the Peachtree Funds
Georgia
Tax-Free
Income Fund
Semi-Annual Report
and Supplement to
Prospectus dated
November 30, 1994
March 31, 1995
Logo
Bank South, N.A.
INVESTMENT ADVISER
3350 CUMBERLAND CIRCLE
ATLANTA, GA 30339
Logo
Federated Securities Corp.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
70467H507
G00223-03 (5/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report and Supplement to Prospectus of
the Peachtree Georgia Tax-Free Income Fund (the "Fund") for the reporting period
ended March 31, 1995. This report provides you with complete financial
information for the Fund, including an investment review by the portfolio
manager, a list of investments for the Fund, and the financial statements.
Over the reporting period, assets in the Fund grew to more than $2.2 million.
The Fund paid more than $12,400 in dividends, or $0.18 per share. For the period
ended March 31, 1995, the Fund's average annual total return was (1.54%) based
on offering price.*
Thank you for your confidence in the Peachtree Georgia Tax-Free Income Fund as a
way to take advantage of the potential of municipal bonds. 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 8, 1995
* 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.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
During the past six months we have seen the municipal bond market experience a
respectable rally. Yields have fallen approximately 25 basis points on AAA-rated
general obligation bonds maturing in two years. Rates on issues maturing in
three to thirty years fell from 40 to 80 basis points, respectively. While the
municipal market has rallied, it has not kept up with the taxable bond market.
The reason given most often for the municipal bond market not keeping pace is
that investors are becoming more and more concerned about the impact a flat (and
much lower) tax rate will have on the value of municipal bonds. It is true that
discussions of the flat tax issue have occurred before, but the likelihood of a
flat and lower rate structure becoming reality has increased dramatically over
the past few months. We will be keeping an eye on this issue and will report any
points of interest in future commentaries. Our speculation that rates would be
raised in the May Federal Reserve Board meeting seems to be less probable given
most of the weak economic news during the past few weeks. We continue to feel
that overall market yields will meander with the general direction headed lower
as it becomes less and less likely that the Federal Reserve Board will raise
rates any time soon.
A. Please delete the "Summary of Fund Expenses" table on page 1 of the
prospectus and replace it with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable).................................................... None
Exchange Fee................................................................................ None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)............................................................ 0.00%
12b-1 Fees(2)............................................................................... 0.00%
Total Other Expenses (after waivers)(3)..................................................... 0.00%
Shareholder Services Fees(4).............................................................. 0.00%
Total Fund Operating Expenses (after waiver)(5)......................................... 0.00%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The investment adviser can terminate
this voluntary waiver at any time in its sole discretion. The maximum management
fee is 0.75%.
(2) 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.
(3) Total Other Expenses are estimated to be 2.68% absent the anticipated
voluntary waivers by the administrator and transfer agent and assumption by the
adviser. The administrator, transfer agent, and advisor may terminate those
waivers and assumptions at anytime at their sole discretion.
(4) The Fund is not paying or accruing shareholder services fees. The Fund can
pay up to 0.25% as a shareholder services fee to certain financial institutions.
Certain trust clients of the Bank or its affiliates, including ERISA plans, will
not be affected by the shareholder services plan because the shareholder
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
clients' investments in the Fund are converted to such Trust class.
(5) The Total Fund Operating Expenses are estimated to be 3.43% absent the
estimated voluntary waivers and assumption by the adviser, administrator, and
transfer agent.
* Expenses are estimated based on average expenses expected to be incurred
during the fiscal year ending September 30, 1995. 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.............................................................. $ 25 $ 25
</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, 1995.
B. Please insert the following "Financial Highlights" table as page 2 of the
prospectus, immediately following the "Summary of Fund Expenses" table and
before the section entitled "General Information." In addition, please add
the heading "Financial Highlights" to the Table of Contents page immediately
following the heading "Summary of Fund Expenses."
PEACHTREE GEORGIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1995(A)
(UNAUDITED)
- ---------------------------------------------------------------------------------- ------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------
Net investment income 0.18
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.08)
- ---------------------------------------------------------------------------------- ------------
Total from investment operations 0.10
- ----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------
Distributions from net investment income (0.18)
- ---------------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.92
- ---------------------------------------------------------------------------------- ------------
TOTAL RETURN (B) 1.02%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------
Expenses 0.00%(c)
- ----------------------------------------------------------------------------------
Net investment income 4.18%(c)
- ----------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 38.06%(c)
- ----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,233
- ----------------------------------------------------------------------------------
Portfolio turnover 56%
- ----------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 6, 1994 (date of initial
public investment) to March 31, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
C. Please delete the last sentence of the first paragraph in the section
entitled "Voting Rights" on page 17 of the prospectus and insert the
following:
As of May 9, 1995, BHC Securities, Inc., Philadelphia, PA, was the owner of
record of approximately 103,575 shares (38.04%) and Bank South, N.A., Atlanta,
GA, acting in various capacities for numerous accounts, was the owner of record
of approximately 168,685 shares (61.95%), 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 financial statements after the section entitled
"Performance Information," which begins on page 20 of the prospectus, and
before the section entitled "Addresses." In addition, please add the heading
"Financial Statements" to the Table of Contents page immediately following
the heading "Performance Information."
PEACHTREE GEORGIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--94.0%
- ------------------------------------------------------------------------
$ 20,000 Albany, GA, Sewer System, 6.30% Revenue Bonds, (Callable
7/1/2002 @ 102)/(MBIA Insured), 7/1/2003 AAA $ 21,542
-----------------------------------------------------------
5,000 Atlanta, GA, 4.40% GO UT Refunding Bonds, (Callable
12/1/2003 @ 102), 12/1/2004 AA 4,525
-----------------------------------------------------------
5,000 Atlanta, GA, 6.50% GO UT Refunding Bonds, 12/1/1996 AA 5,158
-----------------------------------------------------------
5,000 Atlanta, GA, Airport Extension & Improvements, 5.00%
Revenue Bonds, (Callable 7/1/1995 @ 101 1/2), 1/1/2000 AAA 4,979
-----------------------------------------------------------
5,000 Atlanta, GA, Water & Sewer, 4.10% Refunding Revenue Bonds,
(Original Issue Yield: 4.15%), 1/1/2000 AA 4,731
-----------------------------------------------------------
15,000 Atlanta, GA, Water & Sewer, 4.20% Refunding Revenue Bonds,
(Original Issue Yield: 4.25%), 1/1/2001 AA 14,063
-----------------------------------------------------------
5,000 Augusta-Richmond County, GA, Coliseum Authority, 5.20%
Refunding Revenue Bonds, (Callable 2/1/2003 @ 102)/
(Original Issue Yield: 5.25%), 8/1/2005 A1 4,902
-----------------------------------------------------------
25,000 Bibb County, GA, 4.95% GO UT Bonds, 1/1/2002 AA 24,632
-----------------------------------------------------------
5,000 Bibb County, GA, 5.15% GO UT Bonds, (Callable 1/1/2003 @
102), 1/1/2004 AA 4,930
-----------------------------------------------------------
100,000 Brunswick, GA Water & Sewer Improvements, 6.00% Refunding
Revenue Bonds, (MBIA Insured)/(Original Issue Yield:
6.20%), 10/1/2011 AAA 102,319
-----------------------------------------------------------
5,000 Burke County, GA, Development Authority, 4.50% Pollution
Control Refunding Revenue Bonds, (Oglethorpe Power Corp.)/
(Series B), 1/1/2002 AA- 4,710
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 5,000 Calhoun, GA, Water & Sewer Revenue, 6.00%, 6/1/2000 A $ 4,999
-----------------------------------------------------------
15,000 Carroll City-County Hospital Authority, GA, 7.10% Refunding
RANs, (Tanner Medical Center)/(Callable 7/1/1996 @ 102)/
(MBIA Insured), 7/1/2000 (Partially Prerefunded) AAA 15,766
-----------------------------------------------------------
100,000 Cherokee County, GA, School System, 4.60% GO UT Bonds,
2/1/2001 A1 96,519
-----------------------------------------------------------
15,000 Cherokee County, GA, School System, 7.10% GO UT Bonds,
6/1/1997 A1 15,719
-----------------------------------------------------------
