1940 Act File No. 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. ...............................
FEDERATED INVESTMENT PORTFOLIOS
(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, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
EXPLANATORY NOTE
This Initial Registration Statement on Form N-1A ( the "Registration
Statement") has been filed by the Registrant pursuant to Section 8(b) of the
Investment Company Act of 1940, as amended. However, beneficial interests
in the series of the Registrant are not being registered under the
Securities Act of 1933, as amended ( the "1933 Act"), because such interests
will be issued solely in private placement transactions that do not involve
any "public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant's series may only be made by investment
companies, insurance company separate accounts, common or commingled trust
funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. The Registration
Statement does not constitute an offer to sell, or the solicitation of an
offer to buy, any beneficial interests in any series of the Registrant.
PART A.
Responses to Items 1, 2, 3 and 5A have been omitted pursuant to paragraph 4
of the General Instruction F to Form N-1A.
Item 4. General Description of Registrant
Federated Investment Portfolios (the "Trust") is an open-end management
investment company which was organized as a Massachusetts business
trust under a Declaration of Trust dated as of September 28, 1995. The
Declaration permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of
securities ("Series"). The shares in any one Series may be offered in
separate classes. The Board of Trustees ("Trustees") has currently
established one diversified Series, Bond Index Portfolio (the
"Portfolio").
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering"
within the meaning of Section 4(2) of the Securities Act of 1933 (the
"1933 Act"). Investments in the Portfolio may only be made by
investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to
sell, or the solicitation of an offer to buy, any "security" within the
meaning of the 1933 Act.
Federated Management is the investment adviser for the Portfolio and
has delegated the daily management of the security holdings of the
Portfolio to United States Trust Company of New York ("U.S. Trust
Company," and collectively, with Federated Management, the "investment
managers").
The Trust is utilizing certain proprietary rights, know-how and
financial services referred to as Hub and Spoke from Signature
Financial Group, Inc. Hub and Spoke is a two-tier master/feeder fund
structure and a registered service mark of Signature Financial Group,
Inc.
Investment Objectives and Policies
Introduction
Unless otherwise stated, the investment objective, policies and
strategies discussed herein and in Part B are deemed "non-fundamental,"
i.e., the approval of the investors in the Portfolio is not required to
change the Portfolio's investment objective or any of its investment
policies and strategies.
The investment objective of the Portfolio is to provide investment
results that correspond to the investment performance of the Lehman
Brothers Aggregate Bond Index (the "Aggregate Bond Index"), a broad
market-weighted index which encompasses U.S. Treasury and agency
securities, corporate investment grade bonds, and mortgage-backed
securities, each with maturities greater than one year. The Portfolio
seeks to achieve its investment objective by replicating the yield and
total return of the Aggregate Bond Index through a statistically
selected sample of fixed income securities. The Aggregate Bond Index
is a broad market-weighted index of U.S. investment grade fixed income
securities.
Additional information about the investment policies and strategies of
the Portfolio appears in Part B. There can be no assurance that the
investment objective of the Portfolio will be achieved.
Investment Policies and Strategies
U.S. Trust Company, the sub-adviser for the Portfolio, is a state-
chartered bank and trust company which offers a variety of specialized
fiduciary and financial services to high net worth individuals,
institutions and corporations. As one of the largest institutions of
its type, U.S. Trust Company prides itself in offering an attentive and
high level of service to each of its clients.
Investment Philosophy. The Portfolio is not managed pursuant to
traditional methods of active investment management, which involve the
buying and selling of securities based upon economic, financial and
market analyses and investment judgment. Instead, the Portfolio,
utilizing a passive or indexing investment approach, will attempt to
duplicate the investment performance of the Aggregate Bond Index.
The Portfolio seeks to duplicate the investment performance of the
Aggregate Bond Index through statistical sampling procedures, that is,
the Portfolio will invest in a selected group - not the entire universe
- of securities in the Aggregate Bond Index. This group of securities,
when taken together, is expected to perform similarly to the Aggregate
Bond Index as a whole. The sampling technique is expected to enable
the Portfolio to track the price movements and performance of the
Aggregate Bond Index, while minimizing brokerage, custodial and
accounting costs.
The Trust expects that there will be a close correlation between the
Portfolio's performance and that of the Aggregate Bond Index in both
rising and falling markets. The Portfolio will attempt to maximize the
correlation between its performance and that of the Aggregate Bond
Index. Over the long term, the investment managers of the Portfolio
seek a correlation of 0.95 or better. In the event that a correlation
of 0.95 or better is not achieved, the Trustees of the Trust will
review methods for increasing such correlation with the investment
managers, such as through adjustments in securities holdings of the
Portfolio. A correlation of 1.0 would indicate a perfect correlation,
which would be achieved when the Portfolio's net asset value, including
the value of its dividend and capital gains distributions, increases or
decreases in exact proportion to changes in the Aggregate Bond Index.
The Portfolio's investment managers monitor the correlation between the
performance of the Portfolio and the Aggregate Bond Index on a regular
basis. Factors such as the size of the Portfolio's securities
holdings, transaction costs, management fees and expenses, brokerage
commissions and fees, the extent and timing of cash flows into and out
of the Portfolio, and changes in the securities markets and the index
itself, are expected to account for any differences between the
Portfolio's performance and that of the Aggregate Bond Index.
The Portfolio invests at least 80% of its assets in a portfolio of
securities consisting of a representative selection of fixed income
securities included in the Aggregate Bond Index. The Portfolio intends
to remain fully invested, to the extent practicable, in a pool of
securities that match the yield and total return of the Aggregate Bond
Index.
LEHMAN BROTHERS AGGREGATE BOND INDEX. The Aggregate Bond Index is a
broad market-weighted index which encompasses three major classes of
United States investment grade fixed income securities with maturities
greater than one year: U.S. Treasury and agency securities, corporate
bonds, and mortgage-backed securities. The Index measures the total
investment return (capital change plus income) provided by a universe
of fixed income securities, weighted by the market value outstanding of
each security. The securities included in the Index generally meet the
following criteria, as defined by Lehman Brothers: an outstanding
market value of at least $100 million and investment grade quality
(rated a minimum of Baa by Moody's Investors Service, Inc.("Moody's")
or BBB by Standard & Poor's Ratings Group ("S&P")). The Portfolio is
managed without regard to tax ramifications. As of June 30, 1995, the
following classes of fixed income securities represented the stated
proprotions of the total market value of the Aggregate Bond Index:
U.S. Treasury and government
agency securities 54%
Corporate Bonds 17%
Mortgage-backed securities 28%
Asset-backed securities 1%
Option-adjusted duration 4.6 years
The Aggregate Bond Index is composed of the following kinds of
securities: public obligations of the U.S. Government; publicly issued
debt of U.S. Government agencies and quasi-federal corporations;
corporate debt guaranteed by the U.S. Government; fixed rate
nonconvertible dollar-denominated corporate debt; 15- and 30-year fixed
rate securities backed by mortgage pools of the Government National
Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation
(FHLMC), and the Federal National Mortgage Association (FMNA); and
asset-backed pass-through securities representing pools of credit card
receivables and auto or home equity loans.
U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may invest in
U.S. Government securities and securities issued or guaranteed by
agencies or instrumentalities of the U.S. Government. Securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which differ only
in their interest rates, maturities and times of issuance: Treasury
Bills have initial maturities of one year or less; Treasury Notes have
initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years. Some obligations
issued or guaranteed by U.S. Government agencies and instrumentalities,
such as Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S.
Treasury; other securities, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the
Treasury. Securities issued by the Federal National Mortgage
Association are supported by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
instrumentality; other securities, such as those issued by the Student
Loan Marketing Association, are supported only by the credit of the
agency or instrumentality. While the U.S. Government provides
financial support to such U.S. Government-sponsored agencies or
instrumentailities, no assurance can be given that it will always do
so, since it is not so obligated by law. The Portfolio, the yields of
funds investing in the Portfolio, and the value of beneficial interests
in the Portfolio, are not guaranteed by the U.S. Government or any
federal agency or instrumentality.
The Portfolio may, from time to time, substitute one type of investment
grade bond for another. For instance, the Portfolio may hold more
short-term corporate bonds (and fewer short-term U.S. Treasury bonds)
than represented in the Aggregate Bond Index in an attempt to increase
income.
CORPORATE BONDS. The Portfolio may purchase debt securities of United
States corporations only if they are deemed investment grade, that is,
they carry a rating of at least Baa from Moody's or BBB from S&P or, if
not rated by these rating agencies, are judged by the investment
managers of the Portfolio to be of comparable quality. With respect to
securities rated Baa by Moody's and BBB by S&P, interest and principal
payments are regarded as adequate for the present; however, securities
with these ratings may have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a
weakened capacity to make interest and principal payments than is the
case with higher grade bonds. The Portfolio intends to dispose of, in
an orderly manner, any security which is downgraded below investment
grade subsequent to its purchase. See the Appendix to Part B for a
more detailed explanation of these ratings.
Corporate bonds are subject to call risk during periods of falling
interest rates. Securities with high stated interest rates may be
prepaid (or called) prior to maturity, requiring the Portfolio to
invest the proceeds at generally lower interest rates. Call
provisions, common in many corporate bonds, allow bond issuers to
redeem bonds prior to maturity (at a specific price). When interest
rates are falling, bond issuers often exercise these call provisions,
paying off bonds that carry high stated interest rates and often
issuing new bonds at lower rates. For the Portfolio, the result would
be that bonds with high interest rates are called and must be replaced
with lower-yielding instruments. In these circumstances, the income of
the Portfolio would decline.
MORTGAGE PASS-THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS. The
Portfolio may purchase mortgage and mortgage-related securities such as
pass-throughs and collateralized mortgage obligations that meet the
Portfolio's selection criteria (collectively, "Mortgage Securities").
Mortgage pass-throughs are securities that pass through to investors an
undivided interest in a pool of underlying mortgages. These are issued
or guaranteed by U.S. government agencies such as GNMA, FNMA, and
FHLMC. Other mortgage pass-throughs consist of whole loans originated
and issued by private limited purpose corporations or conduits.
Collateralized mortgage obligation bonds are obligations of special
purpose corporations that are collateralized or supported by mortgages
or mortgage securities such as pass-throughs.
As a result of its investments in Mortgage Securities, the mortgage-
backed securities in the Portfolio may be subject to a greater degree
of market volatility as a result of unanticipated prepayments of
principal. During periods of declining interest rates, the principal
invested in mortgage-backed securities with high interest rates may be
repaid earlier than scheduled, and the Portfolio will be forced to
reinvest the unanticipated payments at generally lower interest rates.
When interest rates fall and principal prepayments are reinvested at
lower interest rates, the income that the Portfolio derives from
mortgage-backed securities is reduced. In addition, like other fixed
income securities, Mortgage Securities generally decline in price when
interest rates rise.
Because the Portfolio will seek to represent all major sectors of the
investment grade fixed income securities market, the Portfolio may be a
suitable vehicle for those investors seeking ownership in the "bond
market" as a whole, without regard to particular sectors. The
Portfolio is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term
bond market movements. Because of potential share price fluctuations,
the Portfolio may be inappropriate for investors who have short-term
objectives or who require stability of principal. Investors should not
consider the Portfolio a complete investment program.
ADDITIONAL INVESTMENT STRATEGIES AND TECHNIQUES; RISK FACTORS
The Portfolio may utilize the investment strategies and techniques
described below.
SAMPLING AND TRADING IN THE PORTFOLIO. The Portfolio does not expect
to hold all of the individual issues which comprise the Aggregate Bond
Index because of the large number of securities involved. Instead, the
Portfolio will hold a representative sample of securities, selecting
one or two issues to represent entire classes or types of securities in
the Index. This sampling technique is expected to be an effective means
of substantially duplicating the income and capital returns provided by
the Index.
To reduce transaction costs, the Portfolio's securities holdings will
not be automatically traded or re-balanced to reflect changes in the
Aggregate Bond Index. The Portfolio will seek to buy round lots of
securities and may trade large blocks of securities. These policies
may cause a particular security to be over- or under-represented in the
Portfolio relative to its Index weighting or result in its continued
ownership by the Portfolio after its deletion from the Index, thereby
reducing the correlation between the Portfolio and the Index. The
Portfolio is not required to buy or sell securities solely because the
percentage of its assets invested in Index securities changes when
their market values increase or decrease. In addition, the Portfolio
may omit or remove Index securities from its portfolio if the
investment managers believe the security to be insufficiently liquid or
believe the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. Over the long term, the
investment managers of the Portfolio seek a correlation of 0.95 or
better between the performance of the Portfolio and that of the
Aggregate Bond Index. See "Investment Philosophy and Strategies"
above.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. These transactions
involve a commitment by the Portfolio to purchase or sell particular
securities with payment and delivery taking place in the future, beyond
the normal settlement date, at a stated price and yield. Securities
purchased on a forward commitment or when-issued basis are recorded as
an asset and are subject to changes in value based upon changes in the
general level of interest rates. When such transactions are
negotiated, the price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. When-issued securities and
forward commitments may be sold prior to the settlement date, but the
Portfolio will enter into when-issued and forward commitments only with
the intention of actually receiving or delivering the securities, as
the case may be. At the time the Portfolio enters into a transaction
on a when-issued or forward commitment basis, a segregated account
consisting of cash or high grade liquid debt securities equal to the
value of the when-issued or forward commitment securities will be
established and maintained. There is a risk that the securities may
not be delivered and that the Portfolio may incur a loss.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase
agreement transactions with brokers, dealers or banks that meet the
credit guidelines established by the Trustees of the Trust. In a
repurchase agreement, the Portfolio buys a security from a seller that
has agreed to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement.
The term of these agreements is usually from overnight to one week. A
repurchase agreement may be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The Portfolio always receives
securities as collateral with a market value at least equal to the
purchase price plus accrued interest, and this value is maintained
during the term of the agreement. If the seller defaults and the
collateral value declines, the Portfolio might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be
delayed or limited. Investments in certain repurchase agreements and
certain other investments which may be considered illiquid are limited.
See "Illiquid Investments; Privately Placed and other Unregistered
Securities" below.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds, in an
amount up to one-third of the value of its total assets, for temporary
or emergency purposes, such as meeting larger than anticipated
redemption requests, and not for leverage. The Portfolio may also
agree to sell portfolio securities to financial institutions such as
banks and broker-dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase agreement"). The Securities and
Exchange Commission ("SEC") views reverse repurchase agreements as a
form of borrowing. At the time the Portfolio enters into a reverse
repurchase agreement, it will place in a segregated custodial account
cash, U.S. Government securities or high-grade debt obligations having
a value equal to the repurchase price, including accrued interest.
Reverse repurchase agreements involve the risk that the market value of
the securities sold by the Portfolio may decline below the repurchase
price of those securities.
INVESTMENT COMPANY SECURITIES. In connection with the management of
its daily cash position, the Portfolio may invest in securities issued
by other investment companies which invest in high quality, short-term
debt securities and which determine their net asset value per share
based on the amortized cost or penny-rounding method. In addition to
the advisory fees and other expenses the Portfolio bears directly in
connection with its own operations, as a shareholder of another
investment company, the Portfolio would bear its pro rata portion of
the other investment company's advisory fees and other expenses. As
such, the Portfolio's investors would indirectly bear the expenses of
the other investment company, some or all of which would be duplicated.
Securities of other investment companies may be acquired by the
Portfolio to the extent permitted under the 1940 Act, that is, the
Portfolio may invest a maximum of up to 10% of its total assets in
securities of other investment companies so long as not more than 3% of
the total outstanding voting stock of any one investment company is
held by the Portfolio. In addition, not more than 5% of the
Portfolio's total assets may be invested in the securities of any one
investment company.
FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase put and call
options on securities, indices of securities and futures contracts.
The Portfolio may also purchase and sell futures contracts. Futures
contracts on securities and securities indices will be used primarily
to accommodate cash flows or in anticipation of taking a market
position when, in the opinion of the investment managers, available
cash balances do not permit economically efficient purchases of
securities. Moreover, the Portfolio may sell futures and options to
"close out" futures and options it may have purchased or to protect
against a decrease in the price of securities it owns but intends to
sell. The Portfolio will not invest in futures or options as part of a
defensive strategy to protect against potential market declines. See
"Futures Contracts and Options on Futures Contracts" in Part B.
The Portfolio may (a) purchase exchange-traded and over the counter
(OTC) put and call options on securities and indices of securities, (b)
purchase and sell futures contracts on securities and indices of
securities and (c) purchase put and call options on futures contracts
on securities and indices of securities. In addition, the Portfolio
may sell (write) exchange-traded and OTC put and call options on
securities and indices of securities and on futures contracts on
securities and indices of securities. The staff of the SEC has taken
the position that OTC options are illiquid and, therefore, together
with other illiquid securities held by the Portfolio, cannot exceed 15%
of the Portfolio's net assets. The Portfolio intends to comply with
this limitation.
The Portfolio may use options and futures contracts to manage its
exposure to changing interest rates and/or security prices. Some
options and futures strategies, including selling futures contracts and
buying puts, tend to hedge the Portfolio's investments against price
fluctuations. Other strategies, including buying futures contracts,
writing puts and calls, and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each
other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate by the Portfolio's investment managers and consistent with
its objective and policies. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be
more difficult to open and close out.
The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those
associated with ordinary portfolio securities transactions, and there
can be no guarantee that their use will increase the Portfolio's
return. While the use of these techniques by the Portfolio may reduce
certain risks associated with owning its portfolio securities, these
investments entail certain other risks. If the Portfolio's investment
managers apply a strategy at an inappropriate time or judge market
conditions or trends incorrectly, options and futures strategies may
lower the Portfolio's return. Certain strategies limit the Portfolio's
potential to realize gains as well as limit its exposure to losses.
The Portfolio could also experience losses if the prices of its options
and futures positions were poorly correlated with its other
investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums,
in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover
rate. For more information on these investment techniques, see Part B.
The Portfolio may purchase and sell put and call options on securities,
indices of securities and futures contracts, or purchase and sell
futures contracts, only if such options are written by other persons
and if (i) the aggregate premiums paid on all such options which are
held at any time do not exceed 20% of the Portfolio's total net assets,
and (ii) the aggregate margin deposits required on all such futures or
options thereon held at any time do not exceed 5% of the Portfolio's
total assets. The Portfolio may also be subject to certain limitations
pursuant to the regulations of the Commodity Futures Trading
Commission. The Portfolio does not have any current intention of
purchasing futures contracts or investing in put and call options on
securities, indices of securities, or futures contracts if more than 5%
of its net assets would be at risk from such transactions.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED
SECURITIES. The Portfolio may acquire investments that are illiquid or
have limited liquidity, such as private placements or investments that
are not registered under the Securities Act of 1933 (the "1933 Act"),
and cannot be offered for public sale in the United States without
first being registered under the 1933 Act. An illiquid investment is
any investment that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which it is
valued by the Portfolio. The price the Portfolio pays for illiquid
securities or receives upon resale may be lower than the price paid or
received for similar securities with a more liquid market. Accordingly
the valuation of these securities will reflect any limitations on their
liquidity.
Acquisitions of illiquid investments by the Portfolio are subject to
the following non-fundamental policies. The Portfolio may not invest
in additional illiquid securities if, as a result, more than 15% of the
market value of its net assets would be invested in illiquid
securities. The Portfolio may also purchase Rule 144A securities sold
to institutional investors without registration under the 1933 Act.
These securities may be determined to be liquid in accordance with
guidelines established by the Portfolio's investment managers and
approved by the Trustees. The Trustees of the Trust will monitor the
implementation of these guidelines on a periodic basis. Because Rule
144A is relatively new, it is not possible to predict how markets in
Rule 144A securities will develop. If trading in Rule 144A securities
were to decline, these securities could become illiquid after being
purchased, increasing the level of illiquidity of the Portfolio. As a
result, the Portfolio might not be able to sell these securities when
the investment managers wish to do so, or might have to sell them at
less than fair value.
SHORT-TERM INSTRUMENTS. The Portfolio may invest in short-term income
securities in accordance with its investment objective and policies as
described above. The Portfolio may also make money market investments
pending other investments or settlement, or to maintain liquidity to
meet investor redemptions. Although the Portfolio normally seeks to
remain substantially fully invested in securities selected to match the
Aggregate Bond Index consistent with seeking a correlation of 0.95 or
better between the Portfolio's performance and that of its
corresponding index, the Portfolio may invest temporarily up to 20% of
its assets in certain short-term fixed income securities. The
Portfolio will not invest in short-term instruments as part of a
defensive strategy to protect against potential market declines.
Short-term investments include: obligations of the U.S. Government and
its agencies or instrumentalities; commercial paper and other debt
securities; variable and floating rate securities; bank obligations;
repurchase agreements collateralized by these securities; and shares of
other investment companies that primarily invest in any of the above-
referenced securities. Commercial paper consists of short-term,
unsecured promissory notes issued to finance short-term credit needs.
Other corporate obligations in which the Portfolio may invest consist
of high quality, U.S. dollar-denominated short-term bonds and notes
(including varaible amount master demand notes) issued by domestic and
foreign corporations. The Portfolio may invest in commercial paper
issued by major corporations in reliance on the exemption from
registration afforded by Section 3(a)(3) of the 1933 Act. Such
commercial paper may be issued only to finance current transactions and
must mature in nine months or less. Trading of such commercial paper
is conducted primarily by institutional investors through investment
dealers, and individual investor participation in the commercial paper
market is very limited.
The Portfolio may invest in U.S. dollar-denominated certificates of
deposits, bankers' acceptances and other short-term obligations issued
by domestic banks and domestic or foreign branches or subsidiaries of
foreign banks. Certificates of deposit are certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified
period of time. Such instruments include Yankee Certificates of
Deposit ("Yankee CDs"), which are certificates of deposit denominated
in U.S. dollars and issued in the United States by the domestic branch
of a foreign bank. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a
stated interest rate. Time deposits which may be held by the Portfolio
are not insured by the Federal Deposit Insurance Corporation or any
other agency of the U.S. Government. The Portfolio will not invest
more than 15% of the value of its net assets in time deposits maturing
in longer than seven days and other instruments which are deemed
illiquid or not readily marketable. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on
it by a customer. These instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument upon
maturity. The other short-term obligations may include uninsured,
direct obligations which have either fixed, floating or variable
interest rates.
The Portfolio will limit its short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of
the Trustees of the Trust to present minimal credit risks and which are
of "high quality" as determined by a major rating service (i.e., rated
P-1 by Moody's or A-1 by S&P) or, in the case of instruments which are
not rated, are deemed to be of comparable quality pursuant to
procedures established by the Trustees of the Trust. The Portfolio may
invest in obligations of banks which at the date of investment have
capital, surplus and undivided profits (as of the date of their most
recently published financial statements) in excess of $100 million.
Investments in high quality short-term instruments may, in many
circumstances, result in a lower yield than would be available from
investments in instruments with a lower quality or longer term.
SECURITIES LENDING. The Portfolio may seek to increase its income by
lending securities to banks, brokers or dealers and other recognized
institutional investors. Such loans may not exceed 30% of the value of
the Portfolio's total assets. In connection with such loans, the
Portfolio will receive collateral consisting of cash, U.S. Government
or other high quality securities, irrevocable letters of credit issued
by a bank, or any combination thereof. Such collateral will be
maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The Portfolio can
increase its income through the investment of any such collateral
consisting of cash. The Portfolio continues to be entitled to payments
in amounts equal to the interest or dividends payable on the loaned
security and in addition, if the collateral received is other than
cash, receives a fee based on the amount of the loan. Such loans will
be terminable at any time upon specified notice. The Portfolio might
experience risk of loss if the institution with which it has engaged in
a portfolio loan transaction breaches its agreement with the Portfolio.
SHORT SALES "AGAINST THE BOX." In a short sale, the Portfolio sells a
borrowed security and has a corresponding obligation to the lender to
return the identical security. The Portfolio may engage in short sales
only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being
sold short. This investment technique is known as a short sale
"against the box." The Portfolio may make a short sale as a hedge,
when it believes that the value of a security owned by it (or a
security convertible or exchangeable for such security) may decline, or
when the Portfolio wants to sell the security at an attractive current
price but wishes to defer recognition of gain or loss for tax purposes.
Not more than 40% of the Portfolio's total assets would be involved in
short sales "against the box."
CERTAIN OTHER OBLIGATIONS. Consistent with its investment objectives,
policies and restrictions, the Portfolio may also invest in
participation interests, guaranteed investment contracts and zero
coupon obligations. See Part B. In order to allow for investments in
new instruments that may be created in the future, upon the Trust
supplementing this Part A, the Portfolio may invest in obligations
other than those listed previously, provided such investments are
consistent with the Portfolio's investment objective, policies and
restrictions.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Portfolio
are represented by cash and cash items (including receivables),
government securities, securities of other investment companies, and
other securities which for purposes of this calculation are subject to
the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one
issuer, and (b) the Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer. In addition, the
Portfolio may not invest 25% or more of its assets in the securities of
issuers in any one industry, unless the securities in a single industry
were to comprise 25% or more of the Aggregate Bond Index in which case
the Portfolio will invest 25% or more of its assets in that industry.
These are fundamental investment polices which may not be changed
without investor approval.
Part B includes further discussion of investment strategies and
techniques, and a listing of other fundamental investment restrictions
and non-fundamental investment policies which govern the investment
policies of the Portfolio. Fundamental investment restrictions may not
be changed without the approval of the investors in the Portfolio. If
a percentage restriction (other than a restriction as to borrowing) or
a rating restriction on investment or utilization of assets is adhered
to at the time an investment is made or assets are so utilized, a later
change in percentage resulting from changes in the value of the
securities held by the Portfolio or a later change in the rating or a
security held by the Portfolio is not considered a violation of the
policy.
The investment objective of the Portfolio may be changed without the
approval of the Portfolio's investors but not without written notice
thereof to the Portfolio's investors thirty days prior to implementing
the change. If there were a change in the Portfolio's investment
objective, investors should consider whether the Portfolio remains an
appropriate investment in light of their then-current financial
position and needs. There can, of course, be no assurance that the
investment objective of the Portfolio will be achieved. See
"Investment Restrictions" in Part B for a description of the
fundamental investment policies and restrictions of the Portfolio that
cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" (as defined in the Investment Company
Act of 1940 (the "1940 Act") of the Portfolio. Except as stated
otherwise, the investment objective, policies, strategies and
restrictions described herein and in Part B are non-fundamental.
Item 5. Management of the Registrant
(a) Board of Trustees. The Trust is managed by a Board of Trustees.
The Trustees are responsible for managing the Trust's business affairs
and for exercising all of the Trust's powers except those reserved for
the investors. The Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
(b) Adviser. Federated Management (the "Adviser"), located at 1001
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779 is
responsible for the management of the Portfolio's assets pursuant to an
Investment Advisory Agreement (the "Advisory Agreement") with the Trust
on behalf of the Portfolio.
Both the Trust and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Portfolio and its
securities. These codes recognize that such persons owe a fiduciary
duty to the Portfolio's investors and must place the interests of
investors ahead of the employees' own interest. Among other things,
the codes: require preclearance and periodic reporting of personal
securities transactions; prohibit personal transactions in securities
being purchased or sold, or being considered for purchase or sale, by
the Portfolio; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the
Trustees, and could result in severe penalties.
Advisory Fees. For its services under the Advisory Agreement, the
Adviser is entitled to receive from the Portfolio a fee accrued daily
and paid monthly at an annual rate equal to .25 of 1% of the
Portfolio's average daily net assets. The Adviser has agreed to waive
all investment advisory fees with respect to the Portolio. This waiver
may be terminated at any time, although Federated Investors has agreed
to maintain total operating expenses (after waivers and reimbursements)
of the Portfolio at no greater than 0.20% of average net assets for the
twelve month period following January 2, 1996. The Adviser has also
undertaken to reimburse the Portfolio for operating expenses in excess
of limitations established by certain states.
Adviser's Background. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under
the Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Management and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over
$72 billion invested across more than 260 funds under managment and/or
administration by its subsidiaries, as of December 31, 1994, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,750 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,000 financial inistitions
nationwide. More than 100,000 investment professionals have selected
Federated funds for their clients.
Sub-Adviser. Federated Management has delegated the daily management of
the Portfolio's security holdings to U.S. Trust Company (the "Sub-
Adviser"). U.S. Trust Company is located at 770 Broadway, New York, New
York. Subject to the general guidance and policies set by the Trustees
of the Trust, Federated Management closely monitors the Sub-Adviser's
application of the Portfolio's investment policies and strategies, and
regularly evaluates the Sub-Adviser's investment results and trading
practices.
Sub-Advisory Fees. Pursuant to a Sub-Advisory Agreement (the "Sub-
Advisory Agreement") between the Adviser and the Sub-Adviser, the Sub-
Adviser makes the day-to-day investment decisions and portfolio
selections for the Portfolio, consistent with the general guidelines
and policies established by the Adviser and the Trustees of the Trust.
For the investment management services it provides to the Portfolio,
the Sub-Adviser is compensated only by the Adviser, and receives no
fees directly from the Trust. For its services under the Sub-Advisory
Agreement, the Sub-Adviser is entitled to receive from the Adviser a
fee accrued daily and paid monthly at an annual rate equal to .12 of 1%
of the Portfolio's average daily net assets. U.S. Trust has agreed to
waive all sub-advisory fees with respect to the Portfolio, which waiver
may be terminated at any time. The Sub-Adviser furnishes at its own
expense all services, facilities and personnel necessary in connection
with managing the Portfolio's investments and effecting securities
transactions for the Portfolio.
Sub-Adviser's Background. U.S. Trust Company is a state-chartered trust
company which provides trust and banking services to individuals,
corporations and institutions, both nationally and internationally,
including investment management, estate and trust administration,
financial planning, corporate trust and agency services, and personal
and corporate banking. U.S. Trust Company is a member bank of the
Federal Reserve System and the Federal Deposit Insurance Corporation
and is one of the twelve members of the New York Clearing House
Association. On June 30, 1995, U.S. Trust Company's Asset Management
Group had approximately $41.2 billion in assets under management. U.S.
Trust Company, which has its principal offices at 114 West 47th Street,
New York, New York 10036, is a subsidiary of U.S. Trust Corporation, a
registered bank holding company. U.S. Trust Company also serves as
investment adviser to Excelsior Funds, Inc. (formerly known as UST
Master Funds, Inc.) and Excelsior Tax-Exempt Funds, Inc. (formerly
known as UST Master Tax-Exempt Funds, Inc.) both of which are
registered investment companies. U.S. Trust Company also serves as
investment adviser to the UST Variable Series, Inc.
It is the responsibility of U.S. Trust Company in its capacity as Sub-
Adviser to make the day-to-day investment decisions for the Portfolio
and to place the purchase and sales orders for securities transcations
of the Portfolio, subject to the general supervision of Federated
Management. U.S. Trust Company furnishes at its own expense all
services, facilities and personnel necessary in connection with
managing the Portfolio's investments and effecting securities
transactions for the Portfolio.
INVESTMENTS IN THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, UNITED STATES TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK.
Certain Relationships and Activities. U.S. Trust Company and its
affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities which may be purchased on
behalf of the Portfolio, including outstanding loans to such issuers
which could be repaid in whole or in part with the proceeds of
securities so purchased. U.S. Trust Company has informed the Portfolio
that, in making investment decisions, it does not obtain or use
material inside information in its possession or in the possession of
any of its affiliates. In making investment recommendations for the
Portfolio, U.S. Trust Company will not inquire or take into
consideration whether an issuer of securities proposed for purchase or
sale by the Portfolio is a customer of U.S. Trust Company, its parents
or its subsidiaries or affiliates. When dealing with its customers,
U.S. Trust Company, its parents, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers
are held by any fund managed by U.S. Trust Company or any such
affiliate.
Bank Regulatory Matters. The Glass-Steagall Act and applicable banking
laws and regulations generally prohibit certain financial institutions
such as U.S. Trust Company from engaging in the business of
underwriting securities of open-end investment companies such as the
Trust. Based on advice of its counsel, it is the position of U.S.
Trust Company that the investment sub-advisory services it performs
under the Sub-Advisory Agreement with the Trust do not constitute
underwriting activities and are consistent with the requirements of the
Glass-Steagall Act. State laws on this issue may differ from the
interpretations of relevant federal law and banks and financial
institutions may be required to register as dealers pursuant to state
securities law. Future changes in either federal statutes or
regulations relating to the permissible activities of banks, as well as
future judicial or administrative decisions and interpretations of
present and future statutes and regulations, could prevent a bank from
continuing to perform all or part of its investment management
activities. If a bank were prohibited from so acting, alternative
means for continuing the management of the Portfolio would be sought.
In such event, changes in the operation of the Portfolio might occur.
The Trustees of the Trust do not expect that investors in the Portfolio
would suffer any adverse financial consequences as a result of these
occurrences.
