Copy of Investment Advisory
Contract of the Registrant (2);
(6) (i) Conformed Copy of Distributor's
Contract of the Registrant (2);
(ii) Conformed Copy of Administrative
Services Agreement (2);
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the
Registrant;+
(9) (i) Conformed Copy of Agreement for Fund
Accounting, Shareholder Recordkeeping
and Custody Services Procurment
Agreement of the Registrant (2);
(ii) Conformed Copy of Shareholder
Services Plan of the Registrant
(2);
(10) Conformed Copy of Opinion and Consent of
Counsel as to legality of shares being
registered (2);
(11) (i) Conformed Copy of Consent of
Independent Public Accountants; +
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding (2);
(14) Not applicable;
(15) (i)Conformed Copy of Distribution Plan
(2);
(ii) Copy of Form of 12b-1
Agreement (2);
(16) Schedule for Computation of Fund
Performance Data;+
(i) Peachtree Bond Fund; +
(ii) Peachtree Equity Fund;+
(iii) Peachtree Government Money Market
Fund;+
(iv) Peachtree Prime Money Market Fund;+
(17) Power of Attorney (1);
(18) 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
Initial Registration Statement on Form N-1A filed October
15, 1993. (File Nos. 33-50635).
2. Response is incorporated by reference to Registrant's Pre-
effective Amendment No. 2 on Form N-1A filed January 7,
1994. (File Nos. 33-50635).
3. Response is incorporated by reference to Registrant's
Registration Statement on Form N-1A filed April 8, 1994.
(File Nos. 33-50635).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 6, 1994
Shares of
Beneficial Interest
(no par value)
Peachtree Georgia Tax-Free Income Fund 6
Peachtree Government Money Market Fund 5
Peachtree Prime Money Market Fund 12
Peachtree Bond Fund 10
Peachtree Equity Fund 22
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
(a) Bank South National Association (the "Bank") is
headquartered in Atlanta Georgia and is a wholly
owned subsidiary of Bank South Corporation, a
Georgia corporation which is a registered bank
holding company. The Bank serves consumers through
its network of banking offices with a full range of
deposit and lending products, as well as investment
services. The principal executive offices of the
Adviser are located at 55 Marietta Street N.W.,
Atlanta, GA 30303. The Bank has managed
discretionary assets for its consumers since 1931.
As of December 17, 1993, the Bank managed in excess
of $1 billion of discretionary assets. Prior to
the date hereof, the Bank has not served as an
investment adviser to mutual funds.
The principal executive offices and directors of the
Trust's Investment Adviser are set forth in the
following tables. Unless otherwise noted, the
position listed under Other Substantial Business,
Profession, Vocation or Employment is with the
Bank.
(1) (2) (3)
Other Substantial
Position with Business Profession,
Name the Adviser Vocation or
Employment
Bernard W. Abrams Director Chairman of the Board
and Chief Executive
Officer of Abrams
Industries, Inc., a
holding company for
subsidiaries doing
business in general
contracting, real
estate development
and manufacturing of
store fixtures.
1. Response is incorporated by
reference to Registrant's Pre-Effective Amendment No. 3 on
form N-1 filed April 8, 1994. (File No. 033-50635)
(1) (2) (3)
Other Substantial
Position with Business Profession,
Name the Adviser Vocation or
Employment
Ray C. Anderson Director Chairman and Chief
Executive Officer of
Interface, Inc., a
manufacturer of
carpet, textiles and
chemicals.
Kenneth W. Cannestra Director President of Lockheed
Aeronautical Systems
Co.
John S. Carr Director President of John S.
Carr and Associates,
Inc., a real estate
development company.
Patrick L. Flinn Chairman and
Chief Executive
Officer
Ralph E. Hutchens, Jr. Chief
Financial Officer
Sidney E. Jennette, Jr. Director Management
consultant.
Lynn H. Johnston Director Chairman of Life
Insurance Company of
Georgia.
William M. McClatchey, M.D. Director President
of Piedmont Internal
Medicine Associates,
P.A. and is a doctor
of internal medicine
and rheumatology
John E. McKinley, III Principle Operating
Officer
Julia W. Morgan Director President and Chief
Executive Officer of
Ed Morgan &
Associates, an
insurance company.
Barry Phillips Director Partner of Kilpatrick
& Cody, Attorneys.
Ben. G. Porter Director Chairman of Piedmont
Communications
Corporation.
(1) (2) (3)
Other Substantial
Position with Business Profession,
Name the Adviser Vocation or
Employment
John W. Robinson, Jr. Director President of Southern
Waistbands, Inc.
Lee M. Sessions, Jr. Principle Operating
Officer
Felker W. Ward, Jr. Director President of Ward &
Associates,
investment bankers.
Virgil R. Williams Director President of
Equipment
Technology, Inc.,
President of
International
Banking
Technologies, Inc.
and the President
and Publisher of
Georgia Trend.
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: A.T. Ohio Municipal Money Fund;
Alexander Hamilton Funds; 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; Financial
Reserves 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 Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Trustee, President,
Federated Investors Tower President, and Treasurer, and Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President 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
Solon A. Person, IV 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
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 Assistant
Federated Investors Tower Securities Corp. Secretary
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
Federated Services Company
("Administrator") Pittsburgh, PA
Federated Administrative Services 15222-3779
("Transfer Agent, Dividend Disbursing
Agent and Portfolio Recordkeeper")
Bank of New York 48 Wall Street
("Custodian") New York, New York 10286
Bank South National Association
("Adviser") MC 676
P.O. Box 5092
Atlanta, Georgia 30302
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of 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,
PEACHTREE FUNDS, has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 27th day of
May, 1994.
PEACHTREE FUNDS
BY: /s/C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
May 27, 1994
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/C. Grant Anderson
C. Grant Anderson Attorney In Fact May 27, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Edward C. Gonzales* President, Treasurer and Trustee
(Principal Financial and Accounting
Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item
601/Reg. SK
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our report dated
January 5, 1994 on the statement of assets and liabilities in
Post-Effective Amendment Number 1 to the Registration
Statement (Form N-1A Number 33-50635) and the related
Prospectus of Peachtree Government Money Market Fund (a
Portfolio of Peachtree Funds).
By: ERNST & YOUNG
Ernst & Young
Boston, Massachusetts
May 23, 1994
Exhibit 18 under Form N-1A
Exhibit 99 under Item 601/Reg.
S-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
May 26, 1994
Peachtree Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Peachtree 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-
50635). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective
pursuant to said Rule on May 27, 1994.
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, Housto & Donnelly
By: /s/ Thomas J. Donnelly
TJD:smg
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. SK
CUSTODY AGREEMENT
BETWEEN
BANKSOUTH SELECT FUNDS
AND
THE BANK OF NEW YORK
Agreement made as of this sixth day of January, 1994,
between BANKSOUTH SELECT FUNDS, a Massachusetts business
trust organized and existing under the laws of the
Commonwealth of Massachusetts, having its principal
office and place of business at Federated Investors
Tower, Pittsburgh Pennsylvania 15222-3779 (hereinafter
called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having
its principal office and place of business at 48 Wall
Street, New York, New York 10286 (hereinafter called the
"Custodian").
W I T N E S S E T H :
That for and in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree
as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall
have the following meanings:
1. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States
and federal agency securities, its successor or
successors and its nominee or nominees.
2. "Call Option" shall mean an over the counter or
exchange traded option with respect to Securities
other than Stock Index Options, Futures Contracts,
and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the
writer thereof the specified underlying Securities.
3. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the
rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an
investment company, or any broker-dealer reasonably
believed by the Custodian to be such a clearing
member.
4. "Collateral Account" shall mean an account
maintained and specifically allocated to a Series
under the terms of this Agreement as a segregated
account, by recordation or otherwise, within the
custody account in which certain Securities and/or
other assets of the Fund specifically allocated to
such Series shall be deposited and withdrawn from
time to time in accordance with Proper Instructions
received by the Custodian in connection with such
transactions as the Fund may from time to time
determine.
5. "Covered Call Option" shall mean an exchange
traded option entitling the holder, upon timely
exercise and payment of the exercise price, as
specified therein, to purchase from the writer
thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the
writer thereof and subject to appropriate
restrictions.
6. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with
the Securities and Exchange Commission, its successor
or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other
person authorized to act as a depository under the
Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the
Fund's Board of Directors specifically approving
deposits therein by the Custodian and those book-
entry systems approved pursuant to Rule 17f-4 under
the Investment Company Act of 1940, by the Fund's
Board of Directors.
7. "Derivative" shall mean puts, calls, straddles,
futures, forwards, interest rate swaps, caps,
collars, ceilings and floors and other interest rate
protection instruments and any related options, and
currency swaps.
8. "Financial Futures Contract" shall mean the
firm commitment to buy or sell fixed income
securities including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury
Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a
specified month at an agreed upon price.
9. "Futures Contract" shall mean a Financial
Futures Contract and/or Stock Index Futures
Contracts.
10. "Futures Contract Option" shall mean an option
with respect to a Futures Contract.
11. "Margin Account" shall mean a segregated
account in the name of a broker, dealer, futures
commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer,
futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures
commission merchant or a Clearing Member (a "Margin
Account Agreement"), separate and distinct from the
custody account, in which certain Securities and/or
money of the Fund shall be deposited and withdrawn
from time to time in connection with such
transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System
or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account
upon the Custodian's effecting an appropriate entry
in its books and records.
