485BPOS 1 1933 Act File No. 33-50635 1940 Act File No. 811-7101 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X Pre-Effective Amendment No. Post-Effective Amendment No. 3 X and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X Amendment No. 6 X PEACHTREE FUNDS (Exact Name of Registrant as Specified in Charter) Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (Address of Principal Executive Offices) (412) 288-1900 (Registrant's Telephone Number) John W. McGonigle, Esquire, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (Name and Address of Agent for Service) It is proposed that this filing will become effective: immediately upon filing pursuant to paragraph (b) X on May 31, 1995 pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph (a) (i). 75 days after filing pursuant to paragraph (a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485. If appropriate, check the following box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Registrant has filed with the Securities and Exchange Commission a declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940, and: X filed the Notice required by that Rule on November 15, 1994; or intends to file the Notice required by that Rule on or about ____________; or during the most recent fiscal year did not sell any securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need not file the Notice. Copies to: Matthew G. Maloney, Esquire Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W. Washington, D.C. 20037 CROSS-REFERENCE SHEET This Amendment to the Registration Statement of PEACHTREE FUNDS, which consists of five portfolios, (1) Peachtree Bond Fund; (2) Peachtree Equity Fund; (3) Peachtree Georgia Tax-Free Income Fund; (4) Peachtree Government Money Market Fund; and (5) Peachtree Prime Money Market Fund relates only to the Peachtree Georgia Tax-Free Income Fund and is comprised of the following: PART A. INFORMATION REQUIRED IN A PROSPECTUS. Prospectus Heading (Rule 404(c) Cross Reference) Item 1. Cover Page (1-5) Cover Page Item 2. Synopsis (1-5) Summary of Fund Expenses. Item 3. Condensed Financial Information (1-5) Financial Highlights (1-5) Performance Information. Item 4. General Description of Registrant (1-5) General Information; (1-5) Investment Information; (1-5) Investment Objective; (1-5) Investment Policies; (3,5) Investment Risks; (1-2) Foreign Securities; (1-5) Investment Limitations. Item 5. Management of the Fund (1-5) Peachtree Funds Information; (1-5) Management of the Trust; (1-5) Administration of the Trust; (1-5) Distribution Plan; (1-5); Administrative Services; (1-2, 4-5); (1-5) Shareholder Services Plan; Brokerage Transactions; (1-3) Expenses of the Fund. Item 6. Capital Stock and Other Securities (1-3) Dividends and Distributions; (4-5) Dividends; (1-5) Shareholder Information; (1-5) Voting Rights; (1-5) Massachusetts Partnership Law; (1-5) Effect of Banking Laws; (1-5) Tax Information; (1-5) Federal Income Tax; (1-2, 4-5) State and Local Taxes; (3) State of Georgia Income and Intangible Taxes; (3) Other State and Local Taxes. Item 7. Purchase of Securities Being Offered (1-5) Net Asset Value; (1-5) Investing in the Fund; (1-5) Share Purchases; (1-5) Minimum Investment Required; (1-5) What Shares Cost; (1- 3) Reducing the Sales Load; (1-5) Systematic Investment Program; (1-5) Distribution of Shares; (1-5) Exchanging Securities for Fund Shares; (1-5) Certificates and Confirmations; (1-5) Exchange Privilege. Item 8. Redemption or Repurchase (1-5) Redeeming Shares; (1-5) Systematic Withdrawal Program; (1-5) Accounts with Low Balances. Item 9. Pending Legal Proceedings None. PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION. Item 10. Cover Page (1-5) Cover Page. Item 11. Table of Contents (1-5) Table of Contents. Item 12. General Information and History (1-5) General Information About the Fund. Item 13. Investment Objectives and Policies (1-5) Investment Objective and Policies. Item 14. Management of the Fund (1-5) Peachtree Funds Management. Item 15. Control Persons and Principal Holders of Securities (1-5) Fund Ownership. Item 16. Investment Advisory and Other Services (1-5) Investment Advisory Services; (1-5) Administrative Services; (1-5) Transfer Agent and Dividend Disbursing Agent. Item 17. Brokerage Allocation (1-5) Brokerage Transactions. Item 18. Capital Stock and Other Securities Not applicable. Item 19. Purchase, Redemption and Pricing of Securities Being Offered (1-5) Purchasing Shares; (1-5) Determining Net Asset Value; (1-5) Exchange Privilege; (1-5) Redeeming Shares. Item 20. Tax Status (1-5) Tax Status. Item 21. Underwriters (1-5) Distribution Plan. Item 22. Calculation of Performance Data (1-5) Yield; (1-3) Total Return; (4- 5) Effective Yield; (3) Tax- Equivalent Yield; (1-5) Performance Comparisons. Item 23. Financial Statements......... (1-5) Filed in Part A. 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 -------------------------------------------------------------------------------- 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) 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.