50,000 Clarke County, GA, Hospital Authority, 5.50% Revenue Bonds,
(Regional Medical Center Project)/(Callable 1/1/2003 @
102)/ (MBIA Insured), 1/1/2004 AAA 50,549
-----------------------------------------------------------
40,000 Clayton County, GA, Hospital Authority, 6.50% RANs,
(Southern Regional Medical Center)/(MBIA Insured), 8/1/2000 AAA 42,756
-----------------------------------------------------------
20,000 Cobb County, GA, School District, 4.50% Refunding GO UT
Bonds, (State Aid Withholding)/(Original Issue Yield:
4.60%), 2/1/2000 AA 19,457
-----------------------------------------------------------
5,000 Cobb County, GA, School District, 6.60% GO UT Bonds,
(Callable 2/1/1999 @ 102), 2/1/2000 AA 5,355
-----------------------------------------------------------
25,000 Cobb-Marietta, GA, Coliseum & Exhibit Hall Authority, 6.75%
Revenue Bonds, (Callable 10/1/2001 @ 102)/(MBIA Insured)/
(Original Issue Yield: 6.778%), 10/1/2026 (Prerefunded) AAA 27,751
-----------------------------------------------------------
5,000 Columbus, GA, 3.90% GO UT Bonds, (Sales Tax), 9/1/1998 AA 4,815
-----------------------------------------------------------
15,000 Columbus, GA, 4.20% GO UT Bonds, (Sales Tax)/(Original
Issue Yield: 4.30%), 9/1/2001 AA 14,003
-----------------------------------------------------------
5,000 Columbus, GA, 5.20% GO UT Revenue Bonds, (Sales Tax),
9/1/2000 AA 5,061
-----------------------------------------------------------
15,000 Columbus, GA, Water & Sewer, 6.875% Revenue Bonds,
(Callable 11/1/2001 @ 102)/(Original Issue Yield: 6.93%),
5/1/2020 (Prerefunded) NR 16,741
-----------------------------------------------------------
10,000 Conyers, GA, Water & Sewer, 5.10% Refunding Revenue Bonds,
(AMBAC Insured), 7/1/2000 AAA 10,049
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 5,000 Coweta County, GA, Development Authority, 4.90% GO UT
Refunding & Improvement Revenue Bonds, (Water & Sewer
System Project)/(Series B)/(Callable 6/1/2001 @ 102)/
(Original Issue Yield: 5.00%), 6/1/2003 A $ 4,792
-----------------------------------------------------------
10,000 De Kalb County, GA, Development Authority, 5.00% GO
Refunding Revenue Bonds, (Emroy University Project)/
(Series A)/(Original Issue Yield: 4.90%), 10/1/2000 Aa1 10,029
-----------------------------------------------------------
100,000 De Kalb County, GA, Hospital Authority, 5.00% Refunding
RANs, (De Kalb Medical Center Project)/(Series A)/(Callable
9/1/2003 @ 102)/(MBIA Insured)/(Original Issue Yield:
5.42%), 9/1/2014 AAA 88,826
-----------------------------------------------------------
5,000 De Kalb County, GA, School District, 4.75% GO UT Refunding
Bonds, (Original Issue Yield: 4.899%), 7/1/2001 AA 4,899
-----------------------------------------------------------
5,000 De Kalb County, GA, Water & Sewer, 3.65% Refunding Revenue
Bonds, 10/1/1997 AAA 4,834
-----------------------------------------------------------
100,000 De Kalb County, GA, Water & Sewer, 5.125% Refunding Revenue
Bonds, (Callable 10/1/2003 @ 102)/(Original Issue Yield:
5.324%), 10/1/2014 AAA 90,021
-----------------------------------------------------------
20,000 Douglas County, GA, School District, 6.60% GO UT Refunding
Bonds, (Callable 1/1/1996 @ 102), 1/1/2000 A+ 20,694
-----------------------------------------------------------
5,000 Downtown Savannah Authority, GA, 4.25% Refunding Revenue
Bonds, (Board of Public Education Project)/(MBIA Insured)/
(Original Issue Yield: 4.35%), 8/1/1999 AAA 4,827
-----------------------------------------------------------
5,000 Downtown Savannah Authority, GA, 4.50% Refunding Revenue
Bonds, (Chatham County Projects)/(Series A)/(Original Issue
Yield: 4.65%), 1/1/2002 AA 4,729
-----------------------------------------------------------
25,000 Downtown Savannah Authority, GA, 6.625% GO UT Bonds,
(Stormwater Capital Improvement Project)/(Series A)/
(Callable 8/1/1998 @ 102), 8/1/2003 AA 26,465
-----------------------------------------------------------
5,000 Floyd County, GA, Hospital Authority, 4.70% Refunding RANs,
(Floyd Medical Center)/(FGIC Insured)/(Original Issue
Yield: 4.80%), 7/1/2002 AAA 4,772
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 5,000 Floyd County, GA, Hospital Authority, 4.80% Refunding RANs,
(Floyd Medical Center)/(FGIC Insured)/(Original Issue
Yield: 4.90%), 7/1/2003 AAA $ 4,767
-----------------------------------------------------------
100,000 Fulton County, GA, 6.00% GO UT Bonds, (Callable 1/1/1996 @
102), 1/1/2005 AA 102,000
-----------------------------------------------------------
25,000 Fulton County, GA, Building Authority, 5.30% Refunding
Revenue Bonds, (Judicial Center Facilities Project),
1/1/1996 AA 25,185
-----------------------------------------------------------
25,000 Fulton County, GA, Building Authority, 5.70% Refunding
Revenue Bonds, (County Government & Health Facilities
Project)/(Series A)/(Callable 1/1/2003 @ 102)/(Original
Issue Yield: 5.80%), 1/1/2004 AA 25,638
-----------------------------------------------------------
5,000 Fulton County, GA, Hospital Authority, 4.40% RANs,
(Northside Hospital)/(Series B)/(MBIA Insured)/(Original
Issue Yield: 4.50%), 10/1/2000 AAA 4,767
-----------------------------------------------------------
50,000 Fulton County, GA, School District, 5.625% GO UT Bonds,
(Callable 1/1/2004 @ 102)/(Original Issue Yield: 5.85%),
1/1/2021 AA 47,177
-----------------------------------------------------------
25,000 Fulton County, GA, School District, 6.00% GO UT Refunding
Bonds, 5/1/2002 AA 26,353
-----------------------------------------------------------
5,000 Fulton County, GA, Water & Sewer, 6.60% Revenue Bonds,
(Series 1986)/(Callable 5/26/1995 @ 102), 1/1/2000 AAA 5,341
-----------------------------------------------------------
5,000 Fulton De Kalb, GA, Hospital Authority, 5.10% GO UT
Refunding Revenue Bonds, (MBIA Insured)/(Original Issue
Yield: 5.15%), 1/1/2002 AAA 4,980
-----------------------------------------------------------
5,000 Fulton De Kalb, GA, Hospital Authority, 6.50% Revenue
Bonds, (Grady Memorial Hospital)/(Callable 1/1/2001 @ 102)/
(AMBAC Insured), 1/1/2003 (Prerefunded) AAA 5,438
-----------------------------------------------------------
10,000 Georgia State Municipal Electric Power Authority, 4.40% GO
Refunding Revenue Bonds, (Series Z)/(Original Issue Yield:
4.50%), 1/1/1999 A+ 9,611
-----------------------------------------------------------
15,000 Georgia State Municipal Electric Power Authority, 4.50% GO
Revenue Bonds, (Series AA), 1/1/1997 A+ 14,844
-----------------------------------------------------------
10,000 Georgia State Tollway Authority, 6.25% Revenue Bonds,
(Georgia 400 Project)/(State Guaranteed), 7/1/1998 AAA 10,470
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 40,000 Georgia State, 5.50% GO UT Refunding Bonds, (Series E),
7/1/2003 AAA $ 41,144
-----------------------------------------------------------
50,000 Georgia State, 6.50% GO UT Bonds, (Series C), 7/1/1996 AAA 51,247
-----------------------------------------------------------
15,000 Georgia State, 6.50% GO UT Bonds, (Series C), 7/1/1998 AAA 15,836
-----------------------------------------------------------
5,000 Georgia State, 6.80% GO UT Bonds, (Series D), 8/1/1999 AAA 5,397
-----------------------------------------------------------
5,000 Georgia State, 7.00% GO UT Bonds, (Series D), 11/1/1996 AAA 5,191
-----------------------------------------------------------
25,000 Georgia State, 7.40% GO UT Bonds, (Series D), 8/1/1997 AAA 26,581
-----------------------------------------------------------
10,000 Gwinnett County, GA, School District, 4.40% GO UT Refunding
Bonds, 2/1/1999 AA 9,785
-----------------------------------------------------------
10,000 Gwinnett County, GA, School District, 4.50% GO UT Refunding
Bonds, (Callable 2/1/2002 @ 102), 2/1/2003 AA 9,370
-----------------------------------------------------------
5,000 Gwinnett County, GA, School District, 4.50% GO UT Refunding
Bonds, 2/1/2002 AA 4,751
-----------------------------------------------------------
40,000 Gwinnett County, GA, Water & Sewer, 4.60% Refunding Revenue
Bonds, (Original Issue Yield: 4.699%), 8/1/2000 AA+ 39,092
-----------------------------------------------------------
5,000 Henry County, GA, School District, 5.30% GO UT Refunding
Bonds, (Series B), 8/1/1999 A+ 5,085
-----------------------------------------------------------
50,000 La Grange, GA, Development Authority, IDR 5.625%, (General
Signal Corp.)/(Callable 6/1/1995 @ 101.4), 12/1/2002 A2 49,339
-----------------------------------------------------------
10,000 La Grange, GA, Water & Sewer, 4.70% Refunding Revenue
Bonds, (Original Issue Yield: 4.80%), 1/1/2003 A 9,524
-----------------------------------------------------------
25,000 La Grange, GA, Water & Sewer, 5.10% Refunding Revenue
Bonds, (Callable 1/1/2003 @ 102)/(AMBAC Insured)/ (Original
Issue Yield: 5.20%), 1/1/2007 AAA 23,848
-----------------------------------------------------------
30,000 La Grange, GA, Water & Sewer, 5.25% Refunding Revenue
Bonds, (Callable 1/1/2003 @ 102)/(Original Issue Yield:
5.50%), 1/1/2012 A 27,344
-----------------------------------------------------------
15,000 Macon Bibb County, GA, IDR 5.05% Refunding Bonds,
(Series B), 9/1/2000 AA 14,999
-----------------------------------------------------------
35,000 Macon Bibb County, GA, IDR 6.95% Refunding Bonds, (Parking
Facilities Project)/(Callable 8/1/2000 @ 102), 8/1/2003 AA 38,127
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 15,000 Macon, GA, Lease, 4.30% Revenue Bonds, (School District
Project)/(Series A), 10/1/2000 AA $ 14,101
-----------------------------------------------------------
100,000 Macon, GA, Water & Sewer, 4.20% Revenue Bonds, 10/1/1995 A+ 99,843
-----------------------------------------------------------
15,000 Marietta, GA, 5.00% GO UT Refunding Bonds, 1/1/2001 A+ 14,940
-----------------------------------------------------------
50,000 Metro Atlanta Rapid Transit Authority, GA, 4.90% Sales Tax