12. "Money Market Security" shall be deemed to
include, without limitation, certain Reverse
Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the
government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal
government or public authority, commercial paper,
certificates of deposit and bankers' acceptances,
repurchase agreements with respect to the same and
bank time deposits, and such other instruments and
agreements where the purchase and sale of such
securities and instruments normally requires
settlement in federal funds on the same day as such
purchase or sale.
13. "O.C.C." shall mean the Options Clearing
Corporation, a clearing agency registered under
Section 17A of the Securities Exchange Act of 1934,
its successor or successors, and its nominee or
nominees.
14. "Officers" shall be deemed to include the
President, any Vice President, the Secretary, the
Treasurer, the Controller, any Assistant Secretary,
any Assistant Treasurer, and any other person or
persons, whether or not any such other person is an
officer of the Fund, duly authorized by the Board of
Directors of the Fund to execute any Proper
Instruction, instruction, notice or other instrument
on behalf of the Fund and listed in the Authorized
and Proper Instructions annexed hereto as Appendix A
or such other Proper Instruction as may be received
by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option.
16. "Proper Instruction" shall mean any oral or
written notice, instruction, or other instrument,
authorized or required by this Agreement to be given
to the Custodian which is actually received by the
Custodian and, authorized on behalf of the Fund by
the kind and number of Officers designated in the
Fund's Authorized and Proper Instructions, and the
term Proper Instruction shall also include
instructions by the Fund to the Custodian
communicated by a Terminal Link.
17. "Put Option" shall mean an exchange traded
option with respect to Securities other than Stock
Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying
Securities, to sell such Securities to the writer
thereof for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities
and agrees to repurchase such Securities at a
described or specified date and price.
19. "Security" shall be deemed to include, without
limitation, Money Market Securities, Derivatives,
Call Options, Put Options, Stock Index Options, Stock
Index Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase
Agreements, common stocks and other securities having
characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal
governments and by public authorities, (including,
without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development
bonds), asset-backed securities and obligations,
bonds, debentures, notes, mortgages or other
obligations, and any combination of any of the
foregoing to create "synthetic" securities or
otherwise and any certificates, receipts, warrants or
other instruments representing rights to receive,
purchase, sell or subscribe for the same, or
evidencing or representing any other rights or
interest therein, or any property or assets.
20. "Series" shall mean the various portfolios, if
any, of the Fund as described from time to time in
the current and effective prospectus for the Fund.
21. "Shares" shall mean the shares of capital stock
of the Fund, each of which is, in the case of a Fund
having Series, allocated to a particular Series.
22. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties
agree to take or make delivery of an amount of cash
equal to a specified dollar amount times the
difference between the value of a particular stock
index at the close of the last business day of the
contract and the price at which the futures contract
is originally struck.
23. "Stock Index Option" shall mean an exchange
traded option entitling the holder, upon timely
exercise, to receive an amount of cash determined by
reference to the difference between the exercise
price and the value of the index on the date of
exercise.
24. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian
requiring in connection with each use of the Terminal
Link by or on behalf of the Fund use of an
authorization code provided by the Custodian and at
least two access codes established by the Fund.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys
at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties
thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of
this Article and in Article VIII, the Fund will
deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, at any time
during the period of this Agreement, and shall
specify with respect to such Securities and money the
Series to which the same are specifically allocated.
The Custodian shall segregate, keep and maintain the
assets of each Series separate and apart from the
other Series and from the Custodian's own assets and
assets it holds for others, regardless of capacity,
and shall maintain books and records adequate to
reflect the ownership of Securities and moneys held
hereunder. The Custodian will not be responsible for
any Securities and moneys not actually received by
it. The Custodian will be entitled to reverse any
credits made to the Fund's cash balance on the Fund's
behalf where such credits have been previously made
and moneys are not finally collected. The Fund shall
deliver to the Custodian a certified resolution of
the Board of Directors of the Fund, substantially in
the form of Exhibit A hereto, approving, authorizing
and instructing the Custodian on a continuous and on-
going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein, regardless
of the Series to which the same are specifically
allocated and to utilize the Book-Entry System to the
extent possible in connection with its performance
hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit
of Securities specifically allocated to a Series in
the Depository, the Fund shall deliver to the
Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of
Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing
basis until instructed to the contrary by a Proper
Instruction actually received by the Custodian to
deposit in the Depository all Securities specifically
allocated to such Series eligible for deposit
therein, and to utilize the Depository to the extent
possible with respect to such Securities in
connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either
the Book-Entry System or the Depository will be
represented in accounts which include only assets
held by the Custodian for customers, including, but
not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be
specifically allocated on the Custodian's books to
the separate account for the applicable Series.
Recognizing that only a confirmation and not an
actual security is received when dealing with Options
and Derivatives, prior to the Custodian's accepting,
utilizing and acting with respect to Clearing Member
confirmations for Options and Derivatives and
transactions in Options and Derivatives for a Series
as provided in this Agreement, the Custodian shall
have received a Proper Instruction, substantially in
the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-
going basis, until instructed to the contrary by a
Proper Instruction actually received by the
Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement
with respect to such Series.
2. The Custodian shall establish and maintain
separate accounts, in the name of each Series, and
shall credit to the separate account for each Series
all moneys received by it for the account of the Fund
with respect to such Series. Money credited to a
separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Proper Instructions setting forth the
name and address of the person to whom the payment
is to be made, the Series account from which
payment is to be made and the purpose for which
payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian
attributable to such Series upon invoice and
instruction to pay.
3. Promptly after the close of business on each
day, the Custodian shall furnish the Fund with
confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund
for a Series during said day, either hereunder or
with any co-custodian or sub-custodian appointed in
accordance with this Agreement. Where Securities are
transferred to the account of the Fund for a Series,
the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of
Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its
nominee) as Custodian for the Fund or shown on the
Custodian's account on the books of the Book-Entry
System or the Depository. At least monthly and from
time to time, the Custodian shall furnish the Fund
with a detailed statement, on a per Series basis, of
the Securities and moneys held by the Custodian for
the Fund.
4. Except as otherwise provided in paragraph 7 of
this Article and in Article VIII, all Securities held
by the Custodian hereunder, which are issued or
issuable only in bearer form, except such Securities
as are held in the Book-Entry System, shall be held
by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the
Fund or its nominee, in the name of any duly
appointed registered nominee of the Custodian, as
Custodian for the Fund, as the Custodian may from
time to time determine, or in the name of the Book-
Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund
agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register
in the name of its registered nominee or in the name
of the Book-Entry System or the Depository any
Securities which it may hold hereunder and which may
from time to time be registered in the name of the
Fund or its nominee. The Custodian shall hold all
such Securities specifically allocated to a Series
which are not held in the Book-Entry System or in the
Depository in a separate account in the name of such
Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement
and unless otherwise instructed to the contrary by a
Proper Instruction, the Custodian by itself, or
through the use of the Book-Entry System or the
Depository with respect to Securities held hereunder
and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance
with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if
either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears
in one or more of the publications listed in
Appendix B annexed hereto, which may be amended at
any time by the Custodian without the prior
notification or consent of the Fund, although the
Custodian will give the Fund notice as soon as
practical;
(c) Present for payment and collect the amount payable
upon all Securities which mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as custodian, any necessary declarations
or certificates of ownership under the Federal
Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect;
and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein
deposited, for the account of a Series, all rights
and similar securities issued with respect to any
Securities held by the Custodian for such Series
hereunder.
6. Upon receipt of a Proper Instruction and not
otherwise, the Custodian, directly or through the use
of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Proper Instruction proxies,
consents, authorizations, and any other
instruments whereby the authority of the Fund as
owner of any Securities held by the Custodian
hereunder for the Series specified in such Proper
Instruction may be exercised;
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Proper
Instruction in exchange for other Securities or
cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any
corporation, or the exercise of any conversion
privilege and receive and hold hereunder
specifically allocated to such Series any cash or
other Securities received in exchange;
(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Proper
Instruction to any protective committee,
reorganization committee or other person in
connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold
hereunder specifically allocated to such Series
such certificates of deposit, interim receipts or
other instruments or documents as may be issued to
it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of
the Series specified in such Proper Instruction,
and take such other steps as shall be stated in
such Proper Instruction to be for the purpose of
effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation
or recapitalization of the Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding
paragraph 5(b) of this Article which may be called
as specified in the Proper Instruction.
7. Notwithstanding any provision elsewhere
contained herein, the Custodian shall not be required
to obtain possession of any instrument or certificate
representing any Derivative, Futures Contract, any
Option, or any Futures Contract Option until after it
shall have determined, or shall have received a
Proper Instruction from the Fund stating, that any
such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Proper
Instruction no later than the business day preceding
the availability of any such instrument or
certificate. Prior to such availability, the
Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in
connection with the purchase, sale, settlement,
closing out or writing of Derivatives, Futures
Contracts, Options, or Futures Contract Options by
making payments or deliveries specified in Proper
Instructions received by the Custodian in connection
with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or
confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers,
or future commission merchants with respect to such
Derivatives, Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any
nominee of the Custodian) as custodian for the Fund,
provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to
which a Margin Account relates, shall be made in
accordance with the terms and conditions of the
Margin Account Agreement. Whenever any such
instruments or certificates are available, the
Custodian shall, notwithstanding any provision in
this Agreement to the contrary, make payment for any
Derivative, Futures Contract, Option, or Futures
Contract Option for which such instruments or such
certificates are available only against the delivery
to the Custodian of such instrument or such
certificate, and deliver any Derivative, Futures
Contract, Option or Futures Contract Option for which
such instruments or such certificates are available
only against receipt by the Custodian of payment
therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject
to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by
the Fund, other than a purchase of an Option, a
Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (a) the Series to
which such Securities are to be specifically
allocated; (b) the name of the issuer and the title
of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if
any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable
upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to
be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the
broker specified in the Proper Instruction out of the
moneys held for the account of such Series the total
amount payable upon such purchase, provided that the
same conforms to the total amount payable as set
forth in such Proper Instruction.