EXAMPLE 1 year 3 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
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)
PERIOD ENDED MARCH 31, 1995(A) (UNAUDITED) ---------------------------------------------------------------------------------- ------------------ 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% ----------------------------------------------------------------------------------
(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) --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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 -----------------------------------------------------------
PEACHTREE GEORGIA TAX-FREE INCOME FUND --------------------------------------------------------------------------------
CREDIT RATINGS: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE --------- ----------------------------------------------------------- ------- ---------- 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+ ----------------------------------------------------------- ----------
+ 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: 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
(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) -------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------
(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) -------------------------------------------------------------------------------- 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 ------------------------------------------------------------------------------------------ --------
* 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 --------------------------------------------------------------------------------
PERIOD ENDED MARCH 31, 1995* (UNAUDITED) --------------- 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 -------------------------------------------------------------------------- -------------
* 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:
PERIOD ENDED MARCH 31, 1995* -------------- --------------------------------------------------------------------------- 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 --------------------------------------------------------------------------- ------------
* 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: -------------------------------------------------------------------------------- PURCHASES $2,399,183 -------------------------------------------------------------------------------- ---------- SALES $ 315,901 -------------------------------------------------------------------------------- ----------
March 31, 1995 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
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) PART C. OTHER INFORMATION. Item 24. Financial Statements and Exhibits: (a) Financial Statements: Filed in Part A. (b) Exhibits: (1) (i) Conformed Copy of Declaration of Trust of the Registrant (1); (ii) Conformed Copy of Amended and Restated Declaration of Trust of the Registrant (2); (iii) Conformed Copy of Amendment No. 2 to the Declaration of Trust (3); (2) Copy of By-Laws of the Registrant (2); (3) Not applicable; (4) a. Copy of Specimen Certificates for Shares of Beneficial Interest of the Registrant(5); (i) Peachtree Bond Fund(5); (ii) Peachtree Equity Fund(5); (iii)Peachtree Georgia Tax-Free Income Fund(5); (iv) Peachtree Government Money Market Fund(5); (v) Peachtree Prime Money Market Fund(5); b. Copy of Revised Specimen Certificates for Shares of Beneficial Interest of the Registrant (to be filed by Amendment); (5) Conformed Copy of Investment Advisory Contract of the Registrant (2); (6) (i) Conformed Copy of Distributor's Contract of the Registrant (2); (ii) Conformed Copy of Administrative Services Agreement (2); (7) Not applicable; (8) Conformed Copy of Custodian Agreement of the Registrant (4); (9) (i) Conformed Copy of Agreement for Fund Accounting, Shareholder Recordkeeping and Custody Services Procurment Agreement of the Registrant;+ (ii) Conformed Copy of Shareholder Services Plan of the Registrant (2); (10) Conformed Copy of Opinion and Consent of Counsel as to legality of shares being registered (2); (11) (i) Conformed Copy of Consent of Independent Public Accountants (5); + All Exhibits have been filed electronically. 1. Response is incorporated by reference to Registrant's Initial Registration Statement on Form N-1A filed October 15, 1993. (File Nos. 33-50635 and 811-3432). 2. Response is incorporated by reference to Registrant's Pre-effective Amendment No. 2 on Form N-1A filed January 7, 1994. (File Nos. 33-50635 and 811-3432). 3. Response is incorporated by reference to Registrant's Registration Statement on Form N-1A filed April 8, 1994. (File Nos. 33-50635 and 811- 3432) 4. Response is incorporated by reference to Registrant's Registration Statement on Form N-1A filed May 27, 1994. (File Nos. 33-50635 and 811- 3432) 5. Response is incorporated by reference to Registrant's Registration Statement on Form N-1A filed November 27, 1994. (File Nos. 33-50635 and 811-3432) (12) Not applicable; (13) Conformed Copy of Initial Capital Understanding (2); (14) Not applicable; (15) (i) Conformed Copy of Distribution Plan (2); (ii) Copy of Form of 12b-1 Agreement (2); (16) Copy of Schedule for Computation of Fund Performance Data: (i) Peachtree Bond Fund (4); (ii) Peachtree Equity Fund (4); (iii) Peachtree Government Money Market Fund(4); (iv) Peachtree Prime Money Market Fund (4); (v) Peachtree Georgia Tax-Free Income Fund; + (17) Copy of Financial Data Schedules; + (18) Conformed Copy of Opinion and Consent of Counsel as to Availability of Rule 485(b) (5); (19) Conformed Copy of Power of Attorney; + Item 25. Persons Controlled by or Under Common Control with Registrant: None Item 26. Number of Holders of Securities: Number of Record Holders Title of Class as of May 5, 1995 Shares of Beneficial Interest (no par value) Peachtree Bond Fund 7 Peachtree Government Money Market Fund 8 Peachtree Georgia Tax-Free Income Fund 9 Peachtree Prime Money Market Fund 19 Peachtree Equity Fund 22 Item 27. Indemnification: (1) + All Exhibits have been filed electronically. 1. Response is incorporated by reference to Registrant's Initial Registration Statement on Form N-1A filed October 15, 1993. (File Nos. 33-50635 and 811-3432). 2. Response is incorporated by reference to Registrant's Pre-effective Amendment No. 2 on Form N-1A filed January 7, 1994. (File Nos. 33-50635 and 811-3432). 4. Response is incorporated by reference to Registrant's Registration Statement on Form N-1A filed May 27, 1994. (File Nos. 33-50635 and 811- 3432) 5. Response is incorporated by reference to Registrant's Registration Statement on Form N-1A filed November 22, 1994. (File Nos. 33-50635 and 811-3432) Item 28. Business and Other Connections of Investment Adviser: (a) Bank South National Association (the "Bank") is headquartered in Atlanta Georgia and is a wholly owned subsidiary of Bank South Corporation, a Georgia corporation which is a registered bank holding company. The Bank serves consumers through its network of banking offices with a full range of deposit and lending products, as well as investment services. The principal executive offices of the Adviser are located at 3350 Cumberland Circle, Atlanta, GA 30339. The Bank has managed discretionary assets for its consumers since 1931. As of January, 1994, the Bank managed in excess of $1 billion of discretionary assets. Prior to the date hereof, the Bank has not served as an investment adviser to mutual funds. The principal executive officers and directors of the Trust's Investment Adviser are set forth in the following tables. Unless otherwise noted, the position listed under Other Substantial Business, Profession, Vocation or Employment is with the Bank. (1) (2) (3) Other Substantial Position with Business Profession, Name the Adviser Vocation or Employment Bernard W. Abrams Director Chairman of the Board and Chief Executive Officer of Abrams Industries, Inc., a holding company for subsidiaries doing business in general contracting, real estate development and manufacturing of store fixtures. Ray C. Anderson Director Chairman and Chief Executive Officer of Interface, Inc., a manufacturer of carpet, textiles and chemicals. Kenneth W. Cannestra Director President of Lockheed Aeronautical Systems Co. John S. Carr Director President of John S. Carr and Associates, Inc., a real estate development company. Patrick L. Flinn Chairman and ___ ___ Chief Executive Officer Ralph E. Hutchens, Jr. Chief ___ ___ Financial Officer Sidney E. Jennette, Jr. Director Management consultant. Lynn H. Johnston Director Chairman of Life Insurance Company of Georgia. (1) (2) (3) Other Substantial Position with Business Profession, Name the Adviser Vocation or Employment William