Refunding Revenue Bonds, (Second Indenture Series)/
(Series A)/(AMBAC Insured), 7/1/2001 AAA 49,361
-----------------------------------------------------------
10,000 Metro Atlanta Rapid Transit Authority, GA, 6.05% Sales Tax
Refunding Revenue Bonds, (Series M)/(Original Issue Yield:
6.15%), 7/1/2001 AA- 10,464
-----------------------------------------------------------
40,000 Metro Atlanta Rapid Transit Authority, GA, 7.00% Sales Tax
Revenue Bonds, (Callable 5/31/1995 @ 100)/(Original Issue
Yield: 9.75%), 7/1/2011 Escrowed to Maturity AAA 43,979
-----------------------------------------------------------
25,000 Private Colleges & Universities Authority, GA, 4.65%
Refunding Revenue Bonds, (Agnes Scott College
Project)/(Original Issue Yield: 4.75%), 6/1/2002 AA- 24,054
-----------------------------------------------------------
85,000 Private Colleges & University Facilities Authority, GA,
4.60% GO Refunding Revenue Bonds, (Emory University
Project)/ (Series C), 10/1/1995 Aa1 85,115
-----------------------------------------------------------
25,000 Richmond County, GA, Board of Education, 4.70% GO UT
Refunding Bonds, (Callable 11/1/2003 @ 102)/(FGIC Insured)/
(Original Issue Yield: 4.75%), 11/1/2005 AAA 23,051
-----------------------------------------------------------
100,000 Rome, GA, New Public Housing Authority, 5.00% Revenue
Bonds, (Callable 8/1/1995 @ 103)/(U.S. Government
Guaranteed), 8/1/2004 AAA 98,892
-----------------------------------------------------------
5,000 Savannah, GA, Hospital Authority, 8.00% Revenue Bonds, (St.
Joseph's Hospital Project)/(Callable 7/1/1998 @ 102),
7/1/2003 (Prerefunded) A 5,557
-----------------------------------------------------------
50,000 Valdosta & Lowndes County, GA, Hospital Authority, 5.50%
Refunding Revenue Bonds, (South Georgia Medical Center
Project)/(MBIA Insured)/(Original Issue Yield: 5.60%),
10/1/2006 AAA 49,958
-----------------------------------------------------------
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATINGS:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- --------- ----------------------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
$ 15,000 Valdosta & Lowndes County, GA, Hospital Authority, 5.70%
Refunding Revenue Bonds, (South Georgia Medical Center
Project)/(MBIA Insured)/(Original Issue Yield: 5.80%),
10/1/2008 AAA $ 15,042
-----------------------------------------------------------
85,000 Valdosta & Lowndes County, GA, Hospital Authority, 5.45%
Refunding Revenue Bonds, (South Georgia Medical Center
Project)/(MBIA Insured)/(Original Issue Yield: 5.50%),
10/1/2005 AAA 85,134
-----------------------------------------------------------
25,000 Valdosta, GA, Water & Sewer, 5.80% Revenue Bonds,
(Callable 9/1/1995 @ 102), 9/1/2000 A+ 25,628
----------------------------------------------------------- ----------
TOTAL INVESTMENTS (IDENTIFIED COST, $2,082,432) $2,099,269+
----------------------------------------------------------- ----------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $2,082,432. The
net unrealized appreciation of investments on a federal tax basis amounts to
$16,837, which is comprised of $23,897 appreciation and $7,060 depreciation at
March 31, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($2,232,657) at March 31, 1995.
The following abbreviations are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Investors Assurance
RANs -- Revenue Anticipation Notes
UT -- Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GEORGIA TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $2,082,432) $2,099,269
- ---------------------------------------------------------------------------------
Cash 151,198
- ---------------------------------------------------------------------------------
Income receivable 34,158
- ---------------------------------------------------------------------------------
Receivable for investments sold 117,000
- ---------------------------------------------------------------------------------
Receivable for shares sold 16,184
- --------------------------------------------------------------------------------- ----------
Total assets 2,417,809
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $104,584
- ----------------------------------------------------------------------
Income distribution payable 5,050
- ----------------------------------------------------------------------
Accrued expenses 75,518
- ---------------------------------------------------------------------- --------
Total liabilities 185,152
- --------------------------------------------------------------------------------- ----------
Net Assets for 225,058 shares outstanding $2,232,657
- --------------------------------------------------------------------------------- ----------
NET ASSETS CONSISTS OF:
- ---------------------------------------------------------------------------------
Paid in capital $2,215,825
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 16,837
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (5)
- --------------------------------------------------------------------------------- ----------
Total Net Assets $2,232,657
- --------------------------------------------------------------------------------- ----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Net Asset Value Per Share ($2,232,657 / 225,058 shares outstanding) $9.92
- ---------------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GEORGIA TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1995*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------
Interest $ 12,477
- ------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------
Investment advisory fee $ 2,237
- -------------------------------------------------------------------------------
Administrative personnel and services fee 49,864
- -------------------------------------------------------------------------------
Custodian fees 3,595
- -------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 8,689
- -------------------------------------------------------------------------------
Directors'/Trustees' fees 500
- -------------------------------------------------------------------------------
Auditing fees 601
- -------------------------------------------------------------------------------
Legal fees 1,301
- -------------------------------------------------------------------------------
Portfolio accounting fees 26,727
- -------------------------------------------------------------------------------
Share registration costs 12,266
- -------------------------------------------------------------------------------
Printing and postage 2,994
- -------------------------------------------------------------------------------
Insurance premiums 1,747
- -------------------------------------------------------------------------------
Miscellaneous 2,994
- ------------------------------------------------------------------------------- -------
Total expenses 113,515
- -------------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ 2,237
- ---------------------------------------------------------------------
Waiver of administration personnel and services fee 24,932
- ---------------------------------------------------------------------
Reimbursement of other operating expenses 86,346
- --------------------------------------------------------------------- -------
Total waivers/reimbursements 113,515
- ------------------------------------------------------------------------------- -------
Net expenses 0
- ------------------------------------------------------------------------------------------ --------
Net investment income 12,477
- ------------------------------------------------------------------------------------------ --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------------
Net realized loss on investments (5)
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 16,837
- ------------------------------------------------------------------------------------------ --------
Net realized and unrealized gain on investments 16,832
- ------------------------------------------------------------------------------------------ --------
Change in net assets resulting from operations $ 29,309
- ------------------------------------------------------------------------------------------ --------
</TABLE>
* For the period from October 6, 1994 (date of initial public investment) to
March 31, 1995.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GEORGIA TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1995*
(UNAUDITED)
---------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income $ 12,477
- --------------------------------------------------------------------------
Net realized loss on investments ($5 net loss as computed for
federal tax purposes) (5)
- --------------------------------------------------------------------------
Net change in unrealized appreciation of investments 16,837
- -------------------------------------------------------------------------- -------------
Change in net assets resulting from operations 29,309
- -------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------
Distributions from net investment income (12,477)
- -------------------------------------------------------------------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------
Proceeds from sale of shares 2,240,769
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 5,384
- --------------------------------------------------------------------------
Cost of shares redeemed (30,328)
- -------------------------------------------------------------------------- -------------
Change in net assets resulting from share transactions 2,215,825
- -------------------------------------------------------------------------- -------------
Change in net assets 2,232,657
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period --
- -------------------------------------------------------------------------- -------------
End of period $ 2,232,657
- -------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 6, 1994 (date of initial public investment) to
March 31, 1995.