2. Promptly after each sale of Securities by the
Fund, other than a sale of any Option, Futures
Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the
Custodian (a) the Series to which such Securities
were specifically allocated; (b) the name of the
issuer and the title of the Security; (c) the number
of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale
price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made,
and the name of the clearing broker, if any; and (h)
the name of the broker to whom the Securities are to
be delivered. The Custodian shall deliver the
Securities specifically allocated to such Series to
the broker specified in the Proper Instruction
against payment of the total amount payable to the
Fund upon such sale, provided that the same conforms
to the total amount payable as set forth in such
Proper Instruction.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by
the Fund, the Fund shall deliver to the Custodian a
Proper Instruction specifying with respect to each
Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option
(put or call); (c) the name of the issuer and the
title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e)
the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the
Clearing Member through whom such Option was
purchased; and (i) the name of the broker to whom
payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the
account of the Series to which such Option is to be
specifically allocated, the total amount payable upon
such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to
the total amount payable as set forth in such Proper
Instruction.
2. Promptly after the sale of any Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver to the Custodian a Proper Instruction
specifying with respect to each such sale: (a) the
Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c)
the name of the issuer and the title and number of
shares subject to such Option or, in the case of a
Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f)
the date of settlement; (g) the total amount payable
to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The
Custodian shall consent to the delivery of the Option
sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1
of this Article with respect to such Option against
payment to the Custodian of the total amount payable
to the Fund, provided that the same conforms to the
total amount payable as set forth in such Proper
Instruction.
3. Promptly after the exercise by the Fund of any
Call Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the
Custodian a Proper Instruction specifying with
respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the
name of the is- sure and the title and number of
shares subject to the Call Option; (c) the expiration
date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to
be paid by the Fund upon such exercise; and (g) the
name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon
receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for
the account of the Series to which such Call Option
was specifically allocated the total amount payable
to the Clearing Member through whom the Call Option
was exercised, provided that the same conforms to the
total amount payable as set forth in such Proper
Instruction.
4. Promptly after the exercise by the Fund of any
Put Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the
Custodian a Proper Instruction specifying with
respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the
name of the issuer and the title and number of shares
subject to the Put Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option
was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver
the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to
the Fund as set forth in such Proper Instruction.
5. Promptly after the exercise by the Fund of any
Stock Index Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the
Custodian a Proper Instruction specifying with
respect to such Stock Index Option: (a) the Series to
which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or
call); (c) the number of Options being exercised; (d)
the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the
total amount to be received by the Fund in connection
with such exercise; and (h) the Clearing Member from
whom such payment is to be received. The Custodian
shall remove such Stock Index Option from the Fund's
listing of assets and credit the Fund's cash account
timely upon receipt of such amount by the Custodian.
6. Whenever the Fund writes a Covered Call Option,
the Fund shall promptly deliver to the Custodian a
Proper Instruction specifying with respect to such
Covered Call Option: (a) the Series for which such
Covered Call Option was written; (b) the name of the
issuer and the title and number of shares for which
the Covered Call Option was written and which
underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member
through whom the premium is to be received. The
Custodian shall deliver or cause to be delivered, in
exchange for receipt of the premium specified in the
Proper Instruction with respect to such Covered Call
Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members
dealing in Covered Call Options and shall impose, or
direct the Depository to impose, upon the underlying
Securities specified in the Proper Instruction
specifically allocated to such Series such
restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund
and in order to maintain compliance with OCC Rules
limiting the amount of receipts a bank can issue in
relation to its capital, at any time to refuse to
issue any receipts for Securities in the possession
of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the
Fund and described in the preceding paragraph of this
Article is exercised, the Fund shall promptly deliver
to the Custodian a Proper Instruction instructing the
Custodian to deliver, or to direct the Depository to
deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the
issuer and the title and number of shares subject to
the Covered Call Option; (c) the Clearing Member to
whom the underlying Securities are to be delivered;
and (d) the total amount payable to the Fund upon
such delivery. Upon the return and/or cancellation of
any receipts delivered pursuant to paragraph 6 of
this Article, the Custodian shall deliver, or direct
the Depository to deliver, the underlying Securities
as specified in the Proper Instruction against
payment of the amount to be received as set forth in
such Proper Instruction.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Proper
Instruction specifying with respect to such Put
Option: (a) the Series for which such Put Option was
written; (b) the name of the issuer and the title and
number of shares for which the Put Option is written
and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Put Option is
written; (g) the name of the Clearing Member through
whom the premium is to be received and to whom a Put
Option guarantee letter is to be delivered; (h) the
amount of cash, and/or the amount and kind of
Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account
for such Series; and (I) the amount of cash and/or
the amount and kind of Securities specifically
allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian
shall, after making the deposits into the Collateral
Account specified in the Proper Instruction, issue a
Put Option guarantee letter substantially in the form
utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in
the Proper Instruction against receipt of the premium
specified in said Proper Instruction. Notwithstanding
the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of
the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised,
the Fund shall promptly deliver to the Custodian a
Proper Instruction specifying: (a) the Series to
which such Put Option was written; (b) the name of
the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the
total amount payable by the Fund upon such delivery;
(e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to
be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount
and kind of Securities, specifically allocated to
such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation
of any Put Option guarantee letter or similar
document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the
moneys held for the account of the Series to which
such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in
the Proper Instruction as set forth in such Proper
Instruction against delivery of such Securities, and
shall make the withdrawals specified in such Proper
Instruction.
10. Whenever the Fund writes a Stock Index Option,
the Fund shall promptly deliver to the Custodian a
Proper Instruction specifying with respect to such
Stock Index Option: (a) the Series for which such
Stock Index Option was written; (b) whether such
Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the
exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be
received by the Fund; (i) the amount of cash and/or
the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited
in the Collateral Account for such Series; and (j)
the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such
Series to be deposited in a Margin Account, and the
name in which such account is to be or has been
established. The Custodian shall, upon receipt of the
premium specified in the Proper Instruction, make the
deposits, if any, into the Collateral Account
specified in the Proper Instruction, and either (1)
deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in
accordance with the customs prevailing among Clearing
Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Proper
Instruction, or (2) make the deposits into the Margin
Account specified in the Proper Instruction.
11. Whenever a Stock Index Option written by the
Fund and described in the preceding paragraph of this
Article is exercised, the Fund shall promptly deliver
to the Custodian a Proper Instruction specifying with
respect to such Stock Index Option: (a) the Series
for which such Stock Index Option was written; (b)
such information as may be necessary to identify the
Stock Index Option being exercised; (c) the Clearing
Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such
exercise, and whether such amount is to be paid by or
to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the
Margin Account; and (f) the amount of cash and/or
amount and kind of Securities, if any, to be
withdrawn from the Collateral Account for such
Series. Upon the return and/or cancellation of the
receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay
out of the moneys held for the account of the Series
to which such Stock Index Option was specifically
allocated to the Clearing Member specified in the
Proper Instruction the total amount payable, if any,
as specified therein.
12. Whenever the Fund purchases any Option
identical to a previously written Option described in
paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated by the Fund's
adviser as a "Closing Purchase Transaction" in order
to liquidate its position as a writer of an Option,
the Fund shall promptly deliver to the Custodian a
Proper Instruction specifying with respect to the
Option being purchased: (a) that the transaction is a
Closing Purchase Transaction; (b) the Series for
which the Option was written; (c) the name of the
issuer and the title and number of shares subject to
the Option, or, in the case of a Stock Index Option,
the stock index to which such Option relates and the
number of Options held; (d) the exercise price; (e)
the premium to be paid by the Fund; (f) the
expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of
the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from
the Collateral Account, or a specified Margin
Account, for such Series. Upon the Custodian's
payment of the premium and the return and/or
cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to
the Option being liquidated through the Closing
Purchase Transaction, the Custodian shall remove, or
direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the
Call Option.
13. Upon the expiration, exercise or consummation
of a Closing Purchase Transaction with respect to any
Option purchased or written by the Fund and described
in this Article, the Custodian shall delete such
Option from the statements delivered to the Fund
pursuant to paragraph 3 Article III herein, and upon
the return and/or cancellation of any receipts issued
by the Custodian, shall make such withdrawals from
the Collateral Account, and the Margin Account as may
be specified in a Proper Instruction received in
connection with such expiration, exercise, or
consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Proper Instruction specifying with respect to such
Futures Contract, (or with respect to any number of
identical Futures Contract(s)): (a) the Series for
which the Futures Contract is being entered; (b) the
category of Futures Contract (the name of the
underlying stock index or financial instrument); (c)
the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the
Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity
date; (f) whether the Fund is buying (going long) or
selling (going short) on such Futures Contract(s);
(g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Collateral
Account for such Series; (h) the name of the broker,
dealer, or futures commission merchant through whom
the Futures Contract was entered into; and (i) the
amount of fee or commission, if any, to be paid and
the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys
specifically allocated to such Series of the fee or
commission, if any, specified in the Proper
Instruction and deposit in the Collateral Account for
such Series the amount of cash and/or the amount and
kind of Securities specified in said Proper
Instruction.