(c) Susan M. Nason has been the Portfolio's portfolio manager since
its inception. Ms. Nason joined Federated Investors in 1987 and has
been a Vice President of the Adviser since 1993. Ms. Nason served as
an Assistant Vice President of the Adviser from 1990 until 1992, and
from 1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University.
Bruce Tavel, Senior Vice President, and Cyril M. Theccanat, Vice
President, of U.S. Trust Company, Structured Investment Management
Department, have been portfolio managers of the Portfolio since its
inception and are responsible for the day-to-day management of the
Portfolio. Mr. Theccanat has been managing structured investment
portfolios at U.S. Trust Company since January, 1990. Prior to this,
Mr. Theccanat was a Vice President of Drexel Burnham & Lambert, and was
responsible for interest rate and foreign exchange risk management.
Mr. Tavel designs, develops and implements analytic procedures and
services utilizing quantitative and financial information. He has over
17 years of experience in the execution of decision support systems at
U.S. Trust Company and previously at Lehman Asset Management, where he
was Director of Institutional Computer Services.
(d) Federated Administrative Services, Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, Pennsylvania, 15222-3779, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Trust. Federated Administrative Services provides these
services for each Series in the Trust at an annual rate which relates
to the average aggregate daily net assets of each Series as specified
below:
Average Aggregate Daily Net
Assets of the
Maximum Administrative Fee Series
0.050 of 1% on the first $1 billion
0.045 of 1% on the next $1 billion
0.040 of 1% on the next $1 billion
0.025 of 1% on the next $1 billion
0.010 of 1% on the next $1 billion
0.005 of 1% on assets in excess of
$5 billion
The minimum administrative fee shall be $60,000 annually for each
Series (unless waived). From time to time, Federated Administrative
Services may waive all or a portion of its fee, and has agreed to waive
a portion of the administrative fee for the Portfolio for the twelve
month period following January 2, 1996.
(e) Federated Services Company, a Delaware business trust whose address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania, 15222-3779 is transfer agent, dividend disbursing agent
and custody procurement agent for the Trust. Federated Services Company
also maintains the Trust's accounting records. Federated Services
Company is a wholly-owned subsidiary of Federated Investors.
(f) The expenses of the Trust include the compensation of its Trustees
who are not affiliated with the investment managers or Federated
Administrative Services; governmental fees; interest charges; taxes;
fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or portfolio accounting agent of
the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, interests in the Portfolio.
(g) Not applicable.
Item 6. Capital Stock and Other Securities
(a) The Portfolio is a series of the Trust, which is organized as a
series trust under the laws of the Commonwealth of Massachusetts. Under
the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in one or more series (each a "Series").
Currently, only the Bond Index Portfolio is being offered to investors.
Investments in a Series may not be transferred, but an investor may
withdraw all or any portion of its investment. Certificates of shares
of beneficial interests in the Trust will not be issued. Investors in
a Series (e.g., investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for
all obligations of that Series (and of no other Series) or of the
overall obligations of the Trust. However, the risk of an investor in
a Series incurring financial loss on account of such liability is
limited to circumstances in which the Series itself is unable to meet
its obligations. Investors in a Series have no preemptive or
conversion rights and are fully paid and non-assessable, except as set
forth below.
Each investor is entitled to a vote in proportion to the amount of its
investment in a Series. Investors in a Series do not have cumulative
voting rights, and a plurality of the aggregate beneficial interests in
all outstanding Series may elect all of the Trustees if they choose to
do so and in such event other investors would not be able to elect any
Trustees. Investors in each Series will vote as a separate class,
except as to voting for the election or removal of Trustees, the
termination of the Trust, as otherwise required by the 1940 Act, or if
determined by the Trustees to be a matter which affects all Series. As
to any matter which does not affect a particular Series, only investors
in the one or more affected Series are entitled to vote. The Trust is
not required and has no current intention of holding annual meetings of
investors, but the Trust will hold special meetings of investors when,
in the judgment of the Trust's Trustees, it is necessary or desirable
to submit matters for an investor vote. Changes in fundamental policies
will be submitted to investors for approval. Investors under certain
circumstances (e.g., upon application and submission of certain
specified documents to the Trustees by a specified number of investors)
have the right to communicate with other investors in connection with
requesting a meeting of investors for the purpose of removing one or
more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified
number of investors. Upon liquidation of a Series, investors would be
entitled to share pro rata in the net assets of that Series (and no
other Series) available for distribution to investors.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Investor inquiries regarding the Trust may be directed to the
Trust, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(1-800-245-4270).
(f) The Portfolio determines its net income and realized capital
gains, if any, on each Portfolio Business Day (as defined below) and
allocates all such income and gain pro rata among the investors in the
Portfolio at the time of such determination.
The "net income" of the Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the
Portfolio, less (ii) all actual and accrued expenses of the Portfolio
determined in accordance with generally accepted accounting principles.
Interest income includes discount earned (including both original issue
and market discount) on discount paper accrued ratably to the date of
maturity and any net realized gains or losses on the assets of the
Portfolio. All the net income of the Portfolio is allocated pro rata
among the investors in the Portfolio (and no other Series).
(g) Under its anticipated method of operation, the Portfolio will not
be subject to any income tax. However, each investor in the Portfolio
will be taxable on its share (as determined in accordance with the
governing instruments of the Trust) of the Portfolio's ordinary income
and capital gain in determining its income tax liability. The
determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations
promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be
able to satisfy the requirements of Subchapter M of the Code, assuming
that the investor invested all of its assets in the Portfolio.
For more information on tax matters, see Item 20 in Part B.
(h) Not applicable.
Item 7. Purchase of Securities Being Offered
(a) Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See Item 4 above.
Federated Securities Corp., Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, Pennsylvania 15222-3779 serves as the Trust's
Placement Agent. It is a Pennsylvania corporation organized on
November 14, 1969, and is the principal distributor for a number of
investment companies. Federated Securities Corp. receives no fee for
its services as placement agent for the Trust. Federated Securities
Corp. is a wholly-owned subsidiary of Federated Investors.
(b) The net asset value of the Portfolio is determined each day as of
the close of trading (normally 4:00 p.m., Eastern Time) (the "Valuation
Time") on the New York Stock Exchange, Monday through Friday, except on
(i) days on which there are not sufficient changes in the value of the
Portfolio's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; and (iii) the
following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Any day on which the Portfolio may determine its net
asset value, as described above, may hereinafter be referred to as a
"Portfolio Business Day."
Assets in the Portfolio which are traded on a recognized domestic
exchange or are quoted on a national securities market are valued at
the last sale price on the securities exchange on which such securities
are primarily traded or at the last sale price on such national
securities market. Securities traded only on over-the-counter markets
are valued on the basis of closing over-the-counter bid prices.
Restricted securities, securities for which market quotations are not
readily available, and other assets are valued at fair value, pursuant
to guidelines adopted by the Trustees of the Trust. Absent unusual
circumstances, debt securities maturing in 60 days or less are valued
at amortized cost. Some of the securities acquired by the Portfolio
may be traded on over-the-counter markets on days which are not
Portfolio Business Days. In such cases, the net asset value of the
shares may be significantly affected on days when investors neither
purchase nor redeem their shares of beneficial interest in the
Portfolio. The Portfolio may use one or more independent pricing
services in connection with the pricing of its portfolio securities.
For additional information on the valuation of the Portfolio's
securities, see Item 19 in Part B.
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day. As of the Valuation Time
on each such day, the value of each investor's beneficial interests in
the Portfolio will be determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that day, which
represents that investor's share of the aggregate beneficial interests
in the Portfolio. Any additions or reductions which are to be effected
on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio will then be recomputed
as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the
Valuation Time on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the investor's investment
in the Portfolio effected on such day and (ii) the denominator of which
is the aggregate net asset value of the Portfolio as of the Valuation
Time on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the Valuation Time on the
following Portfolio Business Day.
The Trust reserves the right to cease accepting investments in the
Portfolio at any time or to reject any investment order.
(c) An investment in the Portfolio may be made without sales load at
the net asset value next determined if an order is received "in good
order" by the Trust.
(d) There is no minimum initial or subsequent investment in the
Portfolio. However, because the Portfolio intends to be as fully
invested at all times as is reasonably practicable in order to enhance
the yield on its assets, investments must be made in federal funds
(i.e., monies credited to the account of a Portfolio's custodian bank
by a Federal Reserve Bank).
(e) Not applicable.
(f) Not applicable.
Item 8. Redemption or Repurchase
(a) An investor in the Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal
request in proper form is furnished by the investor to the Trust by the
designated cutoff time for each accredited investor. The proceeds of
a reduction or withdrawal will be paid by the Trust in federal funds
normally on the Portfolio Business Day the withdrawal is effected, but
in any event within seven days. The Trust, on behalf of the Portfolio,
reserves the right to pay redemptions in kind. See Item 19 in Part B.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the New York Stock Exchange
("NYSE") is closed (other than weekends or holidays) or trading on the
NYSE is restricted or, to the extent otherwise permitted by the 1940
Act, if an emergency exists.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
Item 9. Pending Legal Proceedings
None.
PART B.
Item 10. Cover Page
This Part B sets forth information which may be of interest to
investors but which is not necessarily included in Part A as it may be
amended from time to time. This Part B should be read only in
conjunction with Part A, a copy of which may be obtained by an investor
without charge by writing the Trust or calling 1-800-245-4270.
Item 11. Table of Contents
General Information and History B-1
Investment Objective and Policies B-1
Investment Restrictions B-20
Management of the Registrant B-24
Control Persons and Principal
Holders of Securities B-31
Investment Advisory and Other
Services B-31
Brokerage Allocation and Other
Practices B-34
Capital Stock and Other Securities B-36
Purchase, Redemption, and Pricing
of Securities being Offered B-38
Tax Status B-39
Underwriters B-41
Calculation of Performance Data B-41
Financial Statements B-41
Appendix B-42
Item 12. General Information and History
Not applicable.
Item 13. Investment Objective and Policies
(a) Part A contains additional information about the investment
objectives and policies and management techniques of the Portfolio.
This Part B should only be read in conjunction with Part A of the
registration statement.
The approval of the investors in the Portfolio is not required to
change any of the investment objectives, policies or management
techniques of the Portfolio discussed herein or in Part A of this
registration statement, unless otherwise indicated.
BANK OBLIGATIONS
Domestic commercial banks organized under federal law are supervised
and examined by the Comptroller of the Currency and are required to be
members of the Federal Reserve System. Domestic banks organized under
state law are supervised and examined by state banking authorities but
are members of the Federal Reserve System only if they elect to join.
In addition, state banks are subject to federal examination and to a
substantial body of federal law and regulation. As a result of federal
or state laws and regulations, domestic banks, among other things,
generally are required to maintain specified levels of reserves, are
limited in the amounts which they can loan to a single borrower, and
are subject to other regulations designed to promote financial
soundness. However, not all of such laws and regulations apply to the
foreign branches of domestic banks.
Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of
deposit ("CDs") and time deposits ("TDs"), may be general obligations
of the parent banks in addition to the issuing branch, or may be
limited by the terms of a specific obligation and governmental
regulation. Such obligations are subject to different risks than are
those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on
interest income. Foreign branches and subsidiaries are not necessarily
subject to the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and financial record keeping
requirements. In addition, less information may be publicly available
about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or
may be limited by the terms of a specific obligation and by federal or
state regulation as well as governmental action in the country in which
the foreign bank has its head office. A domestic branch of a foreign
bank with assets in excess of $1 billion may be subject to reserve
requirements imposed by the Federal Reserve System or by the state in
which the branch is located if the branch is licensed in that state.
In addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states may be required to: (1) pledge to
the regulator, by depositing assets with a designated bank within the
state, a certain percentage of their assets as fixed from time to time
by the appropriate regulatory authority; and (2) maintain assets within
the state in an amount equal to a specified percentage of the aggregate
amount of liabilities of the foreign bank payable at or through all of
its agencies or branches within the state.
COMMERCIAL PAPER
Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of interest under
an agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest varying
amounts.
The Portfolio may purchase three types of commercial paper, as
classified by exemption from registration under the 1933 Act. The
three types include open market, privately placed, and letter of credit
commercial paper. Trading of such commercial paper is conducted
primarily by institutional investors through investment dealers or
directly through the issuers. Individual investor participation in the
commercial paper market is very limited.
OPEN MARKET. "Open market" commercial paper refers to the commercial
paper of any industrial, commercial, or financial institution which is
openly traded, including directly issued paper. "Open market" paper's
1933 Act exemption is under Section 3(a)(3) which limits the use of
proceeds to current transactions, limits maturities to 270 days and
requires that the paper contain no provisions for automatic rollovers.
PRIVATELY PLACED. "Privately placed" commercial paper relies on the
exemption from registration provided by Section 4(2), which exempts
transactions by an issuer not involving any public offering. The
commercial paper may only be offered to a limited number of accredited
investors. "Privately placed" commercial paper has no maturity
restriction and may be considered illiquid. See "Illiquid Securities"
below.
LETTER OF CREDIT. "Letter of credit" commercial paper is exempt from
registration under Section 3(a)(2) of the 1933 Act. It is backed by an
irrevocable or unconditional commitment by a bank to provide funds for
repayment of the notes. Unlike "open market" and "privately placed"
commercial paper, "letter of credit" paper has no limitations on
purchasers.
LENDING OF PORTFOLIO SECURITIES
The Portfolio has the authority to lend portfolio securities to
brokers, dealers and other financial organizations. By lending its
securities, the Portfolio can increase its income by continuing to
receive income on the loaned securities as well as by either investing
the cash collateral in short-term securities subject to payment of a
rebate fee to the borrower or obtaining a fee from the borrower when
U.S. Government obligations are used as collateral. There may be risks
of delay in receiving additional collateral or risks of delay in
recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially. The Portfolio
will adhere to the following conditions whenever its securities are
loaned: (i) the Portfolio must receive at least 100% cash collateral
or equivalent securities from the borrower; (ii) the borrower must
increase this collateral whenever the market value of the loaned
securities including accrued interest exceeds the level of the
collateral; (iii) the Portfolio must be able to terminate the loan at
any time subject to prior notice; (iv) the Portfolio must receive a
reasonable return on the loan, as well as any dividends, interest or
other distributions on the loaned securities, and any increase in
market value; (v) the Portfolio may pay only reasonable custodian fees
in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower. However, if a material event
adversely affecting the loaned securities were to occur, the Portfolio
would terminate the loan and regain the right to vote the securities.
VARIABLE RATE AND FLOATING SECURITIES
The Portfolio may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in
excess of 397 days, but which permit the holder to demand payment of
principal at any time, or at specified intervals not exceeding 397
days, in each case upon not more than 30 days' notice. Variable rate
demand notes include master demand notes which are obligations that
permit the Portfolio to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the
Portfolio, as lender, and the borrower. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay in
its discretion the outstanding principal amount of the obligations plus
accrued interest upon a specified number of days' notice to the holders
of such obligations. The interest rate on a floating rate demand
obligation is based on a known lending rate, such as a bank's prime
rate, and is adjusted automatically each time such rate is adjusted.
The interest rate on a variable rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are
collateralized by letters of credit or other credit support
arrangements provided by banks. Because these obligations are direct
lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations,
although they are redeemable at face value. Accordingly, where these
obligations are not secured by letters of credit or other credit
support arrangements, the Portfolio's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand.
Such obligations frequently are not rated by credit rating agencies and
the Portfolio may invest in obligations which are not so rated only if
its investment managers determine that at the time of investment the
obligations are of comparable quality to the other obligations in which
the Portfolio may invest. The investment managers of the Portfolio
will consider on an ongoing basis the creditworthiness of the issuers
of the floating and variable rate demand obligations held by the
Portfolio. The Portfolio will not invest more than 15% of the value of
its net assets in floating or variable rate demand obligations as to
which it cannot exercise the demand feature on not more than seven
days' notice if there is no secondary market available for these
obligations, and in other securities that are not readily marketable.
See "Investment Restrictions" below.
PARTICIPATION INTERESTS
The Portfolio may purchase from financial institutions participation
interests in securities in which the Portfolio may invest. A
participation interest gives the Portfolio an undivided interest in the
security in the proportion that the Portfolio's participation interest
bears to the total principal amount of the security. These instruments
may have fixed, floating or variable rates of interest, with remaining
maturities of 13 months or less. If the participation interest is
unrated, or has been given a rating below that which is permissible for
purchase by the Portfolio, the participation interest will be backed by
an irrevocable letter of credit or guarantee of a bank, or the payment
obligation otherwise will be collateralized by U.S. Government
securities, or, in the case of unrated participation interests, the
investment managers of the Portfolio must have determined that the
instrument is of comparable quality to those instruments in which the
Portfolio may invest. For certain participation interests, the
Portfolio will have the right to demand payment, on not more than seven
days' notice, for all or any part of the Portfolio's participation
interest in the security, plus accrued interest. As to these
instruments, the Portfolio intends to exercise its right to demand
payment only upon a default under the terms of the security, as needed
to provide liquidity to meet redemptions or to maintain or improve the
quality of its investment portfolio. The Portfolio will not invest
more than 15% of its net assets in participation interests that do not
have this demand feature, and in other securities that are not readily
marketable. Currently, the Portfolio does not intend to invest more
than 5% of its net assets in participation interests during the current
year. See "Investment Restrictions" below.
ILLIQUID SECURITIES
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not
readily marketable and repurchase agreements having a maturity of
longer than seven days. Securities which have not been registered
under the 1933 Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them which, if possible at
all, would result in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act,
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability
to honor a demand for repayment. The fact that there are contractual
or legal restrictions on resale of such investments to the general
public or to certain institutions may not be indicative of their
liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for
securities otherwise subject to restriction on their resale to the
general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers.
The Portfolio's investment managers will monitor the liquidity of Rule
144A securities for the Portfolio under the supervision of Trust's
Trustees. In reaching liquidity decisions, the investment managers
will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security, (2) the number of
dealers and other potential purchasers wishing to purchase or sell the
security, (3) dealer undertakings to make a market in the security and
(4) the nature of the security and of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers
and the mechanics of the transfer).
UNSECURED PROMISSORY NOTES
The Portfolio also may purchase unsecured promissory notes ("Notes")
which are not readily marketable and have not been registered under the
1933 Act, provided such investments are consistent with the Portfolio's
investment objectives and policies. The Portfolio will invest no more
than 15% of its net assets in such Notes and in other securities that
are not readily marketable (which securities would include floating and
variable rate demand obligations as to which the Portfolio cannot
exercise the demand feature described above and as to which there is no
secondary market). Currently, the Portfolio does not intend to invest
any of its assets in unsecured promissory notes during the coming year.
See "Investment Restrictions" below.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a person purchases a
security and simultaneously commits to resell that security to the
seller (which is usually a member bank of the Federal Reserve System or
a member firm of the New York Stock Exchange or a subsidiary thereof)
at an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is
unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the
agreed-upon price, which obligation is in effect secured by the value
of the underlying security, usually U.S. Government or government
agency issues. Under the Investment Company Act of 1940 (the "1940
Act"), repurchase agreements may be considered to be loans by the
buyer. The Portfolio's risk is limited to the ability of the seller to
pay the agreed upon amount on the delivery date. If the seller
defaults, the underlying security constitutes collateral for the
seller's obligation to pay although the Portfolio may incur certain
costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements
entered into by the Portfolio are fully collateralized, with such
collateral being marked to market daily.
The Portfolio may borrow funds for temporary or emergency purposes,
such as meeting larger than anticipated redemption requests, and not
for leverage. One means of borrowing is by agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed date and price (a "reverse
repurchase agreement"). At the time the Portfolio enters into a
reverse repurchase agreement it will place in a segregated custodial
account cash, U.S. Government securities or high-grade debt obligations
having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the
market value of the securities sold by the Portfolio may decline below
the repurchase price of those securities.
GUARANTEED INVESTMENT CONTRACTS
The Portfolio may invest in guaranteed investment contracts ("GICs")
issued by insurance companies. Pursuant to such contracts, the
Portfolio makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits
guaranteed interest to the fund. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance
company may assess periodic charges against a GIC for expenses and
service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. Because the Portfolio may not receive
the principal amount of a GIC from the insurance company on seven days'
notice or less, the GIC is considered an illiquid investment and,
together with other instruments in the Portfolio which are not readily
marketable, will not exceed 15% of the Portfolio's net assets. The
term of a GIC will be 13 months or less. In determining average
weighted portfolio maturity, a GIC will be deemed to have a maturity
equal to the longer of the period of time remaining until the next
readjustment of the guaranteed interest rate or the period of time
remaining until the principal amount can be recovered from the issuer
through demand. Currently, the Portfolio intends to invest 5% or less
of its net assets in GICs during the current year.
WHEN-ISSUED SECURITIES
The Portfolio may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that under normal
circumstances, the Portfolio would take delivery of such securities.
Prior to committing to the purchase of a security on a when-issued or
on a forward delivery basis, the Portfolio will establish procedures
consistent with the relevant policies of the SEC. Those policies
currently recommend that an amount of the Portfolio's assets equal to
the amount of the purchase commitment be held aside or segregated to be
used to pay for the commitment. Therefore, the Portfolio expects
always to have cash, cash equivalents, or high quality debt securities
sufficient to cover any purchase commitments or to limit any potential
risk. Although the Portfolio does not intend to make such purchases
for speculative purposes and intends to adhere to SEC policies,
purchases of securities on a when-issued or forward delivery basis may
involve additional risks than other types of securities purchases. For
example, the Portfolio may have to sell assets which have been set
aside in order to meet redemptions. Also, if the Portfolio determines
it is advisable as a matter of investment strategy to sell the when-
issued or forward delivery securities, the Portfolio would be required
to meet its obligations from its then available cash flow or the sale
of securities, or, although it would not normally expect to do so, from
the sale of the when-issued or forward delivery securities themselves
(which may have a value greater or less than the Portfolio's payment
obligation).
When the Portfolio engages in when-issued or forward delivery
transactions, it relies on the other party to consummate the trade.
Failure of such other party to do so may result in the Portfolio's
incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
The market value of the securities underlying a when-issued purchase or
a forward commitment to purchase securities and any subsequent
fluctuations in their market value are taken into account when
determining the market value of the Portfolio starting on the day the
Portfolio agrees to purchase the securities. The Portfolio does not
earn interest on the securities it has committed to purchase until they
are paid for and delivered on the settlement date.
ZERO COUPON OBLIGATIONS
The Portfolio may acquire zero coupon obligations when consistent with
its investment objectives and policies. Such obligations have greater
price volatility than coupon obligations and will not result in payment
of interest until maturity. Since interest income is accrued
throughout the term of the zero coupon obligation but is not actually
received until maturity, the Portfolio, which is required for tax
purposes to distribute to its shareholders a certain percentage of its
income, may have to sell other securities to distribute the income
prior to maturity of the zero coupon obligation.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
General. The successful use of such instruments by the Portfolio may
depend in part upon its investment managers' skill and experience with
respect to such instruments. Should interest or exchange rates move in
an unexpected manner, the Portfolio may not achieve the anticipated
benefits of futures contracts or options on futures contracts or may
realize losses and thus will be in a worse position than if such
strategies had not been used. In addition, the correlation between
movements in the price of futures contracts or options on futures
contracts and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce
unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts for the
purchase or sale for future delivery of securities, or contracts based
on financial indices. U.S. futures contracts have been designed by
exchanges which have been designated "contracts markets" by the CFTC,
and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market.
Futures contracts trade on a number of exchange markets, and, through
their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. The
Portfolio may enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S.
Government, such as long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through
mortgage-backed securities and three-month U.S. Treasury Bills. The
Portfolio may also enter into futures contracts which are based on
fixed income securities issued by entities other than the U.S.
Government, including corporate debt securities, or contracts based on
financial indices including any index of U.S. Government securities, or
corporate debt securities.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial
deposit"). It is expected that the initial deposit would be
approximately 1/2% to 5% of a contract's face value. Daily thereafter,
the futures contract is valued and the payment of "variation margin"
may be required, since each day the Portfolio would provide or receive
cash that reflects any decline or increase in the contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that
specified in the contract. In some (but not many) cases, securities
called for by a futures contract may not have been issued when the
contract was written.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation
is fulfilled before the date of the contract without having to make or
take delivery of the securities. The offsetting of a contractual
obligation is accomplished by buying (or selling, as the case may be)
on a commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is effected
through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures
market are made, offset or fulfilled through a clearinghouse associated
with the exchange on which the contracts are traded, the Portfolio will
incur brokerage fees when it purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract, in the
case where the Portfolio holds or intends to acquire fixed-income
securities, is to attempt to protect the Portfolio from fluctuations in
interest or foreign exchange rates without actually buying or selling
fixed-income securities or foreign currencies. For example, if
interest rates were expected to increase, the Portfolio might enter
into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the
debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would
decline, but the value of the futures contracts to the Portfolio would
increase at approximately the same rate, thereby keeping the net asset
value of the Portfolio from declining as much as it otherwise would
have. The Portfolio could accomplish similar results by selling debt
securities and investing in bonds with short maturities when interest
rates are expected to increase. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an
investment technique allows the Portfolio to maintain a defensive
position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated
purchases of debt securities at higher prices. Since the fluctuations
in the value of futures contracts should be similar to those of debt
securities, the Portfolio could take advantage of the anticipated rise
in the value of debt securities without actually buying them until the
market had stabilized. At that time, the futures contracts could be
liquidated and the Portfolio could then buy debt securities on the cash
market. To the extent the Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to
cover the Portfolio's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high quality liquid
debt securities from its portfolio in an amount equal to the difference
between the fluctuating market value of such futures contracts and the
aggregate value of the initial and variation margin payments made by
the Portfolio with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to
distortions. First, all participants in the futures market are subject
to initial deposit and variation margin requirements. Rather than
meeting additional variation margin requirements, investors may close
futures contracts through offsetting transactions which could distort
the normal relationship between the cash and futures markets. Second,
the liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery. To
the extent participants decide to make or take delivery, liquidity in
the futures market could be reduced, thus producing distortion. Third,
from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators
in the futures market may cause temporary price distortions. Due to
the possibility of distortion, a correct forecast of general interest
rate trends by the investment managers may still not result in a
successful transaction.
In addition, futures contracts entail risks. Although the investment
managers believe that use of such contracts will benefit the Portfolio,
if the judgment of the investment managers about the general direction
of interest rates is incorrect, the Portfolio's overall performance
would be poorer than if it had not entered into any such contract. For
example, if the Portfolio has hedged against the possibility of an
increase in interest rates which would adversely affect the price of
debt securities held by it and interest rates decrease instead, the
Portfolio will lose part or all of the benefit of the increased value
of its debt securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
debt securities to meet daily variation margin requirements. Such
sales of bonds may be, but will not necessarily be, at increased prices
which reflect the rising market. The Portfolio may have to sell
securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts. The Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a
call option on a futures contract is similar in some respects to the
purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures
contract upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership of the
futures contract or underlying debt securities. As with the purchase
of futures contracts, when the Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market
advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign
currency which is deliverable upon exercise of the futures contract.
If the futures price at expiration of the option is below the exercise
price, the Portfolio will retain the full amount of the option premium
which provides a partial hedge against any decline that may have
occurred in the Portfolio's portfolio holdings. The writing of a put
option on a futures contract constitutes a partial hedge against
increasing prices of the security which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option
is higher than the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge against any
increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is
exercised, the Portfolio will incur a loss which will be reduced by the
amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Portfolio's
losses from existing options on futures may to some extent be reduced
or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio
securities. For example, the Portfolio may purchase a put option on a
futures contract to hedge its portfolio against the risk of rising
interest rates.
The amount of risk the Portfolio assumes when it purchases an option on
a futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in
the value of the underlying futures contract will not be fully
reflected in the value of the option purchased.
The Trustees of the Trust have adopted the requirement that futures
contracts and options on futures contracts be used either (i) as a
hedge without regard to any quantitative limitation, or (ii) for other
purposes to the extent that immediately thereafter the aggregate amount
of initial margin deposits on all (non-hedge) futures contracts of the
Portfolio and premiums paid on outstanding (non-hedge) options on
futures contracts owned by the Portfolio does not exceed 5% of the
market value of the net assets of the Portfolio. In addition, the
aggregate market value of the outstanding futures contracts purchased
by the Portfolio may not exceed 50% of the market value of the total
assets of the Portfolio. Neither of these restrictions will be changed
by the Trust's Trustees without considering the policies and concerns
of the various applicable federal and state regulatory agencies.
OPTIONS ON SECURITIES
The Portfolio may write (sell) covered call and put options to a
limited extent on its portfolio securities ("covered options").
However, the Portfolio may forgo the benefits of appreciation on
securities sold or may pay more than the market price on securities
acquired pursuant to call and put options written by the Portfolio.
When the Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price
specified in the option (the "exercise price") by exercising the option
at any time during the option period. If the option expires
unexercised, the Portfolio will realize income in an amount equal to
the premium received for writing the option. If the option is
exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the
exercise price. By writing a covered call option, the Portfolio
forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an
increase in the market value of the underlying security above the
exercise price.
When the Portfolio writes a covered put option, it gives the purchaser
of the option the right to sell the underlying security to the
Portfolio at the specified exercise price at any time during the option
period. If the option expires unexercised, the Portfolio will realize
income in the amount of the premium received for writing the option.
If the put option is exercised, a decision over which the Portfolio has
no control, the Portfolio must purchase the underlying security from
the option holder at the exercise price. By writing a covered put
option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying
security below the exercise price. The Portfolio will only write put
options involving securities for which a determination is made at the
time the option is written that the Portfolio wishes to acquire the
securities at the exercise price.
The Portfolio may terminate its obligation as the writer of a call or
put option by purchasing an option with the same exercise price and
expiration date as the option previously written. This transaction is
called a "closing purchase transaction." Where the Portfolio cannot
effect a closing purchase transaction, it may be forced to incur
brokerage commissions or dealer spreads in selling securities it
receives or it may be forced to hold underlying securities until an
option is exercised or expires.
When the Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked to market
to reflect the current market value of the option written. The current
market value of a traded option is the last sale price or, in the
absence of a sale, the mean between the closing bid and asked price.
If an option expires on its stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, the Portfolio
will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and
the deferred credit related to such option will be eliminated. If a
call option is exercised, the Portfolio will realize a gain or loss
from the sale of the underlying security and the proceeds of the sale
will be increased by the premium originally received. The writing of
covered call options may be deemed to involve the pledge of the
securities against which the option is being written. Securities
against which call options are written will be segregated on the books
of the custodian for the Portfolio.
The Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call
option in anticipation of an increase in the market value of such
securities. The purchase of a call option would entitle the Portfolio,
in exchange for the premium paid, to purchase a security at a specified
price during the option period. The Portfolio would ordinarily have a
gain if the value of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if the value of
the securities remained at or below the exercise price during the
option period.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective
puts") or securities of the type in which it is permitted to invest.
The purchase of a put option would entitle the Portfolio, in exchange
for the premium paid, to sell a security, which may or may not be held
in the Portfolio's portfolio, at a specified price during the option
period. The purchase of protective puts is designed merely to offset
or hedge against a decline in the market value of the Portfolio's
portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in
the price of securities which the Portfolio does not own. The
Portfolio would ordinarily recognize a gain if the value of the
securities decreased below the exercise price sufficiently to cover the
premium and would recognize a loss if the value of the securities
remained at or above the exercise price. Gains and losses on the
purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
The Portfolio has adopted certain other non-fundamental policies
concerning option transactions which are discussed below. The
Portfolio's activities in options may also be restricted by the
requirements of the Code, for its qualification as a regulated
investment company.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent
that the option markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying securities markets that cannot be reflected in the option
markets. It is impossible to predict the volume of trading that may
exist in such options, and there can be no assurance that viable
exchange markets will develop or continue.
The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. The ability to
terminate over-the-counter option positions is more limited than with
exchange-traded option positions because the predominant market is the
issuing broker rather than an exchange, and may involve the risk that
broker-dealers participating in such transactions will not fulfill
their obligations. To reduce this risk, the Portfolio will purchase
such options only from broker-dealers who are primary government
securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into
closing transactions, although there can be no guarantee that any such
option will be liquidated at a favorable price prior to expiration.
The investment managers will monitor the creditworthiness of dealers
with whom the Portfolio enters into such option transactions, under the
general supervision of the Trust's Trustees.
OPTIONS ON SECURITIES INDICES
In addition to options on securities, the Portfolio may also purchase
and write (sell) call and put options on securities indices. Such
options give the holder the right to receive a cash settlement during
the term of the option based upon the difference between the exercise
price and the value of the index. Such options will be used for the
purposes described under "Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to
close out options positions on securities indices is more likely to
occur, although the Portfolio generally will only purchase or write
such an option if its investment managers believe the option can be
closed out.
Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities
included in the index is interrupted. The Portfolio will not purchase
such options unless its investment managers believe the market is
sufficiently developed such that the risk of trading in such options is
no greater than the risk of trading in options on securities.
Price movements in the Portfolio's securities may not correlate
precisely with movements in the level of an index and, therefore, the
use of options on indices cannot serve as a complete hedge. Because
options on securities indices require settlement in cash, the
investment managers may be forced to liquidate portfolio securities to
meet the Portfolio's settlement obligations.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical
security. The Portfolio may engage in short sales only if at the time
of the short sale it owns or has the right to obtain, at no additional
cost, an equal amount of the security being sold short. This
investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until
delivery occurs. If the Portfolio engages in a short sale, the
collateral for the short position will be maintained by its custodian
or qualified sub-custodian. While the short sale is open, the
Portfolio maintains in a segregated account an amount of securities
equal in kind and amount to the securities sold short or securities
convertible into or exchangeable for such equivalent securities. These
securities constitute the Portfolio's long position.
The Portfolio will not engage in short sales against the box for
investment purposes. The Portfolio may, however, make a short sale as
a hedge, when it believes that the price of a security may decline,
causing a decline in the value of a security (or a security convertible
or exchangeable for such security), or when the Portfolio wants to sell
the security at an attractive current price, but also wishes to defer
recognition of gain or loss for federal income tax purposes or for
purposes of satisfying certain tests applicable to regulated investment
companies under the Code. In such case, any future losses in the
Portfolio's long position should be reduced by a gain in the short
position. Conversely, any gain in the long position should be reduced
by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short
relative to the amount the Portfolio owns. There are certain
additional transaction costs associated with short sales against the
box, but the Portfolio will endeavor to offset these costs with the
income from the investment of the cash proceeds of short sales.
As a non-fundamental operating policy, not more than 40% of the
Portfolio's total assets would be involved in short sales against the
box.
CERTAIN OTHER OBLIGATIONS
In order to allow for the investments in new instruments that may be
created in the future, upon the Trust supplementing this registration
statement, the Portfolio may invest in obligations other than those
listed previously, provided such investments are consistent with the
Portfolio's investment objective, policies and restrictions.
RATING SERVICES
Ratings represent the opinions of rating services as to the quality of
the securities that they undertake to rate. It should be emphasized,
however, that the ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial
criterion for selection of portfolio investments, the investment
managers also make their own evaluations of these securities, subject
to review by the Trustees of the Trust. After purchase by the
Portfolio, an obligation may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Portfolio.
Neither event would require the Portfolio to dispose of the obligation,
but its investment managers will consider such an event in their
determination of whether the Portfolio should continue to hold the
obligation. A description of the ratings used herein and in Part A is
set forth in the Appendix to this Part B.
Except as stated otherwise, all investment policies and restrictions
described herein are non-fundamental, and may be changed without prior
shareholder approval.
(b) INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of the
Portfolio and may not be changed with respect to the Portfolio without
the approval of a "majority of the outstanding voting securities" of
the Portfolio. "Majority of the outstanding voting securities" under
the 1940 Act and as used in this Part B and Part A means, with respect
to the Portfolio, the lesser of (i) 67% or more of the total beneficial
interest of the Portfolio present at a meeting, if the holders of more
than 50% of the total beneficial interests of the Portfolio are present
or represented by proxy, or (ii) more than 50% of the total beneficial
interests of the Portfolio.
With respect to each fundamental investment restriction and each non-
fundamental investment policy listed below, if a percentage restriction
(other than a restriction as to borrowing) or a rating restriction on
investment or utilization of assets is adhered to at the time an
investment is made or assets are so utilized, a later change in such
percentage resulting from changes in the Portfolio's total assets or
the value of the Portfolio's securities, or a later change in the
rating of a portfolio security, will not be considered a violation of
the relevant restriction or policy.
As a matter of fundamental policy, the Portfolio may not:
(1) borrow money or mortgage or hypothecate assets of the Portfolio, except
that in an amount not to exceed 1/3 of the current value of the
Portfolio's assets (including such borrowing) less liabilities (not
including such borrowing), it may borrow money, enter into reverse
repurchase agreements, and purchase when-issued securities, and except
that it may pledge, mortgage or hypothecate its assets to secure such
borrowings, reverse repurchase agreements, or when-issued securities,
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this restriction,
and except that assets may be pledged to secure letters of credit
solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute.
The Portfolio will not purchase securities while borrowings exceed 5%
of the Portfolio's total assets;
(2) underwrite securities issued by other persons except insofar as the
Trust or the Portfolio may technically be deemed an underwriter under
the 1933 Act in selling a portfolio security;
(3) make loans to other persons except (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's total assets (taken at market value), (b)
through the use of repurchase agreements or the purchase of short-term
obligations, or (c) by purchasing debt securities of types distributed
publicly or privately;
(4) purchase or sell real estate (including limited partnership interests
in partnerships substantially all of whose assets consist of real
estate but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts (except futures and option contracts) in the
ordinary course of business (the Trust may hold and sell, for the
Portfolio's portfolio, real estate acquired as a result of the
Portfolio's ownership of securities);
(5) invest 25% or more of its assets in any one industry (excluding U.S.
Government securities), unless the bonds issued by companies in a
single industry were to comprise 25% or more of Lehman Brothers
Aggregate Bond Index, in which case the Portfolio will invest 25% or
more of its assets in that industry; or
(6) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including deposits of
initial deposit and variation margin, are not considered to be the
issuance of a senior security for purposes of this restriction.
State and Federal Restrictions. In order to comply with certain state
and federal statutes and policies, the Portfolio will not as a matter
of operating policy:
(i) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and
except that deposits of initial deposit and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures;
(ii) invest for the purpose of exercising control or management;
(iii) purchase securities issued by any other investment company
except by purchase in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than the customary
broker's commission, or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation;
provided, however, that securities of any investment company will not
be purchased for the Portfolio if such purchase at the time thereof
would cause (a) more than 10% of the Portfolio's total assets (taken at
the greater of cost or market value) to be invested in the securities
of such issuers; (b) more than 5% of the Portfolio's total assets
(taken at the greater of cost or market value) to be invested in any
one investment company; or (c) more than 3% of the outstanding voting
securities of any such issuer to be held for the Portfolio;
(iv) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of an
issuer shall be deemed a single class and all preferred stock of an
issuer shall be deemed a single class, except that futures or option
contracts shall not be subject to this restriction;
(v) purchase or retain in the Portfolio's portfolio any securities
issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust, or is an
officer or partner of the Adviser or Sub-Adviser of the Portfolio, if
after the purchase of the securities of such issuer for the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of
the shares or securities, or both, all taken at market value, of such
issuer, and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or
securities, or both, all taken at market value;
(vi) invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market), but not more than 2% of the
Portfolio's net assets may be invested in warrants not listed on the
New York Stock Exchange or the American Stock Exchange;
(vii) make short sales of securities or maintain a short position
(excluding short sales if the Portfolio owns an equal amount of such
securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of equivalent kind and
amount) if such short sales represent more than 25% of the Portfolio's
net assets (taken at market value); provided, however, that the value
of the Portfolio's short sales of securities (excluding U.S. Government
securities) of any one issuer may not be greater than 2% of the value
(taken at market value) of the Portfolio's net assets or more than 2%
of the securities of any class of any issuer;
(viii) enter into repurchase agreements providing for settlement in
more than seven days after notice, or purchase securities which are not
readily marketable, if, in the aggregate, more than 15% of its net
assets would be so invested; or
(ix) purchase puts, calls, straddles, spreads or any combination
thereof, if by reason of such purchase the value of its aggregate
investment in such securities would exceed 5% of the Portfolio's total
assets.
(c) See policies (i) through (ix) above.
(d) Portfolio turnover
Although the Portfolio is managed to reflect the composition of the
Lehman Brothers Aggregate Bond Index, the Portfolio may sell securities
irrespective of how long such securities have been held. Ordinarily,
securities will be sold from the Portfolio only to reflect certain
administrative changes in the Lehman Brothers Aggregate Bond Index
(including mergers or changes in its composition) or to accommodate
cash flows into and out of the Portfolio while maintaining the
similarity of its portfolio to its benchmark index. The Portfolio may
sell a portfolio investment immediately after its acquisition if the
investment managers believe that such a disposition is consistent with
the investment objective of the Portfolio. Portfolio investments may
be sold for a variety of reasons, such as a more favorable investment
opportunity or other circumstances bearing on the desirability of
continuing to hold such investments.
Except as may be required to ensure satisfaction of certain tests
applicable to regulated investment companies under the Code, portfolio
changes are made without regard to the length of time a security has
been held, or whether a sale would result in the recognition of a
profit or loss. The Portfolio may engage in short-term trading to
achieve its investment objective. Portfolio turnover may vary greatly
from year to year as well as within a particular year. The Portfolio's
portfolio turnover rate may also be affected by cash requirements for
redemptions of shares and by regulatory provisions which enable a fund
to receive certain favorable tax treatment. Portfolio turnover will
not be a limiting factor in making portfolio decisions. Portfolio
trading is engaged in for the Portfolio if its investment managers
believe that a transaction net of costs (including custodian charges)
will help achieve the Portfolio's investment objective.
The annual portfolio turnover rate for the Portfolio is not expected to
exceed 100%. A rate of 100% indicates that the equivalent of all of
the Portfolio's assets have been sold and reinvested in a calendar
year. A high rate of portfolio turnover may involve correspondingly
greater brokerage commission expenses and other transaction costs,
which must be borne directly by the Portfolio and ultimately by the
investors in the Portfolio. High portfolio turnover may result in the
realization of substantial net capital gains. To the extent net short-
term capital gains are realized, any distributions resulting from such
gains are considered ordinary income for Federal income tax purposes.
See Item 6 above and Item 20 below.
Item 14. Management of the Registrant
(a) Officers and Trustees of the Trust are listed below with their
principal occupations, addresses, birthdates, and present positions
with the Trust, including any affiliation with Federated Management,
Federated Securities Corp., Federated Services Company, Federated
Administrative Services, and the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Executive 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, Chairmand and Trustee of the Trust.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Peter E. Madden
70 Westcliff Road
Weston, MA
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; Executive Vice President and
Treasurer of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the 1940
Act.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between meetings
of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5
Years; Federated U.S. Government Securities Fund: 5-10 Years; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insurance Management Series; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO
Monument Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Targeted Duration Trust; Tax-Free Instruments Trust; 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; World Investment Series, Inc.
(c)
TRUSTEES' COMPENSATION
AGGREGATE TOTAL
NAME, COMPENSATION COMPENSATION
POSITION WITH FROM PAID
TRUST REGISTRANT* FROM FUND COMPLEX+
John F. Donahue, $0 $0 for the Trust and 68
Trustee other investment companies
in the Fund Complex
J.Christopher Donahue $0 $0 for the Trust and 14
President and Trustee other investment companies in
the Fund Complex
Thomas G. Bigley $0 $20,688 for the Fund
Trustee and 49 other investment companies
in the Fund Complex
John T. Conroy, Jr. $0 $117,202 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
William J. Copeland $0 $117,202 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
James E. Dowd $0 $117,202 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
Lawrence D. Ellis, M.D. $0 $106,460 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
Edward L. Flaherty, Jr. $0 $117,202 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
Peter E. Madden $0 $90,563 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
Gregor F. Meyer $0 $106,460 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
John E. Murray, Jr. $0 $0 for the Trust and 64
Trustee other investment companies
in the Fund Complex
Wesley W. Posvar $0 $106,460 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
Marjorie P. Smuts $0 $106,460 for the Fund
Trustee and 64 other investment companies
in the Fund Complex
* The Trust has not yet paid any fees to the Trustees.
+ The information is provided for the last calendar year.
(b) See response to 14(a).
Item 15. Control Persons and Principal Holders of Securities
(a) None.
(b) Not applicable.
(c) Officers and Trustees own less than 1% of the Registrant's
outstanding shares.
Item 16. Investment Advisory and Other Services
(a-b) See Items 5 and 14 above.
The Adviser or Sub-Adviser shall not be liable to the Registrant or any
investor for any losses that may be sustained in the purchase, holding,
or sale of any security, or for anything done or omitted by them, except
acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon them by
their contract with the Registrant.
For its advisory services, the Adviser receives an annual investment
advisory fee as described in Part A.
The Advisory Agreement and the Sub-Advisory Agreement will continue in
effect with respect to the Portfolio as long as such continuance is
specifically approved at least annually by the Trustees of the Trust or
by a majority vote of the investors in the Portfolio and, in either
case, by a majority of the Trustees of the Trust who are not parties to
the Advisory Agreement, the Sub-Advisory Agreement, as the case may be,
or interested persons of any such party, at a meeting called for the
purpose of voting on the Advisory Agreement or Sub-Advisory Agreement.
The Advisory Agreement and the Sub-Advisory Agreement were both approved
by the Trust's Trustees on October 3, 1995. The Adviser, Sub-Adviser,
and administrator have agreed to waive certain fees.
The Advisory Agreement and Sub-Advisory Agreement provide that the
Adviser and Sub-Adviser may render services to others, and each
agreement is terminable by the Trust without penalty on not more than 60
days' nor less than 30 days' written notice when authorized either by
majority vote of the Portfolio and the other investors in the Portfolio,
with the vote of each being in proportion to the amount of its
investment or by a vote of a majority of the Trustees of the Trust or by
the respective Adviser or Sub-Adviser on not more than 60 days' nor less
than 30 days' written notice, and will automatically terminate in the
event of its assignment. The Advisory Agreement and the Sub-Advisory
Agreement provide that neither the Adviser, the Sub-Adviser, nor their
personnel shall be liable for any error of judgment or mistake of law or
for any loss arising out of any investment, or for any act or omission
in the execution of security transactions for the Portfolio, except for
willful misfeasance, bad faith, gross negligence or reckless disregard
of its or their obligations and duties under the Advisory and Sub-
Advisory Agreements.
Part A contains a description of the fees payable to the investment
managers under the Advisory and Sub-Advisory Agreements. The investment
managers, if required by applicable state law, shall reimburse the
Portfolio's investors or waive all or part of their respective fees up
to, but not exceeding, the investment advisory or sub-advisory fees,
respectively, from the Portfolio. Such reimbursement, if required, will
be equal to the combined aggregate annual expenses of an investor and
the Portfolio which exceed that expense limitation with the lowest
threshold prescribed by any state in which those investors are qualified
for offer or sale. Management of the Trust has been advised that the
lowest such threshold currently in effect is 2 1/1% of net assets up to
$30,000,000, 2% of the next $70,000,000 of net assets and 1 1/2% of net
assets in excess of that amount.
(c) From time to time, Federated Administrative Services may waive all
or a portion of the administrative fee, and has agreed to waive a
portion of the administrative fee for the twelve-month period following
January 2, 1996. For a further description of expense reimbursements,
see Item 5.
(d) Federated Administrative Services provides administrative and
personnel services to the Registrant for a fee as described in Part A.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser
to the Registrant, holds approximately 20% of the outstanding common
stock and serves as a director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated
Administrative Services.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Investors Bank and Trust Company, 79 Milk Street, 7th Floor, Boston,
Massachusetts, 02205, is custodian for the cash and securities of
Portfolio.
The Independent Auditors for the Portfolio are Ernst & Young LLP, One
Oxford Centre, Pittsburgh, Pennsylvania, 15219.
(i) The fee paid by the Trust to Federated Services Company, as transfer
agent, is based upon the size, type and number of accounts and
transactions made by investors. The fee paid by the Trust to Federated
Services Company for maintaining the Trust's accounting records (for
which the Portfolio bears its pro rata share) is based upon the level
of the Trust's average net assets for the period plus out-of-pocket
expenses.
Item 17. Brokerage Allocation and Other Practices
(a) Research services provided by brokers and dealers may be used by
the investment managers or by their affiliates in advising the Portfolio
and other accounts. To the extent that receipt of these services may
supplant services for which the investment managers or their affiliates
might otherwise have paid, it would tend to reduce their expenses.
The Portfolio's purchase and sales of securities may be principal
transactions, that is, securities may be purchased directly from the
issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases and,
therefore, the Portfolio does not anticipate paying brokerage
commissions in such transactions. Purchases and sales of the
Portfolio's portfolio securities will usually be principal transactions
without brokerage commissions. Any transactions for which the Portfolio
pays a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of securities include
a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread
between the bid and the asked price.
Allocations of transactions, including their frequency, to various
dealers is determined by the investment managers in their best judgment
and in a manner deemed to be in the best interest of the investors in
the Portfolio rather than by any formula. The primary consideration is
prompt execution of orders in an effective manner at the most favorable
price.
The Advisory and Sub-Advisory Agreements provide that, in executing
portfolio transactions and selecting brokers or dealers, the investment
managers will seek to obtain the best net price and the most favorable
execution. The investment managers shall consider factors they deem
relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, for
the specific transaction and on a continuing basis.
In addition, the Advisory and Sub-Advisory Agreements authorize the
investment managers, to the extent permitted by law and subject to the
review of Trust's Trustees, to cause the Portfolio to pay a broker which
furnishes brokerage and research services a higher commission than that
which might be charged by another broker for effecting the same
transaction, provided that the investment managers determine in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker, viewed in terms
of either that particular transaction or the overall responsibilities of
the investment managers to the accounts as to which they exercise
investment discretion. Such brokerage and research services might
consist of reports and statistics on specific companies or industries,
general summaries of groups of stocks and their comparative earnings, or
broad overviews of the stock market and the economy. Such services
might also include reports on global, regional, and country-by-country
prospects for economic growth, anticipated levels of inflation,
prevailing and expected interest rates, and the outlook for currency
relationships.
Supplementary research information so received is in addition to and not
in lieu of services required to be performed by the investment managers
and does not reduce the investment advisory fees (if any) payable by the
Portfolio. Such information may be useful to the investment managers in
serving the Portfolio and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may
be useful to the investment managers in carrying out their obligations
to the Portfolio.
Investment decisions for the Portfolio will be made independently from
those for any other account or investment company that is or may in the
future become managed by its investment managers or any of their
affiliates. If, however, the Portfolio and other investment companies
or accounts managed by the same investment manager are contemporaneously
engaged in the purchase or sales of the same security, the transactions
may be averaged as to price and allocated equitably to each account. In
some cases, this policy might adversely affect the price paid or
received by the Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security
for the Portfolio and for other investment companies managed by the same
investment manager occur contemporaneously, the purchase or sale orders
may be aggregated in order to obtain any price advantages available to
large denomination purchases or sales. Furthermore, in certain
circumstances affiliates of the investment managers whose investment
portfolios are managed internally, rather than by the investment
managers, might seek to purchase or sell the same type of investments at
the same time as the Portfolio. Such an event might also adversely
affect the Portfolio.
(b) None.
(c) See response to (a).
(d) Not applicable.
(e) Not applicable.
Item 18. Capital Stock and Other Securities
(a) Investors in a Series will be held personally liable for the
obligations and liabilities of that Series (and of no other Series) and
the Trust, subject, however, to indemnification by the Trust in the
event that there is imposed upon an investor any liability or obligation
of the Series or Trust. The Declaration of Trust also provides that the
Trust may maintain appropriate insurance for the protection of the
Trust, its Trustees, officers, employees and agents, and covering
possible tort and other liabilities. The risk of an investor incurring
financial loss on account of investor liability is limited to
circumstances in which the Series or the Trust itself is unable to meet
its obligations.
Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their
respective Series only. Upon liquidation or dissolution of a Series,
investors are entitled to share pro rata in that Series (and no other
Series) net assets available for distribution to its investors. The
Trust reserves the right to create and issue additional Series of
beneficial interests, in which case the beneficial interests in each new
Series would participate equally in the earnings, dividends and assets
of that particular Series only (and of no other Series). Investments in
a Series have no preference, preemptive, conversion or similar rights
and are fully paid and nonassessable, except as set forth below.
Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in a portfolio are not
issued.
Any property of the Trust is allocated and belongs to a specific Series
to the exclusion of all other Series. All consideration received by the
Trust for the issuance and sale of beneficial interests in a particular
Series, together with all assets in which such consideration is invested
or reinvested, all income, earnings and proceeds thereof, and any funds
or payments derived from any reinvestment of such proceeds, is held by
the Trustees in a separate account or accounts (a Series) for the
benefit of investors in that Series and irrevocably belongs to that
Series for all purposes.
The Trust's Declaration of Trust may be amended without the vote of
investors, except that investors have the right to approve by
affirmative majority vote any amendment which would adversely affect
their voting rights, alter the procedures to amend the Declaration of
Trust of the Trust, as required by law or by the Trust's registration
statement, or as submitted to them by the Trustees. Any amendment
submitted to investors which the Trustees determine would affect the
investors of any Series shall be authorized by vote of the investors of
such Series and no vote will be required of investors in a Series not
affected.
The Trust or any Series may enter into a merger or consolidation, or
sell all or substantially all of its assets, if approved (a) at a
meeting of investors by investors representing the lesser of (i) 67% or
more of the beneficial interests in the affected Series present or
represented at such meeting, if investors in more than 50% of all such
beneficial interests are present or represented by proxy, or (ii) more
than 50% of all such beneficial interests, or (b) by an instrument in
writing without a meeting, consented to by investors of the beneficial
interests in the affected Series (hereinafter referred to as a "Majority
Shareholder Vote"). The Trust or any Series may also be terminated (i)
upon liquidation and distribution of its assets if approved by a
Majority Shareholder Vote or (ii) by the Trustees unless otherwise
required by applicable law to obtain investor approval. The Trust will
be dissolved upon the dissolution of the last remaining Series.
The Trust's Declaration of Trust provides that obligations of the Trust
are not binding upon the Trustees individually, but only upon the
property of the Trust and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of his
office.
The Trust's Declaration of Trust further provides that it will indemnify
its Trustees, officers, employees and agents against liabilities and
expenses incurred in connection with litigation in which they may be
involved because of their offices with the Trust, unless, as to
liability to the Trust or its investors, it is finally adjudicated that
they engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in their offices. In the case
of settlement, the By-laws of the Trust provide that such
indemnification will not be provided unless it has been determined by a
court or other body approving the settlement or other disposition, or by
a reasonable determination, based upon a review of readily available
facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
(b) Not applicable.
Item 19. Purchase, Redemption, and Pricing of Securities Being
Offered
(a) Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. See Item 4 in Part A of
this Registration Statement.
(b) Portfolio securities are valued on the basis of market quotations
when they are readily available. The Portfolio values mortgage-backed
and other debt securities for which market quotations are not readily
available at their fair value as determined in good faith, utilizing
procedures approved by the Trustees of the Trust, on the basis of
valuations provided either by dealers or a pricing service. Absent
unusual circumstances, debt securities having a remaining maturity of
sixty days or less when purchased, and debt securities originally
purchased with maturities in excess of sixty days but which currently
have maturities of sixty days or less, are valued at cost adjusted for
amortization of premium and accretion of discounts.
Interest rate futures contracts held by the Portfolio are valued on the
basis of closing market quotations, which are normally available daily.
When market quotations are not readily available, the fair value of
these contracts will be determined in good faith utilizing procedures
approved by the Trustees of the Trust.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures
approved by the Trust's Trustees. While no single standard for
determining fair value exists, as a general rule, the current fair value
of a security would appear to be the amount which the Portfolio could
expect to receive upon its current sale. Some, but not necessarily all,
of the general factors which may be considered in determining fair value
include: (i) the fundamental analytical data relating to the
investment; (ii) the nature and duration of restrictions on disposition
of the securities; and (iii) an evaluation of the forces which influence
the market in which these securities are purchased and sold. Without
limiting or including all of the specific factors which may be
considered in determining fair value, some of the specific factors
include: type of security, financial statements of the issuer, cost at
date of purchase, size of holding, discount from market value, value of
unrestricted securities of the same class at the time of purchase,
special reports prepared by analysts, information as to any transactions
or offers with respect to the security, existence of merger proposals or
tender offers affecting the securities, price and extent of public
trading in similar securities of the issuer or comparable companies, and
other relevant matters.
(c) The Portfolio reserves the right, at its complete discretion, to redeem
its shares of beneficial interest wholly or partly in portfolio
securities ("redemption in kind") instead of in cash, and to deliver one
or more portfolio securities in satisfaction of the redemption request
regardless of which securities were deposited by the investor or the
composition of the portfolio of the Portfolio at the time of redemption.
Item 20. Tax Status
The Trust is organized as a Massachusetts business trust. The Portfolio
is not subject to any income or franchise tax in the Commonwealth of
Massachusetts. However, each investor in the Portfolio will be taxable
on its share (as determined in accordance with the governing instruments
of the Trust) of the Portfolio's ordinary income and capital gains in
determining its income tax liability. The determination of such share of
ordinary income and gains will be made in accordance with the Code and
regulations promulgated thereunder.
It is intended that, under interpretations of the Internal Revenue
Service, (1) the Portfolio will be treated for federal income tax
purposes as a partnership which is not a publicly traded partnership,
and (2) for purposes of determining whether an investor in the Portfolio
satisfies requirements of Subchapter M of the Code, the investor will be
deemed to own a proportionate share of the Portfolio's assets and will
be deemed to be entitled to the Portfolio's income attributable to that
share. The Trust has advised its initial investors that it intends to
conduct its operations so as to enable investors to satisfy those
requirements.
The Portfolio, intending to be taxed as a partnership, will not be
subject to federal income taxation. Instead, an investor must take into
account, in computing its federal income tax liability, its share of the
Portfolio's income, gains, losses, deductions, credits and tax
preference items, without regard to whether it has received any cash
distributions from the Portfolio.
Withdrawals by investors from the Portfolio generally will not result in
their recognizing any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent that any cash
distributed exceeds the basis of the investor's interest in the
Portfolio prior to the distribution, (2) income or gain will be realized
if the withdrawal is in liquidation of the investor's entire interest in
the Portfolio and includes a disproportionate share of any unrealized
receivables held by the Portfolio, and (3) loss will be recognized if
the distribution is in liquidation of that entire interest and consists
solely of cash and/or unrealized receivables. The basis of an investor's
interest in a Portfolio generally equals the amount of cash and the
basis of any property that the investor invests in the Portfolio,
increased by the investor's share of income from the Portfolio and
decreased by the amount of any cash distributions and the basis of any
property distributed from the Portfolio.
The Portfolio's taxable year-end will be May 31st. Although, as
described above, the Portfolio will not be subject to federal income
tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be
able to satisfy the requirements of Subchapter M of the Code.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts
and investors who contribute assets rather than cash to the Portfolio.
It is intended that such segregated asset accounts will be able to
satisfy diversification requirements applicable to them and that such
contributions of assets will not be taxable provided certain
requirements are met. Such investors are advised to consult their own
tax advisors as to the tax consequences of an investment in the
Portfolio.
Other Taxation. Investors are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment
in the Portfolio.
Item 21. Underwriters
Not applicable.
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
Investors of record will receive unaudited semi-annual
reports and annual reports audited by the Portfolio's
independent auditors.
APPENDIX
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--"NR" indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. S&P may apply a plus (+) or
minus (-) to the above rating classifications to show relative standing within
the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated "AAA" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA--Bonds which are rated "AA" are judged to be of high quality by all
standards. Together with the "AAA" group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "AAA" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "AAA"
securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated "BAA" are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3 in
each generic rating classification from "AA" through "B" in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
the obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds and, therefore, impair
timely payment.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated "PRIME-1" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. "PRIME-1"
repayment capacity will normally be evidenced by the following characteristics:
o leading market positions in well-established industries;
o high rates of return on funds employed;
o conservative capitalization structure with moderate reliance on debt and
ample asset protection;
o broad margins in earnings coverage of fixed financial charges and high
internal cash generation; or
o well-established access to a range of financial markets and assured sources
of alternate liquidity.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated "F-
1+."
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Not applicable.
(b) Exhibits filed herewith:
(1) Conformed copy of Declaration of Trust of the
Registrant;+
(2) Copy of By-Laws of the Registrant;+
(3) Not applicable;
(4) Not applicable;
(5) (i) Form of Investment Advisory Contract of the
Registrant; +
(ii) Form of the Sub-Advisory Agreement of the
Registrant; +
(6) Not applicable;
(7) Not applicable;
(8) Form of the Custodian Agreement of the Registrant; +
(9) (i) Form of Administrative Services Agreement of the
Registrant; +
(ii) Form of Agreement for Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement; +
(iii) Form of the Placement Agent Contract of the
Registrant;+
(10) Not applicable;
(11) Not applicable;
(12) Not applicable;
(13) Not applicable;
(14) Not applicable;
(15) Not applicable;
(16) Not applicable;
(17) Not Applicable (Financial Data Schedules);
(18) Not Applicable;
(19) Conformed copy of Power of Attorney;+
+ All exhibits have been filed electronically.
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
Item 26. Number of Holders of Securities of Bond Index Portfolio as of
December 1, 1995:
None
Item 27. Indemnification:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Article XII of Registrant's Declaration of
Trust. The Investment Advisory Contract between the Registrant
and Federated Management ("Adviser") and the Sub-Advisory
Agreement between the Adviser and U.S. Trust Company of New York
("Sub-Adviser") each provide that, in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard
of the obligations or duties under the Investment Advisory
Contract or the Sub-Advisory Contract on the part of the Adviser
or Sub-Adviser, respectively, neither the Adviser nor the Sub-
Adviser shall be liable to the Registrant or to any investor for
any act or omission in the course of or connected in any way with
rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security. Registrant's
Trustees and Officers are covered by an Errors and Omissions
Policy.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for
Trustees, Officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware of the position of the Securities and
Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that
in addition to complying with the applicable provisions of the
Declaration of Trust or otherwise, in the absence of a final
decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not
be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party Trustees who are not
interested persons of the Registrant or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable
for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense
of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate)
against an Officer, Trustee, or controlling person of the
Registrant will not be made absent the fulfillment of at least
one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Registrant is insured
against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of disinterested non-party Trustees
or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will
be entitled to indemnification.
Item 28. Business and Other Connections of Adviser:
(a)For a description of the other business of the Adviser, see
the section entitled "Management of the Registrant" in Part
A. The affiliations with the Registrant of four of the
Trustees and one of the Officers of the Adviser are included
in Part B of this Registration Statement under Management of
the Registrant. The remaining Trustee of the Adviser, and, in
parenthesis, his principal occupation, is Mark D. Olson
(Partner, Wilson, Halbrook and Bayard, 107 W. Market Street,
Georgetown, Delaware, 19947).
The remaining Officers of the Adviser are: William D.
Dawson, Henry A. Frantzen, J. Thomas Madden, and Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior
Vice President-Economist; Peter R. Anderson, and J. Alan
Minteer, Senior Vice Presidents; J. Scott Albrecht, Randall
A. Bauer, David A. Briggs, Jonathan C. Conley, Deborah A.
Cunningham, Michael P. Donnelly, Mark E. Durbiano, Kathleen
M. Foody-Malus, Thomas M. Franks, Edward C. Gonzales, Jeff A.
Kozemchak, Marian R. Marinack, John W. McGonigle, Susan M.
Nason, Mary Jo Ochson, Robert J. Ostrowski, Charles A.
Ritter, James D. Roberge, Sandra L. Weber, and Christopher H.
Wiles, Vice Presidents, Edward C. Gonzales, Treasurer, and
John W. McGonigle, Secretary. The business address of each
of the Officers of the Adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the Advisers to the Funds listed in
Part B of this Registration Statement.
(b) Business and Other Connections of Sub-Adviser:
U.S. Trust Company is a full-service state-chartered bank and
trust company. U.S. Trust Company provides trust and banking
services to individuals, corporations and institutions, both
nationally and internationally, including investment
management, estate and trust administration, financial
planning, corporate trust and agency, and personal and
corporate banking. U.S. Trust Company is a member bank of
the Federal Reserve System and the Federal Deposit Insurance
Corporation and is one of the twelve members of the New York
Clearing House Association. On September 1, 1995, U.S. Trust
Company's Asset Management Group had approximately $36
billion in assets under management. U.S. Trust Company,
which has its principal offices at 114 West 47th Street, New
York, NY 10036, is a wholly-owned subsidiary of U.S. Trust
Corporation, a registered bank holding company. Other than
U.S. Trust Corporation, no person owns more than 10% of the
voting securities of U.S. Trust Company.
The table below sets forth the name, address and principal
occupation of each of the Directors of U.S. Trust Company,
and the principal executive officer of U.S. Trust Company.