(See Notes which are an integral part of the Financial Statements)
PEACHTREE GEORGIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Peachtree Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company. The
Trust consists of four diversified portfolios and one non-diversified portfolio.
The financial statements included herein present only those of Peachtree Georgia
Tax-Free Income Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities. The independent
pricing service does not rely exclusively on quoted prices. Short-term
securities with the remaining maturities of sixty days or less at the time
of purchase may be valued at amortized cost, which approximates fair market
value.
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 under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
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 income. Accordingly, no
provisions for federal tax are necessary.
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.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
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 shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1995*
--------------
<S> <C>
- ---------------------------------------------------------------------------
Shares sold 227,587
- ---------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 544
- ---------------------------------------------------------------------------
Shares redeemed (3,073)
- --------------------------------------------------------------------------- ------------
Net change resulting from share transactions 225,058
- --------------------------------------------------------------------------- ------------
</TABLE>
* For the period from October 6, 1994 (date of initial public investment) to
March 31, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY 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 any portion of its fee and reimburse certain
PEACHTREE GEORGIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with certain administrative personnel and services. The FAS 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.
TRANSFER AND DIVIDEND DISBURSING AGENT AND PORTFOLIO ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated to be $40,000. The Fund has agreed to
reimburse FAS for organizational expenses during the five year period following
January 7, 1994 (date the Fund became effective). For the period ended March 31,
1995, the Fund paid $1,333 pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $2,399,183
- -------------------------------------------------------------------------------- ----------
SALES $ 315,901
- -------------------------------------------------------------------------------- ----------
</TABLE>
March 31, 1995
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- -----------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd Charles L. Davis, Jr.
Lawrence D. Ellis, M.D. Vice President and Assistant Treasurer
Edward L. Flaherty, Jr. J. Christopher Donahue
Edward C. Gonzales Vice President
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts David M. Taylor
Assistant Treasurer
C. Grant Anderson
Assistant Secretary
</TABLE>
PEACHTREE GEORGIA TAX-FREE INCOME FUND
(A PORTFOLIO OF PEACHTREE FUNDS)
SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 30, 1994
The Fund will implement a special offering period during
which shares of the Fund may be purchased at net asset
value, without a sales load. This offering period will be
effective from March 27, 1995 through July 31, 1995. The
following sections in the prospectus should be noted in
regard to this offering only for the aforementioned time
period: "Summary of Fund Expenses"; "What Shares Cost"; and
"Reducing the Sales Load."
March 24, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
70467H507
007718(3/95)
Peachtree Georgia Tax-Free
Income Fund
(A Portfolio of Peachtree Funds)
Prospectus
The shares of the Peachtree Georgia Tax-Free Income Fund (the "Fund")
offered by
this Prospectus represent interests in a non-diversified portfolio of
Peachtree
Funds (the "Trust"), an open-end management investment company (a
mutual fund).
The investment objective of the Fund is to provide current income
exempt from
federal income tax and the personal income taxes imposed by the state
of
Georgia. The Fund invests primarily in securities issued by and on
behalf of the
State of Georgia and its political subdivisions, authorities and
agencies, and
securities issued by other states, territories, and possessions of the
United
States which are exempt from federal income tax and the personal income
taxes
imposed by the State of Georgia ("Georgia Municipal Securities").
This prospectus contains the information you should read carefully and
understand before you invest in the Fund. Keep this prospectus for
future
reference.
The Fund has also filed a Statement of Additional Information dated
November 30,
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
contacting the Peachtree Funds Service Center at 1-404-989-6200 or
1-800-621-8969.
SHARES OF THE FUND 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 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.
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.
November 30, 1994
Table of Contents
- ------------------------------------------------------------------------
- --------
Summary of Fund Expenses
1
- ------------------------------------------------------
General Information
2
- ------------------------------------------------------
Investment Information
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Acceptable Investments
2
Characteristics
3
Participation Interests
3
Variable Rate Municipal Securities
3
Municipal Leases
4
Restricted and Illiquid Securities
4
When-Issued and Delayed Delivery
Transactions
4
Investing in Securities of
Other Investment Companies
4
Temporary Investments
4
Portfolio Turnover
5
Georgia Municipal Securities
5
Investment Risks
6
Non-Diversification
6
Certain Borrowing and Investment Limitations
6
Peachtree Funds Information
7
- ------------------------------------------------------
Management of the Trust
7
Board of Trustees
7
Investment Adviser
7
Advisory Fees
7
Adviser's Background
7
Portfolio Manager
8
Distribution of Shares
8
Distribution Plan
8
Administrative Arrangements
9
Administration of the Trust
9
Administrative Services
9
Shareholder Services Plan
9
Custodian
10
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services
10
Legal Counsel
10
Independent Auditors
10
Expenses of the Fund
10
Net Asset Value
10
- ------------------------------------------------------
Investing in the Fund
10
- ------------------------------------------------------
Share Purchases
10
By Telephone
11
By Mail
11
Payment by Check
11
Payment by Wire
11
Minimum Investment Required
11
Systematic Investment Program
11
What Shares Cost
11
Purchases at Net Asset Value
12
Purchases with Proceeds from Redemptions
of Unaffiliated Investment Companies
12
Sales Load Reallowance
12
Reducing the Sales Load
12
Quantity Discounts and Accumulated
Purchases
12
Letter of Intent
13
Reinvestment Privilege
13
Concurrent Purchases
13
Certificates and Confirmations
13
Dividends and Distributions
13
Purchasing Shares of the Fund with Securities
14
Exchange Privilege
14
- ------------------------------------------------------
Peachtree Funds
14
By Telephone
15
Redeeming Shares
15
- ------------------------------------------------------
By Telephone
15
By Mail
16
Signatures
16
Receiving Payment
17
Systematic Withdrawal Program
17
Accounts with Low Balances
17
Shareholder Information
17
- ------------------------------------------------------
Voting Rights
17
Massachusetts Partnership Law
18
Effect of Banking Laws
18
- ------------------------------------------------------
Tax Information
19
- ------------------------------------------------------
Federal Income Tax
19
State of Georgia Income and
Intangibles Taxes
20
Other State and Local Taxes
20
Performance Information
20
- ------------------------------------------------------
Addresses
22
- ------------------------------------------------------
Summary of Fund Expenses
- ------------------------------------------------------------------------
- --------
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
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable).....................................................
None
Exchange
Fee.....................................................................
........................... None
Annual Fund Operating
Expenses*
(As a percentage of projected
average net assets)
Management Fee (after
waiver)(1)..............................................................
.............. 0.00%
12b-1
Fees(2).................................................................
.............................. 0.00%
Total Other Expenses (after
waivers)(3).............................................................
........ 0.00%
Shareholder Services Fees
(4)................................................................
0.00%
Total Fund Operating Expenses (after
waiver)(5)....................................................
0.00%
- ---------
(1) The estimated management fee has been reduced to reflect the
anticipated
voluntary waiver by the investment adviser. The investment adviser
can
terminate this voluntary waiver at any time in its sole discretion.
The
maximum management fee is 0.75%.
(2) 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.
(3) Total Other Expenses are estimated to be 4.12% absent the
anticipated
voluntary waivers by the administrator and transfer agent and
assumption by
the adviser.
(4) As of the date of the prospectus, the Fund is not paying or
accruing
shareholder services fees. The Fund can pay up to 0.25% as a
shareholder
services fee to certain financial institutions. Certain trust
clients of the
Bank or its affiliates, including ERISA plans, will not be affected
by the
shareholder services plan because the shareholder services plan
will not be
activated unless and until a second, "Trust," class of shares of
the Fund
(which would not a have a services plan) is created and such
clients'
investments in the Fund are converted to such Trust class.
(5) The Total Fund Operating Expenses are estimated to be 4.87% absent
the
anticipated voluntary waivers and assumption by the adviser,
administrator,
and transfer agent.
* Expenses are estimated based on average expenses expected to be
incurred
during the fiscal year ending September 30, 1995. 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.
EXAMPLE
1 year 3 years 5 years 10 years
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............ $25 $25 $25 $25
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, 1995.
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
Georgia Tax-
Free Income Fund. The Fund is designed as a convenient means of
accumulating an
interest in a professionally managed, non-diversified portfolio
investing
primarily in Georgia Municipal Securities. A minimum initial investment
of
$1,000 is required and subsequent investments must be in amounts of at
least
$100.
The Fund is not likely to be a suitable investment for non-Georgia
taxpayers or
retirement plans since Georgia Municipal Securities are not likely to
produce
competitive after-tax yields for such persons and entities when
compared to
other investments.