2. (a) Any variation margin payment or similar
payment required to be made by the Fund to a
broker, dealer, or futures commission merchant
with respect to an outstanding Futures Contract,
shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account
Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission
merchant to the Fund with respect to an
outstanding Futures Contract, shall be received
and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account
Agreement.
3. Whenever a Futures Contract held by the
Custodian hereunder is retained by the Fund until
delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a
Proper Instruction specifying: (a) the Futures
Contract and the Series to which the same relates;
(b) with respect to a Stock Index Futures Contract,
the total cash settlement amount to be paid or
received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be
delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment
or delivery is to be made or received; and (d) the
amount of cash and/or Securities to be withdrawn from
the Collateral Account for such Series. The Custodian
shall make the payment or delivery specified in the
Proper Instruction, and delete such Futures Contract
from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the
Custodian hereunder, the Fund shall deliver to the
Custodian a Proper Instruction specifying: (a) the
items of information required in a Proper Instruction
described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated
to such Series of the fee or commission, if any,
specified in the Proper Instruction and delete the
Futures Contract being offset from the statements
delivered to the Fund pursuant to paragraph 3 of
Article III herein, and make such withdrawals from
the Senior Security Account for such Series as may be
specified in such Proper Instruction. The
withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures
Contract Option by the Fund, the Fund shall promptly
deliver to the Custodian a Proper Instruction
specifying with respect to such Futures Contract
Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying
the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase;
(h) the name of the broker or futures commission
merchant through whom such option was purchased; and
(i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The
Custodian shall pay out of the moneys specifically
allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures
commissions merchant through whom the purchase was
made, provided that the same conforms to the amount
set forth in such Proper Instruction.
2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall promptly deliver to the
Custodian a Proper Instruction specifying with
respect to each such sale: (a) Series to which such
Futures Contract Option was specifically allocated;
(b) the type of Future Contract Option (put or call);
(c) the type of Futures Contract and such other
information as may be necessary to identify the
Futures Contract underlying the Futures Contract
Option; (d) the date of sale; (e) the sale price; (f)
the date of settlement; (g) the total amount payable
to the Fund upon such sale; and (h) the name of the
broker of futures commission merchant through whom
the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total
amount payable to the Fund, provided the same
conforms to the total amount payable as set forth in
such Proper Instruction.
3. Whenever a Futures Contract Option purchased by
the Fund pursuant to paragraph 1 is exercised by the
Fund, the Fund shall promptly deliver to the
Custodian a Proper Instruction specifying: (a) the
Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c)
the type of Futures Contract underlying the Futures
Contract Option; (d) the date of exercise; (e) the
name of the broker or futures commission merchant
through whom the Futures Contract Option is
exercised; (f) the net total amount, if any, payable
by the Fund; (g) the amount, if any, to be received
by the Fund; and (h) the amount of cash and/or the
amount and kind of Securities to be deposited in the
Collateral Account for such Series. The Custodian
shall make, out of the moneys and Securities
specifically allocated to such Series, the payments,
if any, and the deposits, if any, into the Collateral
Accounts specified in the Proper Instruction. The
deposits, if any, to be made to the Margin Account
shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract
Option, the Fund shall promptly deliver to the
Custodian a Proper Instruction specifying with
respect to such Futures Contract Option: (a) the
Series for which such Futures Contract Option was
written; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the
Futures Contract underlying the Futures Contract
Option; (d) the expiration date; (e) the exercise
price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission
merchant through whom the premium is to be received;
and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the
Collateral Account for such Series. The Custodian
shall, upon receipt of the premium specified in the
Proper Instruction, make out of the moneys and
Securities specifically allocated to such Series the
deposits into the Collateral Account, if any, as
specified in the Proper Instruction. The deposits, if
any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by
the Fund which is a call is exercised, the Fund shall
promptly deliver to the Custodian a Proper
Instruction specifying: (a) the Series to which such
Futures Contract Option was specifically allocated;
(b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the
Futures Contract Option; (d) the name of the broker
or futures commission merchant through whom such
Futures Contract Option was exercised; (e) the net
total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable
by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be
deposited in the Collateral Account for such Series.
The Custodian shall, upon its receipt of the net
total amount payable to the Fund, if any, specified
in such Proper Instruction make the payments, if any,
and the deposits, if any, into the Senior Security
Account as specified in the Proper Instruction. The
deposits, if any, to be made to the Margin Account
shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is
written by the Fund and which is a put is exercised,
the Fund shall promptly deliver to the Custodian a
Proper Instruction specifying: (a) the Series to
which such Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the
type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or
futures commission merchant through whom such Futures
Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable
by the Fund upon such exercise; and (g) the amount
and kind of Securities and/or cash to be withdrawn
from or deposited in, the Collateral Account for such
Series, if any. The Custodian shall, upon its receipt
of the net total amount payable to the Fund, if any,
specified in the Proper Instruction, make out of the
moneys and Securities specifically allocated to such
Series, the payments, if any, and the deposits, if
any, into the Senior Security Account as specified in
the Proper Instruction. The deposits to and/or
withdrawals from the Margin Account, if any, shall be
made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures
Contract Option identical to a previously written
Futures Contract Option described in this Article in
order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Proper Instruction
specifying with respect to the Futures Contract
Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of
Future Contract and such other information as may be
necessary to identify the Futures Contract underlying
the Futures Option Contract; (d) the exercise price;
(e) the premium to be paid by the Fund; (f) the
expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to
be paid; and (h) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from
the Collateral Account for such Series. The Custodian
shall effect the withdrawals from the Collateral
Account specified in the Proper Instruction. The
withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation
of a closing transaction with respect to, any Futures
Contract Option written or purchased by the Fund and
described in this Article, the Custodian shall (a)
delete such Futures Contract Option from the
statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such
withdrawals from and/or in the case of an exercise
such deposits into the Collateral Account as may be
specified in a Proper Instruction. The deposits to
and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through
the exercise of a Futures Contract Option described
in this Article shall be subject to Article VI
hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of
the Fund, the Fund shall promptly deliver to the
Custodian a Proper Instruction specifying: (a) the
Series for which such short sale was made; (b) the
name of the issuer and the title of the Security; (c)
the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates
of the sale and settlement; (e) the sale price per
unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the
amount and kind of Securities, if any, which are to
be deposited in a Margin Account and the name in
which such Margin Account has been or is to be
established; (h) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a
Collateral Account, and (i) the name of the broker
through whom such short sale was made. The Custodian
shall upon its receipt of a statement from such
broker confirming such sale and that the total amount
credited to the Fund upon such sale, if any, as
specified in the Proper Instruction is held by such
broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund,
issue a receipt or make the deposits into the Margin
Account and the Collateral Account specified in the
Proper Instruction.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the
Custodian a Proper Instruction specifying with
respect to each such closing out: (a) the Series for
which such transaction is being made; (b) the name of
the issuer and the title of the Security; (c) the
number of shares or the principal amount, and accrued
interest or dividends, if any, required to effect
such closing-out to be delivered to the broker; (d)
the dates of closing-out and settlement; (e) the
purchase price per unit; (f) the net total amount
payable to the Fund upon such closing-out; (g) the
net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount
and kind of Securities to be withdrawn, if any, from
the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be
withdrawn from the Collateral Account; and (j) the
name of the broker through whom the Fund is effecting
such closing-out. The Custodian shall, upon receipt
of the net total amount payable to the Fund upon such
closing-out, and the return and/ or cancellation of
the receipts, if any, issued by the Custodian with
respect to the short sale being closed-out, pay out
of the moneys held for the account of the Fund to the
broker the net total amount payable to the broker,
and make the withdrawals from the Margin Account and
the Collateral Account, as the same are specified in
the Proper Instruction.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse
Repurchase Agreement with respect to Securities held
by the Custodian hereunder, the Fund shall deliver to
the Custodian a Proper Instruction, or in the event
such Reverse Repurchase Agreement is a Money Market
Security, a Proper Instruction specifying: (a) the
Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the names
of the counterparty and of the broker or dealer
through or with whom the Reverse Repurchase Agreement
is entered; (d) the amount and kind of Securities to
be delivered by the Fund to such broker or dealer;
(e) the date of such Reverse Repurchase Agreement;
and (f) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such
Series to be deposited in a Senior Security Account
for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to the Fund
specified in the Proper Instruction, make the
delivery to the broker or dealer, and the deposits,
if any, to the Collateral Account, specified in such
Proper Instruction.
2. Upon the termination of a Reverse Repurchase
Agreement described in preceding paragraph 1 of this
Article, the Fund shall promptly deliver a Proper
Instruction or, in the event such Reverse Repurchase
Agreement is a Money Market Security, a Proper
Instruction to the Custodian specifying: (a) the
Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total
amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to
be received by the Fund and specifically allocated to
such Series in connection with such termination; (d)
the date of termination; (e) the names of the
counterparty and of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to
be terminated; and (f) the amount of cash and/or the
amount and kind of Securities to be withdrawn from
the Collateral Account for such Series. The Custodian
shall, upon receipt of the amount and kind of
Securities to be received by the Fund specified in
the Proper Instruction, make the payment to the
broker or dealer, and the withdrawals, if any, from
the Collateral Account, specified in such Proper
Instruction.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio
Securities specifically allocated to a Series held by
the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Proper
Instruction specifying with respect to each such
loan: (a) the Series to which the loaned Securities
are specifically allocated; (b) the name of the
issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d)
the date of loan and delivery, (e) the total amount
to be delivered to the Custodian against the loan of
the Securities, including the amount of cash
collateral and the premium, if any, separately
identified, and (f) the name of the broker, dealer,
or financial institution to which the loan was made.