<TABLE>
<CAPTIOON>
<S> <C> <C> <C>
Position with
U.S. Trust Company Name Address Principal Occupation
Trustee/Director Samuel C. Butler Cravath, Swaine & Moore Partner in Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
General Partner in Venrock Associates
Trustee/Director Peter O. Crisp Venrock Associates
Room 560
30 Rockefeller Plaza
New York, NY 10019
Trustee/Director Antonia M. Grumbach Patterson, Belknap, Partner in Patterson, Belknap, Webb & Tyler
Webb & Tyler
30 Rockefeller Plaza
New York, NY 10112
Trustee/Director Marshall Schwarz United States Trust Chairman of the Board & Chief Executive
Chairman of the Company of New York Officer of U.S. Trust Corporation and
Board and Chief 114 West 47th Street United States Trust Company of New York
Executive Officer New York, NY 10036
Trustee/Director Phillippe de Metropolitan Museum Director of the Metropolitan Museum of Art
Montebello of Art
1000 Fifth Avenue
New York, NY
10029-0198
Trustee/Director Paul W. Douglas 250 Park Avenue Retired
Room 1900
New York, NY 10177
Trustee/Director Frederic C. Hamilton Oil Corp. Chairman of the Board of Hamilton Oil Corp.
Hamilton 1560 Broadway
Suite 2000
Denver, CO 80202
Trustee/Director John H. Stookey Hanson Industries Chairman and President, Quantum Chemical
410 Park Avenue Corporation
New York, NY 10028
Trustee/Director Robert N. Wilson Johnson & Johnson Vice Chairman of the Board of Johnson &
One Johnson & Johnson Johnson
Plaza
New Brunswick, NJ
08933
Trustee/Director Peter L. Malkin Wein, Malkin & Bettex Chairman of Wein, Malkin & Bettex
Lincoln Building
60 East 42nd Street
New York, NY 10165
Trustee/Director Richard F. Tucker 11 Over Rock Lane etired
Westport, CT 06880
Trustee/Director Carroll L. Milbank, Tweed, Hadley Consulting Partner of Milbank, Tweed,
Wainright, Jr. & McCloy Hadley & McCloy
One Chase Manhattan
Plaza
New York, NY 10005
Trustee/Director, Frederick B. Taylor United States Trust Vice Chairman and Chief Investment Officer
Vice Chairman, Company of New York of U.S. Trust Corporation and United States
and Chief 114 West 47th Street Trust Company of New York
Investment New York, NY 10036
Officer
Trustee/Director Jeffrey S. Maurer United States Trust President of U.S. Trust Corporation and
and President Company of New York United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Trustee/Director Daniel P. Davison Christie, Manson & Chairman, Christie, Manson & Woods
Woods International International, Inc.
Inc.
502 Park Avenue
New York, NY 10021
Trustee/Director Orson D. Munn Munn, Bernhard & Chairman and Director of Munn, Bernhard &
Associates, Inc. Associates, Inc.
6 East 43rd Street
28th Floor
New York, NY 10017
Trustee/Director Philip L. Smith P.O. Box 386 Corporate Director and Trustee
Ponte Verde Beach, FL
32004
Trustee/Director Edwin D. P.O. Box 100 President Emeritus, Wesleyan University and
Etherington Old Lyme, CT 06371 Former President of the American Stock
Exchange
</TABLE>
Item 29. Principal Underwriters:
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, Pennsylvania 15222-3779
Federated Services Company Federated
("Portfolio Accountant") Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Federated Administrative Federated Services
("Administrator") Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Federated Management Federated
("Adviser") Investors Tower
Pittsburgh, Pennsylvania 15222-3779
United States Trust Mutual Funds
Company of New York Service
("Sub-Adviser") Division, 770 Broadway
New York, New York 10003-9598
Investors Bank and Trust 79 Milk Street
Company ("Custodian") 7th Floor
Boston, Massachusetts, 02205
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 a special meeting of investors as
though such provisions of the Act were applicable to the
Registrant.
Registrant hereby undertakes to furnish each investor to whom a
Part A is delivered, a copy of the Registrant's latest annual
report, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, Federated Investment Portfolios, has duly caused this
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
21st day of December, 1995.
FEDERATED INVESTMENT PORTFOLIOS
BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
December 21, 1995
This Initial Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact December 21, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
Exhibit No. 1 Under Form N-1A
DECLARATION OF TRUST
OF
FEDERATED INVESTMENT PORTFOLIOS
TABLE OF CONTENTS
Page
ARTICLE I. NAMES AND DEFINITIONS ................ 1
Section 1. Name .............................. 1
Section 2. Definitions ....................... 1
ARTICLE II. PURPOSE OF TRUST ..................... 2
ARTICLE III.BENEFICIAL INTEREST .................. 2
Section 1. Shares of Beneficial Interest...... 2
Section 2. Ownership of Shares ............... 3
Section 3. Investment in the Trust............ 3
Section 4. No Pre-emptive Rights;
Action by Investors................ 3
Section 5. Establishment and Designation
of Series.......................... 3
ARTICLE IV. THE TRUSTEES ........................ 5
Section 1. Management of the Trust ........... 5
Section 2. Election of Trustees by Investors . 6
Section 3. Term of Office of Trustees ........ 6
Section 4. Termination of Service and
Appointment of Trustees ........... 6
Section 5. Number of Trustees ................ 6
Section 6. Effect of Death, Resignation, etc. of a Trustee 7
Section 7. Ownership of Assets ............... 7
ARTICLE V. POWERS OF THE TRUSTEES .............. 7
Section 1. Powers............................. 7
Section 2. Principal Transactions ............ 10
Section 3. Investments by Trustees and Officers 10
Section 4. Parties to Contract................ 10
ARTICLE VI. TRUSTEES' EXPENSES AND COMPENSATION 10
Section 1. Trustee Reimbursement.............. 10
Section 2. Trustee Compensation .............. 11
ARTICLE VII.INVESTMENT ADVISER, ADMINISTRATIVE
SERVICES, PLACEMENT AGENT, AND
TRANSFER AGENT ...................... 12
Section 1. Investment Adviser ................ 12
Section 2. Administrative Services ........... 12
Section 3. Placement Agent.................... 12
Section 4. Transfer Agent .................... 13
ARTICLE VIII. INVESTORS VOTING POWERS
AND MEETINGS ........................ 13
Section 1. Voting Powers ..................... 13
Section 2. Meetings........................... 14
Section 3. Quorum and Required Vote .......... 14
Section 4. Action by Written Consent ......... 14
Section 5. Additional Provisions ............. 15
ARTICLE IX. CUSTODIAN ........................... 15
ARTICLE X. INCREASES AND REDEMPTIONS
OF INTERESTS ........................ 15
ARTICLE XI. DETERMINATION OF BOOK CAPITAL ACCOUNT
BALANCES AND DISTRIBUTIONS .......... 16
Section 1. Book Capital Account Balances ..... 16
Section 2. Allocations and Distributions to
Investors ......................... 16
Section 3. Power to Modify Foregoing Procedures 16
ARTICLE XII.INDEMNIFICATION ..................... 17
Section 1. Indemnification of Investors ...... 17
Section 2. Limitation of Personal Liability and
Indemnification of Trustees, Officers,
Employees or Agents of the Trust .. 17
ARTICLE XIII. MISCELLANEOUS...................... 18
Section 1. Trustee Action Binding, Expert Advice,
No Bond or Surety ................. 18
Section 2. Establishment of Record Dates ..... 18
Section 3. Termination of Trust .............. 19
Section 4. Offices of the Trust, Filing of Copies,
Headings, Counterparts ............ 20
Section 5. Applicable Law .................... 20
Section 6. Amendments -- General ............. 20
Section 7. Amendments -- Series............... 21
Section 8. Use of Name ....................... 21
DECLARATION OF TRUST
OF
FEDERATED INVESTMENT PORTFOLIOS
Dated as of September 29, 1995
DECLARATION OF TRUST made as of September 29, 1995, by the undersigned, and by
the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WHEREAS, the Trustees desire to establish a trust fund for the investment and
reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property contributed to
the trust fund hereunder shall be held and managed under this Declaration
of Trust IN TRUST as herein set forth below.
ARTICLE I
NAMES AND DEFINITIONS
Section 1. Name. This Trust shall be known as FEDERATED INVESTMENT PORTFOLIOS,
and the Trustees may conduct the business of the Trust under that name or
any other name as they may determine from time to time.
Section 2. Definitions. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," "Investment Adviser," and "Majority Shareholder Vote" (the
67% or 50% requirement of Section 2(a)(42) of the 1940 Act, whichever
may be applicable) shall have the meanings given them in the 1940 Act,
as amended from time to time;
(b) The "Trust" refers to the Massachusetts Business Trust established by
this Declaration of Trust, as amended from time to time, inclusive of
each and every Series established hereunder;
(c) "Series" refers to a series of Interests established and designated
under or in accordance with the provisions of Article III;
(d) "Series Company" refers to the form of a registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in
any successor statutory provision;
(e) "Investor" means a record owner of Interests of any Series;
(f) "Trustees" refer to the individual Trustees in their capacity as
Trustees hereunder of the Trust and their successor or successors for
the time being in office as such Trustees;
(g) "Interests" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to
time, or if more than one Series is authorized by the Trustees, the
equal proportionate units into which each Series shall be divided from
time to time and includes fractions of Interests as well as whole
Interests;
(h) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, (including any exemptions granted
thereunder) as amended from time to time; and
(i) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to operate as an investment company, and provide
investors a continuous source of managed investments by investing primarily
in securities, derivative securities, and also in debt instruments,
commodities, commodity contracts and options thereon, and other property.
ARTICLE III
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the Trust
shall at all times be divided into transferable Interests, without par
value. Subject to the provisions of Section 5 of this Article III, each
Interest shall have voting rights as provided in Article VIII hereof, and
holders of the Interests of any Series shall be entitled to receive
allocations of unrealized gains and losses, taxable income and tax loss,
and profit and loss, when and as declared with respect thereto in the
manner provided in Article XI, Section 2 hereof. Each Interest of a Series
shall represent an equal proportionate interest in the assets and
liabilities and the income and the expenses of the Series with each other
Interest of the same Series, none having priority or preference over
another. The number of Interests authorized shall be unlimited. The
Trustees may from time to time divide or combine the Interests of any
Series into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Series.
Section 2. Ownership of Shares. The ownership of Interests shall be recorded
in the books of the Trust or a transfer agent which books shall be
maintained separately for the Interests of each Series. The Interests of
each Investor may not be transferred by such Investor, except as provided
in Article X with regard to redemptions of Interests. The record books of
the Trust or any transfer agent, as the case may be, shall be conclusive as
to who are the Investors of each Series and as to the number of Interests
of each Series held from time to time by each.
Section 3. Investment in the Trust. The Trustees shall accept investments in
the Trust from such persons and on such terms as they may from time to time
authorize. After the date of the initial contribution of capital (which
shall occur prior to or with the initial private offering of Interests),
the number of Interests to represent the initial contribution shall be
considered as outstanding and the amount received by the Trustees on
account of the contribution shall be treated as an asset of the Trust to be
allocated among any Series in the manner described in Section 5(a) of this
Article. Subsequent to such initial contribution of capital, Interests
(including Interests which may have been redeemed or repurchased by the
Trust) may be issued or sold through a capital contribution as provided in
Article X.
Section 4. No Pre-emptive Right; Action by Investor. Investors shall have no
pre-emptive or other right to subscribe to any additional Interests or
other securities issued by the Trust. No action may be brought by an
Investor on behalf of the Trust unless a prior demand regarding such matter
has been made on the Trustees of the Trust.
Section 5. Establishment and Designation of Series. Without limiting the
authority of the Trustees set forth in Article XIII, Section 7, inter alia,
to establish and designate any additional Series or to modify the rights
and preferences of any existing Series, the initial Series shall be, and is
established and designated as, Bond Index Portfolio.
Interests of any Series established in this Section 5 shall have the
following relative rights and preferences:
(a) Assets belonging to Series. All consideration received by the Trust
for the issue or sale of Interests of a particular Series, together
with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever
source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that Series for all
purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits and proceeds thereof, from whatever
source derived, including, without limitation, any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets,
income, earnings, profits and proceeds thereof, funds or payments
which are not readily identifiable as belonging to any particular
Series (collectively "General Assets"), the Trustees shall allocate
such General Assets to, between or among any one or more of the Series
established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable,
and any General Assets so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Investors of all Series for all
purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust
in respect to that Series and all expenses, costs, charges, and
reserves attributable to that Series, and any general liabilities of
the Trust which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Trustees to
and among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges, and reserves so charged to a Series are
herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities belonging to a Series by the Trustees shall
be conclusive and binding upon the Investors of all Series for all
purposes.
(c) Allocations, Distributions, Redemptions, Repurchases and
Indemnification. Notwithstanding any other provisions of this
Declaration of Trust, including, without limitation, Article XI, no
allocation or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any Series) with
respect to, nor any redemption or repurchase of the Interests of any
Series shall be effected by the Trust other than from the assets
belonging to such Series, nor except as specifically provided in
Section 1 of Article XII hereof, shall any Investor of any particular
Series otherwise have any right or claim against the assets belonging
to any other Series except to the extent that such Investor has such a
right or claim hereunder as an Investor of such other Series.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration of Trust, including, without limitation, Section 1 of
Article VIII, only Investors of a particular Series shall be entitled
to vote on any matters affecting such Series. Except with respect to
matters as to which any particular Series is adversely affected
materially differently or as otherwise required by applicable law, all
of the Interests of each Series shall, on matters as to which such
Series is entitled to vote, vote with other Series so entitled as a
single class. Notwithstanding the foregoing, with respect to matters
which would otherwise be voted on by two or more Series as a single
class, the Trustees may, in their sole discretion, submit such matters
to the Investors of any or all such Series, separately.
(e) Fraction. Any fractional Interest of a Series shall carry
proportionately all the rights and obligations of a whole Interest of
that Series, including rights with respect to voting, receipt of
allocations and distributions, redemption of Interests, and
termination of the Trust or of any Series.
(f) Elimination of Series. The Trustees shall have the authority, without
the approval of Investors of any Series, unless otherwise required by
applicable law, to amend this Declaration of Trust to abolish that
Series and to rescind the establishment and designation thereof.
ARTICLE IV
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary
and desirable to carry out that responsibility. The Trustees who shall
serve as Trustees are as follows: John F. Donahue, J. Christopher Donahue,
Thomas G. Bigley, Jr. , John T. Conroy, Jr., William J. Copeland, James E.
Dowd, Lawrence D. Ellis, M.D., Edward L. Flaherty, Peter E. Madden, Gregor
F. Meyer, John E. Murray, Jr, Wesley W. Posvar, and Marjorie P. Smuts.
Section 2. Election of Trustees by Investors. Unless otherwise required by the
1940 Act or any court or regulatory body of competent jurisdiction, or
unless the Trustees determine otherwise, a Trustee shall be elected by the
Trustees, and Investors shall have no right to elect Trustees.
Section 3. Term of Office of Trustees. The Trustees shall hold office during
the lifetime of this Trust, and until its termination as hereinafter
provided; except (a) that any Trustee may resign his office at any time by
written instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is
specified therein; (b) that any Trustee may be removed at any time by
written instrument signed by at least two-thirds of the number of Trustees
prior to such removal, specifying the date when such removal shall become
effective; (c) that any Trustee who requests in writing to be retired or
who has become mentally or physically incapacitated may be retired by
written instrument signed by a majority of the other Trustees, specifying
the date of his retirement; and (d) a Trustee may be removed at any special
meeting of Investors of the Trust by a vote of two-thirds of the
outstanding Interests. Any removals shall be effective as to the Trust and
each Series hereunder.
Section 4. Termination of Service and Appointment of Trustees. In case of the
death, resignation, retirement, removal or mental or physical incapacity of
any of the Trustees, or in case a vacancy shall, by reason of an increase
in number, or for any other reason, exist, the remaining Trustees shall
fill such vacancy by appointing such other person as they in their
discretion shall see fit. An appointment of a Trustee may be made by the
Trustees then in office in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a
later date, provided that said appointment shall become effective only at
or after the effective date of said retirement, resignation or increase in
number of Trustees. As soon as any Trustee so appointed shall have
accepted this Trust, the trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder. Any appointment
authorized by this Section 4 is subject to the provisions of Section 16(a)
of the 1940 Act.
Section 5. Number of Trustees. The number of Trustees, not less than three (3)
nor more than twenty (20) serving hereunder at any time, shall be
determined by the Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy
is filled or while any Trustee is physically or mentally incapacitated, the
other Trustees shall have all the powers hereunder and the certificate
signed by a majority of the other Trustees of such vacancy, absence or
incapacity, shall be conclusive, provided, however, that no vacancy which
reduces the number of Trustees below three (3) shall remain unfilled for a
period longer than six calendar months.
Section 6. Effect of Death, Resignation, etc. of a Trustee. The death,
resignation, retirement, removal, or mental or physical incapacity of the
Trustees, or any one or more of them, shall not operate to annul the Trust
or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
Section 7. Ownership of Assets. The assets belonging to each Series shall be
held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustee. All of the assets belonging to each Series or owned by the Trust
shall at all times be considered as vested in the Trustees. No Investor
shall be deemed to have a severable ownership interest in any individual
asset belonging to any Series or owned by the Trust or any right of
partition or possession thereof, but each Investor shall have a
proportionate undivided beneficial interest in a Series.
ARTICLE V
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Investors. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust or
a Series. The Trustees shall not be bound or limited by present or future
laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of
this Trust. Without limiting the foregoing, the Trustees shall have the
following specific powers and authority, subject to any applicable
limitation in the 1940 Act or in this Declaration of Trust or in the By-
Laws of the Trust:
(a) To buy, and invest funds in their hands in securities and other
property, including, but not limited to, common stocks, preferred
stocks, bonds, debentures, warrants and rights to purchase securities,
options, certificates of beneficial interest, money market
instruments, notes or other evidences of indebtedness issued by any
corporation, trust or association, domestic or foreign, or issued or
guaranteed by the United States of America or any agency or
instrumentality thereof, by the government of any foreign country, by
any State of the United States, or by any political subdivision or
agency or instrumentality of any State or foreign country, or "when-
issued" or "delayed-delivery" contracts for any such securities, or
any repurchase agreement or reverse repurchase agreement, or debt
instruments, commodities, commodity contracts and options thereon, or
to retain assets belonging to each and every Series in cash, and from
time to time to change the investments of the assets belonging to each
Series;
(b) To adopt By-Laws of the Trust not inconsistent with the Declaration of
Trust providing for the conduct of the business of the Trust and to
amend and repeal them to the extent that they do not reserve that
right to the Investors;
(c) To elect and remove such officers of the Trust and appoint and
terminate such agents of the Trust as they consider appropriate;
(d) To appoint or otherwise engage a bank or other entity permitted by the
1940 Act, as custodian of any assets belonging to any Series subject
to any conditions set forth in this Declaration of Trust or in the By-
Laws;
(e) To appoint or otherwise engage transfer agents, dividend disbursing
agents, Investor servicing agents, Investment Advisers (including any
sub-investment advisers), placement agents, administrative service
agents, and such other agents as the Trustees may from time to time
appoint or otherwise engage;
(f) To provide for the distribution of any Interests of any Series either
through a private placement agent in the manner hereinafter provided
for or by the Trust itself, or both;
(g) To set record dates in the manner hereinafter provided for;
(h) To delegate such authority as they consider desirable to a committee
or committees composed of Trustees, including without limitation, an
Executive Committee, or to any officers of the Trust and to any agent
or custodian;
(i) To sell or exchange any or all of the assets belonging to one or more
Series, subject to the provisions of Article XIII, Section 3(b)
hereof;
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons, including the
Investment Adviser of the Trust as the Trustees shall deem proper,
granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities or other property;
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in
its own name or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual
business practice of Massachusetts business trusts or investment
companies;
(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which belongs to any Series; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any
security which belongs to any Series;
(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration or otherwise, any actions, suits, proceedings,
disputes, claims, demands, and things relating to the Trust, and out
of the assets belonging to any Series to pay, or to satisfy, any
debts, claims or expenses incurred in connection therewith, including
those of litigation, upon any evidence that the Trustees may deem
sufficient (such powers shall include, without limitation, any
actions, suits, proceedings, disputes, claims, demands and things
relating to the Trust wherein any of the Trustees may be named
individually and the subject matter of which arises by reason of
business for or on behalf of the Trust);
(o) To make distributions of income and of capital gains to Investors;
(p) To borrow money;
(q) From time to time to issue and sell the Interests of any Series either
for cash or for property whenever and in such amounts as the Trustees
may deem desirable, but subject to the limitation set forth in Section
3 of Article III.
(r) To purchase insurance of any kind, including, without limitation,
insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of the Trust, or is or was serving at the request
of the Trust as a trustee, director, officer, agent, or employee of
another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such;
(s) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights
relating to any or all of the assets belonging to any Series;
The Trustees shall have all of the powers set forth in this Section 1 with
respect to all assets and liabilities of each Series.
Section 2. Principal Transactions. The Trustees shall not cause the Trust on
behalf of any Series to buy any securities (other than Interests) from or
sell any securities (other than Interests) to, or lend any assets belonging
to any Series to any Trustee or officer or employee of the Trust or any
firm of which any such Trustee or officer is a member acting as principal
unless permitted by the 1940 Act, but the Trust may employ any such other
party or any such person or firm or company in which any such person is an
interested person in any capacity not prohibited by the 1940 Act.
Section 3. Investments by Trustees and Officers. No Trustee, officer,
employee, or other agent of the Trust may acquire or own Interests of any
Series.
Section 4. Parties to Contract. The Trustees may enter into any contract of
the character described in Article VII or in Article IX hereof or any other
capacity not prohibited by the 1940 Act with any corporation, firm,
partnership, trust, or association, although one or more of the Trustees,
officers, employees, or agents of the Trust or their affiliates may be an
officer, director, trustee, partner, or interested person of such other
party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor
shall any person holding such relationship be liable merely by reason of
such relationship for any loss or expense to the Trust or any Series under
or by reason of said contract or accountable for any profit realized
directly or indirectly therefrom, in the absence of actual fraud. The same
person (including a firm, corporation, partnership, trust, or association)
may be the other party to contracts entered into pursuant to Article VII or
Article IX or any other capacity not prohibited by the 1940 Act, and any
individual may be financially interested or otherwise an interested person
of persons who are parties to any or all of the contracts mentioned in this
Section 4.
ARTICLE VI
TRUSTEES' EXPENSES AND COMPENSATION
Section 1. Trustee Reimbursement. The Trustees shall be reimbursed from the
assets belonging to each particular Series for all of such Trustees'
expenses as such expenses are allocated to and among any one or more of the
Series pursuant to Article III, Section 5(b), including, without
limitation, expenses of organizing the Trust or any Series and continuing
its or their existence; fees and expenses of Trustees and officers of the
Trust; fees for investment advisory services, administrative services, and
private placement services provided for in Article VII, Sections 1, 2, and
3; fees and expenses of preparing Registration Statements under the 1940
Act and any amendments thereto; expenses of registering and qualifying the
Trust and any Series and the Interests of any Series under federal and
state laws and regulations, if any; interest expenses, taxes, fees, and
commissions of every kind; expenses of issue, purchases, repurchases and
redemptions of Interests; charges and expenses of custodians, transfer
agents, dividend disbursing agents, Investor servicing agents and
registrars; auditing, accounting, and legal expenses; reports to Investors
and governmental officers and commissions; expenses of meetings of
Investors and proxy solicitations therefor; insurance expenses; association
membership dues and nonrecurring items as may arise, including all losses
and liabilities by them incurred in administering the Trust and any Series,
including expenses incurred in connection with litigation, proceedings, and
claims and the obligations of the Trust under Article XII hereof and the
By-Laws to indemnify its Trustees, officers, employees, and agents, and any
contract obligation to indemnify the placement agent of the Trust under
Section 3 of Article VII; and for the payment of such expenses,
disbursements, losses, and liabilities, the Trustees shall have a lien on
the assets belonging to each Series prior to any rights or interests of the
Investors of any Series. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
Section 2. Trustee Compensation. The Trustees shall be entitled to
compensation from the Trust from the assets belonging to any Series for
their respective services as Trustees, to be determined from time to time
by vote of the Trustees, and the Trustees shall also determine the
compensation of all officers, employees, consultants, and agents whom they
may elect or appoint. The Trust may pay out of the assets belonging to any
Series any Trustee or any corporation, firm, partnership, trust, or other
entity of which a Trustee is an interested person for services rendered in
any capacity not prohibited by the 1940 Act, and such payments shall not be
deemed compensation for services as a Trustee under the first sentence of
this Section 2 of Article VI.
ARTICLE VII
INVESTMENT ADVISER, ADMINISTRATIVE SERVICES,
PLACEMENT AGENT AND TRANSFER AGENT
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote by the
relevant Series to the extent such vote is required by law, the Trustees
may in their discretion from time to time enter into an investment advisory
contract whereby the other party to such contract shall undertake to
furnish the Trustees investment advisory services for such Series upon such
terms and conditions and for such compensation as the Trustees may in their
discretion determine. Subject to a Majority Shareholder Vote by the
relevant Series to the extent such vote is required by law, the Investment
Adviser may enter into a sub-investment advisory contract to receive
investment advice and/or statistical and factual information from the sub-
investment adviser for such Series upon such terms and conditions and for
such compensation as the Trustees, in their discretion, may agree.
Notwithstanding any provisions of this Declaration of Trust, the Trustees
may authorize the Investment Adviser (including any sub-investment adviser)
or any person furnishing administrative personnel and services as set forth
in Article VII, Section 2 (subject to such general or specific instructions
as the Trustees may from time to time adopt) to effect purchases, sales, or
exchanges of portfolio securities belonging to a Series on behalf of the
Trustees or may authorize any officer, employee, or Trustee to effect such
purchases, sales, or exchanges pursuant to recommendations of the
Investment Adviser (and all without further action by the Trustees). Any
such purchases, sales, and exchanges shall be deemed to have been
authorized by the Trustees. The Trustees may also authorize the Investment
Adviser to determine what firms shall be employed to effect transactions in
securities for the account of a Series and to determine what firms shall
participate in any such transactions or shall share in commissions or fees
charged in connection with such transactions.
Section 2. Administrative Services. The Trustees may in their discretion from
time to time contract for administrative personnel and services whereby the
other party shall agree to provide the Trustees administrative personnel
and services to operate the Trust or a Series on a daily basis, on such
terms and conditions as the Trustees may in their discretion determine.
Such services may be provided by one or more entities.
Section 3. Placement Agent. The Trustees may in their discretion from time to
time enter into an exclusive or nonexclusive contract or contracts
providing for the sale of the Interests of a Series, whereby a Series may
either agree to sell the Interests to the other party to the contract or
appoint such other party its sales agent for such shares. In either case,
the contract shall be on such terms and conditions (including
indemnification of the placement agent allowable under applicable law and
regulation) as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article VII; and such contract may
also provide for the repurchase or sale of Interests of a Series by such
other party as agent of the Trust.
Section 4. Transfer Agent. The Trustees may in their discretion from time to
time enter into transfer agency and Investor services contracts whereby the
other party shall undertake to furnish transfer agency and Investor
services. The contracts shall be on such terms and conditions as the
Trustees may in their discretion determine not inconsistent with the
provisions of this Declaration of Trust or of the By-Laws. Such services
may be provided by one or more entities.
ARTICLE VIII
INVESTORS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. Subject to the provisions set forth in Article III,
Section 5(d), the Investors shall have power to vote: (i) for the election
of Trustees as provided in Article IV, Section 2; (ii) for the removal of
Trustees as provided in Article IV, Section 3(d); (iii) with respect to any
Investment Adviser (including any sub-investment adviser) as provided in
Article VII, Section 1; (iv) with respect to the amendment of this
Declaration of Trust as provided in Article XIII, Section 7; and (v) with
respect to such additional matters relating to the Trust as may be required
by law, by this Declaration of Trust, or the By-Laws of the Trust or any
regulation of the Trust or the Securities and Exchange Commission or any
State, or as the Trustees may consider desirable. Each whole Interest
shall be entitled to one vote as to any matter on which it is entitled to
vote, and each fractional Interest shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Interests may be voted in person or by proxy. A proxy purporting
to be executed by or on behalf of any Investor shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. At all meetings of Investors, unless
inspectors of election have been appointed, all questions relating to the
qualification of votes and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. Unless
otherwise specified in the proxy, the proxy shall apply to all Interests of
each Investor in the Trust (or each Series). Any proxy may be in written
form, telephonic or electronic form, including facsimile, and all such
forms shall be valid when in conformance with procedures established and
implemented by the officers of the Trust. Until Interests of a Series are
issued, the Trustees may exercise all rights of Investors of such Series
with respect to matters affecting such Series, and may take any action with
respect to the Trust or such Series required or permitted by law, this
Declaration of Trust or any By-Laws of the Trust to be taken by Investors.
Section 2. Meetings. An Investors' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Investors may
be called by the Trustees or the Chief Executive Officer of the Trust and
shall be called by the Trustees upon the written request of Investors
owning at least one-tenth of the outstanding Interests of all Series
entitled to vote. Investors shall be entitled to at least fifteen days'
notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law, the
presence in person or by proxy of the holders of (a) one-half of the
Interests of the Trust on all matters requiring a Majority Shareholder
Vote, as defined in the Investment Company Act of 1940, or (b) one-third of
the Interests of the Trust on all other matters permitted by law, in each
case, entitled to vote shall constitute a quorum at any meeting of the
Investors, except with respect to any matter which by law requires the
separate approval of one or more Series, in which case the presence in
person or by proxy of the holders of one-half or one-third, as set forth
above, of the Interests of each Series entitled to vote separately on the
matter shall constitute a quorum. When any one or more Series is entitled
to vote as a single Series, more than one-half, or one-third, as
appropriate, of the Interests of each such Series entitled to vote shall
constitute a quorum at an Investors' meeting of that Series. If a quorum
shall not be present for the purpose of any vote that may properly come
before the meeting, the Interests present in person or by proxy and
entitled to vote at such meeting on such matter may, by plurality vote,
adjourn the meeting from time to time to such place and time without
further notice than by announcement to be given at the meeting until a
quorum entitled to vote on such matter shall be present, whereupon any such
matter may be voted upon at the meeting as though held when originally
convened. Subject to any applicable requirement of law or of this
Declaration of Trust or the By-Laws, a plurality of the votes cast shall
elect a Trustee, and all other matters shall be decided by a majority of
the votes cast and entitled to vote thereon.
Section 4. Action by Written Consent. Subject to the provisions of the 1940
Act and other applicable law, any action taken by Investors may be taken
without a meeting if a majority of such Investors entitled to vote on the
matter (or such larger proportion thereof as shall be required by
applicable law or by any express provision of this Declaration of Trust or
the By-Laws) consents to the action in writing. Such consents shall be
treated for all purposes as a vote taken at a meeting of Investors.
Section 5. Additional Provisions. The By-Laws may include further provisions
for Investors' votes and meetings and related matters.
ARTICLE IX
CUSTODIAN
The Trustees may, in their discretion, from time to time enter into contracts
providing for custodial and accounting services to the Trust or any Series.
The contracts shall be on the terms and conditions as the Trustees may in
their discretion determine not inconsistent with the provisions of this
Declaration of Trust or of the By-Laws. Such services may be provided by
one or more entities, including one or more sub-custodians.
ARTICLE X
INCREASES AND REDEMPTIONS OF INTERESTS
Subject to applicable law, to the provisions of this Declaration of Trust and to
such restrictions as may from time to time be adopted by the Trustees, each
Investor may vary its Interest in any Series at any time by increasing
(through a capital contribution) or decreasing (through a capital
withdrawal) or by a redemption of its Interest. An increase in the
Interest of an Investor in a Series shall be reflected as an increase in
the Book Capital Account balance of that Investor in that Series and a
decrease in the Interest of an Investor in a Series or the Redemption of
the Interest of that Investor shall be reflected as a decrease in the Book
Capital Account balance of that Investor in that Series. The Trust shall,
upon appropriate and adequate notice from any Investor, increase, decrease,
or redeem such Investor's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Investor upon any
such decrease or redemption shall not exceed the decrease in the Investor's
Book Capital Account balance effected by such decrease or redemption of its
Interest, and (b) if so authorized by the Trustees, the Trust may, at any
time and from time to time, charge fees for effecting any such decrease or
redemption, at such rates as the Trustees may establish, and may, at any
time and from time to time, suspend such right of decrease or redemption.
The procedures for effecting decreases or redemptions shall be as
determined by the Trustees from time to time.
ARTICLE XI
Determination of Book Capital Account
Balances and Distributions
Section 1. Book Capital Account Balances. The Book Capital Account balance of
Investors with respect to a particular Series shall be determined on such
days and at such time or times as the Trustees may determine. The Trustees
shall adopt resolutions setting forth the method of determining the Book
Capital Account balance of each Investor. The power and duty to make
calculations pursuant to such resolutions may be delegated by the Trustees
to the Investment Adviser or administrator, custodian, or such other person
as the Trustees may determine. Upon the redemption of an Interest, the
Investor in that Interest shall be entitled to receive the balance of its
Book Capital Account. An Investor may not transfer its Book Capital
Account balance.