Fund shares are sold at net asset value plus a maximum sales load of
2.50%, and
are redeemed at net asset value.
Investment Information
- ------------------------------------------------------------------------
- --------
Investment Objective
The Fund's investment objective is to provide current income exempt
from federal
income tax and the personal income taxes imposed by the State of
Georgia. 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.
Interest income of the Fund that is exempt from the income taxes
described above
retains its exempt status when distributed to the Fund's shareholders.
However,
income distributed by the Fund may not necessarily be exempt from state
or
municipal taxes in jurisdictions other than Georgia.
Investment Policies
The Fund pursues its investment objective by investing primarily in
Georgia
Municipal Securities. As a matter of investment policy, which may not
be changed
without shareholder approval, the Fund will invest its assets so that,
under
normal circumstances, at least 80% of its annual interest income is
exempt from
federal income tax (including alternative minimum tax). Unless
indicated
otherwise, the other investment policies of the Fund may be changed by
the Board
of Trustees without approval of shareholders. Shareholders will be
notified
before any material change in these policies becomes effective.
Acceptable Investments. Under normal circumstances, the Fund will
invest at
least 65% of its total assets in Georgia Municipal Securities, which
are
obligations issued by and on behalf of the State of Georgia, its
political
subdivisions, authorities and agencies; debt obligations of any state,
territory,
or possession of the United States, including the District of Columbia,
or any
political subdivision of any of these; and participation interests, as
described
below, in any of the above obligations, the interest from which is, in
the
opinion of bond counsel for the issuers or in the opinion of officers
of the
Fund and/or the investment adviser to the Fund, exempt from both
federal income
tax and the personal income tax imposed by the State of Georgia. While
the Fund
intends to invest primarily in securities issued by or on behalf of the
State of
Georgia, its political subdivisions, authorities and agencies, it will
invest in
other securities issued by states, territories, and possessions of the
United
States which are exempt from federal income tax and the personal income
taxes
imposed by the State of Georgia. The Fund will invest in such
securities in
instances where, in the judgment of the Fund's investment adviser, the
supply
and yield of such securities would be beneficial to the Fund's
investment
performance.
Characteristics. The Georgia Municipal Securities which the Fund
buys are
investment-grade bonds rated, at the time of purchase, Aaa, Aa, A,
or Baa
by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A, or
BBB by
Standard and Poor's Ratings Group ("S&P"), Fitch Investors
Service, Inc.
("Fitch"), or Duff & Phelps Credit Rating Co. ("Duff & Phelps").
In certain
cases, the Fund's investment adviser may choose bonds which are
unrated if
it determines that such bonds are of comparable quality or have
similar
characteristics to investment-grade bonds. Bonds rated "BBB" by
S&P, Fitch,
or Duff & Phelps or "Baa" by Moody's have speculative
characteristics.
Changes in economic conditions or other circumstances are more
likely to
lead to weakened capacity to make principal and interest payments
than
higher rated bonds. The prices of fixed income securities
fluctuate
inversely to the direction of interest rates. Downgrades will be
evaluated
on a case-by-case basis by the investment adviser. The adviser
will
determine whether or not the security continues to be an
acceptable
investment. If not, the security will be sold when deemed
appropriate by
its adviser given the costs of such a sale, including potential
losses. A
description of the rating categories is contained in the Appendix
to the
Statement of Additional Information. 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.
Participation Interests. The Fund may purchase participation
interests
from financial institutions such as commercial banks, savings and
loan
associations, and insurance companies. These participation
interests give
the Fund a fractional undivided interest in Georgia Municipal
Securities.
The financial institutions from which the Fund purchases
participation
interests frequently provide or secure irrevocable letters of
credit or
guarantees to assure that the participation interests are of high
quality.
The Trustees will determine that participation interests meet the
prescribed quality standards for the Fund.
Variable Rate Municipal Securities. Some of the Georgia Municipal
Securities which the Fund purchases may have variable interest
rates.
Variable interest rates are ordinarily stated as a percentage of
the prime
rate of a bank or a similar standard, such as the 91-day U.S.
Treasury bill
rate or established by a remarketing agent as the minimum rate
that it
judges would be necessary on the securities prior to the next
remarketing
date, having due regard for the prevailing financial markets in
order to
sell such securities in a secondary market transaction. Many
variable rate
municipal securities are subject to payment of principal on demand
by the
Fund in not more than seven days. All variable rate municipal
securities
will be selected
consistent with the Fund's quality standards. The Fund's
investment adviser
has been instructed by the Trustees to monitor the pricing,
quality, and
liquidity of the variable rate municipal securities, including
participation interests held by the Fund, on the basis of
published
financial information and reports of the rating agencies and other
analytical services.
Municipal Leases. Municipal leases are obligations issued by
state and
local governments or authorities to finance the acquisition of
equipment
and facilities and some may be considered to be illiquid. They may
take the
form of a lease, an installment purchase contract, a conditional
sales
contract, or a certificate of participation in any of the above.
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.
When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
Investing in Securities of Other Investment Companies. The Fund may
invest in
the securities of other investment companies, but 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.
Temporary Investments. From time to time, during periods of abnormal
market
conditions, the Fund may invest in short-term tax-exempt or taxable
temporary
investments. These temporary investments include: notes issued by or on
behalf
of municipal or corporate issuers; obligations issued or guaranteed by
the U.S.
government, its agencies or instrumentalities; other debt securities;
commercial
paper; certificates of deposit of banks; securities of other investment
companies;
and repurchase agreements (generally short-term arrangements in which
the Fund
may buy securities subject to the seller's agreement to repurchase such
securities at a mutually agreed upon time and price such that the Fund
earns
interest during the term of the agreement).
There are no rating requirements applicable to temporary investments.
However,
the investment adviser will limit temporary investments to those within
the
investment-grade categories described under "Acceptable
Investments 1/2Characteristics" (if rated) or those which the
investment adviser
judges to have similar characteristics as such investment-grade
securities (if
unrated).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention of generating income subject to federal income tax
or
personal income taxes imposed by the State of Georgia.
Portfolio Turnover
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in the portfolio will be sold whenever
the
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.
Georgia Municipal Securities
Georgia Municipal Securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. These are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and, under certain circumstances, to make loans for profit and
non-profit public
and private entities.
The two principal classifications of municipal securities are "general
obligations" and "revenue" bonds. General obligation bonds are secured
by the
issuer's pledge of its full faith and credit and/or taxing power for
the payment
of principal and interest. However, interest on and principal of
revenue bonds
are payable only from the revenue generated by the facility financed by
the bond
or other specified sources of revenue. Revenue bonds do not represent a
pledge
of credit or create any debt of or charge against the general revenues
of a
municipality or public authority.
A significant portion of revenue bonds issued by governmental units
constitute
"private activity" bonds. Private activity bonds are issued by or on
behalf of a
governmental unit, generally to finance the acquisition, construction
and
equipping of facilities to be used, directly or indirectly, by private
for-profit and non-profit companies. These private activity bonds are
generally
secured by a pledge of the revenues to be paid by such private
companies under a
financing agreement (which usually takes the form of a lease,
installment sale
or loan agreement) between a private company and a governmental unit,
as well as
a security interest in the real and personal property acquired or
constructed
with the proceeds of such bonds. Often the credit securing these types
of
private activity bonds is enhanced through the issuance of a letter of
credit or
guarantee by a credit-worthy financial institution. The credit ratings
of these
so-called "credit enhanced" bond issues are based on the credit
worthiness of
the financial institution issuing the credit enhancement and not the
private user of the facilities financed with the proceeds of such bonds
or the
governmental unit issuing the bonds, which are not liable for the
payment
thereof, other than through the assignment of revenues to be received
by the
private user under the financing agreement.
Investment Risks
Yields on Georgia Municipal Securities depend on a variety of factors,
including, but not limited to: the general conditions of the municipal
bond
market; the size of the particular offering; the maturity of the
obligations;
and the rating of the issue. Further, any adverse economic conditions
or
developments affecting the State of Georgia or its municipalities, or
companies
and financial institutions obligated under private activity bonds,
could affect
the Fund's portfolio. The Fund's ability to achieve its investment
objective
also depends on the continuing ability of the obligors of securities
held by the
Fund to meet their obligations for the payment of interest and
principal when
due. Investing in Georgia Municipal Securities which meet the Fund's
quality
standards may not be possible if the State of Georgia and its
municipalities do
not maintain their current credit ratings. In addition, certain Georgia
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in
adverse
consequences affecting various Georgia Municipal Securities. A
discussion of the
current economic risks associated with the purchase of Georgia
Municipal
Securities is contained in the Statement of Additional Information.
Non-Diversification
The Fund is a non-diversified investment portfolio. As such, there is
no limit
on the percentage of assets which can be invested in any single issuer.