The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial
institution to which the loan was made upon receipt
of the total amount designated as to be delivered
against the loan of Securities. The Custodian may
accept payment in connection with a delivery
otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or
the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or
cause to be delivered to the Custodian a Proper
Instruction specifying with respect to each such loan
termination and return of Securities: (a) the Series
to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title
of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash
collateral for such Securities minus any offsetting
credits as described in said Proper Instruction), and
(f) the name of the broker, dealer, or financial
institution from which the Securities will be
returned. The Custodian shall receive all Securities
returned from the broker, dealer, or financial
institution to which such Securities were loaned and
upon receipt thereof shall pay, out of the moneys
held for the account of the Fund, the total amount
payable upon such return of Securities as set forth
in the Proper Instruction.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall make deliveries or payments
from a Margin Account to the broker, dealer, futures
commission merchant or Clearing Member in whose name,
or for whose benefit, the account was established as
specified in the Margin Account Agreement.
2. Amounts received by the Custodian as payments
or distributions with respect to Securities deposited
in any Margin Account shall be dealt with in
accordance with the terms and conditions of the
related Margin Account Agreement.
3. The Custodian shall have a continuing lien and
security interest in and to any property at any time
held by the Custodian in any Collateral Account
described herein. In accordance with applicable law,
including limitations under the 1940 Act and the
Fund's Prospectus, the Custodian may enforce its lien
and realize on any such property whenever the
Custodian has made payment or delivery pursuant to
any Put Option guarantee letter or similar document
or any receipt issued hereunder by the Custodian. In
the event the Custodian should realize on any such
property net proceeds which are less than the
Custodian's obligations under any Put Option
guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
4. On each business day the Custodian shall
furnish the Fund with a statement with respect to
each Margin Account in which money or Securities are
held specifying as of the close of business on the
previous business day: (a) the name of the Margin
Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein.
The Custodian shall make available upon request to
any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of
the statement furnished the Fund with respect to such
Margin Account.
5. Promptly after the close of business on each
business day in which cash and/or Securities are
maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement
with respect to such Collateral Account specifying
the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of
business next succeeding the delivery to the Fund of
such statement, the Fund shall furnish to the
Custodian a Proper Instruction or Written
Instructions specifying the then market value of the
Securities described in such statement. In the event
such then market value is indicated to be less than
the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar
document, the Fund shall promptly specify in a Proper
Instruction the additional cash and/or Securities to
be deposited in such Collateral Account to eliminate
such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy
of the resolution of the Board of Directors of the
Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to
the Series specified therein the date of the
declaration of a dividend or distribution, the date
of payment thereof, the record date as of which
shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the
shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-
dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of
dividends and distributions on a daily basis and
authorizing the Custodian to rely on a Proper
Instruction setting forth the date of the declaration
of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders
of record as of that date and the total amount
payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such
resolution, Proper Instruction, as the case may
be, the Custodian shall pay out of the moneys held
for the account of each Series the total amount
payable to the Dividend Agent and any sub-dividend
agent or co-dividend agent of the Fund with respect
to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it
shall deliver to the Custodian a Proper Instruction
duly specifying the amount of money to be received by
the Custodian for the sale of such Shares and
specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer
Agent, the Custodian shall credit such money to the
separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series
described in the foregoing provisions of this
Article, the Custodian shall pay, out of the money
held for the account of such Series, all original
issue or other taxes required to be paid by the Fund
in connection with such issuance upon the receipt of
a Proper Instruction specifying the amount to be
paid.
4. Except as provided hereinafter, whenever the
Fund desires the Custodian to make payment out of the
money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to
the Custodian a Proper Instruction specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an
advice setting forth the Series and number of Shares
received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the
Custodian shall make payment to the Transfer Agent or
to another account of the Fund at the Custodian out
of the moneys held in the separate account in the
name of the Series the total amount specified in the
Proper Instruction issued pursuant to the foregoing
paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding
the redemption of any Shares, whenever any Shares are
redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Fund,
the Custodian, unless otherwise instructed by a
Proper Instruction, shall, upon receipt of an advice
from the Fund or its agent setting forth that the
redemption is in good form for redemption in
accordance with the check redemption procedure, honor
the check presented as part of such check redemption
privilege out of the moneys held in the separate
account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results
in an overdraft because the moneys held by the
Custodian in the separate account for such Series
shall be insufficient to pay the total amount payable
upon a purchase of Securities specifically allocated
to such Series, as set forth in a Proper Instruction,
or which results in an overdraft in the separate
account of such Series for some other reason, or if
the Fund is for any other reason indebted to the
Custodian with respect to a Series (except a
borrowing for investment or for temporary or
emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a
loan made by the Custodian to the Fund for such
Series payable on demand and shall bear interest from
the date incurred at a rate per annum (based on a 360-
day year for the actual number of days involved)
equal to one-half percent over Custodian's prime
commercial lending rate, or alternatively, such other
rate, if any, as the Custodian and the Fund may agree
to from time to time. In addition, the Fund hereby
agrees that the Custodian shall have a continuing
lien and security interest in and to up to 5% of the
net assets specifically allocated to such Series, at
any time held by it for the benefit of such Series or
in which the Fund may have an interest which is then
in the Custodian's possession or control or in
possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the
Custodian, in its sole discretion, at any time to
charge any such overdraft or indebtedness together
with interest due thereon against any balance of
account standing to such Series' credit on the
Custodian's books. In addition, the Fund hereby
agrees that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement
and/or otherwise borrow from a third party, or which
next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse
Repurchase Agreement or such a borrowing, it shall
attempt prior to 9 a.m., New York City time, or as
soon as practicable, advise the Custodian, in
writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur
any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the
Custodian by any bank (including, if the borrowing is
pursuant to a separate agreement, the Custodian) from
which it borrows money for investment or for
temporary or emergency purposes using Securities held
by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the
amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund
shall promptly deliver to the Custodian a Proper
Instruction specifying with respect to each such
borrowing: (a) the Series to which such borrowing
relates; (b) the name of the bank, (c) the amount and
terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory
note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which
the loan is to be entered into, (e) the date on which
the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g)
the market value of Securities to be delivered as
collateral for such loan, including the name of the
issuer, the title and the number of shares or the
principal amount of any particular Securities, and
(h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency
purposes and that such loan is in conformance with
the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the
borrowing date specified in a Proper Instruction the
specified collateral and the executed promissory
note, if any, against delivery by the lending bank of
the total amount of the loan payable, provided that
the same conforms to the total amount payable as set
forth in the Proper Instruction. The Custodian may,
at the option of the lending bank, keep such
collateral in its possession, but such collateral
shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such
Securities as additional collateral as may be
specified in a Proper Instruction to collateralize
further any transaction described in this paragraph.
The Fund shall cause all Securities released from
collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time
to time such return of collateral as may be tendered
to it. In the event that the Fund fails to specify in
a Proper Instruction the Series, the name of the
issuer, the title and number of shares or the
principal amount of any particular Securities to be
delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the
Fund be obligated to have or utilize the Terminal
Link, and the provisions of this Article shall apply
if, but only if, the Fund in its sole and absolute
discretion elects to utilize the Terminal Link to
transmit Proper Instructions to the Custodian.
2. The Terminal Link shall be utilized by the Fund
only for the purpose of the Fund providing Proper
Instructions to the Custodian with respect to
transactions involving Securities or for the transfer
of money to be applied to the payment of dividends,
distributions or redemptions of Fund Shares, and
shall be utilized by the Custodian only for the
purpose of providing notices to the Fund. Such use
shall commence only after the Fund shall have
delivered to the Custodian a Proper Instruction
substantially in the form of Exhibit D and shall have
established access codes. Each use of the Terminal
Link by the Fund shall constitute a representation
and warranty that the Terminal Link is being used
only for the purposes permitted hereby, that at least
two Officers have each utilized an access code, that
such safekeeping procedures have been established by
the Fund, and that such use does not contravene the
Investment Company Act of 1940, as amended, or the
rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own
cost and expense all equipment and services,
including, but not limited to communications
services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for
the reliability or availability of any such equipment
or services.
4. The Fund acknowledges that any data bases made
available as part of, or through the Terminal Link
and any proprietary data, software, processes,
information and documentation (other than any such
which are or become part of the public domain or are
legally required to be made available to the public)
(collectively, the "Information"), are the exclusive
and confidential property of the Custodian. The Fund
shall, and shall cause others to which it discloses
the Information, to keep the Information confidential
by using the same care and discretion it uses with
respect to its own confidential property and trade
secrets, and shall neither make nor permit any
disclosure without the express prior written consent
of the Custodian.
5. Upon termination of this Agreement for any
reason, the Fund shall return to the Custodian any
and all copies of the Information which are in the
Fund's possession or under its control, or which the
Fund distributed to third parties. The provisions of
this Article shall not affect the copyright status of
any of the Information which may be copyrighted and
shall apply to all Information whether or not
copyrighted.