Section 2. Allocations and Distributions to Investors. The Trustees shall, in
compliance with the Internal Revenue Code, the 1940 Act, and generally
accepted accounting principles, establish the procedures by which the Trust
shall make with respect to each Series: (i) the allocation of unrealized
gains and losses, taxable income and tax loss, and profit and loss, or any
item or items thereof, to each Investor, (ii) the payment of distributions,
if any to Investors, and (iii) upon liquidation, the final distribution of
items of taxable income and expense. Such procedures shall be set forth in
writing and be furnished to the Trust's accountants. The Trustees may
amend the procedures adopted pursuant to this Section 2 of Article XI from
time to time. The Trustees may retain from the net profits of each Series
such amount as they may deem necessary to pay the liabilities and expenses
of that Series.
Section 3. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article XI, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the
net income and net assets of the Trust and of each Series, the allocation
of income of the Trust and of each Series, the Book Capital Account balance
of each Investor, or the payment of distributions to the Investors as they
deem necessary or desirable to enable the Trust or a Series to comply with
any provision of the 1940 Act or any order of exemption issued by the
Commission or with the Internal Revenue Code.
ARTICLE XII
INDEMNIFICATION
Section 1. Indemnification of Investors. Each Investor of any Series shall be
liable for any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind, against or with respect to the
Trust or any Series arising out of any action taken or omitted for or on
behalf of the Trust or such Series.
Each Investor or former Investor of any Series (or their corporate or other
general successor) shall be entitled to be held harmless from and
indemnified against to the full extent of such liability and the costs of
any litigation or other proceedings in which such liability shall have been
determined, including, without limitation, the fees and disbursements of
counsel if, contrary to the provisions hereof, such Investor or former
Investor of such Series shall be held to be liable. Such indemnification
shall come exclusively from the assets of the relevant Series.
The Trust shall, upon request by an Investor or former Investor, assume the
defense of any claim made against any Investor for any act or obligation of
the Trust or any Series and satisfy any judgment thereon.
Section 2. Limitation of Personal Liability and Indemnification of Trustees,
Officers, Employees, or Agents of the Trust. No Trustee, officer,
employee, or agent of the Trust shall have the power to bind any other
Trustee, officer, employee, or agent of the Trust personally. The
Trustees, officers, employees, or agents of the Trust in incurring any
debts, liabilities or obligations, or in taking or omitting any other
actions for or in connection with the Trust, are, and each shall be deemed
to be, acting as Trustee, officer, employee or agent of the Trust and not
in his own individual capacity.
Trustees and officers of the Trust shall be liable for their willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee or officer, as the
case may be, and for nothing else.
Each person who is or was a Trustee, officer, employee, or agent of the
Trust shall be entitled to indemnification out of the assets of the Trust
(or of any Series) to the extent provided in, and subject to the provisions
of, the By-Laws, provided that no indemnification shall be granted in
contravention of the 1940 Act.
ARTICLE XIII
MISCELLANEOUS
Section 1. Trustee Action Binding, Expert Advice, No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. Subject to the provisions of Article
XII, the Trustees shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and
subject to the provisions of Article XII, shall be under no liability for
any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such,
nor any surety if a bond is required.
Section 2. Establishment of Record Dates. The Trustees may close the Interest
transfer books of the Trust maintained with respect to any Series for a
period not exceeding ninety (90) days preceding the date of any meeting of
Investors of the Trust or any Series, or the date for the payment of any
allocation or the making of any distribution to Investors, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of Interests of any Series shall go into effect or the last day on
which the consent or dissent of Investors of any Series may be effectively
expressed for any purpose; or in lieu of closing the Interests transfer
books as aforesaid, the Trustees may fix in advance a date, not exceeding
ninety (90) days preceding the date of any meeting of Investors of the
Trust or any Series, or the date for the payment of any allocation or the
making of any distribution to Investors of any Series, or the date for the
allotment of rights, or the date when any change or conversion or exchange
of Interests of any Series shall go into effect, or the last day on which
the consent or dissent of Investors of any Series may be effectively
expressed for any purpose, as a record date for the determination of the
Investors entitled to notice of, and, to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such allocation
or distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Interests,
or to exercise the right to give such consent or dissent, and in such case
such Investors and only such Investors as shall be Investors of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such allocation or distribution, or to
receive such allotment or rights, or to change, convert or exchange
Interests of any Series, or to exercise such rights, as the case may be,
notwithstanding, after such date fixed aforesaid, any transfer of any
Interests on the books of the Trust maintained with respect to any Series.
Nothing in the foregoing sentence shall be construed as precluding the
Trustees from setting different record dates for different Series.
Section 3. Termination of Trust.
(a) This Trust shall continue for a period of fifty (50) years from
September 29, 1995, but subject to the provisions of paragraphs (b),
(c) and (d) of this Section 3. At the date of termination of the
Trust pursuant to this paragraph (a) of Section 3, the Investors may
elect to continue the existence of the Trust for such period of time
as they may agree in writing. If the existence of the Trust is not
continued, the Trustees, upon making provision for the payment of all
outstanding obligations, taxes, and other liabilities, accrued or
contingent, belonging to each Series, shall distribute the remaining
assets belonging to each Series ratably among the holders of the
outstanding Interests of each Series. In termination of the Trust,
the Trustees may, as they deem appropriate, sell and convert into
money any or all of the assets of each Series prior to distribution.
(b) The Trustees may, by majority action, with the approval of a
Majority Shareholder Vote of each Series entitled to vote as
determined by the Trustees under Section 5(d) of Article III, sell and
convey the assets of the Trust or any Series to another trust or
corporation. Upon making provision for the payment of all outstanding
obligations, taxes and other liabilities, accrued or contingent,
belonging to each Series, the Trustees shall distribute the remaining
assets belonging to each Series ratably among the holders of the
outstanding Interests of that Series. The Trustees shall make a good
faith determination that a conveyance of a part of the assets of a
Series is in the best interest of Investors of the relevant Series.
(c) The Trustees may at any time sell and convert into money all the
assets of the Trust or any Series without Investor approval, unless
otherwise required by applicable law. Upon making provision for the
payment of all outstanding obligations, taxes, and other liabilities,
accrued or contingent, belonging to each Series, the Trustees shall
distribute the remaining assets belonging to each Series ratably among
the holders of the outstanding Interests of that Series.
(d) Upon completion of the distribution of the remaining proceeds of
the remaining assets as provided in paragraphs (b) and (c), the Trust
or the applicable Series shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder or
with respect thereto and the right, title, and interest of all parties
shall be canceled and discharged.
Section 4. Offices of the Trust, Filing of Copies, Headings, Counterparts. The
Trust shall maintain a usual place of business in Massachusetts, which,
initially, shall be c/o Donnelly, Conroy & Gelhaar, One Post Office Square,
Boston, Massachusetts 02109-2105, and shall continue to maintain an office
at such address unless changed by the Trustees to another location in
Massachusetts. The Trust may maintain other offices as the Trustees may
from time to time determine. The original or a copy of this instrument and
of each declaration of trust supplemental hereto shall be kept at the
office of the Trust where it may be inspected by any Investor. A copy of
this instrument and of each supplemental declaration of trust shall be
filed by the Trustees with the Massachusetts Secretary of State and the
Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
instrument, rather than the headings shall control. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 5. Applicable Law. The Trust set forth in this instrument is created
under and is to be governed by and construed and administered according to
the laws of The Commonwealth of Massachusetts.
Section 6. Amendments -- General. All rights granted to the Investors under
this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided. The
provisions of this Declaration of Trust (whether or not related to the
rights of Investors) may be amended at any time, so long as such amendment
does not adversely affect the rights of any Investor with respect to which
such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to the vote of a majority of such
Trustees). Any amendment to this Declaration of Trust that adversely
affects the rights of Investors may be adopted at any time by an instrument
signed in writing by a majority of the then Trustees (or by any officer of
the Trust pursuant to the vote of a majority of such Trustees) when
authorized to do so by the vote of the Investors holding a majority of the
Interests entitled to vote. Subject to the foregoing, any such amendment
shall be effective as provided in the instrument containing the terms of
such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate
(which may be a part of such instrument) executed by a Trustee or officer
to the effect that such amendment has been duly adopted. Copies of the
amendment to this Declaration of Trust shall be filed as specified in
Section 4 of this Article XIII. A restated Declaration of Trust,
integrating into a single instrument all of the provisions of the
Declaration of Trust which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall be
effective upon filing as specified in Section 4.
Section 7. Amendments -- Series. The establishment and designation of any
Series in addition to those established and designated in Section 5 of
Article III hereof shall be effective upon the execution by a majority of
the then Trustees, without the need for Investor approval, of an amendment
to this Declaration of Trust, taking the form of a complete restatement or
otherwise, setting forth such establishment and designation and the
relative rights and preferences of any such Series, or as otherwise
provided in such instrument.
Without limiting the generality of the foregoing, the Declaration of the
Trust may be amended without the need for Investor approval to:
(a) create one or more Series (in addition to any Series already
existing or otherwise) with such rights and preferences and such
eligibility requirements for investment therein as the Trustees shall
determine and reclassify any or all outstanding Interests as Interest
of particular Series in accordance with such eligibility requirements;
(b) combine two or more Series into a single Series on such terms and
conditions as the Trustees shall determine;
(c) change or eliminate any eligibility requirements for investment
in Interests of any Series, including without limitation the power to
provide for the issue of Interests of any Series in connection with
any merger or consolidation of the Trust with another trust or company
or any acquisition by the Trust of part or all of the assets of
another trust or company;
(d) change the designation of any Series;
(e) change the method of allocating unrealized gains and losses,
taxable income and tax loss, and profit and loss among the various
Series;
(f) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more
Series; and
(g) specifically allocate assets to any or all Series or create one
or more additional Series which are preferred over all other Series in
respect of assets specifically allocated thereto or any allocations
made by the Trust with respect to any item of income or expense,
however determined.
Section 8. Use of Name. The Trust acknowledges that Federated Investors has
reserved the right to grant the non-exclusive use of the name "Federated"
or any derivative thereof to any other investment company, investment
company portfolio, Investment Adviser, distributor, or other business
enterprise, and to withdraw from the Trust or one or more Series any right
to the use of the name "Federated."
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the day
and year first above written.
/s/John F. Donahue /s/Lawrence D.
Ellis, M.D.
John F. Donahue Lawrence D. Ellis, M.D.
/s/J. Christopher Donahue /s/Edward L. Flaherty, Jr.
J. Christopher Donahue Edward L.
Flaherty, Jr.
/s/Thomas G. Bigley, Jr. /s/Peter E. Madden
Thomas G. Bigley, Jr Peter E. Madden
/s/John T. Conroy, Jr. /s/Gregor F. Meyer
John T. Conroy, Jr. Gregor F. Meyer
/s/William J. Copeland /s/John E.
Murrary, Jr.
William J. Copeland John E. Murray, Jr.
/s/James E. Dowd /s/Wesley W. Posvar
James E. Dowd Wesley W. Posvar
/s/Marjorie P. Smuts
Marjorie P. Smuts
COMMONWEALTH OF PENNSYLVANIA )
: ss:
COUNTY OF ALLEGHENY )
I hereby certify that on September 29, 1995, before me, the subscriber, a
Notary Public of the Commonwealth of Pennsylvania, in for the County of
Allegheny, personally appeared John F. Donahue, J. Christopher Donahue, Thomas
G. Bigley, Jr. , John T. Conroy, Jr., William J. Copeland, James E. Dowd,
Lawrence D. Ellis, M.D., Edward L. Flaherty, Peter E. Madden, Gregor F. Meyer,
John E. Murray, Jr, Wesley W. Posvar, Marjorie P. Smuts, who acknowledged the
foregoing Declaration of Trust to be their act.
Witness my hand and notarial seal the day and year above written.
/s/Marie M. Hamm
Notary Public
Exhibit No. 2 under Form N-1A
FEDERATED INVESTMENT PORTFOLIOS
BY-LAWS
ARTICLE I
OFFICERS AND THEIR ELECTION
SECTION 1. OFFICERS. The officers of the Trust shall be elected
by the Board of Trustees, and shall be a President, one or more Vice
Presidents, a Treasurer, a Secretary and such other officers as the
Trustees may from time to time elect. The Board of Trustees, in its
discretion, may also elect a Chairman of the Board of Trustees (who must be
a Trustee). It shall not be necessary, and is prohibited, for any Trustee
or other officer to be a holder of Interests in any Series of the Trust.
SECTION 2. ELECTION OF OFFICERS. The President, Vice
President(s), Treasurer and Secretary shall be elected annually by the
Trustees, and serve until a successor is so elected and qualified, or until
earlier resignation or removal. The Chairman of the Trustees, if there is
one, shall be elected annually by and from the Trustees, and serve until a
successor is so elected and qualified, or until earlier resignation or
removal.
Two or more offices may be held by a single person except the offices
of President and Secretary. The officers shall hold office until their
successors are elected and qualified.
SECTION 3. RESIGNATIONS AND REMOVALS AND VACANCIES. Any officer
of the Trust may resign by filing a written resignation with the President
(or Chairman, if there is one) of the Trustees or with the Trustees or with
the Secretary, which shall take effect on being so filed or at such time as
may be therein specified. The Trustees may remove any officer, with or
without cause, by a majority vote of all of the Trustees. The Trustees may
fill any vacancy created in any office whether by resignation, removal or
otherwise, subject to the limitations of the Investment Company Act of
1940.
ARTICLE II
POWERS AND DUTIES OF TRUSTEES AND OFFICERS
SECTION 1. TRUSTEES. The business and affairs of the Trust shall
be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
SECTION 2. CHAIRMAN OF THE TRUSTEES ("CHAIRMAN"). The Chairman,
if there be a Chairman, shall preside at the meetings of Investors and of
the Board of Trustees. He shall have general supervision over the business
of the Trust and policies of the Trust. He shall employ and define the
duties of all employees of the Trust, shall have power to discharge any
such employees, shall exercise general supervision over the affairs of the
Trust and shall perform such other duties as may be assigned to him from
time to time by the Trustees. The Chairman shall appoint a Trustee or
officer to preside at such meetings in his absence.
SECTION 3. PRESIDENT. The President shall be the chief executive
officer of the Trust. The President, in the absence of the Chairman, or if
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there is no Chairman, shall perform all duties and may exercise any of the
powers of the Chairman subject to the control of the Trustees. He shall
counsel and advise the Chairman and shall perform such other duties as may
be assigned to him from time to time by the Trustees, the Chairman or the
Executive Committee. The President shall have the power to appoint one or
more Assistant Secretaries or other junior officers, subject to
ratification of such appointments by the Board. The President shall have
the power to sign, in the name of and on behalf of the Trust, powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities or other property owned by the Trust,
and may, in the name of and on behalf of the Trust, take all such action as
the President may deem advisable in entering into agreements to purchase
securities or other property in the ordinary course of business, and to
sign representation letters in the course of buying securities or other
property.
SECTION 4. VICE PRESIDENT. The Vice President (or if more than
one, the senior Vice President) in the absence of the President shall
perform all duties and may exercise any of the powers of the President
subject to the control of the Trustees. Each Vice President shall perform
such other duties as may be assigned to him from time to time by the
Trustees, the Chairman, the President, or the Executive Committee. Each
Vice President shall be authorized to sign documents on behalf of the
Trust. The Vice President shall have the power to sign, in the name of and
on behalf of the Trust and subject to Article VIII, Section 1, powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities or other property owned by the Trust,
and may, in the name of and on behalf of the Trust, take all such action as
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the Vice President may deem advisable in entering into agreements to
purchase securities or other property in the ordinary course of business,
and to sign representation letters in the course of buying securities or
other property.
SECTION 5. SECRETARY. The Secretary shall keep or cause to be
kept in books provided for that purpose the Minutes of the Meetings of
Investors and of the Trustees; shall see that all Notices are duly given in
accordance with the provisions of these By-Laws and as required by law;
shall be custodian of the records and of the Seal of the Trust (if there be
a Seal) and see that the Seal is affixed to all documents, the execution of
which on behalf of the Trust under its Seal is duly authorized; shall keep
directly or through a transfer agent a register of the post office address
of each Investor of each Series of the Trust, and make all proper changes
in such register, retaining and filing his authority for such entries;
shall see that the books, reports, statements, certificates and all other
documents and records required by law are properly kept and filed; and in
general shall perform all duties incident to the Office of Secretary and
such other duties as may from time to time be assigned to him by the
Trustees, Chairman, the President, or the Executive Committee.
SECTION 6. TREASURER. The Treasurer shall be the principal
financial and accounting officer of the Trust responsible for the
preparation and maintenance of the financial books and records of the
Trust. He shall deliver all funds and securities belonging to any Series
to such custodian or sub-custodian as may be employed by the Trust for any
Series. The Treasurer shall perform such duties additional to the
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foregoing as the Trustees, Chairman, the President or the Executive
Committee may from time to time designate.
SECTION 7. ASSISTANT VICE PRESIDENT. The Assistant Vice President
or Vice Presidents of the Trust shall have such authority and perform such
duties as may be assigned to them by the Trustees, the Executive Committee,
the President, or the Chairman.
SECTION 8. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or
Treasurers shall perform the duties of the Secretary and of the Treasurer,
respectively, in the absence of those Officers and shall have such further
powers and perform such other duties as may be assigned to them
respectively by the Trustees or the Executive Committee, the President, or
the Chairman.
SECTION 9. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Trustees. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a Trustee.
ARTICLE III
POWERS AND DUTIES OF THE EXECUTIVE AND OTHER COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect
from their own number an Executive Committee to consist of not less than
two members. The Executive Committee shall be elected by a resolution
passed by a vote of at least a majority of the Trustees then in office.
-5-
The Trustees may also elect from their own number other committees from
time to time, the number composing such committees and the powers conferred
upon the same to be determined by vote of the Trustees. Any committee may
make rules for the conduct of its business.
SECTION 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring
in the Executive Committee from any cause shall be filled by the Trustees
by a resolution passed by the vote of at least a majority of the Trustees
then in office.
SECTION 3. EXECUTIVE COMMITTEE TO REPORT TO TRUSTEES. All action
by the Executive Committee shall be reported to the Trustees at their
meeting next succeeding such action.
SECTION 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive
Committee shall fix its own rules of procedure not inconsistent with these
By-Laws or with any directions of the Trustees. It shall meet at such
times and places and upon such notice as shall be provided by such rules or
by resolution of the Trustees. The presence of a majority shall constitute
a quorum for the transaction of business, and in every case an affirmative
vote of a majority of all the members of the Committee present shall be
necessary for the taking of any action.
SECTION 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Trustees, the Executive Committee, except as
limited by the By-Laws of the Trust or by specific directions of the
Trustees, shall possess and may exercise all the powers of the Trustees in
the management and direction of the business and conduct of the affairs of
-6-
the Trust in such manner as the Executive Committee shall deem to be in the
best interests of the Trust, and shall have power to authorize the Seal of
the Trust (if there is one) to be affixed to all instruments and documents
requiring same. Notwithstanding the foregoing, the Executive Committee
shall not have the power to elect or remove Trustees, increase or decrease
the number of Trustees, elect or remove any Officer, declare allocations
among Investors, issue Interests or recommend to Investors any action
requiring Investor approval.
SECTION 6. COMPENSATION. The members of any duly appointed
committee shall receive such compensation and/or fees as from time to time
may be fixed by the Trustees.
SECTION 7. ACTION BY UNANIMOUS CONSENT OF THE BOARD OF TRUSTEES,
EXECUTIVE COMMITTEE OR OTHER COMMITTEE. Subject to Article V, Section 2 of
these By-Laws, any action required or permitted to be taken at any meeting
of the Trustees, Executive Committee or any other duly appointed Committee
may be taken without a meeting if consents in writing setting forth such
action are signed by all members of the Board or such committee and such
consents are filed with the records of the Trust. In the event of the
death, removal, resignation or incapacity of any Board or committee member
prior to that Trustee signing such consent, the remaining Board or
committee members may re-constitute themselves as the entire Board or
committee until such time as the vacancy is filled in order to fulfill the
requirement that such consents be signed by all members of the Board or
committee.
ARTICLE IV
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INVESTORS' MEETINGS
SECTION 1. SPECIAL MEETINGS. A special meeting of the Investors
of the Trust or of a particular Series shall be called by the Secretary
whenever ordered by the Trustees, the Chairman or requested in writing by
the holder or holders of at least one-tenth of the outstanding Interests of
the Trust or of the relevant Series, entitled to vote. If the Secretary,
when so ordered or requested, refuses or neglects for more than two days to
call such special meeting, the Trustees, Chairman or the Investors so
requesting may, in the name of the Secretary, call the meeting by giving
notice thereof in the manner required when notice is given by the
Secretary.
SECTION 2. NOTICES. Except as above provided, notices of any
special meeting of the Investors of the Trust or a particular Series, shall
be given by the Secretary by delivering or mailing, postage prepaid, to
each Investor entitled to vote at said meeting, a written or printed
notification of such meeting, at least seven business days before the
meeting, to such address as may be registered with the Trust by the
Investor. No notice of any meeting to Investors need be given to an
Investor if a written waiver of notice, executed before or after the
meeting by such Investor or their attorney that is duly authorized, is
filed with the records of the meeting. Notice may be waived as provided in
Article XIII of these By-Laws.
SECTION 3. PLACE OF MEETING. Meetings of the Investors of the
Trust or a particular Series, shall be held at the principal place of
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business of the Trust in Pittsburgh, Pennsylvania, or at such place within
or without The Commonwealth of Massachusetts as fixed from time to time by
resolution of the Trustees.
SECTION 4. ACTION BY UNANIMOUS CONSENT. Any action required or
permitted to be taken at any meeting of Investors may be taken without a
meeting, if a consent in writing, setting forth such action, is signed by a
majority of the Investors entitled to vote on the subject matter thereof,
and such consent is filed with the records of the Trust.
SECTION 5. PROXIES. Any investor entitled to vote at any meeting
of Investors may vote, by their duly authorized representative, either in
person, by telephone, by electronic means including facsimile, or by proxy.
Every written proxy shall be subscribed by the Investor or his duly
authorized attorney and dated, but need not be sealed, witnessed or
acknowledged. All proxies shall be filed with and verified by the
Secretary or an Assistant Secretary of the Trust or the person acting as
Secretary of the Meeting.
ARTICLE V
TRUSTEES' MEETINGS
SECTION 1. NUMBER AND QUALIFICATIONS OF TRUSTEES. The number of
Trustees can be changed from time to time by a majority of the Trustees to
not less than three nor more than twenty. The term of office of a Trustee
shall not be affected by any decrease in the number of Trustees made by the
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Trustees pursuant to the foregoing authorization. Each Trustee shall hold
office for the life of the Trust, or as otherwise provided in the
Declaration of Trust.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Trustees
shall be called by the Secretary at the written request of the Chairman,
the President, or any Trustee, and if the Secretary when so requested
refuses or fails for more than twenty-four hours to call such meeting, the
Chairman, the President, or such Trustee may in the name of the Secretary
call such meeting by giving due notice in the manner required when notice
is given by the Secretary.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Trustees may
be held without call or notice at such places and at such times as the
Trustees may from time to time determine, provided that any Trustee who is
absent when such determination is made shall be given notice of the
determination.
SECTION 4. QUORUM AND VOTE. A majority of the Trustees shall
constitute a quorum for the transaction of business. The act of a majority
of the Trustees present at any meeting at which a quorum is present shall
be the act of the Trustees unless a greater proportion is required by the
Declaration of Trust or these By-Laws or applicable law. In the absence of
a quorum, a majority of the Trustees present may adjourn the meeting from
time to time until a quorum shall be present. Notice of any adjourned
meeting need not be given.
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SECTION 5. NOTICES. The Secretary or any Assistant Secretary
shall give, at least two days before the meeting, notice of each meeting of
the Board of Trustees, whether Annual, Regular or Special, to each member
of the Board by mail, telegram, telephone or electronic facsimile to his
last known address. It shall not be necessary to state the purpose or
business to be transacted in the notice of any meeting unless otherwise
required by law. Personal attendance at any meeting by a Trustee other
than to protest the validity of said meeting shall constitute a waiver of
the foregoing requirement of notice. In addition, notice of a meeting need
not be given if a written waiver of notice executed by such Trustee before
or after the meeting is filed with the records of the meeting.
SECTION 6. PLACE OF MEETING. Meetings of the Trustees shall be
held at the principal place of business of the Trust in Pittsburgh,
Pennsylvania, or at such place within or without The Commonwealth of
Massachusetts as fixed from time to time by resolution of the Trustees, or
as the person or persons requesting said meeting to be called may
designate, but any meeting may adjourn to any other place.
SECTION 7. TELECONFERENCE MEETINGS ACTION BY CONSENT. Except as
otherwise provided herein or from time to time in the 1940 Act or in the
Declaration of Trust, any action to be taken by the Trustees may be taken
by a majority of the Trustees within or without Massachusetts, including
any meeting held by means of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can
communicate with each other simultaneously, and participation by such means
shall constitute presence in person at a meeting. Any action by the
Trustees may be taken without a meeting if a written consent thereto is
-11-
signed by all the Trustees and filed with the records of the Trustees'
meetings. Such consent shall be treated as a vote of the Trustees for all
purposes.Written consents may be executed in counterparts, which when taken
together, constitute a validly executed consent of the Trustees.
SECTION 8. SPECIAL ACTION. When all the Trustees shall be present
at any meeting, however called, or whenever held, or shall assent to the
holding of the meeting without notice, or after the meeting shall sign a
written assent thereto on the record of such meeting, the acts of such
meeting shall be valid as if such meeting had been regularly held.
SECTION 9. COMPENSATION OF TRUSTEES. The Trustees may receive a
stated salary for their services as Trustees, and by resolution of Trustees
a fixed fee and expenses of attendance may be allowed for attendance at
each Meeting. Nothing herein contained shall be construed to preclude any
Trustee from serving the Trust in any other capacity, as an officer, agent
or otherwise, and receiving compensation therefor.
ARTICLE VI
SHARES OF INTEREST
SECTION 1. CERTIFICATES. If certificates for shares of Interest
are issued, all certificates representing such Interest shall be signed by
the Chairman, President or any Vice President and by the Treasurer or
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Secretary or any Assistant Treasurer or Assistant Secretary and sealed with
the seal of the Trust, if the Trust has a seal. The signatures may be
either manual or facsimile signatures and the seal, if there is one, may be
either facsimile or any other form of seal. Certificates for shares of
Interest for which the Trust has appointed an independent Transfer Agent
and Registrar shall not be valid unless countersigned by such Transfer
Agent and registered by such Registrar. In case any officer who has signed
any certificate ceases to be an officer of the Trust before the certificate
is issued, the certificate may nevertheless be issued by the Trust with the
same effect as if the officer had not ceased to be such officer as of the
date of its issuance. Certificates of each Series shall be in such form
not inconsistent with law or the Declaration of Trust or these By-Laws as
may be determined by the Trustees.
SECTION 2. NON-TRANSFERABILITY OF INTERESTS. The shares of
Interest of each Series of the Trust shall not be transferable, except as
provided in the Declaration of Trust with regard to redemptions of
Interests in the Trust.
SECTION 3. EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be
entitled to treat the holder of record of any share or shares of interest
of a Series as the absolute owner thereof and shall not be bound to
recognize any equitable or other claim or interest in such share or shares
of Interest of a Series on the part of any other person except as may be
otherwise expressly provided by law.
SECTION 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
certificate for shares of Interest is lost, mutilated or destroyed, the
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Trustees may issue a new certificate in place thereof upon indemnity to the
relevant Series against loss and upon such other terms and conditions as
the Trustees may deem advisable.
SECTION 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The
Trustees shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer
and registration of certificates for shares of Interest and may appoint a
Transfer Agent and/or Registrar of certificates for shares of Interest of
each Series, and may require all such certificates to bear the signature of
such Transfer Agent and/or of such Registrar.
ARTICLE VII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust maintained on behalf of
each Series or any of them shall be open to the inspection of the Investors
of any Series; and no Investor shall have any right of inspecting any
account or book or document of the Trust except that, to the extent such
account or book or document relates to the Series in which it is an
Investor or the Trust generally, such Investor shall have such right of
inspection as conferred by laws or authorized by the Trustees or by
resolution of the Investor of the relevant Series.
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ARTICLE VIII
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
SECTION 1. AGREEMENTS, ETC. The Trustees or the Executive
Committee may authorize any Officer or Agent of the Trust to enter into any
Agreement or execute and deliver any instrument in the name of the Trust on
behalf of any Series, and such authority may be general or confined to
specific instances; and, unless so authorized by the Trustees or by the
Executive Committee or by the Declaration of Trust or these By-Laws, no
Officer, Agent or Employee shall have any power or authority to bind the
Trust by any Agreement or engagement or to pledge its credit or to render
it liable pecuniarily for any purpose or for any amount.
SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for
the payment of money, notes and other evidences of indebtedness shall be
signed by such Officers, Employees, or Agents, as shall from time to time
be designated by the Trustees or the Executive Committee, or as may be
specified in or pursuant to the agreement between the Trust on behalf of
any Series and the custodian appointed, pursuant to the provisions of the
Declaration of Trust.
SECTION 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES.
All endorsements, assignments, stock powers, other instruments of transfer
or directions for the transfer of portfolio securities or other property,
whether or not registered in nominee form, shall be made by such Officers,
-15-
Employees, or Agents as may be authorized by the Trustees or the Executive
Committee.
SECTION 4. EVIDENCE OF AUTHORITY. Anyone dealing with the Trust
shall be fully justified in relying on a copy of a resolution of the
Trustees or of any committee thereof empowered to act in the premises which
is certified as true by the Secretary or an Assistant Secretary under the
seal of the Trust, if any.
ARTICLE IX
INDEMNIFICATION OF TRUSTEES AND OFFICERS
SECTION 1. GENERAL. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees
reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil,
criminal, administrative, or investigative, and any appeal therefrom,
before any court or administrative or legislative body, in which such
Covered Person may be or may have been involved as a party or otherwise or
with which such person may be or may have been threatened, while in office
or thereafter, by reason of being or having been such a Covered Person,
-16-
except that no Covered Person shall be indemnified against any liability to
the Trust or its Investors to which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Expenses, including counsel fees so incurred by any such Covered
Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the
Trust in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is ultimately determined
that indemnification of such expenses is not authorized under this Article,
provided that (a) such Covered Person shall provide security for his
undertaking, (b) the Trust shall be insured against losses arising by
reason of such Covered Person's failure to fulfill his undertaking or (c) a
majority of the nonparty Trustees who are not interested persons of the
Trust (provided that a majority of such Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (but not a full
trial-type inquiry), that there is reason to believe such Covered Person
ultimately will be entitled to indemnification.
SECTION 2. COMPROMISE PAYMENT. As to any matter disposed of
(whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication in a decision on the merits by a court,
or by any other body before which the proceeding was brought, that such
Covered Person is liable to the Trust or its Investors by reason of willful
-17-
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office,
indemnification shall be provided if (a) approved as in the best interest
of the Trust, after notice that it involves such indemnification, by at
least a majority of non-party Trustees who are not interested persons of
the Trust (provided that a majority of such Trustees then in office act on
the matter), upon a determination, based upon a review of readily available
facts (but not a full trial-type inquiry) that such Covered Person is not
liable to the Trust or its Investors by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of
readily available facts (but not a full trial-type inquiry) to the effect
that such indemnification would not protect such Covered Person against any
liability to the Trust to which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Investors by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
SECTION 3. INDEMNIFICATION NOT EXCLUSIVE; DEFINITIONS. The right
of indemnification hereby provided shall not be exclusive of or affect any
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other rights to which any such Covered Person may be entitled. As used in
this Article IX, the term "Covered Person" shall include such person's
heirs, executors and administrators. For purposes of this Article IX, the
term "non-party Trustee" is a Trustee against whom none of the actions,
suits or other proceedings in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this Article IX shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of such persons.
ARTICLE X
SEAL
The seal of the Trust, if there is one, shall consist either of a
flat-faced die with the word "Massachusetts," together with the name of the
Trust and the year of its organization cut or engraved thereon, or any
other indication that the Trust has a seal that has been approved by the
Trustees, but, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on, and its absence shall not impair the
validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust.
ARTICLE XI
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FISCAL YEAR
The fiscal year of the Trust and each Series shall be as designated
from time to time by the Trustees.
ARTICLE XII
AMENDMENTS
These By-Laws may be amended by a majority vote of all of the
Trustees.