An
investment in the Fund, therefore, will entail greater risks and
fluctuation in
market value of the Fund's portfolio than investments in a diversified
portfolio
of securities. Any economic, political, or regulatory developments
affecting the
value of the securities in the Fund's portfolio will have a greater
effect on
the total value of the portfolio than would be the case if the
portfolio were
diversified among more issuers. However, the Fund intends to comply
with
Subchapter M of the Internal Revenue Code. This undertaking requires
that at the
end of each quarter of the taxable year: (a) with regard to at least
50% of the
Fund's total assets, no more than 5% of its total assets are invested
in the
securities of a single issuer and (b) no more than 25% of its total
assets are
invested in the securities of a single issuer.
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.
The above limitation cannot be changed without shareholder approval.
The
following limitation however, can be changed by the Trustees without
shareholder
approval. Shareholders will be notified before any material change in
this
limitation becomes effective.
The Fund will not:
invest more than 5% of its total assets in industrial
development bonds
where the payment of principal and interest is the
responsibility of
companies (including guarantors where applicable) with less than
three
years of continuous operations, including the operation of any
predecessor.
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.
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 offices of the Adviser are located at 3350 Cumberland
Circle,
Atlanta, GA 30339.
The Adviser has managed discretionary assets for its consumers
since 1931.
As of November 30, 1994, the Adviser managed in excess of $1
billion of
discretionary assets. The Bank has served as an investment adviser
to
mutual funds since January, 1994.
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 Fund
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.
Portfolio Manager. Mr. J.M. Johnston, Jr. is primarily
responsible for the
day-to-day management of the Fund's portfolio. He joined the
Adviser in
September of 1992. Mr. Johnston directs the investment management
of
several large employee benefit plans, fixed income mutual and
common trust
funds, money market mutual funds and personal trust accounts. 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 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
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:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
.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
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 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 (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, L.L.P.,
Washington,
D.C.
Independent Auditors. The independent auditors for the Fund are Ernst &
Young
LLP, 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. Shares of the Fund
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 Shares of the Fund, call
the
Peachtree Funds Service Center at 1-404-989-6200 or 1-800-621-8969.
Texas
residents must purchase shares of the Fund 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 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 Georgia Tax-Free Income Fund, c/o
the
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 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.
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 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 load. 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 load as follows:
Sales Load as Sales Load
as
a Percentage a
Percentage
of Public of Net
Amount
Amount of Transaction Offering Price
Invested
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%
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 load, 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. In addition, no
sales
load is imposed for Fund shares purchased through Bank South Investment
Services, Inc.'s wrap fee program. Shareholders who wish to obtain more
information about the wrap fee program may contact Bank South
Investment
Services, Inc. Investors who purchase shares through the wrap fee
program may be
charged an additional fee by Bank South Investment Services, Inc.
Sales Load Reallowance. The Bank and any authorized dealer or bank will
normally
receive up to 85% of the applicable sales load 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 load which is not
paid to the
Bank or a dealer will be retained by the Distributor. 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 load 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.
Reducing the Sales Load
The sales load 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 load 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 load.
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
load on
the additional purchase according to the schedule now in effect would
be 2.00%,
not 2.50%.
To receive the sales load 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 load
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 load may be
reduced by
signing a letter of intent to that effect. This letter of intent
includes a
provision for a sales load 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 load.
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
load 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 load.
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 load. If
the
shareholder redeems his shares in the Fund, there may be tax
consequences.
Concurrent Purchases. For purposes of qualifying for a sale load
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 load.
For
example, if a shareholder concurrently invested $30,000 in one of the
other
funds in the Trust with a sales load and $70,000 in this Fund, the
sales load
would be reduced.
To receive this sales load 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 load 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 load, unless a shareholder makes a written request for cash
payments to
the Fund or the Bank.
Purchasing Shares of the Fund 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 Bond Fund, Peachtree Equity
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 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
load may be exchanged at net asset value for shares of other funds with
an equal
sales load or no sales load. Shares of funds with a sales load may be
exchanged
for shares of funds with a higher sales load at net asset value, plus
the
additional sales load. Shares of funds with no sales load, acquired by
direct
purchase may be exchanged for shares of funds with a sales load at net
asset
value, plus the applicable sales load.
When an exchange is made from a fund with a sales load to a fund with
no sales
load, 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 load
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 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 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, 3350 Cumberland Circle, 10th Floor, Atlanta,
Georgia
30339.
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 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 Fund
receives the redemption request from the Bank. Redemption requests to
the Bank
must be received by the Bank 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 telephonee
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 Peachtree Funds Service Center at
1-404-989-6200 or
1-800-621-8969 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.
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. As of November 4, 1994, Bank
South N.A.,
Atlanta, Georgia, acting in various capacities for numerous accounts,
was the
owner of record of approximately 1,600 shares (80.22%) 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.
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 itself 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 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
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 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.
Shareholders are not required to include any dividends received from
the Fund
that represent net interest on tax-exempt municipal bonds in gross
income for
federal income tax purposes. However, under the Tax Reform Act of 1986,
dividends representing net interest income earned on some municipal
bonds are
included in calculating the federal individual alternative minimum tax
or the
federal alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum
taxable
income for individuals and 20% for corporations, applies when it
exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to
the regular taxable income for the taxpayer increased by certain "tax
preference" items not included in regular taxable income and reduced by
only a
portion of the deductions allowed in the calculation of the regular
income tax.
The Tax Reform Act of 1986 treats interest on certain "private
activity" bonds
issued after August 7, 1986, as a tax-preference item for both
individuals and
corporations. Unlike traditional government purpose municipal bonds,
which
finance roads, schools, libraries, prisons, and other public
facilities, private
activity bonds provide benefits to private parties. The Fund may
purchase all
types of municipal bonds, including private activity bonds. Thus, while
the Fund
has no present intention of purchasing any private activity bonds that
would be
treated as tax preference items, should it purchase any such bonds, a
portion of
the Fund's dividends may be treated as a tax-preference item.
In addition, in the case of a corporate shareholder, dividends of the
Fund which
represent interest on municipal bonds will become subject to the 20%
corporate
alternative minimum tax because the dividends are included in a
corporation's
"adjusted current earnings." The corporate alternative minimum tax
treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax-preference item.
"Adjusted current earnings" are based upon the concept of a
corporation's
"earnings and profits." Since "earnings and profits" generally includes
the full
amount of any Fund dividend, and alternative minimum taxable income
does not
include the portion of the Fund's dividend attributable to municipal
bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares. Information on the tax status of dividends and
distributions
is provided annually.
State of Georgia Income and Intangibles Taxes
Under existing Georgia law, shareholders of the Fund will not be
subject to
Georgia income taxes on Fund dividends to the extent that such
distributions
represent "exempt-interest dividends" for federal income tax purposes
that are
attributable to (1) interest-bearing obligations issued by or on behalf
of the
State of Georgia or its political subdivisions or (2) interest on
obligations of
the United States or of any other issuer whose obligations are exempt
from state
income taxes under federal law. Distributions, if any, derived from
capital
gains or other sources generally will be taxable for Georgia income tax
purposes
to shareholders of the Fund who are subject to the Georgia income tax.
The Fund,
as a Massachusetts business trust, is not expected to be required to
pay the
annual Georgia intangible property tax on the securities it holds. It
is,
however, the current practice of the Georgia Department of Revenue to
subject
trust interests similar to the shares to the intangibles tax at a rate
equal to
10 cents per $1,000 of value if the owners of such interests reside or
have
their principal business location in Georgia. The Department of Revenue
is
currently considering whether the taxable value of trust interests
representing
beneficial interests in tax-exempt securities may be reduced to take
into
account the exempt nature of such securities. Georgia law exempts the
following
securities from the intangibles tax: (1) obligations of the United
States
(including United States government agencies and corporations
established by
Acts of Congress), (2) obligations of the State of Georgia (including
its
political subdivisions or public institutions); and (3) industrial
development
revenue bonds issued pursuant to the laws of Georgia.
Other State and Local Taxes
Dividends payable with respect to the shares of the Fund may or may not
be
subject to state or local state income taxation in jurisdictions other
than
Georgia under applicable state or local laws. Similarly, shares in the
Fund may
or may not be subject to an intangible personal property tax in states
other
than Georgia. Each purchaser of the shares of the Fund is urged to
consult his
or her own tax adviser regarding the tax-exempt status of the Fund
shares and
dividends in state or local jurisdictions other than the State of
Georgia.
Performance Information
- ------------------------------------------------------------------------
- --------
From time to time, the Fund may advertise its total return, yield and
tax-equivalent yield.
Total return represents the change, over a specified period of time, in
the
value of an investment in the Fund after reinvesting all income and
capital
gains distributions. It is calculated by dividing that change by the
initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment
income per
share (as defined by the Securities and Exchange Commission) earned by
the Fund
over a thirty-day period by the maximum offering price per share of the
Fund on
the last day of the period. This number is then annualized using
semi-annual
compounding. The tax-equivalent yield of the Fund is calculated
similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would
have had
to
earn to equal the actual after tax yield, assuming a specific tax rate.