6. The Custodian reserves the right to modify the
Terminal Link from time to time without notice to the
Fund except that the Custodian shall give the Fund
notice not less than 75 days in advance of any
modification which would materially adversely affect
the Fund's operation, and the Fund agrees that the
Fund shall not modify or attempt to modify the
Terminal Link without the Custodian's prior written
consent. The Fund acknowledges that any software or
procedures provided the Fund as part of the Terminal
Link are the property of the Custodian and,
accordingly, the Fund agrees that any modifications
to the Terminal Link, whether by the Fund, or by the
Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and
suppliers it utilizes or the Fund utilizes in
connection with the Terminal Link makes any
warranties or representations, express or implied, in
fact or in law, including but not limited to
warranties of merchantability and fitness for a
particular purpose.
8. The Fund will cause its Officers and employees
to treat the authorization codes and the access codes
applicable to Terminal Link with extreme care, and
irrevocably authorizes the Custodian to act in
accordance with and rely on Proper Instructions
received by it through the Terminal Link. The Fund
acknowledges that it is its responsibility to assure
that only its Officers use the Terminal Link on its
behalf, and that a Custodian shall not be responsible
nor liable for use of the Terminal Link on the Fund's
behalf by persons other than such persons or
Officers, or by only a single Officer, nor for any
alteration, omission, or failure to promptly forward.
9. (a). Except as otherwise
specifically provided in Section 9(b) of this Article, the Custodian
shall
have no liability for any losses, damages, injuries, claims, costs or
expenses arising out of or in connection with any failure, malfunction or
other problem relating to the Terminal Link except for money damages
suffered as the direct result of the negligence of the Custodian in an
amount not exceeding for any incident $100,000 provided, however,
that the
Custodian shall have no liability under this Section 9 if the Fund fails
to comply with the provisions of Section 11.
(b). The Custodian shall
be liable for any loss or damage arising out of its own negligence or
willful misconduct in executing or failing to execute in accordance
with a
duly acknowledged Proper Instruction received through Terminal Link.
10. Without limiting the generality of the
foregoing, in no event shall the Custodian or any
manufacturer or supplier of its computer equipment,
software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or
consequential damages which the Fund may incur or
experience by reason of its use of the Terminal Link
even if the Custodian or any manufacturer or supplier
has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link
shall the Custodian or any such manufacturer or
supplier be liable for acts of God, or with respect
to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or
malfunction, interruption or malfunction of
communication facilities, labor difficulties or any
other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any
errors, omissions or interruptions in, or delay or
unavailability of, the Terminal Link as promptly as
practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the
Business Day on which discovery should have occurred
as a result of the need to use such Terminal Link,
and where, through the exercise of reasonable care
such omission, interruption, delay or unavailability,
such problem would have been discovered, and (iii) in
the case of any error, the date of actual receipt of
the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian
learns of any errors, omissions or interruption in,
or delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use
of the Terminal Link, receipt of each Proper
Instruction the Custodian receives through the
Terminal Link. If the Custodian cannot, for some
reason, verify through Terminal Link, then it will
verify by facsimile. In the absence of such
verification the Custodian shall not be liable for
any failure to act in accordance with such
Certificate and the Fund may not claim that such
Certificate was received by the Custodian. Such
verification, which may occur after the Custodian has
acted upon such Proper Instruction, shall be
accomplished on the same day on which such Proper
Instruction is received.
ARTICLE XVI.
RESERVED
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. The Custodian shall be held to a standard of
reasonable care in carrying out the provisions of
this Agreement. Except as hereinafter provided, or
as provided in Article XVI, neither the Custodian nor
its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or
omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any
such loss or damage arising out of its own negligence
or willful misconduct. In no event shall the
Custodian be liable to the Fund or any third party
for special, indirect or consequential damages or
lost profits or loss of business, arising under or in
connection with this Agreement, even if previously
informed of the possibility of such damages and
regardless of the form of action, unless such loss
resulted from the Custodian's willful misconduct.
Negligence includes the failure of the Custodian to
comply with any law or regulation applicable to the
Custodian. The Custodian may, with respect to
questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the
advice and opinion of counsel to the Fund or of its
own counsel, and the Fund shall pay the reasonable
expenses thereof, and the Custodian shall be fully
protected with respect to anything done or omitted by
it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund
for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason
of any negligence or willful misconduct on the part
of the Custodian or any of its employees or agents.
2. Without limiting the generality of the
foregoing, the Custodian shall be under no obligation
to inquire into, and shall not be liable for:
(a) The validity of the
issue of any Securities purchased, sold, or written by or for the Fund,
the legality of the purchase, sale or writing thereof, or the
propriety of
the amount paid or received therefor;
(b) The legality of the
sale or redemption of any Shares, or the propriety of the amount to be
received or paid therefor;
(c) The legality of the
declaration or payment of any dividend by the Fund;
(d) The legality of any
borrowing by the Fund using Securities as collateral;
(e) The legality of any
loan of portfolio Securities, nor shall the Custodian be under any
duty or
obligation to determine that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any time as a
result of such loan of portfolio Securities of the Fund is adequate
collateral for the Fund against any loss it might sustain as a result of
such loan. The Custodian specifically, but not by way of limitation,
shall
not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be
the sole responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or financial
institution to which portfolio Securities of the Fund are lent
pursuant to
Article XIV of this Agreement makes payment to it of any dividends or
interest which are payable to or for the account of the Fund during the
period of such loan or at the termination of such loan, provided,
however,
that the Custodian shall promptly notify the Fund in the event that such
dividends or interest are not paid and received when due and to fully
cooperate (at the Fund's expense) with the Fund in obtaining any such
dividends and/or interest; or
(f) The sufficiency or
value of any amounts of money and/or Securities held in any Margin
Account, Senior Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any variation
margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any
broker,
dealer, futures commission merchant or Clearing Member is the amount the
Fund is entitled to receive, or to notify the Fund of the Custodian's
receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether
or not represented by any check, draft, or other
instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the
final crediting of the account representing the
Fund's interest at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and
shall not be liable for ascertaining or acting upon
any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to
Securities held in the Depository, unless the
Custodian shall have actually received timely notice
thereof from. In no event shall the Custodian have
any responsibility or liability for the failure of
the Depository to collect, or for the late collection
or late crediting by the Depository or any other
payor or issuer of any amount payable upon Securities
deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become
payable. However, upon receipt of a Proper
Instruction from the Fund of an overdue amount on
Securities held in the Depository the Custodian shall
make a claim against the Depository on behalf of the
Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any
action suit or proceeding in respect to any
Securities held by the Depository which in its
opinion may involve it in expense or liability,
unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be
required.
5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any
amount due to the Fund from the Transfer Agent of the
Fund nor to take any action to effect payment or
distribution by the Transfer Agent of the Fund of any
amount paid by the Custodian to the Transfer Agent of
the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any
amount, if the Securities upon which such amount is
payable are in default, or if payment is refused
after due demand or presentation, unless and until
(i) it shall be directed to take such action by a
Proper Instruction and (ii) it shall be assured to
its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may appoint one or more banking
institutions as Depository or Depositories, as Sub-
Custodian or Sub-Custodians, or as Co-Custodian or Co-
Custodians, of Securities and moneys at any time
owned by the Fund, upon such terms and conditions as
may be approved in a Proper Instruction or contained
in an agreement executed by the Custodian, the Fund
and the appointed institution.
8. The Custodian shall not be under any duty or
obligation (a) to ascertain whether any Securities at
any time delivered to, or held by it or by any
Foreign Sub-Custodian, for the account of the Fund
and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under
the provisions of its then current prospectus, or (b)
to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such
transactions as may properly be engaged in by the
Fund.
9. The Custodian shall be entitled to receive and
the Fund agrees to pay to the Custodian all
reasonable out-of-pocket expenses and such
compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Custodian may
charge such compensation and any such reasonable
expenses with respect to a Series incurred by the
Custodian in the performance of its duties pursuant
to such agreement against any money specifically
allocated to such Series. Unless and until the Fund
instructs the Custodian by a Proper Instruction to
apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian
shall also be entitled to invoice a Series such
Series' pro rata share (based on such Series net
asset value at the time of the charge to the
aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or
expense, including reasonable fees of counsel not of
salaried employees of the Custodian, for which it
shall be entitled to reimbursement under the
provisions of this Agreement.
10. The Custodian shall be entitled to rely upon
any Proper Instruction, notice or other instrument in
writing received by the Custodian and reasonably
believed by the Custodian to be a Proper Instruction.
The Custodian shall be entitled to rely upon any
Proper Instruction orally given and actually received
by the Custodian hereinabove provided for, provided
such instructions reasonably appear to have been
received from an Officer. The Fund agrees to confirm
to the Custodian such a Proper Instruction by
facsimile or otherwise, by the close of business of
the same day that such Instructions are given to the
Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the
Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that
the Custodian shall incur no liability to the Fund in
acting upon Proper Instructions orally given to the
Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have
been received from an Officer.
11. The Custodian shall be entitled to rely upon
any instrument, instruction or notice received by the
Custodian and reasonably believed by the Custodian to
be given in accordance with the terms and conditions
of any Margin Account Agreement. Without limiting the
generality of the foregoing, the Custodian shall be
under no duty to inquire into, and shall not be
liable for, the accuracy of any statements or
representations contained in any such instrument or
other notice including, without limitation, any
specification of any amount to be paid to a broker,
dealer, futures commission merchant or Clearing
Member.
