1933 Act File No.
1940 Act File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. .................
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. ...............................
FT FUNDS
(Exact name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering As soon as possible after
the effectiveness of the Registration Statement
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
Registrant hereby elects to register an indefinite number of shares.
Amendment Pursuant to Rule 473
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This Registration Statement of FT Funds, which consists of four portfolios:
(1) FT Small Cap Equity Fund, (2) FT International Equity Fund, (3) FT
International Bond Fund, and (4) FT Global Bond Fund, is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1,2,3,4) Cover Page.
Item 2. Synopsis.................(1,2,3,4) Synopsis; (1,2,3,4) Expenses of the
Funds.
Item 3. Condensed Financial
Information..............(1,2,3,4) Performance Information.
Item 4. General Description of
Registrant...............(1,2,3,4) Investment Objective of Each Fund;
(1) Small Capitalization Equity Fund; (2)
International Equity Fund;
(3) International Bond
Fund; (4) Global Bond Fund;
(1,2,3,4) Portfolio
Investments and Strategies.
Item 5. Management of the Fund...(1,2,3,4) FT Funds Information; (1,2,3,4)
Management of FT Funds; (1,2,3,4)
Distribution of
Shares of the Funds; (1,2,3,4) Administrative
Arrangements; (1,2,3,4) Administration of the
Funds; (1,2,3,4) Brokerage Transactions;
(1,2,3,4) Expenses of the Funds.
Item 6. Capital Stock and Other
Securities...............(1,2,3,4) Dividends; (1,2,3,4) Capital Gains;
(1,2,3,4) Shareholder Information; (1,2,3,4)
Voting Rights; (1,2,3,4) Massachusetts
Partnership Law; (1,2,3,4) Effect of Banking
Laws; (1,2,3,4) Tax Information; (1,2,3,4)
Federal Income Tax; (1,2,3,4) Pennsylvania
Corporate and Personal Property Taxes.
Item 7. Purchase of Securities Being
Offered..................(1,2,3,4) Net Asset Value; (1,2,3,4)
Investing in the Funds; (1,2,3,4) Share
Purchases; (1,2,3,4)
Minimum Investment Required; (1,2,3,4) What
Shares Cost; (1,2,3,4) Certificates and
Confirmations.
Item 8. Redemption or Repurchase.(1,2,3,4) Exchange Privilege; (1,2,3,4)
Requirements for Exchange; (1,2,3,4) Tax
Consequences; (1,2,3,4) Redeeming Shares;
(1,2,3,4) By Telephone; (1,2,3,4) By Mail;
(1,2,3,4) Signatures; (1,2,3,4) Accounts
with Low Balances.
Item 9. Pending Legal Proceedings None
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1,2,3,4) Cover Page
Item 11. Table of Contents........(1,2,3,4) Table of Contents.
Item 12. General Information and
History..................(1,2,3,4) General Information About the
Trust.
Item 13. Investment Objectives and
Policies.................(1,2,3,4) Investment Objective and
Policies of the Funds;
(1,2,3,4) Investment Limitations.
Item 14. Management of the Fund...(1,2,3,4) FT Funds Management.
Item 15. Control Persons and Principal
Holders of Securities....Not applicable.
Item 16. Investment Advisory and Other
Services.................(1,2,3,4) Investment Advisory Services;
(1,2,3,4) Administrative Services;
(1,2,3,4) Transfer Agent, Dividend
Disbursing Agent and Portfolio
Recordkeeper; (1,2,3,4) Custodian.
Item 17. Brokerage Allocation.....(1,2,3,4) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered............(1,2,3,4) Purchasing Shares; (1,2,3,4)
Determining Net Asset Value;
(1,2,3,4) Redeeming Shares.
Item 20. Tax Status...............(1,2,3,4) Tax Status.
Item 21. Underwriters.............(1,2,3,4) Distribution and Shareholder
Services Plans.
Item 22. Calculation of Performance
Data.....................(1,2,3,4) Total Return; (1,2,3,4) Yield;
(1,2,3,4) Performance Comparisons; (1,2,3,4)
Appendix.