M. McClatchey, M.D. Director President of Piedmont Internal Medicine Associates, P.A. and is a doctor of internal medicine and rheumatology John E. McKinley, III Principle Operating ___ ___ Officer Julia W. Morgan Director President and Chief Executive Officer of Ed Morgan & Associates, an insurance company. Barry Phillips Director Partner of Kilpatrick & Cody, Attorneys. Ben. G. Porter Director Chairman of Piedmont Communications Corporation. John W. Robinson, Jr. Director President of Southern Waistbands, Inc. Lee M. Sessions, Jr. Principle Operating Officer Felker W. Ward, Jr. Director President of Ward & Associates, investment bankers. Virgil R. Williams Director President of Equipment Technology, Inc., President of International Banking Technologies, Inc. and the President and Publisher of Georgia Trend. Item 29. Principal Underwriters: (a) Federated Securities Corp., the Distributor for shares of the Registrant, also acts as principal underwriter for the following open-end investment companies: Alexander Hamilton Funds; American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated Cash Management Trust; Automated Government Money Trust; BayFunds; The Biltmore Funds; The Biltmore Municipal Funds; California Municipal Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated Income Securities Trust; Federated Income Trust; Federated Index Trust; Federated Institutional Trust; Federated Intermediate Government Trust; Federated Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; First Union Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fountain Square Funds; Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Independence One Mutual Funds; Insight Institutional Series, Inc.; Insurance Management Series; Intermediate Municipal Trust; International Series Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market Obligations Trust; Money Market Trust; The Monitor Funds; Municipal Securities Income Trust; Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; SouthTrust Vulcan Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Tower Mutual Funds; Trademark Funds; Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; Vision Fiduciary Funds, Inc.; Vision Group of Funds, Inc.; and World Investment Series, Inc. Federated Securities Corp. also acts as principal underwriter for the following closed-end investment company: Liberty Term Trust, Inc.- 1999. (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Underwriter With Registrant Richard B. Fisher Director, Chairman, Chief Vice President Federated Investors Tower Executive Officer, Chief Pittsburgh, PA 15222-3779 Operating Officer, and Asst. Treasurer, Federated Securities Corp. Edward C. Gonzales Director, Executive Vice President, Federated Investors Tower President, and Treasurer, Treasurer and Pittsburgh, PA 15222-3779 Federated Securities Trustee Corp. John W. McGonigle Director, Executive Vice Vice President and Federated Investors Tower President, and Assistant Secretary Pittsburgh, PA 15222-3779 Secretary, Federated Securities Corp. John B. Fisher President-Institutional Sales, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Underwriter With Registrant James F. Getz President-Broker/Dealer, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Mark R. Gensheimer Executive Vice President of -- Federated Investors Tower Bank/Trust Pittsburgh, PA 15222-3779 Federated Securities Corp. Mark W. Bloss Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Theodore Fadool, Jr. Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Bryant R. Fisher Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Christopher T. Fives Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 James S. Hamilton Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 James M. Heaton Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 H. Joseph Kennedy Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Keith Nixon Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Solon A. Person, IV Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Timothy C. Pillion Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Thomas E. Territ Senior Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 John B. Bohnet Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Richard W. Boyd Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Underwriter With Registrant Jane E. Broeren-Lambesis Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Mary J. Combs Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 R. Edmond Connell, Jr. Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Kevin J. Crenny Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Daniel T. Culbertson Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Laura M. Deger Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Jill Ehrenfeld Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Joseph L. Epstein Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Mark D. Fisher Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Michael D. Fitzgerald Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Joseph D. Gibbons Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 David C. Glabicki Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Craig S. Gonzales Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Richard C. Gonzales Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Scott A. Hutton Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Underwriter With Registrant William J. Kerns Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 William E. Kugler Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Dennis M. Laffey Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Stephen A. LaVersa Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Francis J. Matten, Jr. Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Mark J. Miehl Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Richard C. Mihm Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 J. Michael Miller Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 R. Jeffrey Niss Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Michael P. O'Brien Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Robert D. Oehlschlager Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Robert F. Phillips Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Eugene B. Reed Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Paul V. Riordan Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Charles A. Robison Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address With Underwriter With Registrant John C. Shelar, Jr. Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 David W. Spears Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Jeffrey A. Stewart Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Jamie M. Teschner Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 William C. Tustin Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Paul A. Uhlman Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Richard B. Watts Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Michael P. Wolff Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Philip C. Hetzel Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Charlene H. Jennings Assistant Vice President, Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 Ernest L. Linane Assistant Vice President, -- Federated Investors Tower Federated Securities Corp. Pittsburgh, PA 15222-3779 S. Elliott Cohan Secretary, Assistant Federated Investors Tower Federated Securities Corp. Secretary Pittsburgh, PA 15222-3779 (c) Not applicable. Item 30. Location of Accounts and Records: All accounts and records required to be maintained by Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated thereunder are maintained at one of the following locations: Registrant Federated Investors Tower Pittsburgh, PA 15222-3779 Federated Services Company Federated Investors Tower ("Administrator") Pittsburgh, PA 15222-3779 Federated Administrative Services Federated Investors Tower ("Transfer Agent, Dividend Disbursing Pittsburgh, PA 15222-3779 Agent and Portfolio Recordkeeper") The Bank of New York 48 Wall Street ("Custodian") New York, New York 10286 Bank South National Association 3350 Cumberland Circle ("Adviser") Atlanta, Georgia 30339 Item 31. Management Services: Not applicable. Item 32. Undertakings: Registrant hereby undertakes to comply with the provisions of Section 16(c) of the 1940 Act with respect to the removal of Trustees and the calling of special shareholder meetings by shareholders. Registrant hereby undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, PEACHTREE FUNDS, has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the 24th day of May, 1995. PEACHTREE FUNDS BY: /s/ C. Grant Anderson C. Grant Anderson, Assistant Secretary Attorney in Fact for John F. Donahue May 24, 1995 Pursuant to the requirements of the Securities Act of 1933, this Amendment to its Registration Statement has been signed below by the following person in the capacity and on the date indicated: NAME TITLE DATE By: /s/ C. Grant Anderson C. Grant Anderson Attorney In Fact May 24, 1995 ASSISTANT SECRETARY For the Persons Listed Below NAME TITLE John F. Donahue* Chairman and Trustee (Chief Executive Officer) Edward C. Gonzales* President, Treasurerand Trustee (Principal Financial and Accounting Officer) John T. Conroy, Jr.