12. The books and records pertaining to the Fund
which are in the possession of the Custodian shall be
the property of the Fund. Such books and records
shall be prepared and maintained as required by the
1940 Act, as amended, and other applicable securities
laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access
to such books and records during the Custodian's
normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall
be provided by the Custodian to the Fund or the
Fund's authorized representative, and the Fund shall
reimburse the Custodian its reasonable expenses of
providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on
micro-film computer disc or other electronic means,
whichever the Custodian elects, any records included
in any such delivery which are maintained by the
Custodian on a computer disc, or are similarly
maintained, and the Fund shall reimburse the
Custodian for its reasonable expenses of providing
such hard copy or micro-film.
13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of
internal accounting control of the Book-Entry System,
the Depository or O.C.C., including any report of
such entities the Custodian receives from any banking
regulator, and with such reports on its own systems
of internal accounting control as the Fund may
reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian
against and save the Custodian harmless from all
liability, claims, losses and demands whatsoever,
including reasonable attorneys' fees, howsoever
arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of
Article XIII as part of any check redemption
privilege program of the Fund, except for any such
liability, claim, loss and demand arising out of the
Custodian's own or its agents negligence or willful
misconduct or breach of the terms of this Agreement.
15. Subject to the
foregoing provisions of this Agreement, including, without limitation, those
contained in Article XVI, the Custodian may deliver and receive Securities,
and receipts with respect to such Securities, and arrange for payments to be
made and received by the Custodian in accordance with the rules of any
Depository or Book-Entry System or OCC and with respect to physicals not
delivered to one of the foregoing, in accordance with the customs and
practices prevailing among brokers and dealers in such securities on the date
of execution of this Agreement, or in accordance with such lesser customs, if
any, as may be approved by the Fund in Proper Instructions. The Custodian
will immediately inform the Fund and await a specific Proper Instruction
and/or a resolution of the Executive Committee of the Board of Directors
before permitting the release of securities or cash which is not against
delivery of the counteritem, except for deliveries described in the preceding
sentence. The Fund assumes all responsibility and liability for all credit
risks involved in connection with the Custodian's delivery of Securities
pursuant to such Proper Instructions or Executive Committee Resolution of the
Fund, which responsibility and liability shall continue until final
payment in
full has been received by the Custodian.
16. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in
this Agreement, and no covenant or obligation shall
be implied in this Agreement against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in
writing specifying the date of such termination,
which shall be not less than ninety (90) days after
the date of giving of such notice. In the event such
notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary or any
Assistant Secretary, electing to terminate this
Agreement and designating a successor custodian or
custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event
such notice is given by the Custodian, the Fund
shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Board of
Directors of the Fund, certified by the Secretary or
any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate
a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date
set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a
notice of acceptance by the successor custodian on
that date deliver directly to the successor custodian
all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees,
reasonable expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by
the Fund or the Custodian in accordance with the
preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of
all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the
Fund) and moneys then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby
be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with
respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such
Securities hereunder in accordance with this
Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A are the Authorized
and Proper Instructions signed by present Officers of
the Fund under its corporate seal, setting forth the
names and the signatures of the present Officers of
the Fund. The Fund agrees to furnish to the Custodian
a new Authorized and Proper Instructions in similar
form in the event any such present Officer ceases to
be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed.
Until such new Authorized and Proper Instructions
shall be received, the Custodian shall be fully
protected in acting under the provisions of this
Agreement upon the signatures of the Officers as set
forth in the last delivered Authorized and Proper
Instructions.
2. Any notice or other instrument in writing,
authorized or required by this Agreement to be given
to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed, sent by
reliable overnight delivery service or delivered to
it at its offices at 90 Washington Street, New York,
New York 10286, or sent by facsimile to
(212)_________ or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given
to the Fund shall be sufficiently given if addressed
to the Fund and mailed, sent by reliable overnight
delivery service or delivered to it at its office at
the address for the Fund first above written, or at
such other place or facsimile number as the Fund may
from time to time designate in writing.
4. This Agreement may not be amended except by a
written agreement executed by both parties with the
same formality as this Agreement and approved by a
resolution of the Board of Directors of the Fund.
However, in connection with the operation of the
Agreement, the Custodian and the Fund may from time
to time agree in writing on such provisions
interpretive of or in addition to the provisions of
this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement,
which provisions will not be deemed to be amendments.
5. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without
the written consent of the Custodian, or by the
Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's
Board of Directors.
6. This Agreement shall be construed in accordance
with the laws of the State of New York without giving
effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state
or federal court situated in New York City, New York
in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together,
constitute only one and the same instrument.
8. A copy of the Declaration of Trust of the Fund
is on file with the Secretary of the Commonwealth of
Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of
Trustees of the Fund as Trustee and not individually
and that the obligations of this instrument are not
binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and
property of the Fund; provided, however, that the
Declaration of the Fund provides that the assets of a
particular Series of the Fund shall under no
circumstances be charged with liabilities
attributable to any other Series of the Fund and that
all persons extending credit to, or contracting with
or having any claim against a particular Series of
the Fund shall look only to the assets of that
particular Series for payment of such credit,
contract or claim. The Custodian acknowledges that
it has read and understands the exculpation and
limitation of liability provisions of the Trust,
Article XI, Section 3.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate
Officers, thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and
year first above written.
Attest: BANKSOUTH SELECT FUNDS
/s/ C. Grant Anderson By: /s/ Charles L.
Davis, Jr.
Typed Name: Charles L.
Davis, Jr.
Title:Vice President
Attest THE BANK OF NEW YORK
/s/ Ira R. Rosner By: /s/ Stephen E. Grunston
Typed Name: Stephen E.
Grunston
Title:Vice President
APPENDIX A
Custodian Contract
Authorization and Proper Instructions
I. Pursuant to Sections III, 3; XI, 5, 6; XVII, 12; XIV,
1; XVII, 1, 2, 3, 4, 5, 6, 14; and XVIII, 1, 6 of the
Custodian Contract (the "Contract") between BankSouth
Select Funds (the "Fund") and The Bank of New York (the
"Custodian"), this shall constitute the authorization of
the persons named herein to issue Proper Instructions on
behalf of the Fund, in the form and on the basis set
forth in the Authorizations and Proper Instructions. The
meaning of all terms used herein shall be the same as the
meaning of those respective terms in the Custodian
Contract.
II. Oral instructions shall be authorized only as
specified herein and shall be subject to any security
measures as shall hereafter be directed by each Fund in
writing.
III. The following Fund officers, J. Christopher
Donahue, Edward C. Gonzales or John W. McGonigle, shall
be authorized to sign Proper Instructions issued under
Sections II, 1; III, 1 and Section III, 5(e) of the
Contract, and to perform all functions set forth
hereafter.
IV. Standing instructions, which shall be in writing,
shall be authorized only as specified herein and shall
continue until such instructions are revoked directly or
by the transmittal of new instructions by the Fund.
-- Standing instructions may be issued with
respect to the following sections of the
Contract by persons as designated in the
subsequent sections of this API:
A. Sections V, 7; III, 5(b)(c), 6(e); III,
6(b)(c)(d); V, 9, 11; VI, 3, 4; VIII, 2; XI,
1, 2; III, 5(d); X, 1; VIII, 1; VI, 1; VII,
3, 4, 5, 6, 8; and XI, 1, 2 of Section 2.2 of
the contract
B. Sections III, 2(b); XIII, 5; III, 2(c); VI,
1; XII, 2; VIII, 2; V, 8, 10, 11; VII, 4, 5,
8; VIII, 1, 2; XI, 1, 2; and XIV, 2 of
Section 2.8 of the contract.
V. Proper instructions issued:
A. With regard to Section 2.2 of the Contract:
Delivery of Securities, Sections IV, 2; V, 2,
4; IX, 1; IV, 2; V, 2.4; V, 7; III, 5(b)(c),
6(e); V, 7; XVII, 15; III, 6(b)(c)(d); V, 9,
11; VI, 3, 4; VIII, 2; XI, 1, 2; III, 5(d);
V, 8, 10; XI, 1, 2; VI, 1; VII, 3, 4, 5, 6,
8; XI, 1, 2.
B. With regard to Section 2.8 of the Contract:
Payment of Fund Moneys, Sections IV, 1; V, 1,
3, 9; VI, 1, 2, 4; VII, 1, 3, 6, 8; IX, 1;
XI, 1, 2; V, 9; and VI, 3.
C. With regard to Section of the Contract:
Joint Repurchase Agreements.
D. With regard to Sections XIV, 1 and XVII, 1,
2, 3, 4, 5, 6, 14 of the Contract:
Responsibility of Custodian
A. Designations of Fund securities subject
to a security interest of the Custodian
made pursuant to this Section of the
Contract;
B. These designations shall be standing.
Proper Instructions issued under the above Sections of
the Contract as described in this Article V shall be
given orally, electronically, by telefacsimile or in
writing by any one of the persons designated in
Attachment A under Section (4. Trading, Trading Support
Staff or Research).
Confirmation of the above Oral or Fax Proper Instructions
shall be given in writing by any two of the persons
designated in Attachment A under Sections (2. Corporate
Records) or (4. Trading, Trading Support Staff or
Research).
VI. Sections XI and VIII, 1 of Section 2.2 of the
Contract:
Proper Instructions issued under the above subsections of
the Contract as described in this Article VI shall be
signed by J. Kenneth Alderman, Vice President.