The
yield and the tax-equivalent yield do not necessarily reflect income
actually
earned by the Fund and, therefore, may not correlate to the dividends
or other
distributions paid to shareholders.
From time to time, the Fund may advertise its performance using certain
financial publications and/ or compare its performance to certain
indices.
Addresses
- ------------------------------------------------------------------------
- --------
Peachtree Georgia Tax-Free
Federated Investors Tower
Income Fund
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------
- ---------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------
- ---------------------------------------------
Investment Adviser
Bank South, N.A.
3350 Cumberland Circle
Atlanta, Georgia 30339
- ------------------------------------------------------------------------
- ---------------------------------------------
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, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------
- ---------------------------------------------
Independent Auditors
Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------
- ---------------------------------------------
Georgia
Tax-Free Income
Fund
Prospectus
A Diversified Portfolio of
Peachtree Funds,
an Open-End Management
Investment Company
(a Mutual Fund)
November 30, 1994
3350 Cumberland Circle
Atlanta, GA 30339
70467H507
3100503A (11/94)
PEACHTREE GEORGIA TAX-FREE INCOME FUND
(A Portfolio of Peachtree Funds)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 30,
1994
A. Please insert the following as a new section immediately preceding
the section entitled "Georgia Investment Risks" on page 4. In
addition, please add the heading "Portfolio Turnover" immediately
preceding the heading "Georgia Investment Risks" on the Table of
Contents page.
"PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as
considered necessary to meet its investment objective. For
the period from October 6, 1994 (date of initial public
investment) to March 31, 1995, the Fund's portfolio turnover
rate was 56%."
B. Please delete the second paragraph under the section entitled
"Fund Ownership" on page 8 and replace it with the following:
"As of May 9, 1995, the following shareholders of record
owned 5% or more of the outstanding shares of the Fund: BHC
Securities, Inc., Philadelphia, PA, owned approximately
103,575 shares (38.04%); Bank South, N.A., Atlanta, GA,
acting in various capacities for numerous accounts, owned
approximately 168,685 shares (61.95%)."
C. Please insert the following as the second sentence of the first
paragraph in the section entitled "Advisory Fees" on page 8:
"For the period from October 6, 1994 (date of initial public
investment) to March 31, 1995, the Adviser earned $2,237,
all of which was voluntarily waived."
D. Please insert the following as the second sentence under the
section entitled "Administrative Services" on page 8:
"For the period from October 6, 1994 (date of initial public
investment) to March 31, 1995, the Fund incurred costs for
administrative services of $49,864."
E. Please insert the following as the final paragraph under the
section entitled "Brokerage Transactions," which begins on page 8:
"For the period from October 6, 1994 (date of initial public
investment) to March 31, 1995, the Fund paid no brokerage
commissions."
F. Please insert the following as the second paragraph under the
section entitled "Distribution Plan" on page 9:
"For the period from October 6, 1994 (date of initial public
investment) to March 31, 1995, brokers and administrators
(financial institutions) received no fees, pursuant to the
Distribution Plan."
G. Please insert the following as the first paragraph under the
section entitled "Total Return" on page 11:
"The Fund's cumulative total return for the period from
October 6, 1994, (date of initial public investment) to
March 31, 1995 was (1.54%). 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 6 months of investment activity since
the Fund's effective date."
H. Please insert the following as the third paragraph under the
section entitled "Yield" on page 11:
"The Fund's yield for the thirty-day period ended March 31,
1995, was 4.48%."
I. Please insert the following as the second paragraph under the
section entitled "Tax-Equivalent Yield" on page 11:
"The Fund's tax-equivalent yield for the thirty-day period
ended March 31, 1995, was 6.79%."
March 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
70467H507
G00221-06 (5/95)
Peachtree Georgia Tax-Free Income Fund
(A Portfolio of Peachtree Funds)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Peachtree Georgia Tax-Free Income Fund (the "Fund")
dated November 30, 1994. This Statement is not a prospectus itself. To
receive a copy of the prospectus call the Peachtree Funds Service
Center at 1-404-989-6200 or 1-800-621-8969.
SHARES OF THE FUND 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 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 November 30, 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
Types of Acceptable Investments 1
Participation Interests 1
Variable Rate Municipal Securities 1
Municipal Leases 2
When-Issued and Delayed
Delivery Transactions 2
Temporary Investments 2
Reverse Repurchase Agreements 2
Investment Limitations 3
Georgia Investment Risks 4
Peachtree Funds Management 5
- ---------------------------------------------------------------
Officers and Trustees 5
The Funds 7
Fund Ownership 8
Trustee Liability 8
Investment Advisory Services 8
- ---------------------------------------------------------------
Adviser to the Fund 8
Advisory Fees 8
Administrative Services 8
- ---------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent 8
- ---------------------------------------------------------------
Brokerage Transactions 8
- ---------------------------------------------------------------
Purchasing Shares 9
- ---------------------------------------------------------------
Administrative Arrangements 9
Distribution Plan 9
Purchasing Fund Shares with Securities 9
Determining Net Asset Value 9
- ---------------------------------------------------------------
Valuing Municipal Bonds 10
Exchange Privilege 10
- ---------------------------------------------------------------
Redeeming Shares 10
- ---------------------------------------------------------------
Redemption in Kind 10
Tax Status 10
- ---------------------------------------------------------------
The Fund's Tax Status 10
Shareholders' Tax Status 10
Total Return 11
- ---------------------------------------------------------------
Yield 11
- ---------------------------------------------------------------
Tax Equivalent Yield 11
- ---------------------------------------------------------------
Tax-Equivalency Table 11
Performance Comparisons 12
- ---------------------------------------------------------------
Appendix 13
- ---------------------------------------------------------------
General Information About the Fund
- --------------------------------------------------------------------------------
Peachtree Georgia Tax-Free Income 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 September 22, 1993, as amended and restated
dated December 20, 1993.
Investment Objective and Policies
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income exempt from federal
income tax and the personal income taxes imposed by the state of Georgia. The
investment objective cannot be changed without shareholder approval.
Types of Investments
The Fund invests primarily in a portfolio of municipal securities which are
exempt from federal income tax and the personal income taxes imposed by the
State of Georgia. The municipal securities in which the Fund invests include
those issued by or on behalf of the State of Georgia and its political
subdivisions, authorities and agencies and securities issued by other states,
territories, and possessions of the United States which are exempt from the
federal income tax and the personal income taxes imposed by the State of Georgia
("Georgia Municipal Securities").
Characteristics
The Georgia Municipal Securities in which the Fund invests have the
characteristics set forth in the prospectus. If ratings made by Moody's
Investors Service, Inc. ("Moody's"), Standard and Poor's Ratings Group
("S&P"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Fitch
Investors Service, Inc. ("Fitch"), change because of changes in those
organizations or in their rating systems, the Fund will try to use
comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
Types of Acceptable Investments
Examples of Georgia Municipal Securities include:
.general obligation bonds;
.governmental lease certificates of participation issued by governmental units
where payment is secured by installment payments for equipment, buildings, or
other facilities being leased by the state or municipality (Government lease
certificates purchased by the Fund will not contain nonappropriation clauses.);
.municipal notes and tax-exempt commercial paper;
.serial bonds;
.tax anticipation notes sold to finance working capital needs of municipalities
in anticipation of receiving taxes;
.bond anticipation notes sold in anticipation of the issuance of long-term
bonds;
.pre-refunded municipal bonds whose timely payment of interest and principal is
ensured by an escrow of U.S. government obligations; and
.private activity and industrial development bonds issued to finance facilities
for use, directly and indirectly, by private for-profit and non-profit
companies.
Participation Interests
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
depreciation is less for variable rate municipal securities than for fixed
income obligations. Many of the securities with variable interest rates
purchased by the Fund will be subject to repayment of principal (usually within
seven days) on the Fund's demand. The terms of these variable rate demand
instruments require payment of principal and accrued interest from the issuer of
the municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.
1
- --------------------------------------------------------------------------------
Municipal Leases
The Fund may purchase securities in the form of participation interests which
represent undivided fractional interests in lease payments by a governmental or
non-profit entity. The lease payments and other rights under the lease provide
for and secure the payments on the certificates. Lease obligations may be
limited by municipal charter or the nature of the appropriation for the lease.
In particular, lease obligations may be subject to periodic appropriation. If
the entity does not appropriate funds for future lease payments, the entity
cannot be compelled to make such payments. Furthermore, a lease may provide that
the certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they became due. In the
event of a default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease obligations, the Fund's
investment adviser, under the authority delegated by the Trustees, will base its
determination on the following factors:
.whether the lease can be terminated by the lessee;
.the potential recovery, if any, from a sale of the leased property upon
termination of the lease;
.the lessee's general credit strength (e.g., its debt, administrative, economic,
and financial characteristics and prospects);
.the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and
.any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Temporary Investments
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.