ARTICLE XIII
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of any statute of The Commonwealth of Massachusetts, or under
the provisions of the Declaration of Trust or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, or presence at a
meeting to which such person was entitled notice of, shall be deemed
equivalent thereto. A notice shall be deemed to have been given if
telegraphed, cabled, or sent by wireless when it has been delivered to a
representative of any telegraph, cable or wireless company with
-20-
instructions that it be telegraphed, cabled, or sent by wireless. Any
notice shall be deemed to be given if mailed at the time when the same
shall be deposited in the mail.
ARTICLE XIV
REPORT TO INVESTORS
The Trustees, so long as required by applicable law, shall at least
semi-annually submit to the Investors of each Series a written financial
report of the transactions of that Series including financial statements
which shall at least annually be certified by independent public
accountants.
ARTICLE XV
BOOKS AND RECORDS
The books and records of the Trust and any Series, including the
ledger or ledgers representing Interests in the Trust or any Series, may be
kept in or outside The Commonwealth of Massachusetts at such office or
agency of the Trust as may from time to time be determined by the Secretary
of the Trust, as set forth in Article II, Section 5 of these By-Laws.
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ARTICLE XVI
TERMS
Terms defined in the Declaration of Trust and not otherwise defined
herein are used herein with the meanings set forth or referred to in the
Declaration of Trust.
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FEDERATED INVESTMENT PORTFOLIOS
BY-LAWS
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICERS AND THEIR ELECTION 1
Section 1. Officers 1
Section 2. Election of Officers 1
Section 3. Resignations and Removals and Vacancies 1
ARTICLE II POWERS AND DUTIES OF TRUSTEES AND OFFICERS 1
Section 1. Trustees 1
Section 2. Chairman of the Trustees ("Chairman") 1
Section 3. President 1
Section 4. Vice President 2
Section 5. Secretary 2
Section 6. Treasurer 2
Section 7. Assistant Vice President 2
Section 8. Assistant Secretaries and Assistant Treasurers 2
Section 9. Salaries 3
ARTICLE IIIPOWERS AND DUTIES OF THE EXECUTIVE
AND OTHER COMMITTEES 3
Section 1. Executive and Other Committees 3
Section 2. Vacancies in Executive Committee 3
Section 3. Executive Committee to Report to Trustees 3
Section 4. Procedure of Executive Committee 3
Section 5. Powers of Executive Committee 3
Section 6. Compensation 3
Section 7. Action by Unanimous Consent of the Board of
Trustees, Executive Committee or Other Committee 3
ARTICLE IV INVESTORS' MEETINGS 4
Section 1. Special Meetings 4
Section 2. Notices 4
Section 3. Place of Meeting 4
Section 4. Action by Unanimous Consent 4
Section 5. Proxies 4
ARTICLE V TRUSTEES' MEETINGS 4
Section 1. Number and Qualifications of Trustees 4
Section 2. Special Meetings 4
Section 3. Regular Meetings 5
Section 4. Quorum and Vote 5
Section 5. Notices 5
Section 6. Place of Meeting 5
Section 7. Teleconference Meetings Action by Consent 5
Section 8. Special Action 5
Section 9. Compensation of Trustees 5
ARTICLE VI SHARES OF INTEREST 6
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Section 1. Certificates 6
Section 2. Non-Transferability of Interests 6
Section 3. Equitable Interest Not Recognized 6
Section 4. Lost, Destroyed or Mutilated Certificates 6
Section 5. Transfer Agent and Registrar: Regulations 6
ARTICLE VIIINSPECTION OF BOOKS 6
ARTICLE VIII AGREEMENTS, CHECKS,
DRAFTS, ENDORSEMENTS, ETC. 7
Section 1. Agreements, Etc 7
Section 2. Checks, Drafts, Etc 7
Section 3. Endorsements, Assignments and Transfer of Securities 7
Section 4. Evidence of Authority 7
ARTICLE IX INDEMNIFICATION OF TRUSTEES AND OFFICERS 7
Section 1. General 7
Section 2. Compromise Payment 8
Section 3. Indemnification Not Exclusive; Definitions 8
ARTICLE X SEAL 8
ARTICLE XI FISCAL YEAR 9
ARTICLE XIIAMENDMENTS 9
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ARTICLE XIII WAIVERS OF
NOTICE 9
ARTICLE XIVREPORT TO INVESTORS 9
ARTICLE XV BOOKS AND RECORDS 9
ARTICLE XVITERMS 10
Exhibit 9(ii) under Form N-1A
AGREEMENT
FOR
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of , 1995, by and between Federated
Investment Portfolios ("FIP"), on behalf of its portfolio the Bond Index
Portfolio ("Hub Fund"), and Federated Investment Trust ("FIT") on behalf of
its portfolio Federated Bond Index Fund ("Spoke Fund") and its Classes,
(collectively referred to herein as the "Funds"), having their principal
office and place of business at Federated Investors Tower, Pittsburgh, PA
15222-3779, 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, FIP 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 beneficial interests ("Interests");
WHEREAS, FIT is registered as an open-end management investment company
under the 1940 Act with authorized and issued shares of beneficial interest
("Shareholder Interests");
WHEREAS, the Spoke Fund invests all of its investable assets in the
Interests of the Hub Fund which has the same investment objective as the
Spoke Fund;
WHEREAS, the Spoke Fund invests in the Hub Fund through Signature
Financial Group, Inc.'s Hub and Spoke(R) master-feeder mutual fund
investment system;
WHEREAS, the Funds may desire to retain the Company to provide certain
pricing and/or accounting and recordkeeping services for each of the Funds,
and the Company is willing to furnish such services;
WHEREAS, the Funds may desire to appoint the Company as their transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment;
WHEREAS, the Funds may desire to appoint the Company as their agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks, and the Company desires to accept such
appointment; and
WHEREAS, from time to time the Funds may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to another agent (the "Agent").
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 Funds hereby appoint the Company to provide certain pricing and/or
accounting services to the Funds, 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 4 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES WITH REGARD TO THE HUB FUND.
Subject to the supervision and control of the Hub Fund's Board of
Trustees ("Hub Board"), the Company will assist the Hub Fund with regard to
fund accounting for the Hub Fund, and in connection therewith undertakes to
perform the following specific services;
A. Value the Interests of the Hub Fund 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 Hub 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 Hub
Fund, 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 Hub 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 Hub Fund for
potential errors in valuing the Hub Fund's Interests or calculating
the net asset value of such Interests 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 Hub
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 of the Interests of the Hub Fund, at
the time and in the manner from time to time determined by the Hub
Board and as set forth in the Hub Fund's Prospectus and Statement of
Additional Information ("Prospectus");
C. Calculate the net income of the Hub Fund, if any;
D. Calculate capital gains or losses of the Hub Fund resulting from
the sale or disposition of Interests, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Hub Fund, 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 Hub Fund
are the property of the Hub Fund and further agrees to surrender
promptly to the Trust such records upon the Hub Fund's request;
G. At the request of the Hub Fund, 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
Hub Fund.
ARTICLE 3. THE COMPANY'S DUTIES WITH REGARD TO THE SPOKE FUND.
Subject to the supervision and control of the Spoke Fund's Board of
Trustees ("Spoke Board"), the Company will assist the Spoke Fund with
regard to fund accounting for the Spoke Fund, and in connection therewith
undertakes to perform the following specific services;
A. Determine the net asset value of the Shareholder Interests of the
Spoke Fund based upon the assets allocated to it by the Hub Fund, at
the time and in the manner from time to time determined by the Board
and as set forth in the Spoke Fund's Prospectus and Statement of
Additional Information ("Prospectus");
B. Calculate the net income of the Spoke Fund, if any;
C. Calculate capital gains or losses of the Spoke Fund resulting from
sale or disposition of Shareholder Interests, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Spoke Fund, as required under Section 31(a) of the
1940 Act and the Rules thereunder in connection with the services
provided by the Company;
E. 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 Spoke Fund
are the property of the Spoke Fund and further agrees to surrender
promptly to the Spoke Fund such records upon the Spoke Fund's
request;
F. At the request of the Spoke Fund, prepare various reports or other
financial documents required by federal, state and other applicable
laws and regulations; and
G. Such other similar services as may be reasonably requested by the
Spoke Fund.
ARTICLE 4. 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 Funds, 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 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 of the Funds;
independent auditors expenses; legal and audit department expenses
billed to Federated Services Company for work performed related to
the Funds; law firm expenses; or other expenses not specified in
this Article 4 which may be properly payable by the Funds.
C. The compensation and out-of-pocket expenses shall be accrued by the
Funds 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 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 the Funds 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 Funds' net Interests and Shareholder
Interests shall be computed at the time and in the manner specified
in the Funds' Prospectuses.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate itself with 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
Funds in such respect.
SECTION TWO: INVESTOR AND SHAREHOLDER RECORDKEEPING.
ARTICLE 5. TERMS OF APPOINTMENT BY HUB FUND.
Subject to the terms and conditions set forth in this Agreement, the Hub
Fund hereby appoints the Company to act as, and the Company agrees to act
as, transfer agent and dividend disbursing agent for the Interests of the
investors of the Hub Fund ("Investor(s)").
ARTICLE 6 TERMS OF APPOINTMENT BY SPOKE FUND.
Subject to the terms and conditions set forth in this Agreement, Spoke
Fund hereby appoints the Company to act as, and the Company agrees to act
as, transfer agent and dividend disbursing agent for the Spoke Fund's
Shareholder Interests, and agent in connection with any accumulation, open-
end account, or similar plans provided the shareholders of the Spoke Fund
("Shareholder(s)"), including without limitation, any periodic investment
plan or periodic withdrawal.
ARTICLE 7. PROPER INSTRUCTIONS.
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 Funds, 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 Funds, and the Company are satisfied
that such procedures afford adequate safeguards for the Funds' assets.
Proper Instructions may only be amended in writing.
ARTICLE 8. DUTIES OF THE COMPANY WITH REGARD TO THE HUB FUND.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Hub Fund:
A. Purchases
(1) The Company shall receive orders and payment for the initial
purchase of and subsequent investments in Interests
("Purchases") and promptly deliver payment and appropriate
documentation therefore to the custodian of the Hub Fund, (the
"Custodian"). The Company shall notify the Hub 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 Hub
Fund's current Prospectus, the Company shall compute and issue
the appropriate number of Interests of the Hub Fund and hold
such Interests in the appropriate Investor accounts.
B. Distribution
(1) Upon notification by the Hub Fund of the declaration of any
distribution to Investors, the Company shall act as Dividend
Disbursing Agent for the Hub Fund in accordance with the
provisions of its governing document and the then-current
Prospectus of the Hub Fund. The Company shall credit income,
capital gain, or any other payments to Investors. 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 an Investor is entitled to receive additional
Interests by virtue of any such distribution or dividend,
appropriate credits shall be made to the Investor's account;
and
(2) The Company shall maintain records of account for the Hub Fund
and advise the Hub Fund and its Investors 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 Hub Fund Prospectus or
set forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Hub Fund 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 Investors, pursuant to procedures
described in the then-current Prospectus of the Hub Fund.
(3) If any request for redemption does not comply with the
procedures for redemption approved by the Hub Fund, the Company
shall promptly notify the Investor 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 Interests by the
registered Investor owners thereof.
D. Recordkeeping
(1) The Company shall record the issuance of Interests of the Hub
Fund, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of Interests of the Hub Fund which are authorized,
based upon data provided to it by the Hub Fund, and issued and
outstanding. The Company shall also provide the Hub Fund on a
regular basis or upon reasonable request with the total number
of Interests which are authorized and issued and outstanding,
but shall have no obligation when recording the issuance of
Interests, except as otherwise set forth herein, to monitor the
issuance of such Interests or to take cognizance of any laws
relating to the issue or sale of such Interests, which
functions shall be the sole responsibility of the Hub Fund.
(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
Hub Fund to include a record for each Investor's account of the
following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Interests 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) 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 Hub Fund at reasonable
times. The Company may, at its option at any time, and shall
forthwith upon the Hub Fund's demand, turn over to the Hub 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 Hub 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
Hub Fund or destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Hub Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) Investor lists and statistical information;
(d) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction or sales-related payments;
(e) 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 Investors, 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.
(2) 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, including but not limited to:
maintaining all Investor accounts, mailing Investor
reports and Prospectuses to current Investors, withholding
taxes on accounts subject to back-up or other withholding,
preparing and filing appropriate forms required with
respect to dividends and distributions by federal
authorities for all Investors, preparing and mailing
confirmation forms and statements of account to Investors
for all purchases and redemptions of Interests and other
conformable transactions in Investor accounts, preparing
and mailing activity statements for Investors, and
providing Investor account information.
F. Other Duties
(1) The Company shall answer correspondence from Investors relating
to their Interest accounts and such other correspondence as may
from time to time be addressed to the Company;
(2) The Company shall prepare Investor meeting lists, mail proxy
cards and other material supplied to it by the Hub Fund in
connection with Investor Meetings of the Hub Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Investors;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of, check forms and facsimile
signature imprinting devices, if any; and for the preparation
or use, and for keeping account of, such forms and devices.
ARTICLE 9. DUTIES OF THE COMPANY WITH REGARD TO THE SPOKE FUND.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Spoke Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of Shareholder Interests and promptly deliver payment and
appropriate documentation therefore to the custodian of the
Spoke Fund, (the "Custodian"). The Company shall notify the
Spoke 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 Spoke
Fund's current Prospectus, the Company shall compute and issue
the appropriate number of Shareholder Interests of the Spoke
Fund and hold such Shareholder Interests in the appropriate
Shareholder accounts.
(4) In the event that any check or other order for the purchase of
Shareholder Interests of the Spoke Fund is returned unpaid for
any reason, the Company shall debit the account of the
Shareholder by the number of Shareholder Interests that had
been credited to its account upon receipt of the order,
promptly mail a debit advice to the Shareholder , and notify
the Spoke Fund. In the event that the amount paid for such
Shareholder Interests exceeds proceeds of the redemption of
such Shareholder Interests plus the amount of any dividends
paid with respect to such Shareholder Interests, the Spoke Fund
or its distributor will reimburse the Company on the amount of
such excess.
B. Distribution
(1) Upon notification by the Spoke Fund of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Spoke Fund in accordance with the
provisions of its governing document and the then-current
Prospectus of the Spoke Fund. The Company shall 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
Shareholder Interests by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account; and
(2) The Company shall maintain records of account for the Spoke
Fund and advise the Spoke Fund 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 Spoke Fund Prospectus or
set forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Spoke Fund 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
Spoke Fund.
(3) The Company shall effect transfers of Shareholder Interests by
the registered Shareholder owners thereof.
(4) If any request for redemption does not comply with the
procedures for redemption approved by the Spoke 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.
(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 Spoke Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shareholder Interests
of the Spoke Fund, and maintain pursuant to applicable rules of
the Securities and Exchange Commission ("SEC") a record of the
total number of Shareholder Interests of the Spoke Fund which
are authorized, based upon data provided to it by the Spoke
Fund, and issued and outstanding. The Company shall also
provide the Spoke Fund on a regular basis or upon reasonable
request with the total number of Shareholder Interests which
are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shareholder
Interests, except as otherwise set forth herein, to monitor the
issuance of such Shareholder Interests or to take cognizance of
any laws relating to the issue or sale of such Shareholder
Interests, which functions shall be the sole responsibility of
the Spoke Fund.
(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
Spoke 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 Shareholder Interests 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) 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 Spoke Fund at reasonable
times. The Company may, at its option at any time, and shall
forthwith upon the Spoke Fund's demand, turn over to the Spoke
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 Spoke 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
Spoke Fund or destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Spoke Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) Shareholder lists and statistical information;
(d) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(e) 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
Shareholder Interests 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 Shareholder Interests of the Spoke Fund
sold in each state ("blue sky reporting"). The Spoke 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 the Spoke Fund'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 Spoke Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholder s
relating to their Shareholder Interest 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 Spoke Fund in
connection with Shareholder Meetings of the Spoke Fund;
receive, examine and tabulate returned proxies, and certify the
vote of the Shareholder s;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of, 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 10. DUTIES OF THE HUB FUND.
A. Compliance
The Hub Fund assumes full responsibility for the preparation,
contents and distribution of its own Prospectus and for complying
with all applicable requirements the 1940 Act and any laws, rules
and regulations of government authorities having jurisdiction.
B. Distributions
The Hub Fund shall promptly inform the Company of the declaration of
any dividend or distribution on account of any of the Hub Fund's
Interests.
ARTICLE 11. DUTIES OF THE SPOKE FUND.
A. Compliance
The Spoke Fund assumes full responsibility for the preparation,
contents and distribution of its own 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. Distributions
The Spoke Fund shall promptly inform the Company of the declaration
of any dividend or distribution on account of any of the Spoke
Fund's Interests.
ARTICLE 12. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Funds agree to pay the Company an annual maintenance
fee for each Investor or 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 Funds and the Company.
B. Reimbursements
In addition to the fee paid under Article 12A above, the Funds 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 Funds, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Funds 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 Funds and a duly authorized officer of the Company.
ARTICLE 13. 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 Funds
subcontract for the performance hereof with 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 Funds subcontract for
the performance hereof with an Agent selected by the Trust, or a
provider of services selected by Company, as described above;
provided, however, that the Company shall in no way be responsible
to the Funds for the acts and omissions of the Agent.
SECTION THREE: CUSTODY SERVICES PROCUREMENT.
ARTICLE 14. APPOINTMENT.
The Funds hereby appoint 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 Boards of the Funds as being eligible for selection by the Company as a
custodian (the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 15. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of each Fund's 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 Funds as
Custodian of the Funds' assets substantially on the terms approved
by the Fund Boards;
C. negotiate and enter into agreements with the Eligible Custodians for
the benefit of the Funds, with the Funds 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 Eligible Custodians;
E. continuously monitor the nature and the quality of services provided
by the Eligible Custodians; and
F. periodically provide to the Funds (i) written reports on the
activities and services of the Eligible Custodians; (ii) the nature
and amount of disbursement made on account of the Funds with respect
to each custodial agreement; and (iii) such other information as
each Fund's 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 16. FEES AND EXPENSES.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Funds agree to pay the Company an annual fee as
agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 15A above, the Funds 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 Funds, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Funds 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 the Funds.
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 Funds and a duly authorized officer of the Company.
SECTION FOUR: GENERAL PROVISIONS.
ARTICLE 17. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Funds shall file with the Company the following
documents:
(1) A copy of the Declarations of Trust and By-Laws of the Funds
and all amendments thereto;
(2) A copy of the resolution of the Boards of the Funds authorizing
this Agreement;
(3) All account application forms and other documents relating to
Investor and Shareholder accounts; and
(4) A copy of the current Prospectus for each Fund.
B. The Funds will also furnish from time to time the following
documents:
(1) Each resolution of the Boards of either Fund authorizing the
original issuance of each Fund's Interests or Shareholder
Interests ;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Interests or Shareholder Interests of the Funds;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Funds;
(4) Certified copies of each vote of either Board authorizing
officers to give Proper Instructions to the Eligible Custodians
and agents for fund accountant, custody services procurement,
and recordkeeping or transfer agency services;
(5) Such other documents or opinions which the Company may, in its
discretion, deem necessary or appropriate in the proper
performance of its duties; and
(6) Revisions to the Prospectus of each Fund.
ARTICLE 18. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Funds 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 Declaration of
Trust 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.
(7) It has obtained all required approvals from all government or
regulatory authorities necessary to enter into this arrangement
and to provide the services contemplated herein.
B. Representations and Warranties of the FIP and FIT
FIP and FIT represent and warrant to the Company that:
(1) They are investment companies duly organized and existing and
in good standing under the laws of their state of organization;
(2) They are empowered under applicable laws and by their
Declarations of Trust and By-Laws to enter into and perform its
obligations under this Agreement;
(3) All corporate proceedings required by said Declarations of
Trust and By-Laws have been taken to authorize it to enter into
and perform its obligations under this Agreement;
(4) The Funds are open-end investment companies registered under
the 1940 Act; and
C. Representation and Warranty of the Spoke Fund
(5) The Spoke Fund represents and warrants that 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 Shareholder Interests of the
Spoke Fund being offered for sale.
ARTICLE 19. 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 either of the Funds) 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 the Funds
The Company shall not be responsible for and the Funds 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 Eligible Custodian, Adviser, Sub-
adviser or other party contracted by or approved by the Funds,
(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
Funds, their Shareholders or Investors regarding the
purchase, redemption or transfer of Interests or
Shareholder Interests and Investor 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 Funds for use in
the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Funds or their
affiliates or any other person or firm on behalf of the
Funds.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the Funds.
(4) The offer or sale of Interests in violation of any requirement
under the federal securities laws or regulations; or the offer
or sale of Shareholder Interests in violation of such federal
securities laws or the securities laws of any state requiring
that Shareholder Interests 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 Shareholder Interests in such state.
Provided, however, that the Company shall not be protected by
this Article 18.B. 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 18.A. above.
C. Reliance
At any time the Company may apply to any officer of the Funds 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
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.
D. Notification
In order that the indemnification provisions contained in this
Article 18 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 20. TERMINATION OF AGREEMENT.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Funds exercise their
right to terminate, all out-of-pocket expenses associated with the movement
of records and materials will be borne by the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Article 19 shall survive the termination of this Agreement.
ARTICLE 21. AMENDMENT.
This Agreement may be amended or modified by a written agreement
executed by the parties.
ARTICLE 22. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Funds 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 all
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 their Declarations of Trust. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 23. 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 24. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Funds 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 25. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 26. 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 Funds and signed by an authorized officer of the Funds,
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, Investors or Shareholders of the Funds, but bind only the
appropriate property of the Funds, as provided in the Declaration of Trust.
ARTICLE 27. 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 28. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Funds by any of the parties hereto except by
the specific written consent of the other party.
ARTICLE 29. 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 30. SUCCESSOR AGENT.
If a successor agent shall be appointed by for either of the Funds, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Fund(s) 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 31. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Funds as a result of work
stoppage, power or other mechanical failure, natural disaster, governmental
action, communication disruption or other impossibility of performance.
ARTICLE 32. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by any 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 31 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 33. 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: FEDERATED INVESTMENT PORTFOLIOS
FEDERATED INVESTMENT TRUST
By
ATTEST: FEDERATED SERVICES COMPANY
Exhibit 9(i) Under Form N-1A
FEDERATED INVESTMENT PORTFOLIOS
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st
day of December, 1995, between Federated Investment Portfolios, a
Massachusetts business trust (herein called the "Fund"), and
Federated Administrative Services, a Delaware business trust
(herein called "FAS").
WHEREAS, the Fund has authorized and issued shares of beneficial
interest, consists of one or more portfolios, and is registered as
an open-end management investment company under the Investment
Company Act of 1940; and
WHEREAS, the Fund desires to retain FAS as its Administrator to
provide it with Administrative Services (as herein defined), and
FAS is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Fund hereby appoints FAS as
Administrator of the Fund on the terms and conditions set forth in
this Agreement; and FAS hereby accepts such appointment and agrees
to perform the services and duties set forth in Section 2 of this
Agreement in consideration of the compensation provided for in
Section 5 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Fund's Board of Trustees, FAS will
provide facilities, equipment, and personnel to carry out the
following administrative services for operation of the business
and affairs of the Fund and each of its portfolios, in each case
to the extent applicable and consistent with the Fund's proposed
activities as a "master" fund in a two-tiered "master/feeder" fund
structure:
(a) prepare, file, and maintain the Fund's governing documents
and any amendments thereto, including the Declaration of
Trust (which has already been prepared and filed), the By-
laws and minutes of meetings of Trustees and shareholders;
(b) prepare and file with the Securities and Exchange Commission
and the appropriate state securities authorities the
registration statements for the Fund and, if applicable, the
Fund's shares and all amendments thereto, reports to
regulatory authorities and shareholders, prospectuses, proxy
statements, and such other documents all as may be necessary
to enable the Fund to make a private offering of its shares;
(c) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's investment adviser,
placement agent, custodian, and transfer agent, subject to
any applicable restrictions of the Board of Trustees or the
1940 Act;
(d) supervise the Fund's custodian in the maintenance of the
Fund's general ledger and in the preparation of the Fund's
financial statements, including oversight of expense accruals
and payments, of the determination of the net asset value of
the Fund and of the declaration and payment of dividends and
other distributions to shareholders;
(e) calculate performance data of the Fund for dissemination to
information services covering the investment company
industry;
(f) prepare and file the Fund's tax returns;
(g) examine and review the operations of the Fund's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) perform internal audit examinations in accordance with a
charter to be adopted by FAS and the Fund;
(j) assist with the design, development, and operation of the
Fund;
(k) provide individuals reasonably acceptable to the Fund's Board
of Trustees for nomination, appointment, or election as
officers of the Fund, who will be responsible for the
management of certain of the Fund's affairs as determined by
the Fund's Board of Trustees; and
(l) consult with the Fund and its Board of Trustees on matters
concerning the Fund and its affairs.
The foregoing, along with any additional services that FAS shall
agree in writing to perform for the Fund hereunder, shall
hereafter be referred to as "Administrative Services."
Administrative Services shall not include any duties, functions,
or services to be performed for the Fund by the Fund's investment
adviser, placement agent, custodian, or transfer agent pursuant to
their respective agreements with the Fund.
3. Records. FAS shall create and maintain all necessary books and
records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by
Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not
otherwise created and maintained by another party pursuant to
contract with the Fund. Where applicable, such records shall be
maintained by FAS for the periods and in the places required by
Rule 31a-2 under the 1940 Act. The books and records pertaining
to the Fund which are in the possession of FAS shall be the
property of the Fund. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at
all times during FAS's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be
provided promptly by FAS to the Fund or the Fund's authorized
representatives.
4. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be
necessary or convenient to provide the Administrative Services to
the Fund, including the compensation of FAS employees who serve as
Trustees or officers of the Fund. The Fund shall be responsible
for all other expenses incurred by FAS on behalf of the Fund,
including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to Trustees who are not FAS employees, and
trade association dues.
5. Compensation. For the Administrative Services provided, the Fund
hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative
fee at an annual rate per portfolio of the Fund's shares, payable
daily, as specified below:
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUND
.050% on the first $1 billion
.045% on the next $1 billion
.040% on the next $1 billion
.025% on the next $1 billion
.010% on the next $1 billion
.005% on assets in excess of $5 billion
However, in no event shall the administrative fee received during
any year of this Agreement be less than, or be paid at a rate less
than would aggregate, $60,000, per portfolio.
6. Responsibility of Administrator.
(a) FAS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties
under this Agreement. FAS shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Any person, even though also an officer, trustee, partner,
employee or agent of FAS, who may be or become an officer,
Trustee, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of
the Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to
or acting solely for the Fund and not as an officer, trustee,
partner, employee or agent or one under the control or
direction of FAS even though paid by FAS.
(b) FAS shall be kept indemnified by the Fund and be without
liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the
above standards. In order that the indemnification
provisions contained in this Section 6 shall apply, however,
it is understood that if in any case the Fund may be asked to
indemnify or save FAS harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that FAS
will use all reasonable care to identify and notify the Fund
promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the
option to defend FAS against any claim which may be the
subject of this indemnification. In the event that the Fund
so elects, it will so notify FAS and thereupon the Fund shall
take over complete defense of the claim, and FAS shall in
such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Section.
FAS shall in no case confess any claim or make any compromise
in any case in which the Fund will be asked to indemnify FAS
except with the Fund's written consent.
(c) This Section 6 shall survive termination of this Agreement.
7. Duration and Termination. The initial term of this Agreement with
respect to each Fund shall commence on the date hereof, and extend
for a period of one year, renewable annually by the approval of
the Board of Directors/Trustees of each Fund.
8. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which an enforcement of the
change, waiver, discharge or termination is sought.
9. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Fund. FAS is expressly put on
notice of the limitation of liability as set forth in the Fund's
Declaration of Trust and agrees that the obligations assumed by
the Fund pursuant to this Agreement shall be limited in any case
to the Fund and its assets and that FAS shall not seek
satisfaction of any such obligations from the shareholders of the
Fund, the Trustees, Officers, Employees or Agents of the Fund, or
any of them.
10. Limitations of Liability of Trustees and Shareholders of FAS. The
execution and delivery of this Agreement have been authorized by
the Trustees of FAS and signed by an authorized officer of FAS,
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 FAS, but bind only the trust property of FAS as provided in the
Declaration of Trust of FAS.
11. Notices. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly
given if delivered to the Fund, to its investment adviser and to
FAS at the following addresses: Federated Investment Portfolios
(Fund), Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779; Federated Management
(Adviser), Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779, Attention: J. Christopher
Donahue, President; and if delivered to FAS at Federated Investors
Tower, Pittsburgh, PA 15222-3779, Attention: President.
12. Miscellaneous. 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. The
captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby. Subject to the provisions of Section 6, hereof, this
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be
governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.
13. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed
and delivered, shall be an original, and all such counterparts
shall together constitute one and the same instrument.
14. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of
assignment by any Fund, or of the Funds, in the case of assignment
by FAS, except that any party may assign to a successor all of or
a substantial portion of its business to a party controlling,
controlled by, or under common control with such party. Nothing
in this Section 14 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of
the day and year first above written.
FEDERATED INVESTMENT PORTFOLIOS
By:
------------------------
[Title]
Attest:
----------------------
Secretary
FEDERATED ADMINISTRATIVE SERVICES
By:
------------------------
[Title]
Attest:
----------------------
Exhibit 8 Under Form N-1A
FORM OF
CUSTODIAN AGREEMENT
BETWEEN
FEDERATED INVESTMENT PORTFOLIOS
AND
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian. 1
2. Definitions 1
2.1 Authorized Person 1
2.2 Board
2.3 Security 1
2.4 Portfolio Security 1
2.5 Officers' Certificate 1
2.6 Book-Entry System 1
2.7 Depository 1
2.8 Proper Instructions 2
3. Separate Accounts 2
4. Certification as to Authorized Persons 2
5. Custody of CasH 2
5.1 Purchase of Securities 3
5.2 Withdrawals 3
5.3 Distributions and Expenses of Trust 3
5.4 Payment in Respect of Securities 3
5.5 Repayment of Loans 3
5.6 Repayment of Cash 3
5.7 Foreign Exchange Transactions 3
5.8 Other Authorized Payments 3
5.9 Termination 4
6. Securities 4
6.1 Segregation and Registration 4
6.2 Voting and Proxies 4
6.3 Book-Entry System 4
6.4 Use of a Depository 5
6.5 Use of Book-Entry System for
Commercial Paper 6
6.6 Use of Immobilization Programs 7
6.7 Eurodollar CDs 7
6.8 Options and Futures Transactions 7
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-
Counter.......................... 7
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges 8
6.9 Segregated Account 8
6.10 Interest Bearing Call or Time Deposits 9
6.11 Transfer of Securities 9
7. Withdrawals 10
8. Merger, Dissolution, etc. of Trust 10
9. Actions of Bank Without Prior Authorization 10
10. Collections and Defaults 11
11. Maintenance of Records 11
12. Trust Evaluation 11
13. Concerning the Bank 12
13.1 Performance of Duties; Standard of Care 12
13.2 Agents and Subcustodians with Respect
to Property of the Trust Held in the United
States 13
13.3 Duties of the Bank with Respect to
Property Held Outside of the United
States.............................. 13
(a)Appointment of Foreign Sub-Custodians 13
(b)Foreign Securities Depositories 13
(c)Segregation of Securities 14
(d)Agreements with Foreign Banking
Instructions 14
(e)Access of Independent Accountants of
the Trust 14
(f)Reports by Bank 14
(g)Transactions in Foreign Custody
Account 14
(h)Liability of Selected Foreign
Sub-Custodians 15
(i)Liability of Bank 15
(j)Monitoring Responsibilities 15
(k)Tax Law 15
13.4 Insurance 16
13.5 Fees and Expenses 16
13.6 Advances 16
14. Termination 16
15. Confidentiality 17
16. Notices 17
17. Amendments 17
18. Parties 17
19. Governing Law 18
20. Counterparts 18
21. Limitation of Liability. 18
CUSTODIAN AGREEMENT
AGREEMENT made as of this [ ] day of November, 1995, between FEDERATED
INVESTMENT PORTFOLIOS, a Massachusetts business trust (the "Trust") and
INVESTORS BANK & TRUST COMPANY (the "Bank").
The Trust, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1) of
the Investment Company Act of 1940 (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Trust, and has indicated its willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Trust hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons duly
authorized to give Proper Instructions or otherwise act on behalf of the Trust
by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of Trustees
of the Trust, as the case may be.
2.3 Security. The term security as used herein will have the same meaning
as when such term is used in the Securities Act of 1933, as amended, including,
without limitation, any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security owned by
the Trust.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Trust.