VII. Section III, 2, 4 of the Contract (Segregated
Account):
Proper Instructions issued under the above subsections
of the Contract as described in this Article VII shall be
signed by any one of the persons designated in Attachment
A under Section (4. Trading, Trading Support Staff or
Research).
VIII. Sections XII, 2; VIII, 2; V, 8, 10, 11; VII, 4,
5, 8; VIII, 1, 2; XI, 1, 2; and XIV, 2 of Section 2.8 of
the Contract:
Proper Instructions issued under the above subsections of
the
Contract as described in this Article VIII shall be
signed by any
one of the persons designated in Attachment A under
Section (3. Finance).
IX. Sections III, 2(c); and IV, 1 of Section 2.8 of
the Contract:
Proper Instructions issued under the above Subsection of
the Contract as described in this Article IX shall be
signed by any one of the persons designated in Attachment
A under Sections
(1. Product Administration Names) or (3. Finance
Names).
ATTACHMENT A to the
Authorization & Proper Instructions
to the Custodian Contract
for BANKSOUTH SELECT FUNDS
Section 1
Product Administration
(authorized to sign for operating expenses)
James J. Dolan
R. Jeffrey Niss
Robert J. Wagner
Section 2
Corporate Records
(authorized to co-sign confirmations
Larry Kreger
Christine A. Nettrour
Section 3
Finance
(authorized to perform accounting entries, etc.)
Barbara A. Moritz
Theresa Dewar
Lisa J. Ling
Kathleen M. Friday
Anna Germ
Sharon W. Huckestein
Darci Langan
Deborah M. Molini
David M. Taylor
Richard J. Thomas
C. Christine Thomson
Section 4
Trading, Trading Support, and Research Personnel
(authorized to give oral and telefacsimile instructions
and to co-sign written instructions)
Phil Larkins, Executive Vice President
Shelton Price, Senior Investment Officer
Mack Johnston, Vice President
Gary Ollman, Vice President
Jenny Jordan, Assistant Vice President
APPENDIX B
I, , a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer Depository Trust Company Notices Financial
Daily Card Service JJ Kenney Municipal Bond Service
London Financial Times New York Times Standard & Poor's
Called Bond Record Wall Street Journal
Exhibit A
BANKSOUTH SELECT FUNDS
C E R T I F I C A T I O N
The undersigned, Assistant Secretary of BankSouth Select Funds
(the "Trust"), hereby certifies that the following resolutions
were duly adopted by the Board of Trustees of the Trust on
October 19, 1993, substantially and materially as follows and
that said resolutions have not been amended or rescinded:
RESOLVED, that the Board hereby approves the use of the
following book-entry systems for the Trust, as
specified in the Custodian Contract between
the Custodian and the
Trust:
Bank of New York;
Bankers Trust Company;
Chemical Bank and Trust Company;
Morgan Guaranty Trust Company of New York;
NationsBank of North Carolina;
NationsBank of Virginia
PNC Bank
WITNESS the due execution hereof this 7th day of February,
1994.
/s/ C. Grant Anderson
C. Grant Anderson
Assistant Secretary
Exhibit B
BANKSOUTH SELECT FUNDS
C E R T I F I C A T I O N
The undersigned, Assistant Secretary of BankSouth Select Funds
(the "Trust"), hereby certifies that the following resolution was
duly adopted by the Board of Trustees of the Trust on October 19,
1993, substantially and materially as follows and that said
resolution has not been amended or rescinded:
RESOLVED, that the Board hereby authorizes and approves
the use by the Custodian of Depository Trust
Company the Federal Reserve Book-Entry System
as securities depositories for
the Trust and the use of Participants Trust
Company as a securities depository for the
Trust, as specified in the Custodian Contract
between the Custodian and the
Trust.
WITNESS the due execution hereof this 7th day of February,
1994.
/s/ C. Grant Anderson
C. Grant Anderson
Assistant Secretary
Exhibit C
BANKSOUTH SELECT FUNDS
C E R T I F I C A T I O N
The undersigned, Assistant Secretary of BankSouth Select Funds
(the "Trust"), hereby certifies that the following resolution was
duly adopted by the Board of Trustees of the Trust on January 7,
1994, substantially and materially as follows and that said
resolution has not been amended or rescinded:
RESOLVED, that The Bank of New York, as Custodian pursuant
to
a Custody Agreement between
The Bank of New York and the Trust dated as
of January 6, 1994, (the "Custody
Agreement") is authorized and instructed
on a continuous and ongoing basis until
such time as it receives a Proper
Instruction, as defined in the Custody
Agreement, to the contrary, to accept,
utilize and act with respect to Clearing
Member confirmations for Derivatives and
Options and transactions in Derivations
and Options, regardless of the Series to
which the same are specifically allocated,
as such terms are defined in the Custody
Agreement, as provided in the Custody
Agreement.
WITNESS the due execution hereof this 16th day of February,
1994.
/s/ C. Grant Anderson
C. Grant Anderson
Exhibit D
BANKSOUTH SELECT FUNDS
C E R T I F I C A T I O N
The undersigned, Assistant Secretary of BankSouth Select Funds
(the "Trust"), hereby certifies that the following resolutions
were duly adopted by the Board of Trustees of the Trust on
January 7, 1994, substantially and materially as follows and that
said resolutions have not been amended or rescinded:
RESOLVED, that The Bank of New York, as Custodian pursuant
to
a Custody Agreement between The Bank of New
York and the Trust dated as of January 6,
1994, (the "Custody Agreement") is
authorized and instructed
on a continuous and ongoing basis to act in
accordance with, and to rely on Proper
Instructions (as defined in the Custody
Agreement) given by the Fund to the
Custodian by a Terminal Link (as defined in
the Custody Agreement).
RESOLVED, that the Fund shall establish access codes
and grant
use of such access codes only to Officers of
the Fund as defined in the Custody
Agreement, shall establish internal
safekeeping procedures to safeguard and
protect the confidentiality and
availability of such access codes, shall
limit its use of the Terminal Link to those
purposes permitted by the 'Custody
Agreement, shall require at least two such
Officers to utilize their respective access
codes in connection with each such Proper
Instruction, and shall use the Terminal
Link only in a manner that does not
contravene the Investment Company Act of
1940, as amended, or the rules and
regulations thereunder.
RESOLVED, that Officers of the Fund shall, following
the establishment of such access codes and
such internal safekeeping procedures,
advise the Custodian that the same have
been established by delivering a Proper
Instruction, as defined in the Custody
Agreement, and the Custodian shall be
entitled to rely upon such advice.
WITNESS the due execution hereof this 16th day of February,
1994.
/s/ C. Grant Anderson
C. Grant Anderson
Assistant Secretary
ATTACHMENT A to
Exhibit D
to the Custodian Contract
for BANKSOUTH SELECT FUNDS
Section 1
Transfer Agency Personnel
(authorized to give oral and written instructions for purposes of
The Cash Management and Related Services Agreement)
Donna Topley
Lisa Sharick
Angela Guzzo
David Tirdel
James Ranallo
Exhibit 16 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
PeachTree Equity Fund Price/
Share= $10.26
Return Since Inception
ending 2/28/94 NAV= $10.00
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FYE: September 30 Ending
Begin Capital Reinvest Period Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Shares Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share 97.466 Price Value
2/11/94 97.466 0.000000000 0.00000 $10.00 97.731 $10.00 $974.66
2/28/94 97.466 0.026917696 0.00000 $9.90 $9.90 $967.54
</TABLE>
$1,000 (1+T) = End Value
T = -3.25%
Exhibit 16 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
PeachTree Equity Fund Price/
Share= $10.39
Return Since Inception
ending 2/28/94 NAV= $10.00
FYE: September 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: QUARTERLY Reinvest Period Dividend Gain Price Period Invest
PAID: QUARTERLY Dates Shares /Share /Share /Share Shares Ending Value
2/11/94 96.246 0.000000000 0.00000 $10.00 96.246 Price $962.46
2/28/94 96.246 0.000000000 0.00000 $9.97 96.246 $10.00 $959.58
</TABLE>
$1,000 (1+T) = End Value
T = -4.04%
Exhibit 16 Under Form N-1A
Exhibit 99 Under Item 601/Reg. S-K
Schedule for computation of Yield Calculation
Peach Tree Government Money Market Fund
This example illustrates the yield
quotation for the seven-day period ended: 28-Feb-94
Value of a hypothetical pre-existing account with exactly $1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end $1.000621917
of the seven-day base period*
$0.000621917
Net change in account value
Base Period Return:
<TABLE>
<S> <C> <C>
Net change in account value divided by the beginning account value $0.000621917
($ .000621917/ $1.000000000)
3.24%
Annualized Current Net Yield ( .000621917x 365/7)
3.29%
Effective Yield ** (.000621917+ 1 ) ^ (365/7) - 1
</TABLE>
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Exhibit 16 Under Form N-1A
Exhibit 99 Under Item 601/Reg. S-K
Schedule for computation of Yield Calculation
Peach Tree Prime Money Market Fund 28-Feb-94
This example illustrates the yield quotation for the seven-day period ended:
$1.000000000
Value of a hypothetical pre-existing account with exactly
one share at the beginning of the base period
Value of same account (excluding capital changes) at end
of the seven-day base period* $0.000570411
Net change in account value
Base Period Return: $0.000570411
Net change in account value divided by the beginning
account value
($ .000570411/ $1.000000000)
2.97%
e 3.02%
Effective Yield ** (.000570411+ 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