Repurchase Agreements
Repurchase agreements are arrangements in which banks, securities
broker-dealers, and other financial institutions sell U.S. government and
agency securities to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price including interest within
one year from the date of acquisition. 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. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The
Fund believes that under the regular procedures normally in effect for
custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other financial
institutions, such as securities broker-dealers, which are deemed by the
Fund's investment adviser to be creditworthy pursuant to guidelines
established by the 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.
2
- --------------------------------------------------------------------------------
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.
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
the clearance of purchases and sales of portfolio securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow
money 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 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 permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 15% of the value
of the Fund's total assets at the time of the borrowing.
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.
Investing in Real Estate
The Fund will not invest in real estate, including limited partnership
interests, although it may invest in municipal bonds secured by real
estate or interests in real estate.
Investing in Commodities, Commodity Contracts, or Commodity Futures
Contracts
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may acquire
publicly or non-publicly issued municipal bonds or temporary investments
or enter into repurchase agreements in accordance with its investment
objective, policies, and limitations or the Trust's Declaration of Trust.
Concentration of Investments
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in private activity bonds or other securities, the interest
upon which is paid from revenues of similar types of projects. However,
the Fund may invest as temporary investments more than 25% of the value
of its assets in cash or cash items, securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or instruments
secured by these money market instruments, such as repurchase agreements.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be change by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in the following limitations becomes effective.
3
- --------------------------------------------------------------------------------
Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its total assets
in securities subject to restrictions on resale under the Securities Act
of 1933, except for certain restricted securities which meet the criteria
for liquidity as established by the Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets in
securities, including repurchase agreements providing for settlement in
more than seven calendar days after notice, non-negotiable fixed time
deposits with maturities over seven days, and certain municipal leases
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 Trust or the Fund's investment adviser
owning individually more than 0.50% of the issuer's securities together
own more than 5% of the issuer's securities.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets in
private activity bonds where the principal and interest are the
responsibility of companies (including guarantors, where applicable) with
less than three years of continuous operations, including the operation
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 Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
securities of issuers which invest in or sponsor such programs.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not expect to borrow money or pledge securities in excess of 5% of
the value of its net assets in its next fiscal year. For purposes of its
policies and limitations, the Fund considers certificates of deposit and demand
and time deposits issued by a U.S. branch of a domestic bank or savings and loan
having capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items."
Georgia Investment Risks
Georgia's economy is based on manufacturing (textiles, food products, paper
products, electronic equipment and aircraft), trade and a growing service
sector. Atlanta, with a service-oriented economy, is a trade, service and
transportation center for the Southeast region and is the focus of economic
growth in the State. In most other cities in Georgia, manufacturing
predominates. The State economy was only mildly affected by the early 1980's
recession and grew rapidly for most of the decade, with employment and personal
income growth in excess of comparable national rates. Despite continued
population growth, personal income per capita has steadily gained relative to
the nation. The economy began to slow in 1989, with less vigorous job growth
evident and relative per capita income position slipping.
Throughout the 1980's the State's expanding economy fostered strong income and
sales tax growth. This enabled the State to record fairly strong fiscal
operations from fiscal years 1984-1989. Financial operations have suffered since
fiscal year 1990, recording operating deficits in each of the fiscal years
1990-1992. Revenue projections were overly optimistic in fiscal year 1992 and
although the State reduced general fund expenditures, a minor operating deficit
was experienced.
The 1993 budget assumes a 6.9% increase in revenue from existing levels;
however, no surpluses or reserves from 1992 remain to carry over into fiscal
year 1993. If economic recovery is delayed or weakened, revenue shortfalls could
persist.
Except for the major building projects necessary for the 1996 Summer Olympics,
it appears unlikely that areas in and around metropolitan Atlanta will
experience the building construction rates of the mid to late 1980's.
4
Peachtree Funds Management
- --------------------------------------------------------------------------------
Officers and Trustees
Officers and Trustees are listed with their addresses, present positions with
Peachtree Funds, and principal occupations.
- --------------------------------------------------------------------------------
John F. Donahue*+
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Director, Eat'N Park
Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
- --------------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
Two Gateway Center-Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer & Flaherty; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
President, Treasurer and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and Assistant
Treasurer of some of the Funds; formerly, Vice President and Director of
Investor Relations, MNC Financial, Inc. and Vice President, Product Management,
MNC Financial, Inc.
- --------------------------------------------------------------------------------
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles 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: American
Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG Investor Series; Edward
D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The Medalist Funds;
Money Market Management Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; 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; Trust for U.S. Treasury Obligations and World Investment
Series, Inc.
7
- --------------------------------------------------------------------------------
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of November 4, 1994, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Bank South N.A., Atlanta, Georgia, acting in
various capacities for numerous accounts, owned approximately 1600 shares
(80.22%); BHC Securities Inc. Philadelphia, Pennsylvania, acting in various
capacities for numerous accounts, owned approximately 369 shares (18.52%).
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 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.
Because of the internal controls maintained by the Bank to restrict the flow of
non-public information, Fund investments are typically made without any
knowledge of the Bank's or its affiliates' lending relationships with an issuer.
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.
Transfer Agent and Dividend Disbursing Agent
- --------------------------------------------------------------------------------
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee paid to the transfer agent is based upon the size,
type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee paid for this service is based upon the level of the Fund's average net
assets for the period plus out-of-pocket expenses.
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
8
- --------------------------------------------------------------------------------
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 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.
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. 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 Fund's investment restrictions at the time of sale.
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.
9
- --------------------------------------------------------------------------------
Valuing Municipal Bonds
The Board of Trustees uses an independent pricing service to value municipal
bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and any
other factors or market data it considers relevant in determining valuations for
normal institutional size trading units of debt securities, and does not rely
exclusively on quoted prices.
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 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
No portion of any income dividend paid by the Fund is eligible for the dividends
received deduction available to corporations.
Capital Gains
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
the availability of higher relative yields;
differentials in market values;
new investment opportunities;
changes in creditworthiness of an issuer; or
an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
10
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 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
value is then annualized using semi-annual compounding. This means that the
amount of income generated during the 30-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.
Tax-Equivalent Yield
- --------------------------------------------------------------------------------
The tax-equivalent yield is calculated similarly to the yield, but is adjusted
to reflect the taxable yield necessary to equal on an after tax basis, the
actual yield of the Fund, assuming that income from the Fund is 100% tax-exempt.
Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the portfolio
generally remains free from federal regular income tax,* and is often free from
state and local taxes as well. As the following table indicates, a "tax-free"
investment is an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF GEORGIA
Tax Bracket: Federal
15.00% 28.00% 31.00% 36.00% 39.60%
- -------------------------------------------------------------------------------
Combined Federal and State
21.000% 34.000% 37.000% 42.000% 45.600%
- --------------------------------------------------------------------------------
Joint Return:
$1-38,000 $38,001-91,850 $91,851-140,000 $140,001-250,000 Over $250,000
- ------------------------------------------------------------------------------
Single Return:
$1-22,750 $22,751-55,100 $55,101-115,000 $115,001-250,000 Over $250,000
- ------------------------------------------------------------------------------
Tax-Exempt
Yield Taxable Yield Equivalent
- -----------------------------------------------------------------------------
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00 2.53 3.03 3.17 3.45 3.68
2.50 3.16 3.79 3.97 4.31 4.60
3.00 3.80 4.55 4.76 5.17 5.51
3.50 4.43 5.30 5.56 6.03 6.43
4.00 5.06 6.06 6.35 6.90 7.35
4.50 5.70 6.82 7.14 7.76 8.27
5.00 6.33 7.58 7.94 8.62 9.19
5.50 6.96 8.33 8.73 9.48 10.11
6.00 7.59 9.09 9.52 10.34 11.03
6.50 8.23 9.85 10.32 11.21 11.95
7.00 8.86 10.61 11.11 12.07 12.87
11
- --------------------------------------------------------------------------------
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of any class of shares.
*Some portion of each class's income may be subject to the federal alternative
minimum tax and state and local taxes.
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.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
.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 a specific category in
advertising and sales literature.
.Morningstar, Inc. an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
represent the historic change in the value of an investment in the Fund based on
the monthly reinvestment of dividends over a specific period of time. In
addition, advertisements and sales literature for the Fund may include charts
and other illustrations which depict the hypothetical growth of an investment in
a systematic investment plan.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
12
Appendix
- --------------------------------------------------------------------------------
Standard and Poor's Ratings Group Municipal Bond Rating Definitions
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Moody's Investors Service, Inc., Municipal 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 edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in "Aaa"
securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Fitch 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 " or "D" categories.
Duff & Phelps Credit Rating Co. Municipal Bond Ratings Definitions
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- --High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
13
- --------------------------------------------------------------------------------
A+, A, A- --Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB, BBB- --Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
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.
704674507
14 3100503B (11/94)