2.6 Book-Entry System. Book-Entry System shall mean the Federal Reserve-
Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person as shall have
been designated in an Officers' Certificate, such instructions to be given in
such form and manner as the Bank and the Trust shall agree upon from time to
time, and (ii) instructions (which may be continuing instructions) regarding
other matters signed or initialed by such one or more persons from time to time
designated in an Officers' Certificate as having been authorized by the Board.
Oral instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Trust. The Trust shall be responsible, at the Trust's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act the Trust shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
3
authorization by the Board accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate safeguards
for the Trust's assets.
3. Separate Accounts. If the Trust has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Trust shall be deemed to refer to
the Trust acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Trust, including, without limitation, any
Portfolio Securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Trust shall be deemed to refer to duties and obligations with
respect to the individual series and any obligation or liability of the Trust
hereunder shall be binding only with respect to the individual series, and shall
be discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Trust, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
4
be entitled to rely and act upon any Officers' Certificate given to it by the
Trust which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Trust, the Bank will open and
------ -
maintain a separate account or accounts in the name of the Trust or in the name
of the Bank, as Custodian of the Trust, and will deposit to the account of the
Trust all of the cash of the Trust, except for cash held by a subcustodian
appointed pursuant to Section 13.2 or Section 13.3 hereof, including borrowed
funds, delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Trust, notification from the Trust's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Trust, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Trust,
against contemporaneous receipt of such securities by the Bank registered in the
name of the Trust or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the securities received
by the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made.
5
5.2 Withdrawals. In such amount as may be necessary for the withdrawal of
beneficial interests in the Trust in accordance with Section 7 of this
Agreement.
5.3 Distributions and Expenses of Trust. For the payment on the account of
the Trust of dividends or other distributions to investors as may from time to
time be declared by the Board, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and reimbursement
of the expenses and liabilities of the Bank as provided hereunder, fees of any
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Trust.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Trust held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Trust, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Trust for the
purpose of collateralizing the obligation to return to the Trust certificates
borrowed from the Trust representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Trust upon the receipt of Proper Instructions, such Proper Instructions to
6
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Trust
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of the
Trust, or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Trust, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: upon the termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Section 13.2 or Section 13.3 hereof, the Bank as custodian, will
receive and hold pursuant to the provisions hereof, in a separate account or
accounts and physically segregated at all times from those of other persons, any
and all Portfolio Securities which may now or hereafter be delivered to it by or
for the account of the Trust. All such Portfolio Securities will be held or
disposed of by the Bank for, and subject at all times to, the instructions of
7
the Trust pursuant to the terms of this Agreement. Subject to the specific
provisions herein relating to Portfolio Securities that are not physically held
by the Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by such
laws or regulations or under the laws of any state. The Bank will use its best
efforts to the end that the specific Portfolio Securities held by it hereunder
will be at all times indentifiable.
The Trust will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Trust.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials with respect to such Securities, such
proxies to be executed by the registered holder of such Securities (if
registered otherwise than in the name of the Trust), but without indicating the
manner in which such proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a certified copy
of a resolution of the Board specifically approving deposits of Trust assets in
the Book-Entry System, and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
8
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Trust's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities which are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Trust. Where securities are
transferred to the Trust's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Trust a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Trust or shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Trust. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Trust upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of Portfolio Securities loaned by the Trust has been transferred to the Account;
and
9
(ii) the making of an entry on the records of the Bank (or its agent)
to reflect such transfer and payment for the account of the Trust. Copies of all
advises from the Book-Entry System of transfers of securities for the account of
the Trust shall identify the Trust, be maintained for the Trust by the Bank and
shall be provided to the Trust at its request. The Bank shall send the Trust a
confirmation, as defined by Rule 17f-4 under the 1940 Act, of any transfers to
or from the account of the Trust;
(d) The Bank will promptly provide the Trust with any report obtained by
the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System; and
(e) The Bank shall be liable to the Trust for any loss or damage to the
Trust resulting from use of the Book-Entry System by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or any of its agents or
of any of its or their employees or from any reckless disregard by the Bank or
any such agent of its duty to use its best efforts to enforce such rights as it
may have against the Book-Entry System; at the election of the Trust, it shall
be entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a consequence
of any such loss or damage if and to the extent that the Trust has not been made
whole for any loss or damage;
6.4 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
10
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Trust all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Trust and
the Trust shall pay cash collateral against the return of Portfolio Securities
loaned by the Trust only upon delivery of the Securities to or for the account
of the Trust; and upon any sale of Portfolio Securities, delivery of the
Securities will be made only against payment thereof or, in the event Portfolio
Securities are loaned, delivery of Securities will be made only against receipt
of the initial cash collateral to or for the account of the Trust; and
(d) The Bank shall be liable to the Trust for any loss or damage to the
Trust resulting from use of a Depository by reason of any gross negligence,
willful misfeasance or bad faith of the Bank or its employees or from any
reckless disregard by the Bank of its duty to use its best efforts to enforce
such rights as it may have against a Depository. In this connection, the Bank
shall use its best efforts to ensure that:
(i) The Depository obtains replacement of any certificate Portfolio
Security deposited with it in the event such Security is lost, destroyed,
11
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for prompt transmittal to the Trust;
(iii) Such Depository immediately forwards to the Bank confirmation of
any purchase or sale of Portfolio Securities and of the appropriate book entry
made by such Depository to the Trust's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties hereunder
as may be necessary for the Trust to comply with the recordkeeping requirements
of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank and the Trust all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Trust may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Trust has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Trust,
commercial paper issued by issuers with whom the Bank has entered into a book-
12
entry agreement (the "Issuers"). In maintaining its Book-entry Paper System, the
Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the Trust in an
account of the Bank that includes only assets held by it for customers;
(b) the records of the Bank with respect to the Trust's purchase of
Book-entry Paper through the Bank will identify, by book-entry, Commercial Paper
belonging to the Trust which is included in the Book-entry Paper System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Trust;
(c) the Bank shall pay for Book-Entry Paper purchased for the account of
the Trust upon contemporaneous (i) receipt of advice from the Issuer that such
sale of Book-Entry Paper has been effected, and (ii) the making of an entry on
the records of the Bank to reflect such payment and transfer for the account of
the Trust;
(d) the Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Trust, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Trust;
(e) the Bank shall transmit to the Trust a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Trust on
the next business day following the transaction; and
(f) the Bank will send to the Trust such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as the
Trust may reasonably request from time to time.
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.
6.6 Use of Immobilization Programs. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Securities are identified on the books of the Bank as belonging to the
Trust and that the books of the Bank identify the European Branch holding such
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.7, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Trust, and shall have no liability to the Trust or its shareholders with
respect to the actions, inaction, whether negligent or otherwise of such
European Branch in connection with such Eurodollar CDs, except for any loss or
damage to the Trust resulting from the Bank's own gross negligence, willful
misfeasance or bad faith in the performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-
the-Counter.
1. The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by the Trust regarding escrow or
14
other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any broker-
dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Trust relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Trust has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Trust.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Trust, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Trust that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Trust against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Trust that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. The Bank shall take action as to puts, calls and futures contracts
("Futures") purchased or sold by the Trust in accordance with the provisions of
any agreement among the Trust, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
15
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Trust.
2. The responsibilities and liabilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(2) of this Section 6.8 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper Instructions
establish and maintain a Segregated Account or Accounts for and on behalf of the
Trust.
(a) in accordance with the provisions of any agreement among the Trust,
the Bank and a broker-dealer registered under the Exchange Act and a member of
the NASD or any Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange or the Commodity
Futures Trading Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection with
transactions by the Trust;
(b) for the purpose of segregating cash or securities in connection with
options purchased or written by the Trust or commodity futures purchased or
written by the Trust;
(c) for the deposit of liquid assets, such as cash, U.S. Government
securities or other high grade debt obligations, having a market value (marked
to market on a daily basis) at all times equal to not less than the aggregate
16
purchase price due on the settlement dates of all the Trust's then outstanding
forward commitment or "when-issued" agreements relating to the purchase of
Portfolio Securities and all the Trust's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms;
(d) for the purpose of compliance by the Trust with the procedures
required by Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of Segregated Accounts by registered investment companies;
(e) for other proper corporate purposes, but only, in the case of this
clause (e), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board, or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such Segregated Account and declaring
such purposes to be proper corporate purposes.;
(f) Assets may be withdrawn from the Segregated Account pursuant to
Proper Instructions only
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a) or (b) above, in accordance with
the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (c) or (d) above,
for sale or delivery to meet the Trust's obligations under outstanding firm
commitment when issued agreements for the purchase of Portfolio Securities and
under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
17
(iv) to the extent that the Trust's outstanding forward commitment or
when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Trust's obligations
thereunder are met from assets of the Trust other than those in the Segregated
Account;
(v) for delivery upon settlement of a forward commitment agreement
for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Trust of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Trust appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Trust and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Trust.
6.11 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
18
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 6.11, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the Trust,
against contemporaneous receipt by the Bank of payment therefor in full, each
such payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) in exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided
however that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their terms
into other securities;
19
(d) for the purpose of withdrawing in kind beneficial interests in of
the Trust upon authorization from the Trust;
(e) in the case of option contracts owned by the Trust, for presentation
to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to the Trust by any bank,
including the Bank; provided, however, that such Portfolio Securities will be
released only upon payment to the Bank for the account of the Trust of the
moneys borrowed, except that in cases where additional collateral is required to
secure a borrowing already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that purpose
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Trust from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the Trust to a bank
or broker dealer, but only against receipt in accordance with street delivery
custom except as otherwise provided herein, of adequate collateral as agreed
20
upon from time to time by the Trust and the Bank, and upon receipt of payment in
connection with any repurchase agreement relating to such securities entered
into by the Trust;
(j) for other authorized transactions of the Trust or for other proper
corporate purposes; provided that before making such transfer, the Bank will
also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Trust (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Trust or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth pursuant
to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b), (c),
(e), (f), (g), (h) and (i) securities or cash receivable in exchange therefor
shall be delivered to the Bank.
7. Withdrawals. In the case of payment of assets of the Trust held by the
Bank in connection with withdrawal of beneficial interests in the Trust, the
Bank will rely on notification by the Trust's transfer agent of receipt of a
request for withdrawal before such payment is made. Payment shall be made in
accordance with the Articles and By-laws of the Trust, from assets available for
said purpose.
8. Merger, Dissolution, etc. of Trust. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
21
Trust into or the consolidation of the Trust with another investment company,
the sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Trust
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Trust or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Trust all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Trust and hold for the account of the Trust all income, dividends, interest and
other payments or distribution of cash with respect to the Portfolio Securities
held thereunder;
9.2 Present for payment all coupons and other income items held by it
for the account of the Trust which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Trust;
9.3 Receive and hold for the account of the Trust all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder;
22
9.4 Execute as agent on behalf of the Trust all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Trust's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Trust; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Trust in writing of any default or refusal to pay
within two business days from the day on which it receives knowledge of such
default or refusal. In addition, the Bank will send the Trust a written report
once each month showing any income on any Portfolio Security held by it which is
23
more than ten days overdue on the date of such report and which has not
previously been reported.
11. Maintenance of Records. The Bank will maintain records with respect to
transactions for which the Bank is responsible pursuant to the terms and
conditions of this Agreement, and in compliance with the applicable rules and
regulations of the 1940 Act and will furnish the Trust daily with a statement of
condition of the Trust. The Bank will furnish to the Trust at the end of every
month, and at the close of each quarter of the Trust's fiscal year, a list of
the Portfolio Securities and the aggregate amount of cash held by it for the
Trust. The books and records of the Bank pertaining to its actions under this
Agreement and reports by the Bank or its independent accountants concerning its
accounting system, procedures for safeguarding securities and internal
accounting controls will be open to inspection and audit at reasonable times by
officers of or auditors employed by the Trust and will be preserved by the Bank
in the manner and in accordance with the applicable rules and regulations under
the 1940 Act.
12. Trust Evaluation. The Bank shall compute and, unless otherwise directed
by the Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other days, or hours, if any, as may be authorized by the Board the
net asset value of the Trust, such determination to be made in accordance with
the provisions of the Articles and By-laws of the Trust and Prospectus and
Statement of Additional Information relating to the Trust, as they may from time
to time be amended, and any applicable resolutions of the Board at the time in
force and applicable; and promptly to notify the Trust, or such other persons as
the Trust may request of the results of such computation and determination. In
computing the net asset value hereunder, the Bank may rely in good faith upon
information furnished to it by any Authorized Person in respect of (i) the
manner of accrual of the liabilities of the Trust and in respect of liabilities
24
of the Trust not appearing on its books of account kept by the Bank, (ii)
reserves, if any, authorized by the Board or that no such reserves have been
authorized, (iii) the source of the quotations to be used in computing the net
asset value, (iv) the value to be assigned to any security for which no price
quotations are available, and (v) the method of computation of the net asset
value, and the Bank shall not be responsible for any loss occasioned by such
reliance or for any good faith reliance on any quotations received from a source
pursuant to (iii) above.
In addition, the Bank shall determine daily the net asset value of each
investor's interest in the Trust and shall allocate daily on a book basis and
annually or as mutually agreed on a tax basis among the investors in the Trust
on a pro rata basis all incremental investment activity.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Trust, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
with such advice. In the performance of its duties hereunder, the Bank will be
protected and not be liable, and will be indemnified and held harmless for any
action taken or omitted to be taken by it in good faith reliance upon the terms
of this Agreement, any Officers' Certificate, Proper Instructions, resolution of
the Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Trust except in
the case of its gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.
25
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased by
or for the Trust, the legality of the purchases thereof or the propriety of the
price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for the
Trust or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Trust
or the sufficiency of the amount to be received therefor;
(d) the legality of the withdrawal of any beneficial interests in the
Trust or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Trust or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and
(f) any property or moneys of the Trust unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Trust are such as may properly be held by the Trust under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
26
Notwithstanding anything in this Agreement to the contrary, in no event shall
the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, or computers
(hardware or software) and computer facilities, the unavailability of energy
sources and other similar happenings or events except as results from the Bank's
own gross negligence; or
(b) for special, punitive or consequential damages arising from the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 Agents and Subcustodians with Respect to Property of the Trust Held
in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ certain
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Trust's assets with respect to property of the Trust held in
the United States. The Bank shall have no liability to the Trust or any other
person by reason of any act or omission of such subcustodian and the Trust shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of such
27
subcustodian. Upon request of the Bank, the Trust shall assume the entire
defense of any action, suit, or claim subject to the foregoing indemnity. The
Trust shall pay all fees and expenses of such subcustodian.
13.3 Duties of the Bank with Respect to Property of the Trust Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Trust hereby authorizes
and instructs the Bank to employ as sub-custodians for the Trust's Portfolio
Securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on the
Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Trust's Board of Trustees, the Bank and the Trust may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Trust may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Trust's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Bank and the Trust, assets of the Trust shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign Sub-
Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Trust, the Trust authorizes the
deposit in Euro-clear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
28
Foreign Portfolio Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its books as
belonging to the Trust the Foreign Portfolio Securities held by each Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Portfolio
Securities and other assets of the Trust, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Trust (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Trust and shall provide that: (a) the
Trust's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or registration of securities); (b) beneficial ownership of the
Trust's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or registration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
accountants for the Trust, will be given access to the books and records of the
29
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Trust held by the Selected Foreign Sub-Custodian
will be subject only to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Trust. Upon request of the
Trust, the Bank will use its best efforts to arrange for the independent
accountants of the Trust to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Trust from time to
time, as mutually agreed upon, statements in respect of the securities and other
assets of the Trust held by Selected Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Trust.
(g) Transactions in Foreign Custody Account. Transactions with respect
to the assets of the Trust held by a Selected Foreign Sub-Custodian shall be
effected pursuant to Proper Instructions from the Trust to the Bank and shall be
effected in accordance with the applicable Foreign Sub-Custodian Agreement. If
at any time any Foreign Portfolio Securities shall be registered in the name of
the nominee of the Selected Foreign Sub-Custodian, the Trust agrees to hold any
such nominee harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Trust and delivery of Foreign Portfolio Securities maintained for the
account of the Trust may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
30
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such securities from such
purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Trust such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign Sub-
Custodian any instructions, forms or certifications with respect to such Rights,
and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Trust pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further
duty or obligation with respect to such Rights, including, without limitation,
the determination of whether the Trust is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Trust or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign Sub-
Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Trust from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
31
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Trust acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Trust. The Trust acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Trust's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign Sub-
Custodian has to the Bank and, without limiting the foregoing, the Bank shall
not be liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism, political risk (including, but not limited to, exchange control
restrictions, confiscation, insurrection, civil strife or armed hostilities)
other losses due to Acts of God, nuclear incident or any loss where the Selected
Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually to the
Trust, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Trust in evaluating such Selected Foreign Sub-
Custodians to ensure compliance with the requirements of Rule 17f-5 of the Act.
In addition, the Bank will promptly inform the Trust in the event that the Bank
is notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
32
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Trust held by a Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or liability for any
obligations now or hereafter imposed on the Trust or the Bank as custodian of
the Trust by the tax laws of any jurisdiction, and it shall be the
responsibility of the Trust to notify the Bank of the obligations imposed on the
Trust or the Bank as the custodian of the Trust by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Trust with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Trust
has provided such information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Trust held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Trust.
13.5. Fees and Expenses of Bank. The Trust will pay or reimburse the Bank
from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Trust will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
33
reimbursement by the Trust for all reasonable expenses incurred in conjunction
with termination of this Agreement by the Trust.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance funds
on behalf of the Trust to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Trust. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Trust's account with the Bank, or
for any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Trust payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Trust
shall provide the Bank with agreed upon compensating balances. The Trust agrees
that the Bank shall have a continuing lien and security interest to the extent
of any overdraft or indebtedness, in and to any property at any time held by it
for the Trust's benefit or in which the Trust has an interest and which is then
in the Bank's possession or control (or in the possession or control of any
third party acting on the Bank's behalf). The Trust authorizes the Bank, in its
sole discretion, at any time to charge any overdraft or indebtedness, together
with interest due thereon against any balance of account standing to the credit
of the Trust on the Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time after three years from
the date of this Agreement without penalty upon sixty days written notice
delivered by either party to the other by means of registered mail, and upon the
expiration of such sixty days this Agreement will terminate; provided, however,
that the effective date of such termination may be postponed to a date not more
than ninety days from the date of delivery of such notice (i) by the Bank in
order to prepare for the transfer by the Bank of all of the assets of the Trust
held hereunder, and (ii) by the Trust in order to give the Trust an opportunity
34
to make suitable arrangements for a successor custodian. At any time after the
termination of this Agreement, the Trust will, at its request, have access to
the records of the Bank relating to the performance of its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of
notice of termination, commence and prosecute diligently to completion the
transfer of all cash and the delivery of all Portfolio Securities duly
endorsed and all records maintained under Section 11 to the successor
custodian when appointed by the Trust. The obligation of the Bank to
deliver and transfer over the assets of the Trust held by it directly to
such successor custodian will commence as soon as such successor is appointed
and will continue until completed as aforesaid. If the Trust does not select a
successor custodian within ninety (90) days from the date of delivery of notice
of termination the Bank may, subject to the provisions of subsection (14.3),
deliver the Portfolio Securities and cash of the Trust held by the Bank to a
bank or trust company of its own selection which meets the requirements of
Section 17(f)(1) of the 1940 Act and has a reported capital, surplus and
undivided profits aggregating not less than $2,000,000, to be held as the
property of the Trust under terms similar to those on which they were held by
the Bank, whereupon such bank or trust company so selected by the Bank will
become the successor custodian of such assets of the Trust with the same effect
as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Trust may furnish the Bank with an order of the
Trust advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to the
investors of the Trust the question of whether the Trust will be liquidated or
will function without a custodian for the assets of the Trust held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
35
Trust held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Trust's Secretary and an opinion of
counsel to the Trust in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust to:
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attn: Doug Hein
(b) In the case of notices sent to the Bank to:
36
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Carol Lowd
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Trust,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of the Trust and notice is hereby given that
this Agreement has been executed on behalf of the Trust by an officer of the
Trust as an officer and not individually and the obligations of the Trust
37
arising out of this Agreement are not binding upon any of the trustees, officers
or investors of the Trust individually but are binding only upon the assets and
property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
FEDERATED INVESTMENT PORTFOLIOS
By:
Name:
Title:
ATTEST:
INVESTORS BANK &
TRUST COMPANY
By:
Name:
38
Title:
ATTEST:
DATE:
LIST OF PORTFOLIOS
Federated Investment Portfolios - Bond Index Portfolio
Exhibit 19 on Form N-1A
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED INVESTMENT
PORTFOLIOS and the Deputy 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 October 18, 1995
John F. Donahue (Chief Executive Officer)
/s/ J. Christopher Donahue President and Trustee
October 18, 1995
J. Christopher Donahue
/s/ David M. Taylor Treasurer October 18, 1995
David M. Taylor (Principal Financial and
Accounting Officer)
/s/ Thomas G. Bigley Trustee October 18, 1995
Thomas G. Bigley
/s/ John T. Conroy, Jr. Trustee October 18, 1995
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/ William J. Copeland Trustee October 18, 1995
William J. Copeland
/s/ James E. Dowd Trustee October 18, 1995
James E. Dowd
/s/ Lawrence D. Ellis, M.D. Trustee October 18, 1995
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Trustee October 18, 1995
Edward L. Flaherty, Jr.
/s/ Peter E. Madden Trustee October 18, 1995
Peter E. Madden
/s/ Gregor F. Meyer Trustee October 18, 1995
Gregor F. Meyer
/s/ John E. Murray, Jr. Trustee October 18, 1995
John E. Murray, Jr.
/s/ Wesley W. Posvar Trustee October 18, 1995
Wesley W. Posvar
/s/ Marjorie P. Smuts Trustee October 18, 1995
Marjorie P. Smuts
Sworn to and subscribed before me this 18th day of October, 1995
/s/ Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Sept. 16, 1996
Exhibit No. 5(i) under Form N-1A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of December 1, 1995, by and between FEDERATED
INVESTMENT PORTFOLIOS, a Massachusetts business trust (the "Trust"),
registered as an open-end diversified management investment company under
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and FEDERATED MANAGEMENT, a Delaware business trust registered as an
investment adviser under the Investment Advisers Act of 1940 (the
"Adviser").
In consideration of the promises and the mutual covenants herein
contained, the Trust and the Adviser agree as follows:
1. Appointment. The Trust appoints the Adviser to act as
investment adviser to the Trust with respect to the series of the Trust
listed on Exhibit A hereto (the "Series") for the period and on the terms
set forth in this Agreement. The Adviser accepts such appointment and
agrees to provide an investment program for the compensation provided by
this Agreement. In providing the services and assuming the obligations set
forth herein, the Adviser, may, at its own expense, employ one or more
subadvisers; provided that the Adviser understands and agrees that it shall
remain fully responsible for the performance of all the duties set forth in
this Agreement and that it shall supervise the activities of each
subadviser. Any agreement between the Adviser and a subadviser shall be
subject to the renewal, termination and amendment provisions applicable to
this Agreement.
2. Duties of the Subadviser. Subject to the direction and
control of the Adviser and the Board of Trustees of the Trust, the
Subadviser shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate
for the performance of its duties under this Agreement;
(b) formulate and continuously review, supervise, and
administer an investment program for each Series;
(c) determine the securities to be purchased by the Series,
and continuously monitor such securities and the issuers thereof to
determine whether and when to sell, exchange, or take any other action
concerning such securities;
(d) determine whether and how to exercise warrants, voting
rights, or other rights with respect to the Series' securities;
(e) provide valuations with respect to the securities held
by the Series if so requested by the Trustees of the Trust;
(f) render regular reports to the Trust's officers and the
Board of Trustees concerning the investment performance of the Trust, the
Adviser's discharge of its responsibilities under this Agreement, and any
other subject as the Trust's officers or Board of Trustees reasonably may
request; and
(g) assist the Trust's officers in connection with the
operation of the Trust and perform any further acts that may be necessary to
effectuate the purposes of this Agreement.
3. Supervision and Compliance. The activities of the Adviser
shall be subject at all times to the direction and control of the Board of
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Trustees of the Trust and shall comply with: (a) the Declaration of Trust
and By-Laws of the Trust; (b) the Registration Statement of the Trust, as it
may be amended from time to time, including the investment objectives and
policies set forth therein; (c) the Investment Company Act and the
regulations thereunder; (d) the Internal Revenue Code of 1986 and the
regulations thereunder applicable to regulated investment companies; (e) any
other applicable laws or regulations; and (f) such other limitations as the
Adviser or the Board of Trustees of the Trust may adopt.
4. Purchase and Sale of Securities. The Adviser shall, at its
own expense, place orders for the purchase, sale or loan of securities by
the Trust either directly with the issuer or with any broker and/or dealer
who deals in such securities.
(a) In placing orders with brokers and/or dealers, the
Adviser shall use its best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all factors it
deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of
the broker and/or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis.
Consistent with this obligation, the Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934) to or for the benefit of the Trust
and/or other accounts over which the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker who provides such
brokerage and research services a commission for effecting a securities
transaction which is in excess of the amount of commission another broker
would have charged for effecting that transaction, if the Adviser determines
-3-
in good faith that such commission was reasonable in relation to the value
of brokerage and research services provided by such broker. This
determination may be viewed in terms of either than particular transaction
or of the overall responsibilities of the Adviser with respect to the
accounts as to which it exercises investment discretion.
(b) The Adviser may execute transactions through itself and
its affiliates on a securities exchange provided that the commissions paid
by the Trust are "reasonable and fair" compared to commissions received by
other brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange
provided that the affiliated broker arranges for unaffiliated brokers to
execute the transactions.
(c) Notwithstanding the foregoing, the Board of Trustees
periodically shall review the commissions paid by the Trust and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Trustees of the
Trust, in its discretion, may instruct the Adviser to effect all or a
portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Trustees, if it determines that the use of
such brokers and/or dealers is in the best interest of the Trust.
(d) When the Adviser deems the purchase or sale of a
security to be in the best interest of the Trust as well as other customers,
the Adviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution
or lower brokerage commissions. The Adviser also may purchase or sell a
particular security for one or more customers in different amounts.
-4-
Allocations of the securities purchased or sold in either manner, as well as
the expenses incurred in the transactions, will be made by the Adviser in a
manner that is equitable and consistent with applicable law and regulations
and with its fiduciary obligations to the Trust and to such other customers.
5. Expenses.
(a) The Adviser shall furnish at its own expense all office
space, office facilities, equipment and personnel necessary or appropriate
to the performance of its duties under this Agreement. The Adviser also
shall pay the salaries of all personnel of the Trust or the Adviser
performing services related to the Adviser's duties under this Agreement.
(b) It is understood that the Trust will pay all of its
expenses and liabilities, including compensation of its independent
Trustees; taxes and governmental fees; interest charges; fees and expenses
of the Trust's independent auditors and legal counsel; trade association
membership dues; fees and expenses of any custodian (including safekeeping
of funds and securities, maintenance of books and accounts and calculation
of the net asset value of beneficial interests of the Series), transfer
agent and registrar and dividend disbursing agent of the Trust; expenses of
preparing and mailing reports to investors and regulatory agencies; any
expenses relating to the issuance, registration and qualification of shares
of each Series, and the preparation, printing and mailing of prospectuses
for such purposes; insurance premiums; brokerage and other expenses of
executing portfolio transactions; expenses of investors' and Trustees'
meetings; organization expenses; and extraordinary expenses.
6. Compensation of the Adviser. In consideration of the
services to be rendered by the Adviser under this Agreement, the Adviser
shall pay the Adviser a fee accrued daily and paid monthly from the Series
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at an annual rate equal to that specified in Exhibit A to this Agreement for
the Series' average daily net assets. The fee for any period in which the
Adviser serves as investment adviser pursuant to this Agreement for less
than one full month shall be paid for that portion of the month accrued.
For purposes of calculating fees, the value of the net assets of the Series
of the Trust shall be computed in the manner specified in its Registration
Statement on Form N-1A.
7. Services to Others. The services of the Adviser to the Trust
are not to be deemed exclusive, and the Adviser is free to render services
to others and to engage in other activities, provided, however, that those
services and activities do not adversely affect the Adviser's ability to
perform its obligations under this Agreement.
8. Books, Records, and Information. The Adviser shall provide
the Trust with all records concerning the Adviser's activities that the
Trust is required by law to maintain. Any records required to be maintained
and preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2 under
the Investment Company Act which are prepared or maintained by the
Subadviser on behalf of the Trust are the property of the Trust and will be
surrendered promptly to the Trust on request. The Trust also shall comply
with all reasonable requests for information by the Trust's officers or
Board of Trustees, including information required for the Trust's filings
with the Securities and Exchange Commission and state securities
commissions.
9. Limitations on Liability.
(a) The Adviser hereby is notified expressly of the
limitation of shareholder liability as set forth in the Declaration of Trust
and agrees that any obligation of the Trust or the Series arising in
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connection with this Agreement shall be limited in all cases to the Series
and their assets, and the Adviser shall not seek satisfaction of any such
obligation from any Trustee or shareholder of the Series.
(b) The Adviser shall give the Trust the benefit of its best
judgment and efforts in rendering services under this Agreement. In the
absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser, the
Adviser shall not be liable to the Trust, to any shareholder of the Series
or to the Adviser for any act or omission in the course of, or connected
with, rendering services under this Agreement or for any losses that may be
sustained in the purchase, holding or sale of any security.
10. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as to the Series on
the date the Series commences investment operations, and, unless terminated
sooner as provided herein, shall continue until the second anniversary of
the execution of this Agreement. Thereafter, unless terminated sooner as
provided herein, this Agreement shall continue in effect as to each Series
for successive annual periods, provided that such continuance is
specifically approved at least annually by the vote of a majority of the
Board of Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such continuance, and either: (i) the vote of a
majority of the outstanding voting securities of such Series; or (ii) the
vote of a majority of the full Board of Trustees.
(b) This Agreement may be terminated at any time and as to
any one or more Series, without the payment of any penalty, either by: (i)
the Trust, by action of the Board of Trustees or by vote of a majority of
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the outstanding voting securities of the Series, on 60 days' written notice
to the Adviser; or (ii) the Adviser, on 90 days' written notice to the
Adviser and the Trust. This Agreement shall terminate immediately in the
event of its assignment.
(c) This Agreement may be amended only if such amendment is
approved by the vote of a majority of the outstanding voting securities of
the Series or Trust or by vote of a majority of the Board of Trustees of the
Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such amendment.
(d) As used in this Agreement, the terms "specifically
approved at least annually," "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meanings as such terms have in the Investment Company Act and the regulation
thereunder.
11. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to the choice of law provisions thereof, to the extent that such laws
are consistent with provisions of the Investment Company Act and the
regulations thereunder.
12. Miscellaneous. The captions in this Agreement are included
for the convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made invalid by a court
decision, statute, regulation, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall
inure to the benefit of the parties hereto and their respective successors,
-8-
to the extent permitted by law. The parties hereto acknowledge that
Federated Investors and its subsidiary, Federated Management, have reserved
the right to grant the non-exclusive use of the name "Federated" or any
derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor or other business enterprise, and
to withdraw from the Trust and one or more of the Series the use of the name
"Federated."
IN WITNESS WHEREOF, the Trust and the Adviser have caused this
Agreement to be executed and delivered in their names and on their behalf by
the undersigned, duly authorized officers, all as of the day and year first
above written.
Attest: FEDERATED INVESTMENT PORTFOLIOS
By:
Name:
Title:
Attest: FEDERATED MANAGEMENT
By:
Name:
Title:
Exhibit A
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SCHEDULE OF SERIES AND FEES UNDER
INVESTMENT SUBADVISORY AGREEMENT
Annual Fee (as a percentage of
Series Names the average daily net assets of a series)
Bond Index Portfolio 0.25%
Exhibit No. 5(ii) under Form N-1A
INVESTMENT SUBADVISORY AGREEMENT
AGREEMENT made as of December 1, 1995, by and between Federated
Management, a Delaware business trust (the "Adviser"), and United States
Trust Company of New York, a New York trust company (the "Subadviser").
In consideration of the promises and the mutual covenants herein
contained, the Adviser and the Subadviser agree as follows:
1. Appointment. The Adviser has been retained by Federated
Investment Portfolios, a Massachusetts business trust (the "Trust"), to act
as investment adviser to the Trust with respect to the series of the Trust
listed on Exhibit A hereto (the "Series"). In accordance with and subject to
the Investment Advisory Agreement between the Trust and the Adviser, attached
hereto as Exhibit B (the "Advisory Agreement"), the Adviser appoints the
Subadviser to act as subadviser with respect to the Series for the period and
on the terms set forth in this Agreement. The Subadviser accepts such
appointment and agrees to provide an investment program for the compensation
provided by this Agreement.