* Trustee William J. Copeland* Trustee James E. Dowd* Trustee Lawrence D. Ellis, M.D.* Trustee Edward L. Flaherty, Jr.* Trustee Peter E. Madden* Trustee Gregor F. Meyer* Trustee Wesley W. Posvar* Trustee Marjorie P. Smuts* Trustee * By Power of Attorney EX-99.POWEROFATTY 2 Exhibit 19 under Form N-1A Exhibit 24 under Item 601/Reg. S-K POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints the Secretary and Assistant Secretary of Peachtree Funds and the Assistant General Counsel of Federated Investors, and each of them, their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for them and in their names, place and stead, in any and all capacities, to sign any and all documents to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means of the Securities and Exchange Commission's electronic disclosure system known as EDGAR; and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to sign and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. SIGNATURES TITLE DATE /s/ John F. Donahue Chairman and Trustee April 28, 1995 John F. Donahue (Chief Executive Officer) /s/ Edward C. Gonzales Vice President and Treasurer April 28, 1995 Edward C. Gonzales and Trustee (Principal Financial and Accounting Officer) /s/ Thomas G. Bigley Trustee April 28, 1995 Thomas G. Bigley /s/ John T. Conroy, Jr. Trustee April 28, 1995 John T. Conroy, Jr. /s/ William J. Copeland Trustee April 28, 1995 William J. Copeland /s/ James E. Dowd Trustee April 28, 1995 James E. Dowd /s/ Lawrence D. Ellis, M.D. Trustee April 28, 1995 Lawrence D. Ellis, M.D. /s/ Edward L. Flaherty, Jr. Trustee April 28, 1995 Edward L. Flaherty, Jr. /s/ Peter E. Madden Trustee April 28, 1995 Peter E. Madden /s/ Gregor F. Meyer Trustee April 28, 1995 Gregor F. Meyer /s/ John E. Murray, Jr. Trustee April 28, 1995 John E. Murray, Jr. /s/ Wesley W. Posvar Trustee April 28, 1995 Wesley W. Posvar /s/ Marjorie P. Smuts Trustee April 28, 1995 Marjorie P. Smuts Sworn to and subscribed before me this 28th day of April, 1995. /s/ Marie M. Hamm Notary Public EX-99.TAAGREEMENT 3 Peachtree Funds Page 1 5/15/95 ver. 129v1 Exhibit 9(i) under Form N-1A Exhibit 10 under Item 601/Reg. S-K AGREEMENT for FUND ACCOUNTING, SHAREHOLDER RECORDKEEPING, and CUSTODY SERVICES PROCUREMENT AGREEMENT made as of December 1, 1994, by and between those investment companies listed on Exhibit 1 as may be amended from time to time, having their principal office and place of business at Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios (individually referred to herein as a "Fund" and collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having its principal office and place of business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the "Company"). WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), with authorized and issued shares of capital stock or beneficial interest ("Shares"); and WHEREAS, the Trust may desire to retain the Company to provide certain pricing, accounting and recordkeeping services for each of the Funds, including any classes of shares issued by any Fund ("Classes") if so indicated on Exhibit 1, and the Company is willing to furnish such services; and WHEREAS, the Trust may desire to appoint the Company as its transfer agent, dividend disbursing agent if so indicated on Exhibit 1, and agent in connection with certain other activities, and the Company desires to accept such appointment; and WHEREAS, the Trust may desire to appoint the Company as its agent to select, negotiate and subcontract for custodian services from an approved list of qualified banks if so indicated on Exhibit 1, and the Company desires to accept such appointment; and WHEREAS, from time to time the Trust may desire and may instruct the Company to subcontract for the performance of certain of its duties and responsibilities hereunder to State Street Bank and Trust Company or another agent (the "Agent"); and WHEREAS, the words Trust and Fund may be used interchangeably for those investment companies consisting of only one portfolio; NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: SECTION ONE: Fund Accounting. Article 1. Appointment. The Trust hereby appoints the Company to provide certain pricing and accounting services to the Funds, and/or the Classes, for the period and on the terms set forth in this Agreement. The Company accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Article 3 of this Section. Article 2. The Company's Duties. Subject to the supervision and control of the Trust's Board of Trustees or Directors ("Board"), the Company will assist the Trust with regard to fund accounting for the Trust, and/or the Funds, and/or the Classes, and in connection therewith undertakes to perform the following specific services; A. Value the assets of the Funds using: primarily, market quotations, including the use of matrix pricing, supplied by the independent pricing services selected by the Company in consultation with the adviser, or sources selected by the adviser, and reviewed by the board; secondarily, if a designated pricing service does not provide a price for a security which the Company believes should be available by market quotation, the Company may obtain a price by calling brokers designated by the investment adviser of the fund holding the security, or if the adviser does not supply the names of such brokers, the Company will attempt on its own to find brokers to price those securities; thirdly, for securities for which no market price is available, the Pricing Committee of the Board will determine a fair value in good faith. Consistent with Rule 2a-4 of the 40 Act, estimates may be used where necessary or appropriate. The Company's obligations with regard to the prices received from outside pricing services and designated brokers or other outside sources, is to exercise reasonable care in the supervision of the pricing agent. The Company is not the guarantor of the securities prices received from such agents and the Company is not liable to the Fund for potential errors in valuing a Fund's assets or calculating the net asset value per share of such Fund or Class when the calculations are based upon such prices. All of the above sources of prices used as described are deemed by the Company to be authorized sources of security prices. The Company provides daily to the adviser the securities prices used in calculating the net asset value of the fund, for its use in preparing exception reports for those prices on which the adviser has comment. Further, upon receipt of the exception reports generated by the adviser, the Company diligently pursues communication regarding exception reports with the designated pricing agents. B. Determine the net asset value per share of each Fund and/or Class, at the time and in the manner from time to time determined by the Board and as set forth in the Prospectus and Statement of Additional Information ("Prospectus") of each Fund; C. Calculate the net income of each of the Funds, if any; D. Calculate capital gains or losses of each of the Funds resulting from sale or disposition of assets, if any; E. Maintain the general ledger and other accounts, books and financial records of the Trust, including for each Fund, and/or Class, as required under Section 31(a) of the 1940 Act and the Rules thereunder in connection with the services provided by the Company; F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records to be maintained by Rule 31a-1 under the 1940 Act in connection with the services provided by the Company. The Company further agrees that all such records it maintains for the Trust are the property of the Trust and further agrees to surrender promptly to the Trust such records upon the Trust's request; G. At the request of the Trust, prepare various reports or other financial documents required by federal, state and other applicable laws and regulations; and H. Such other similar services as may be reasonably requested by the Trust. Article 3. Compensation and Allocation of Expenses. A. The Funds will compensate the Company for its services rendered pursuant to Section One of this Agreement in accordance with the fees agreed upon from time to time between the parties hereto. Such fees do not include out-of-pocket disbursements of the Company for which the Funds shall reimburse the Company upon receipt of a separate invoice. Out-of-pocket disbursements shall include, but shall not be limited to, the items agreed upon between the parties from time to time. B. The Fund and/or the Class, and not the Company, shall bear the cost of: custodial expenses; membership dues in the Investment Company Institute or any similar organization; transfer agency expenses; investment advisory expenses; costs of printing and mailing stock certificates, Prospectuses, reports and notices; administrative expenses; interest on borrowed money; brokerage commissions; taxes and fees payable to federal, state and other governmental agencies; fees of Trustees or Directors of the Trust; independent auditors expenses; Federated Administrative Services and/or Federated Administrative Services, Inc. legal and audit department expenses billed to Federated Services Company for work performed related to the Trust, the Funds, or the Classes; law firm expenses; or other expenses not specified in this Article 3 which may be properly payable by the Funds and/or classes. C. The compensation and out-of-pocket expenses shall be accrued by the Fund and shall be paid to the Company no less frequently than monthly, and shall be paid daily upon request of the Company. The Company will maintain detailed information about the compensation and out-of-pocket expenses by Fund and Class. D. Any schedule of compensation agreed to hereunder, as may be adjusted from time to time, shall be dated and signed by a duly authorized officer of the Trust and/or the Funds and a duly authorized officer of the Company. E. The fee for the period from the effective date of this Agreement with respect to a Fund or a Class to the end of the initial month shall be prorated according to the proportion that such period bears to the full month period. Upon any termination of this Agreement before the end of any month, the fee for such period shall be prorated according to the proportion which such period bears to the full month period. For purposes of determining fees payable to the Company, the value of the Fund's net assets shall be computed at the time and in the manner specified in the Fund's Prospectus. F. The Company, in its sole discretion, may from time to time subcontract to, employ or associate with itself such person or persons as the Company may believe to be particularly suited to assist it in performing services under this Section One. Such person or persons may be third-party service providers, or they may be officers and employees who are employed by both the Company and the Funds. The compensation of such person or persons shall be paid by the Company and no obligation shall be incurred on behalf of the Trust, the Funds, or the Classes in such respect. SECTION TWO: Shareholder Recordkeeping. Article 4. Terms of Appointment. Subject to the terms and conditions set forth in this Agreement, the Trust hereby appoints the Company to act as, and the Company agrees to act as, transfer agent and dividend disbursing agent for each Fund's Shares, and agent in connection with any accumulation, open-account or similar plans provided to the shareholders of any Fund ("Shareholder(s)"), including without limitation any periodic investment plan or periodic withdrawal program. As used throughout this Agreement, a "Proper Instruction" means a writing signed or initialed by one or more person or persons as the Board shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved. Oral instructions will be deemed to be Proper Instructions if (a) the Company reasonably believes them to have been given by a person previously authorized in Proper Instructions to give such instructions with respect to the transaction involved, and (b) the Trust, or the Fund, and the Company promptly cause such oral instructions to be confirmed in writing. Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Trust, or the Fund, and the Company are satisfied that such procedures afford adequate safeguards for the Fund's assets. Proper Instructions may only be amended in writing. Article 5. Duties of the Company. The Company shall perform the following services in accordance with Proper Instructions as may be provided from time to time by the Trust as to any Fund: A. Purchases (1) The Company shall receive orders and payment for the purchase of shares and promptly deliver payment and appropriate documentation therefore to the custodian of the relevant Fund, (the "Custodian"). The Company shall notify the Fund and the Custodian on a daily basis of the total amount of orders and payments so delivered. (2) Pursuant to purchase orders and in accordance with the Fund's current Prospectus, the Company shall compute and issue the appropriate number of Shares of each Fund and/or Class and hold such Shares in the appropriate Shareholder accounts. (3) For certificated Funds and/or Classes, if a Shareholder or its agent requests a certificate, the Company, as Transfer Agent, shall countersign and mail by first class mail, a certificate to the Shareholder at its address as set forth on the transfer books of the Funds, and/or Classes, subject to any Proper Instructions regarding the delivery of certificates. (4) In the event that any check or other order for the purchase of Shares of the Fund and/or Class is returned unpaid for any reason, the Company shall debit the Share account of the Shareholder by the number of Shares that had been credited to its account upon receipt of the check or other order, promptly mail a debit advice to the Shareholder, and notify the Fund and/or Class of its action. In the event that the amount paid for such Shares exceeds proceeds of the redemption of such Shares plus the amount of any dividends paid with respect to such Shares, the Fund and/the Class or its distributor will reimburse the Company on the amount of such excess. B. Distribution (1) Upon notification by the Funds of the declaration of any distribution to Shareholders, the Company shall act as Dividend Disbursing Agent for the Funds in accordance with the provisions of its governing document and the then-current Prospectus of the Fund. The Company shall prepare and mail or credit income, capital gain, or any other payments to Shareholders. As the Dividend Disbursing Agent, the Company shall, on or before the payment date of any such distribution, notify the Custodian of the estimated amount required to pay any portion of said distribution which is payable in cash and request the Custodian to make available sufficient funds for the cash amount to be paid out. The Company shall reconcile the amounts so requested and the amounts actually received with the Custodian on a daily basis. If a Shareholder is entitled to receive additional Shares by virtue of any such distribution or dividend, appropriate credits shall be made to the Shareholder's account, for certificated Funds and/or Classes, delivered where requested; and (2) The Company shall maintain records of account for each Fund and Class and advise the Trust, each Fund and Class and its Shareholders as to the foregoing. C. Redemptions and Transfers (1) The Company shall receive redemption requests and redemption directions and, if such redemption requests comply with the procedures as may be described in the Fund Prospectus or set forth in Proper Instructions, deliver the appropriate instructions therefor to the Custodian. The Company shall notify the Funds on a daily basis of the total amount of redemption requests processed and monies paid to the Company by the Custodian for redemptions. (2) At the appropriate time upon receiving redemption proceeds from the Custodian with respect to any redemption, the Company shall pay or cause to be paid the redemption proceeds in the manner instructed by the redeeming Shareholders, pursuant to procedures described in the then-current Prospectus of the Fund. (3) If any certificate returned for redemption or other request for redemption does not comply with the procedures for redemption approved by the Fund, the Company shall promptly notify the Shareholder of such fact, together with the reason therefor, and shall effect such redemption at the price applicable to the date and time of receipt of documents complying with said procedures. (4) The Company shall effect transfers of Shares by the registered owners thereof. (5) The Company shall identify and process abandoned accounts and uncashed checks for state escheat requirements on an annual basis and report such actions to the Fund. D. Recordkeeping (1) The Company shall record the issuance of Shares of each Fund, and/or Class, and maintain pursuant to applicable rules of the Securities and Exchange Commission ("SEC") a record of the total number of Shares of the Fund and/or Class which are authorized, based