2. Duties of the Subadviser. Subject to the direction and
control of the Adviser and the Board of Trustees of the Trust, the Subadviser
shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate
for the performance of its duties under this Agreement;
(b) formulate and continuously review, supervise, and
administer an investment program for each Series;
(c) determine the securities to be purchased by each Series,
and continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;
(d) determine whether and how to exercise warrants, voting
rights, or other rights with respect to the Series' securities;
(e) provide valuations with respect to the securities held by
each Series if so requested by the Trustees of the Trust;
(f) render regular reports to the Trust's officers and the
Board of Trustees concerning the investment performance of the Trust, the
Subadviser's discharge of its responsibilities under this Agreement, and any
other subject as the Trust's officers or Board of Trustees reasonably may
request; and
(g) assist the Adviser and the Trust's officers in connection
with the operation of the Trust and perform any further acts that may be
necessary to effectuate the purposes of this Agreement.
3. Supervision and Compliance. Notwithstanding any provision of
this Agreement, the Adviser shall retain all rights and ultimate
responsibilities to supervise, and, in its discretion, conduct investment
advisory activities relating to the Trust. The activities of the Subadviser
shall be subject at all times to the direction and control of the Board of
Trustees of the Trust and the Adviser and shall comply with: (a) the
Declaration of Trust and By-Laws of the Trust; (b) the Registration Statement
of the Trust, as it may be amended from time to time, including the
investment objectives and policies set forth therein; (c) the Investment
-2-
Company Act and the regulations thereunder; (d) the Internal Revenue Code of
1986 and the regulations thereunder applicable to regulated investment
companies; (e) any other applicable laws or regulations; and (f) such other
limitations as the Adviser or the Board of Trustees of the Trust may adopt.
4. Purchase and Sale of Securities. The Subadviser shall, at its
own expense, place orders for the purchase, sale or loan of securities by the
Trust either directly with the issuer or with any broker and/or dealer who
deals in such securities.
(a) In placing orders with brokers and/or dealers, the
Subadviser shall use its best efforts to obtain the best net price and the
most favorable execution of its orders, after taking into account all factors
it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of
the broker and/or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. Consistent with
this obligation, the Subadviser may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers who provide brokerage and
research services (within the meaning of Section 28(e) of the Securities and
Exchange Act of 1934) to or for the benefit of the Trust and/or other
accounts over which the Subadviser or the Adviser exercises investment
discretion. The Subadviser is authorized to pay a broker who provides such
brokerage and research services a commission for effecting a securities
transaction which is in excess of the amount of commission another broker
would have charged for effecting that transaction, if the Subadviser
determines in good faith that such commission was reasonable in relation to
the value of brokerage and research services provided by such broker. This
determination may be viewed in terms of either that particular transaction or
of the overall responsibilities of the Subadviser with respect to the
accounts as to which it exercises investment discretion.
-3-
(b) The Subadviser may execute transactions through itself
and its affiliates on a securities exchange provided that the commissions
paid by the Trust are "reasonable and fair" compared to commissions received
by other brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange
provided that the affiliated broker arranges for unaffiliated brokers to
execute the transactions.
(c) Notwithstanding the foregoing, the Board of Trustees and
the Adviser periodically shall review the commissions paid by the Trust and
determine whether those commission were reasonable in relation to the
brokerage and research services received. In addition, the Board of Trustees
of the Trust, in its discretion, may instruct the Subadviser to effect all or
a portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Trustees, if it determines that the use of
such brokers and/or dealers is in the best interest of the Trust.
(d) When the Subadviser deems the purchase or sale of a
security to be in the best interest of the Trust as well as other customers,
the Subadviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution
or lower brokerage commissions. The Subadviser also may purchase or sell a
particular security for one or more customers in different amounts.
Allocations of the securities purchased or sold in either manner, as well as
the expenses incurred in the transactions, will be made by the Subadviser in
a manner that is equitable and consistent with applicable law and regulations
and with its fiduciary obligations to the Trust and to such other customers.
-4-
5. Expenses.
(a) The Subadviser shall furnish at its own expense all
office space, office facilities, equipment and personnel necessary or
appropriate to the performance of its duties under this Agreement. The
Subadviser also shall pay the salaries of all personnel performing services
related to the Subadviser's duties under this Agreement.
(b) It is understood that the Trust will pay all of its
expenses and liabilities, including compensation of its independent Trustees;
taxes and governmental fees; interest charges; fees and expenses of the
Trust's independent auditors and legal counsel; trade association membership
dues; fees and expenses of any custodian (including safekeeping of funds and
securities, maintenance of books and accounts and calculation of the net
asset value of beneficial interests of each Series), transfer agent and
registrar and dividend disbursing agent of the Trust; expenses of preparing
and mailing reports to investors and regulatory agencies; any expenses
relating to the issuance, registration and qualification of shares of each
Series, and the preparation, printing and mailing of prospectuses for such
purposes; insurance premiums; brokerage and other expenses of executing
portfolio transactions; expenses of investors' and Trustees' meetings;
organization expenses; and extraordinary expenses.
6. Compensation of the Subadviser. In consideration of the
services to be rendered by the Subadviser under this Agreement, the Adviser
shall pay the Subadviser a fee accrued daily and paid monthly at an annual
rate equal to that specified in Exhibit A to this Agreement for that Series'
average daily net assets. The fee for any period in which the Subadviser
serves as investment adviser pursuant to this Agreement for less than one
full month shall be paid for that portion of the month accrued. For purposes
of calculating fees, the value of the net assets of each Series of the Trust
-5-
shall be computed in the manner specified in its Registration Statement on
Form N-1A.
7. Services to Others. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser is
free to render services to others and to engage in other activities;
provided, however, that those services and activities do not adversely affect
the Subadviser's ability to perform its obligations under this Agreement.
8. Books, Records, and Information. The Subadviser shall provide
the Adviser and the Trust with all records concerning the Subadviser's
activities that the Trust is required by law to maintain. Any records
required to be maintained and preserved pursuant to the provisions of Rule
31a-1 and Rule 31a-2 under the Investment Company Act which are prepared or
maintained by the Subadviser on behalf of the Trust are the property of the
Trust and will be surrendered promptly to the Trust on request.
The Subadviser also shall comply with all reasonable requests
for information by the Adviser or the Trust's officers or Board of Trustees,
including information required for the Trust's filings with the Securities
and Exchange Commission and state securities commissions.
9. Limitations on Liability.
(a) The Subadviser hereby is notified expressly of the
limitation of shareholder liability as set forth in the Declaration of Trust
and agrees that any obligation of the Trust or the Series arising in
connection with this Agreement shall be limited in all cases to the Series
and their assets, and the Subadviser shall not seek satisfaction of any such
obligation from any Trustee or shareholder of the Series.
-6-
(b) The Subadviser shall give the Adviser and the Trust the
benefit of its best judgment and efforts in rendering services under this
Agreement. In the absence of willful malfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Subadviser, the Subadviser shall not be liable to the Trust, to
any shareholder of the Series or to the Adviser for any act or omission in
the course of, or connected with, rendering services under this Agreement or
for any losses that may be sustained in the purchase, holding or sale of any
security. The Adviser agrees that the Subadviser shall not be liable for,
and shall be indemnified and held harmless by the Adviser for, any losses,
liabilities, or expenses that the Subadviser may incur due to errors of
judgment, mistakes, acts or omission of the Adviser.
10. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as to each Series on
the date the Series commences investment operations, and, unless terminated
sooner as provided herein, shall continue until the second anniversary of the
execution of this Agreement. Thereafter, unless terminated sooner as
provided herein, this Agreement shall continue in effect as to each Series
for successive annual periods, provided that such continuance is specifically
approved at least annually by the vote of a majority of the Board of Trustees
of the Trust who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting
on such continuance, and either: (i) the vote of a majority of the
outstanding voting securities of such Series; or (ii) the vote of a majority
of the full Board of Trustees.
(b) This Agreement may be terminated at any time and as to
any one or more Series, without the payment of any penalty, either by: (i)
the Trust, by action of the Board of Trustees or by vote of a majority of the
-7-
outstanding voting securities of such Series, on 60 days' written notice to
the Subadviser; (ii) the Adviser, on 60 days' written notice to the
Subadviser; or (iii) the Subadviser, on 90 days' written notice to the
Adviser and the Trust. This Agreement shall terminate immediately in the
event of its assignment.
(c) This Agreement may be amended only if such amendment is
approved by the vote of a majority of the outstanding voting securities of
the Series or the Trust or by vote of a majority of the Board of Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such amendment.
(d) As used in this Agreement, the terms "specifically
approved at least annually," "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meanings as such
terms have in the Investment Company Act and the regulation thereunder.
11. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Massachusetts without giving
effect to the choice of law provisions thereof, to the extent that such laws
are consistent with provisions of the Investment Company Act and the
regulations thereunder.
12. Miscellaneous. The captions in this Agreement are included
for the convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made invalid by a court
decision, statute, regulation, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall
-8-
inure to the benefit of the parties hereto and their respective successors,
to the extent permitted by law.
IN WITNESS WHEREOF, the Adviser and the Subadviser have caused this
Agreement to be executed and delivered in their names and on their behalf by
the undersigned, duly authorized officers, all as of the day and year first
above written.
Attest: FEDERATED MANAGEMENT
By:
Name:
Title:
Attest: UNITED STATES TRUST COMPANY
OF NEW YORK
By:
Name:
Title:
Exhibit A
SCHEDULE OF SERIES AND FEES UNDER
-9-
INVESTMENT SUBADVISORY AGREEMENT
Annual Fee (as a percentage of
Series Names the average daily net assets of a series)
Bond Index Portfolio 0.12%
Exhibit B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of December 1, 1995, by and between FEDERATED
INVESTMENT PORTFOLIOS, a Massachusetts business trust (the "Trust"),
registered as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
and FEDERATED MANAGEMENT, a Delaware business trust registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Adviser").
In consideration of the promises and the mutual covenants herein
contained, the Trust and the Adviser agree as follows:
1. Appointment. The Trust appoints the Adviser to act as
investment adviser to the Trust with respect to the series of the Trust
listed on Exhibit A hereto (the "Series") for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
provide an investment program for the compensation provided by this
Agreement. In providing the services and assuming the obligations set forth
herein, the Adviser, may, at its own expense, employ one or more subadvisers;
-10-
provided that the Adviser understands and agrees that it shall remain fully
responsible for the performance of all the duties set forth in this Agreement
and that it shall supervise the activities of each subadviser. Any agreement
between the Adviser and a subadviser shall be subject to the renewal,
termination and amendment provisions applicable to this Agreement.
2. Duties of the Subadviser. Subject to the direction and
control of the Adviser and the Board of Trustees of the Trust, the Subadviser
shall:
(a) prepare (or otherwise obtain) and evaluate on both a
macroeconomic and microeconomic level any pertinent research; statistical,
financial and economic data; and other information necessary or appropriate
for the performance of its duties under this Agreement;
(b) formulate and continuously review, supervise, and
administer an investment program for each Series;
(c) determine the securities to be purchased by the Series,
and continuously monitor such securities and the issuers thereof to determine
whether and when to sell, exchange, or take any other action concerning such
securities;
(d) determine whether and how to exercise warrants, voting
rights, or other rights with respect to the Series' securities;
(e) provide valuations with respect to the securities held by
the Series if so requested by the Trustees of the Trust;
(f) render regular reports to the Trust's officers and the
Board of Trustees concerning the investment performance of the Trust, the
-11-
Adviser's discharge of its responsibilities under this Agreement, and any
other subject as the Trust's officers or Board of Trustees reasonably may
request; and
(g) assist the Trust's officers in connection with the
operation of the Trust and perform any further acts that may be necessary to
effectuate the purposes of this Agreement.
3. Supervision and Compliance. The activities of the Adviser
shall be subject at all times to the direction and control of the Board of
Trustees of the Trust and shall comply with: (a) the Declaration of Trust
and By-Laws of the Trust; (b) the Registration Statement of the Trust, as it
may be amended from time to time, including the investment objectives and
policies set forth therein; (c) the Investment Company Act and the
regulations thereunder; (d) the Internal Revenue Code of 1986 and the
regulations thereunder applicable to regulated investment companies; (e) any
other applicable laws or regulations; and (f) such other limitations as the
Adviser or the Board of Trustees of the Trust may adopt.
4. Purchase and Sale of Securities. The Adviser shall, at its
own expense, place orders for the purchase, sale or loan of securities by the
Trust either directly with the issuer or with any broker and/or dealer who
deals in such securities.
(a) In placing orders with brokers and/or dealers, the
Adviser shall use its best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all factors it
deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of
the broker and/or dealer, and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis.
-12-
Consistent with this obligation, the Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities and Exchange Act of 1934) to or for the benefit of the Trust
and/or other accounts over which the Adviser exercises investment discretion.
The Adviser is authorized to pay a broker who provides such brokerage and
research services a commission for effecting a securities transaction which
is in excess of the amount of commission another broker would have charged
for effecting that transaction, if the Adviser determines in good faith that
such commission was reasonable in relation to the value of brokerage and
research services provided by such broker. This determination may be viewed
in terms of either than particular transaction or of the overall
responsibilities of the Adviser with respect to the accounts as to which it
exercises investment discretion.
(b) The Adviser may execute transactions through itself and
its affiliates on a securities exchange provided that the commissions paid by
the Trust are "reasonable and fair" compared to commissions received by other
brokers having comparable execution capability and provided that the
transactions are effected pursuant to procedures established by the Board of
Trustees of the Trust. An affiliated broker may transmit, clear and settle
transactions for the Trust that are executed on a securities exchange
provided that the affiliated broker arranges for unaffiliated brokers to
execute the transactions.
(c) Notwithstanding the foregoing, the Board of Trustees
periodically shall review the commissions paid by the Trust and determine
whether those commissions were reasonable in relation to the brokerage and
research services received. In addition, the Board of Trustees of the Trust,
in its discretion, may instruct the Adviser to effect all or a portion of its
-13-
securities transactions with one or more brokers and/or dealers selected by
the Board of Trustees, if it determines that the use of such brokers and/or
dealers is in the best interest of the Trust.
(d) When the Adviser deems the purchase or sale of a security
to be in the best interest of the Trust as well as other customers, the
Adviser, to the extent permitted by applicable law, may aggregate the
securities to be so sold or purchased in order to obtain the best execution
or lower brokerage commissions. The Adviser also may purchase or sell a
particular security for one or more customers in different amounts.
Allocations of the securities purchased or sold in either manner, as well as
the expenses incurred in the transactions, will be made by the Adviser in a
manner that is equitable and consistent with applicable law and regulations
and with its fiduciary obligations to the Trust and to such other customers.
5. Expenses.
(a) The Adviser shall furnish at its own expense all office
space, office facilities, equipment and personnel necessary or appropriate to
the performance of its duties under this Agreement. The Adviser also shall
pay the salaries of all personnel of the Trust or the Adviser performing
services related to the Adviser's duties under this Agreement.
(b) It is understood that the Trust will pay all of its
expenses and liabilities, including compensation of its independent Trustees;
taxes and governmental fees; interest charges; fees and expenses of the
Trust's independent auditors and legal counsel; trade association membership
dues; fees and expenses of any custodian (including safekeeping of funds and
securities, maintenance of books and accounts and calculation of the net
asset value of beneficial interests of the Series), transfer agent and
registrar and dividend disbursing agent of the Trust; expenses of preparing
-14-
and mailing reports to investors and regulatory agencies; any expenses
relating to the issuance, registration and qualification of shares of each
Series, and the preparation, printing and mailing of prospectuses for such
purposes; insurance premiums; brokerage and other expenses of executing
portfolio transactions; expenses of investors' and Trustees' meetings;
organization expenses; and extraordinary expenses.
6. Compensation of the Adviser. In consideration of the services
to be rendered by the Adviser under this Agreement, the Adviser shall pay the
Adviser a fee accrued daily and paid monthly from the Series at an annual
rate equal to that specified in Exhibit A to this Agreement for the Series'
average daily net assets. The fee for any period in which the Adviser serves
as investment adviser pursuant to this Agreement for less than one full month
shall be paid for that portion of the month accrued. For purposes of
calculating fees, the value of the net assets of the Series of the Trust
shall be computed in the manner specified in its Registration Statement on
Form N-1A.
7. Services to Others. The services of the Adviser to the Trust
are not to be deemed exclusive, and the Adviser is free to render services to
others and to engage in other activities, provided, however, that those
services and activities do not adversely affect the Adviser's ability to
perform its obligations under this Agreement.
8. Books, Records, and Information. The Adviser shall provide
the Trust with all records concerning the Adviser's activities that the Trust
is required by law to maintain. Any records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1 and Rule 31a-2 under the
Investment Company Act which are prepared or maintained by the Subadviser on
behalf of the Trust are the property of the Trust and will be surrendered
promptly to the Trust on request. The Trust also shall comply with all
-15-
reasonable requests for information by the Trust's officers or Board of
Trustees, including information required for the Trust's filings with the
Securities and Exchange Commission and state securities commissions.
9. Limitations on Liability.
(a) The Adviser hereby is notified expressly of the
limitation of shareholder liability as set forth in the Declaration of Trust
and agrees that any obligation of the Trust or the Series arising in
connection with this Agreement shall be limited in all cases to the Series
and their assets, and the Adviser shall not seek satisfaction of any such
obligation from any Trustee or shareholder of the Series.
(b) The Adviser shall give the Trust the benefit of its best
judgment and efforts in rendering services under this Agreement. In the
absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser, the
Adviser shall not be liable to the Trust, to any shareholder of the Series or
to the Adviser for any act or omission in the course of, or connected with,
rendering services under this Agreement or for any losses that may be
sustained in the purchase, holding or sale of any security.
10. Effective Date; Termination; Amendments.
(a) This Agreement shall be effective as to the Series on the
date the Series commences investment operations, and, unless terminated
sooner as provided herein, shall continue until the second anniversary of the
execution of this Agreement. Thereafter, unless terminated sooner as
provided herein, this Agreement shall continue in effect as to each Series
for successive annual periods, provided that such continuance is specifically
approved at least annually by the vote of a majority of the Board of Trustees
-16-
of the Trust who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting
on such continuance, and either: (i) the vote of a majority of the
outstanding voting securities of such Series; or (ii) the vote of a majority
of the full Board of Trustees.
(b) This Agreement may be terminated at any time and as to
any one or more Series, without the payment of any penalty, either by: (i)
the Trust, by action of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Series, on 60 days' written notice to
the Adviser; or (ii) the Adviser, on 90 days' written notice to the Adviser
and the Trust. This Agreement shall terminate immediately in the event of
its assignment.
(c) This Agreement may be amended only if such amendment is
approved by the vote of a majority of the outstanding voting securities of
the Series or Trust or by vote of a majority of the Board of Trustees of the
Trust who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
amendment.
(d) As used in this Agreement, the terms "specifically
approved at least annually," "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meanings as such
terms have in the Investment Company Act and the regulation thereunder.
11. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to the choice of law provisions thereof, to the extent that such laws
are consistent with provisions of the Investment Company Act and the
regulations thereunder.
-17-
12. Miscellaneous. The captions in this Agreement are included
for the convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
Should any part of this Agreement be held or made invalid by a court
decision, statute, regulation, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall
inure to the benefit of the parties hereto and their respective successors,
to the extent permitted by law. The parties hereto acknowledge that
Federated Investors and its subsidiary, Federated Management, have reserved
the right to grant the non-exclusive use of the name "Federated" or any
derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor or other business enterprise, and
to withdraw from the Trust and one or more of the Series the use of the name
"Federated."
IN WITNESS WHEREOF, the Trust and the Adviser have caused this
Agreement to be executed and delivered in their names and on their behalf by
the undersigned, duly authorized officers, all as of the day and year first
above written.
Attest: FEDERATED INVESTMENT PORTFOLIOS
By:
Name:
Title:
Attest: FEDERATED MANAGEMENT
-18-
By:
Name:
Title:
Exhibit A
SCHEDULE OF SERIES AND FEES UNDER
INVESTMENT SUBADVISORY AGREEMENT
Annual Fee (as a percentage of
Series Names the average daily net assets of a series)
Bond Index Portfolio 0.25%
Exhibit No. 9(iii) under Form N-1A
Federated Investment Portfolios
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
December 1, 1995
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ladies and Gentlemen:
Re: EXCLUSIVE PLACEMENT AGENT AGREEMENT
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Federated Investment Portfolios (the "Trust"),
an open-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), organized as a
business trust under the laws of the Commonwealth of Massachusetts, has
agreed that Federated Securities Corp., a Pennsylvania corporation ("FSC"),
shall be the exclusive placement agent (the "Exclusive Placement Agent") of
beneficial interests ("Trust Interests") of each series of the Trust.
1. Services as Exclusive Placement Agent.
1.1 FSC will act as Exclusive Placement Agent of the Trust
Interests. In acting as Exclusive Placement Agent under this Exclusive
Federated Securities Corp.
December 1, 1995
Page 2
Placement Agent Agreement, neither FSC nor its employees or any agents
thereof shall make any offer or sale of Trust Interests in a manner which
would require the Trust Interests to be registered under the Securities Act
of 1933, as amended (the "1933 Act").
1.2 All activities by FSC and its agents and employees as
Exclusive Placement Agent of Trust Interests shall comply with all
applicable laws, rules and regulations, including, without limitation, all
rules and regulations adopted pursuant to the 1940 Act by the Securities and
Exchange Commission (the "Commission").
1.3 Nothing herein shall be construed to require the Trust to
accept any offer to purchase any Trust Interests, all of which shall be
subject to approval by the Trust's Board of Trustees.
1.4 The Trust shall furnish from time to time for use in
connection with the sale of Trust Interests such information with respect to
the Trust and Trust Interests as FSC may reasonably request. The Trust
shall also furnish FSC upon request with: (a) unaudited semiannual
statements of the Trust's books and accounts prepared by the Trust, and (b)
from time to time such additional information regarding the Trust's
financial or regulatory condition as FSC may reasonably request.
1.5 The Trust represents to FSC that all registration statements
filed by the Trust with the Commission under the 1940 Act with respect to
Trust Interests have been prepared in conformity with the requirements of
such statute and the rules and regulations of the Commission thereunder. As
used in this Agreement the term "registration statement" shall mean any
registration statement filed with the Commission, as modified by any
amendments thereto that at any time shall have been filed with the
Federated Securities Corp.
December 1, 1995
Page 3
Commission by or on behalf of the Trust. The Trust represents and warrants
to FSC that any registration statement will contain all statements required
to be stated therein in conformity with both such statute and the rules and
regulations of the Commission; that all statements of fact contained in any
registration statement will be true and correct in all material respects at
the time of filing of such registration statement or amendment thereto; and
that no registration statement will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading to a purchaser of
Trust Interests. The Trust may but shall not be obligated to propose from
time to time such amendment to any registration statement as in the light of
future developments may, in the opinion of the Trust's counsel, be necessary
or advisable. If the Trust shall not propose such amendment and/or
supplement within fifteen days after receipt by the Trust of a written
request from FSC to do so, FSC may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement without
giving FSC reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right
to file at any time such amendment to any registration statement as the
Trust may deem advisable, such right being in all respects absolute and
unconditional.
1.6 The Trust agrees to indemnify, defend and hold FSC, its several
officers and directors, and any person who controls FSC within the meaning
of Section 15 of the 1933 Act or Section 20 of the Securities and Exchange
Act of 1934 (the "1934 Act") (for purposes of this paragraph 1.6,
collectively, the "Covered Persons") free and harmless from and against any
and all claims, demand, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person may
Federated Securities Corp.
December 1, 1995
Page 4
incur under the 1933 Act, the 1934 Act, or otherwise, arising out of or
based on any untrue statement of a material fact contained in any
registration statement, private placement memorandum or other offering
material ("Offering Material") or arising out of or based on any omission to
state a material fact required to be stated in any Offering Material or
necessary to make the statements in any Offering Material not misleading;
provided, however, that the Trust's agreement to indemnify Covered Persons
shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any financial and other statements as are furnished in
writing to the Trust by FSC in its capacity as Exclusive Placement Agent for
use in the answers to any items of any registration statement or in any
statements made in any Offering Material, or arising out of or based on any
omission or alleged omission to state a material fact in connection with the
giving of such information required to be stated in such answers or
necessary to make the answers not misleading; and further provided that the
Trust's agreement to indemnify FSC and the Trust's representation and
warranties hereinbefore set forth in paragraph 1.5 shall not be deemed to
cover any liability to the Trust or its investors to which a Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of a Covered
Person's reckless disregard of its obligations and duties under this
Agreement. The Trust should be notified of any action brought against a
Covered Person, such notification to be given by letter or by telegram
addressed to the Trust, Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, Attention: Secretary, with a copy to Matthew G.
Maloney, Esq., Dickstein, Shapiro & Morin, L.L.P., 2101 L Street, N.W.,
Washington, DC 20037, promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered Person.
The failure to so notify the Trust of any such action shall not relieve the
Trust from any liability except to the extent the Trust shall have been
Federated Securities Corp.
December 1, 1995
Page 5
prejudiced by such failure, or from any liability that the Trust may have to
the Covered Person against whom such action is brought by reason of any such
untrue statement or omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand
or liability, but in such case such defense shall be conducted by counsel of
good standing chosen by the Trust and approved by FSC, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense in any such suit and retain counsel of good standing approved by
FSC, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case FSC
reasonably does not approve of counsel chosen by the Trust, the Trust will
reimburse the Covered Person named as defendant in such suit, for the fees
and expenses of any counsel retained by FSC or the Covered Persons. The
Trust's indemnification agreement contained in this paragraph and the
Trust's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of Covered Persons, and shall survive the delivery of any
Trust Interests. This agreement of indemnity will inure exclusively to
Covered Persons and their successors. The Trust agrees to notify FSC
promptly of the commencement of any litigation or proceedings against the
Trust or any of its officers or Trustees in connection with the issue and
sale of any Trust Interests.
1.7 FSC agrees to indemnify, defend and hold the Trust, its
several officers and trustees, and any person who controls the Trust within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for
purposes of this paragraph 1.7, collectively, the "Covered Persons") free
and harmless from and against any and all claims, demands, liabilities and
Federated Securities Corp.
December 1, 1995
Page 6
expenses (including the costs of investigating or defending such claims,
demands, liabilities and any counsel fees incurred in connection therewith)
that Covered Persons may incur under the 1933 Act, the 1934 Act, common law,
or otherwise, but only to the extent that such liability or expense incurred
by a Covered Person resulting from such claims or demands shall arise out of
or be based on (i) any untrue statement of a material fact contained in
information furnished in writing by FSC in its capacity as Exclusive
Placement Agent to the Trust for use in the answers to any of the items of
any registration statement or in any statements in any other Offering
Material, or (ii) any omission to state a material fact in connection with
such information furnished in writing by FSC to the Trust required to be
stated in such answers or necessary to make such information not misleading.
FSC shall be notified of any action brought against a Covered Person, such
notification to be given by letter or telegram addressed to FSC at Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, Attention:
Secretary, promptly after the summons or other first legal process shall
have been duly and completely served upon such Covered Person. FSC shall
have the right of first control of the defense of the action with counsel of
its own choosing satisfactory to the Trust if such action is based solely on
such alleged misstatement or omission on FSC's part, and in any other event
each Covered Person shall have the right to participate in the defense or
preparation of the defense of any such action. The failure to so notify FSC
of any such action shall not relieve FSC (i) from any liability except to
the extent the Trust shall have been prejudiced by such failure, or (ii)
from any liability that FSC may have to Covered Persons by reason of any
such untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of FSC's indemnity agreement contained in this
paragraph.
Federated Securities Corp.
December 1, 1995
Page 7
1.8 No Trust Interests shall be offered by either FSC or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Trust Interests hereunder shall be accepted by the Trust
if and so long as the effectiveness of the registration statement or any
necessary amendments thereto shall be suspended under any of the provisions
of the 1940 Act; provided, however, that nothing contained in this paragraph
shall in any way restrict or have an application to or bearing on the
Trust's obligation to redeem Trust Interests from any investor in accordance
with the provisions of the Trust's registration statement or Declaration of
Trust, as amended from time to time. The Trust shall notify FSC promptly of
the suspension of the registration statement or any necessary amendments
thereto, such notification to be given by letter or telegram addressed to
FSC at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA
15222-3779, Attention: Secretary.
1.9 The Trust agrees to advise FSC as soon as reasonably
practical by a notice in writing delivered to FSC or its counsel:
(a) of any request by the Commission for amendments to the
registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statements of a material fact made in the registration statement then in
effect or that requires the making of a change in such registration
statement in order to make the statements therein not misleading; and
Federated Securities Corp.
December 1, 1995
Page 8
(d) of all action of the Commission with respect to any amendment
to any registration statement that may from time to time be filed with the
Commission.
For purposes of this paragraph 1.9, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests by
the Commission.
1.10 FSC agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
other information not otherwise publicly available relative to the Trust and
its prior, present or potential investors and not to use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Trust, which approval shall not be unreasonably withheld and
may not be withheld where FSC may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Trust.
1.11 In addition to FSC's duties as Exclusive Placement Agent, the
Trust understands that FSC may, in its discretion, perform additional
functions in connection with transactions in Trust Interests.
The processing of Trust Interest transactions may include, but is
not limited to, compilation of all transactions from FSC's various offices;
creation of a transaction tape and timely delivery of it to the Trust's
transfer agent for processing; reconciliation of all transactions delivered
to the Trust's transfer agent; and the recording and reporting of these
Federated Securities Corp.
December 1, 1995
Page 9
transactions executed by the Trust's transfer agent in customer statements;
rendering of periodic customer statements; and the reporting of IRS Form
1099 information at year end if required.
FSC may also provide other investor services, such as
communicating with Trust investors and other functions in administering
customer accounts for Trust investors.
FSC understands that these services may result in cost savings to
the Trust or to the Trust's investment manager and neither the Trust nor the
Trust's investment manager will compensate FSC for all or a portion of the
costs incurred in performing functions in connection with transactions in
Trust Interests. Nothing herein is intended, nor shall be construed, as
requiring FSC to perform any of the foregoing functions.
1.12 Except as set forth in paragraph 1.6 of this Agreement, the
Trust shall not be liable to FSC or any Covered Persons as defined in
paragraph 1.6 for any error of judgment or mistake of law or for any loss
suffered by FSC in connection with the matters to which this Agreement
relates, except a loss resulting from the willful misfeasance, bad faith or
gross negligence on the part of the Trust in the performance of its duties
or from reckless disregard by the Trust of its obligations and duties under
this Agreement.
1.13 Except as set forth in paragraph 1.7 of this Agreement, FSC
shall not be liable to the Trust or any Covered Persons as defined in
paragraph 1.7 for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which this Agreement
relates, except a loss resulting from the willful misfeasance, bad faith or
gross negligence on the part of FSC in the performance of its duties or from
Federated Securities Corp.
December 1, 1995
Page 10
reckless disregard by FSC of its obligations and duties under this
Agreement.
2. Term.
This Agreement shall become effective on the date first above
written and, unless sooner terminated as provided herein, shall continue
until December 1, 1997 and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically
approved at least annually by (i) the Trust's Board of Trustees or (ii) by a
vote of a majority (as defined in the 1940 Act) of the Trust's outstanding
voting securities, provided that in either event the continuance is also
approved by the majority of the Trust's Trustees who are not interested
persons (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement
is terminable without penalty, on not less than 60 days' notice, by the
Board, by a vote of a majority (as defined in the 1940 Act) of the Trust's
outstanding voting securities, or by FSC. This Agreement will also
terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
3. Representations and Warranties.
FSC and the Trust each hereby represents and warrants to the other
that it has all requisite authority to enter into, execute, deliver and
perform its obligations under this Agreement and that, with respect to it,
this Agreement is legal, valid and binding, and enforceable in accordance
with its terms.
Federated Securities Corp.
December 1, 1995
Page 11
4. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of
law, including the applicable provisions of the 1940 Act and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.
The laws of the Commonwealth of Pennsylvania shall, except to the
extent that any applicable provisions of Federal law shall be controlling,
govern the construction, validity and effect of this Agreement, without
reference to principles of conflicts of law.
The undersigned officer of the Trust has executed this Agreement
not individually, but as President under the Trust's Declaration of Trust,
dated as of September 29, 1995. Pursuant to the Declaration of Trust the
obligations of this Agreement are not binding upon any of the Trustees or
investors of the Trust individually, but bind only the trust estate.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning the
same to the undersigned, whereupon this Agreement shall constitute a binding
contract between the parties hereto effective at the closing of business on
the date hereof.
Yours very truly,
FEDERATED INVESTMENT PORTFOLIOS
By:
Federated Securities Corp.
December 1, 1995
Page 12
President
Accepted:
FEDERATED SECURITIES CORP.