upon data provided to it by the Fund, and issued and outstanding. The Company shall also provide the Fund on a regular basis or upon reasonable request with the total number of Shares which are authorized and issued and outstanding, but shall have no obligation when recording the issuance of Shares, except as otherwise set forth herein, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Funds. (2) The Company shall establish and maintain records pursuant to applicable rules of the SEC relating to the services to be performed hereunder in the form and manner as agreed to by the Trust or the Fund to include a record for each Shareholder's account of the following: (a) Name, address and tax identification number (and whether such number has been certified); (b) Number of Shares held; (c) Historical information regarding the account, including dividends paid and date and price for all transactions; (d) Any stop or restraining order placed against the account; (e) Information with respect to withholding in the case of a foreign account or an account for which withholding is required by the Internal Revenue Code; (f) Any dividend reinvestment order, plan application, dividend address and correspondence relating to the current maintenance of the account; (g) Certificate numbers and denominations for any Shareholder holding certificates; (h) Any information required in order for the Company to perform the calculations contemplated or required by this Agreement. (3) The Company shall preserve any such records required to be maintained pursuant to the rules of the SEC for the periods prescribed in said rules as specifically noted below. Such record retention shall be at the expense of the Company, and such records may be inspected by the Fund at reasonable times. The Company may, at its option at any time, and shall forthwith upon the Fund's demand, turn over to the Fund and cease to retain in the Company's files, records and documents created and maintained by the Company pursuant to this Agreement, which are no longer needed by the Company in performance of its services or for its protection. If not so turned over to the Fund, such records and documents will be retained by the Company for six years from the year of creation, during the first two of which such documents will be in readily accessible form. At the end of the six year period, such records and documents will either be turned over to the Fund or destroyed in accordance with Proper Instructions. E. Confirmations/Reports (1) The Company shall furnish to the Fund periodically the following information: (a) A copy of the transaction register; (b) Dividend and reinvestment blotters; (c) The total number of Shares issued and outstanding in each state for "blue sky" purposes as determined according to Proper Instructions delivered from time to time by the Fund to the Company; (d) Shareholder lists and statistical information; (e) Payments to third parties relating to distribution agreements, allocations of sales loads, redemption fees, or other transaction- or sales-related payments; (f) Such other information as may be agreed upon from time to time. (2) The Company shall prepare in the appropriate form, file with the Internal Revenue Service and appropriate state agencies, and, if required, mail to Shareholders, such notices for reporting dividends and distributions paid as are required to be so filed and mailed and shall withhold such sums as are required to be withheld under applicable federal and state income tax laws, rules and regulations. (3) In addition to and not in lieu of the services set forth above, the Company shall: (a) Perform all of the customary services of a transfer agent, dividend disbursing agent and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to: maintaining all Shareholder accounts, mailing Shareholder reports and Prospectuses to current Shareholders, withholding taxes on accounts subject to back-up or other withholding (including non-resident alien accounts), preparing and filing reports on U.S. Treasury Department Form 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other conformable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information; and (b) provide a system which will enable the Fund to monitor the total number of Shares of each Fund and/or Class sold in each state ("blue sky reporting"). The Fund shall by Proper Instructions (i) identify to the Company those transactions and assets to be treated as exempt from the blue sky reporting for each state and (ii) verify the classification of transactions for each state on the system prior to activation and thereafter monitor the daily activity for each state. The responsibility of the Company for each Fund's and/or Class's state blue sky registration status is limited solely to the recording of the initial classification of transactions or accounts with regard to blue sky compliance and the reporting of such transactions and accounts to the Fund as provided above. F. Other Duties (1) The Company shall answer correspondence from Shareholders relating to their Share accounts and such other correspondence as may from time to time be addressed to the Company; (2) The Company shall prepare Shareholder meeting lists, mail proxy cards and other material supplied to it by the Fund in connection with Shareholder Meetings of each Fund; receive, examine and tabulate returned proxies, and certify the vote of the Shareholders; (3) The Company shall establish and maintain facilities and procedures for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. Article 6. Duties of the Trust. A. Compliance The Trust or Fund assume full responsibility for the preparation, contents and distribution of their own and/or their classes' Prospectus and for complying with all applicable requirements of the Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and any laws, rules and regulations of government authorities having jurisdiction. B. Share Certificates The Trust shall supply the Company with a sufficient supply of blank Share certificates and from time to time shall renew such supply upon request of the Company. Such blank Share certificates shall be properly signed, manually or by facsimile, if authorized by the Trust and shall bear the seal of the Trust or facsimile thereof; and notwithstanding the death, resignation or removal of any officer of the Trust authorized to sign certificates, the Company may continue to countersign certificates which bear the manual or facsimile signature of such officer until otherwise directed by the Trust. C. Distributions The Fund shall promptly inform the Company of the declaration of any dividend or distribution on account of any Fund's shares. Article 7. Compensation and Expenses. A. Annual Fee For performance by the Company pursuant to Section Two of this Agreement, the Trust and/or the Fund agree to pay the Company an annual maintenance fee for each Shareholder account as agreed upon between the parties and as may be added to or amended from time to time. Such fees may be changed from time to time subject to written agreement between the Trust and the Company. Pursuant to information in the Fund Prospectus or other information or instructions from the Fund, the Company may sub-divide any Fund into Classes or other sub- components for recordkeeping purposes. The Company will charge the Fund the same fees for each such Class or sub-component the same as if each were a Fund. B. Reimbursements In addition to the fee paid under Article 7A above, the Trust and/or Fund agree to reimburse the Company for out-of-pocket expenses or advances incurred by the Company for the items agreed upon between the parties, as may be added to or amended from time to time. In addition, any other expenses incurred by the Company at the request or with the consent of the Trust and/or the Fund, will be reimbursed by the appropriate Fund. C. Payment The compensation and out-of-pocket expenses shall be accrued by the Fund and shall be paid to the Company no less frequently than monthly, and shall be paid daily upon request of the Company. The Company will maintain detailed information about the compensation and out-of-pocket expenses by Fund and Class. D. Any schedule of compensation agreed to hereunder, as may be adjusted from time to time, shall be dated and signed by a duly authorized officer of the Trust and/or the Funds and a duly authorized officer of the Company. Article 8. Assignment of Shareholder Recordkeeping. Except as provided below, no right or obligation under this Section Two may be assigned by either party without the written consent of the other party. A. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. B. The Company may without further consent on the part of the Trust subcontract for the performance hereof with (A) State Street Bank and its subsidiary, Boston Financial Data Services, Inc., a Massachusetts Trust ("BFDS"), which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934, as amended, or any succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other provider of services duly registered as a transfer agent under Section 17A(c)(1) as Company shall select; provided, however, that the Company shall be as fully responsible to the Trust for the acts and omissions of any subcontractor as it is for its own acts and omissions; or C. The Company shall upon instruction from the Trust subcontract for the performance hereof with an Agent selected by the Trust, other than BFDS or a provider of services selected by Company, as described in (2) above; provided, however, that the Company shall in no way be responsible to the Trust for the acts and omissions of the Agent. SECTION THREE: Custody Services Procurement. Article 9. Appointment. The Trust hereby appoints Company as its agent to evaluate and obtain custody services from a financial institution that (i) meets the criteria established in Section 17(f) of the 1940 Act and (ii) has been approved by the Board as eligible for selection by the Company as a custodian (the "Eligible Custodian"). The Company accepts such appointment. Article 10. The Company and Its Duties. Subject to the review, supervision and control of the Board, the Company shall: A. evaluate the nature and the quality of the custodial services provided by the Eligible Custodian; B. employ the Eligible Custodian to serve on behalf of the Trust as Custodian of the Trust's assets substantially on the terms set forth as the form of agreement in Exhibit 2; C. negotiate and enter into agreements with the Custodians for the benefit of the Trust, with the Trust as a party to each such agreement. The Company shall not be a party to any agreement with any such Custodian; D. establish procedures to monitor the nature and the quality of the services provided by the Custodians; E. continuously monitor the nature and the quality of services provided by the Custodians; and F. periodically provide to the Trust (i) written reports on the activities and services of the Custodians; (ii) the nature and amount of disbursement made on account of the Trust with respect to each custodial agreement; and (iii) such other information as the Board shall reasonably request to enable it to fulfill its duties and obligations under Sections 17(f) and 36(b) of the 1940 Act and other duties and obligations thereof. Article 11. Fees and Expenses. A. Annual Fee For the performance by the Company pursuant to Section Three of this Agreement, the Trust and/or the Fund agree to pay the Company an annual fee as agreed upon between the parties. B. Reimbursements In addition to the fee paid under Section 11A above, the Trust and/or Fund agree to reimburse the Company for out-of-pocket expenses or advances incurred by the Company for the items agreed upon between the parties, as may be added to or amended from time to time. In addition, any other expenses incurred by the Company at the request or with the consent of the Trust and/or the Fund, will be reimbursed by the appropriate Fund. C. Payment The compensation and out-of-pocket expenses shall be accrued by the Fund and shall be paid to the Company no less frequently than monthly, and shall be paid daily upon request of the Company. The Company will maintain detailed information about the compensation and out-of-pocket expenses by Fund. D. Any schedule of compensation agreed to hereunder, as may be adjusted from time to time, shall be dated and signed by a duly authorized officer of the Trust and/or the Funds and a duly authorized officer of the Company. Article 12. Representations. The Company represents and warrants that it has obtained all required approvals from all government or regulatory authorities necessary to enter into this arrangement and to provide the services contemplated in Section Three of this Agreement. SECTION FOUR: General Provisions. Article 13. Documents. A. In connection with the appointment of the Company under this Agreement, the Trust shall file with the Company the following documents: (1) A copy of the Charter and By-Laws of the Trust and all amendments thereto; (2) A copy of the resolution of the Board of the Trust authorizing this Agreement; (3) Specimens of all forms of outstanding Share certificates of the Trust or the Funds in the forms approved by the Board of the Trust with a certificate of the Secretary of the Trust as to such approval; (4) All account application forms and other documents relating to Shareholders accounts; and (5) A copy of the current Prospectus for each Fund. B. The Fund will also furnish from time to time the following documents: (1) Each resolution of the Board of the Trust authorizing the original issuance of each Fund's, and/or Class's Shares; (2) Each Registration Statement filed with the SEC and amendments thereof and orders relating thereto in effect with respect to the sale of Shares of any Fund, and/or Class; (3) A certified copy of each amendment to the governing document and the By-Laws of the Trust; (4) Certified copies of each vote of the Board authorizing officers to give Proper Instructions to the Custodian and agents for fund accountant, custody services procurement, and shareholder recordkeeping or transfer agency services; (5) Specimens of all new Share certificates representing Shares of any Fund, accompanied by Board resolutions approving such forms; (6) Such other certificates, documents or opinions which the Company may, in its discretion, deem necessary or appropriate in the proper performance of its duties; and (7) Revisions to the Prospectus of each Fund. Article 14. Representations and Warranties. A. Representations and Warranties of the Company The Company represents and warrants to the Trust that: (1) It is a business trust duly organized and existing and in good standing under the laws of the State of Delaware. (2) It is duly qualified to carry on its business in the State of Delaware. (3) It is empowered under applicable laws and by its charter and by- laws to enter into and perform this Agreement. (4) All requisite corporate proceedings have been taken to authorize it to enter into and perform its obligations under this Agreement. (5) It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. (6) It is in compliance with federal securities law requirements and in good standing as a transfer agent. B. Representations and Warranties of the Trust The Trust represents and warrants to the Company that: (1) It is an investment company duly organized and existing and in good standing under the laws of its state of organization; (2) It is empowered under applicable laws and by its Charter and By- Laws to enter into and perform its obligations under this Agreement; (3) All corporate proceedings required by said Charter and By-Laws have been taken to authorize it to enter into and perform its obligations under this Agreement; (4) The Trust is an open-end investment company registered under the 1940 Act; and (5) A registration statement under the 1933 Act will be effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of each Fund being offered for sale. Article 15. Standard of Care and Indemnification. A. Standard of Care The Company shall be held to a standard of reasonable care in carrying out the provisions of this Contract. The Company shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Trust) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice, provided that such action is not in violation of applicable federal or state laws or regulations, and is in good faith and without negligence. B. Indemnification by Trust The Company shall not be responsible for and the Trust or Fund shall indemnify and hold the Company, including its officers, directors, shareholders and their agents employees and affiliates, harmless against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liabilities arising out of or attributable to: (1) The acts or omissions of any Custodian, Adviser, Sub-adviser or other party contracted by or approved by the Trust or Fund, (2) The reliance on or use by the Company or its agents or subcontractors of information, records and documents in proper form which (a) are received by the Company or its agents or subcontractors and furnished to it by or on behalf of the Fund, its Shareholders or investors regarding the purchase, redemption or transfer of Shares and Shareholder account information; (b) are received by the Company from independent pricing services or sources for use in valuing the assets of the Funds; or (c) are received by the Company or its agents or subcontractors from Advisers, Sub-advisers or other third parties contracted by or approved by the Trust of Fund for use in the performance of services under this Agreement; (d) have been prepared and/or maintained by the Fund or its affiliates or any other person or firm on behalf of the Trust. (3) The reliance on, or the carrying out by the Company or its agents or subcontractors of Proper Instructions of the Trust or the Fund. (4) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. Provided, however, that the Company shall not be protected by this Article 15.A. from liability for any act or omission resulting from the Company's willful misfeasance, bad faith, negligence or reckless disregard of its duties of failure to meet the standard of care set forth in 15.A. above. C. Reliance At any time the Company may apply to any officer of the Trust or Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Company under this Agreement, and the Company and its agents or subcontractors shall not be liable and shall be indemnified by the Trust or the appropriate Fund for any action reasonably taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel provided such action is not in violation of applicable federal or state laws or regulations. The Company, its agents and subcontractors shall be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Trust or the Fund, and the proper countersignature of any former transfer agent or registrar, or of a co-transfer agent or co-registrar. D. Notification In order that the indemnification provisions contained in this Article 15 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. Article 16. Termination of Agreement. This Agreement may be terminated by either party upon one hundred twenty (120) days written notice to the other. Should the Trust exercise its rights to terminate, all out-of-pocket expenses associated with the movement of records and materials will be borne by the Trust or the appropriate Fund. Additionally, the Company reserves the right to charge for any other reasonable expenses associated with such termination. The provisions of Article 15 shall survive the termination of this Agreement. Article 17. Amendment. This Agreement may be amended or modified by a written agreement executed by both parties. Article 18. Interpretive and Additional Provisions. In connection with the operation of this Agreement, the Company and the Trust may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Charter. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. Article 19. Governing Law. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts Article 20. Notices. Except as otherwise specifically provided herein, Notices and other writings delivered or mailed postage prepaid to the Trust at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such other address as the Trust or the Company may hereafter specify, shall be deemed to have been properly delivered or given hereunder to the respective address. Article 21. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. Article 22. Limitations of Liability of Trustees and Shareholders of the Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by an authorized officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, and the obligations of this Agreement are not binding upon any of the Trustees or Shareholders of the Trust, but bind only the appropriate property of the Fund, or Class, as provided in the Declaration of Trust. Article 23. Limitations of Liability of Trustees and Shareholders of the Company. The execution and delivery of this Agreement have been authorized by the Trustees of the Company and signed by an authorized officer of the Company, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, and the obligations of this Agreement are not binding upon any of the Trustees or Shareholders of the Company, but bind only the property of the Company as provided in the Declaration of Trust. Article 24. Assignment. This Agreement and the rights and duties hereunder shall not be assignable with respect to the Trust or the Funds by either of the parties hereto except by the specific written consent of the other party. Article 25. Merger of Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject hereof whether oral or written. Article 26. Successor Agent. If a successor agent for the Trust shall be appointed by the Trust, the Company shall upon termination of this Agreement deliver to such successor agent at the office of the Company all properties of the Trust held by it hereunder. If no such successor agent shall be appointed, the Company shall at its office upon receipt of Proper Instructions deliver such properties in accordance with such instructions. In the event that no written order designating a successor agent or Proper Instructions shall have been delivered to the Company on or before the date when such termination shall become effective, then the Company shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $2,000,000, all properties held by the Company under this Agreement. Thereafter, such bank or trust company shall be the successor of the Company under this Agreement. Article 27. Force Majeure. The Company shall have no liability for cessation of services hereunder or any damages resulting therefrom to the Fund as a result of work stoppage, power or other mechanical failure, natural disaster, governmental action, communication disruption or other impossibility of performance. Article 28. Assignment; Successors. This Agreement shall not be assigned by either party without the prior written consent of the other party, except that either party may assign to a successor all of or a substantial portion of its business, or to a party controlling, controlled by, or under common control with such party. Nothing in this Article 28 shall prevent the Company from delegating its responsibilities to another entity to the extent provided herein. Article 29. Severability. In the event any provision of this Agreement is held illegal, void or unenforceable, the balance shall remain in effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf under their seals by and through their duly authorized officers, as of the day and year first above written. ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1) /s/ John W. McGonigle_______ By:__/s/ John F. Donahue___ John W. McGonigle John F. Donahue Secretary Chairman ATTEST: FEDERATED SERVICES COMPANY /s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____ Jeannette Fisher-Garber James J. Dolan Secretary President EXHIBIT 1 CONTRACT DATE INVESTMENT COMPANY Portfolios Classes 1/7/94 PEACHTREE FUNDS 1/7/94 Peachtree Bond Fund 1/7/94 Peachtree Equity Fund 1/7/94 Peachtree Georgia Tax-Free Income Fund 1/7/94 Peachtree Government Money Market Fund 1/7/94 Peachtree Prime Money Market Fund FEDERATED SERVICES COMPANY provides the following services: Fund Accounting Shareholder Recordkeeping EX-99.SCHEDULECOMPU 4 Exhibit No. 16 (v)
PeachTree Georgia Tax- Yield = 2{( $7,471.62 - $0.00 )+ 1)^6-1}= Free Income Fund 203,447 * $9.93 - 0.00000 ) Computation of SEC Yield As of: March 31, 1995 SEC Yield = 4.48% Dividend and/or Interest Inc for the 30 days ended $7,471.62 Net Expenses for $0.00 the Period Avg Daily Shares Outstanding and entitled to receive dividends 203,447 Maxium offering price $9.93 per share as of 3-31-95 Undistributed net income 0.00000 Tax Equivalent Yield (assumes individual does not itemize on Federal Return) 100 % minus the Federal taxable % (100%-28%=72%) 30 SEC yield / by the tax equiv % (0.00% / 72.0%)= 6.22%
EX-99.SCHEDULECOMPU 5 Exhibit No. 16 Schedule for Computation Initial of Fund Performance Data Invest of: $1,000 Offering PeachTree Georgia Tax- Price/ Free Income Fund Share= $10.26 Return Since Inception ending 3/31/95 NAV= $10.00 FYE: September 30
Begin Capital Reinvest Ending Total DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending invest PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value 10/5/94 97.466 0.000000000 0.00000 $10.00 97.466 $10.00 $974.66 10/31/94 97.466 0.021598884 0.00000 $9.81 97.680 $9.81 $958.25 11/30/94 97.680 0.036439034 0.00000 $9.71 98.047 $9.71 $952.04 12/31/94 98.047 0.022011020 0.00000 $9.71 98.269 $9.71 $954.19 1/31/95 98.269 0.028241769 0.00000 $9.78 98.553 $9.78 $963.85 2/28/95 98.553 0.033577138 0.00000 $9.93 98.886 $9.93 $981.94 3/31/95 98.886 0.037075603 0.00000 $9.92 99.256 $9.92 $984.62
$1,000 (1+T) = End Value T = -1.54% EX-27.FINANDATASCH 6
6 3 PEACHTREE GEORGIA TAX-FREE INCOME FUND 6-MOS Sep-30-1995 Mar-31-1995 2,082,432 2,099,269 167,342 151,198 0 2,417,809 104,584 0 80,568 185,152 0 2,215,825 225,058 0 0 0 (5) 0 16,837 2,232,657 0 12,477 0 0 12,477 (5) 16,837 29,309 0 12,477 0 0 227,587 3,073 544 2,232,657 0 0 0 0 2,237 0 113,515 598,230 10.000 0.180 (0.080) 0.180 0.000 0.000 9.920 0 0 0.000