Item 23. Financial Statements.....(to be filed by Amendment)
FT FUNDS
COMBINED PROSPECTUS
FT Funds (the "Trust") is an open-end, management investment company (a mutual
fund). This combined prospectus offers investors interests in the following
four separate investment portfolios (individually referred to as the "Fund," and
collectively as the "Funds"), each having a distinct investment objective and
policies:
o FT Small Capitalization Equity Fund;
o FT International Equity Fund;
o FT International Bond Fund; and
o FT Global Bond Fund.
The investment adviser to the Funds is Fiduciary International, Inc. Edgewood
Services, Inc. serves as the distributor. This combined prospectus contains the
information you should read and know before you invest in any of the Funds in
the Trust. Keep this prospectus for future reference.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Additional information about the Trust is contained in the Trust's Combined
Statement of Additional Information, dated December , 1995, which has also
--
been filed with the Securities and Exchange Commission. The information
contained in the Combined Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement of Additional Information free of charge, obtain other information, or
make inquiries about any of the Funds by writing to the Trust or by calling
212/466-4100.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated December , 1995
--
TABLE OF CONTENTS
Synopsis 5
Expenses of the Funds 8
Performance Information 12
Investment Objective of Each Fund 13
Small Capitalization Equity Fund 13
International Equity Fund 18
International Bond Fund 21
Global Bond Fund 26
Portfolio Investments and Strategies 29
Borrowing Money 29
Diversification 30
Restricted and Illiquid Securities 30
Repurchase Agreements 31
When-Issued and Delayed Delivery Transactions 32
Forward Commitments 32
Lending of Portfolio Securities 33
Convertible Securities 34
Asset-Backed Securities 35
U.S. Government Securities 43
Investing in Securities of Other Investment Companies 43
Risk Factors 44
Equity Investment Considerations 44
Foreign Securities Considerations 45
U.S. Government Policies 50
Currency Risks 51
Allocation 52
Hedging Vehicles and Strategies 53
Hedging Strategies 57
Duration 59
Portfolio Turnover 60
FT Funds Information 61
Management of FT Funds 61
Distribution of Shares of the Funds 65
Distribution Plan 65
Shareholder Services Plan 68
Administrative Arrangements 69
Administration of the Funds 69
Administrative Services 69
Custodian 70
Transfer Agent, Dividend Disbursing Agent and
Portfolio Recordkeeper 70
Independent Auditors 70
Legal Counsel to the Funds 71
Brokerage Transactions 71
Expenses of the Funds 71
Net Asset Value 72
Investing in the Funds 73
Share Purchases 73
Through Fiduciary International, Inc. 73
By Mail 74
By Wire 74
Through Authorized Broker/Dealers 75
Minimum Investment Required 75
What Shares Cost 75
Certificates and Confirmations 76
Dividends 76
Capital Gains 77
Exchange Privilege 77
Requirements for Exchange 78
Tax Consequences 80
Redeeming Shares 80
By Telephone 80
By Mail 81
Signatures 82
Accounts with Low Balances 83
Shareholder Information 84
Voting Rights 84
Massachusetts Partnership Law 84
Effect of Banking Laws 85
Tax Information 87
Federal Income Tax 87
Pennsylvania Corporate and Personal Property Taxes 89
Addresses 90
SYNOPSIS
The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated October 19,
1995. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. The shares of any one portfolio may be offered in separate classes.
The Funds are designed for customers of financial institutions such as banks,
fiduciaries, custodians of public funds and investment advisers.
As of the date of this prospectus, the Board of Trustees (the "Trustees")
of the Trust has established the following four Funds:
o FT Small Capitalization Equity Fund ("Small Capitalization Fund") --
seeks to provide growth of principal by investing primarily in
domestic equity securities of small to mid-size companies having a
market value capitalization between $50 million and $1.5 billion;
o FT International Equity Fund ("International Equity Fund") --seeks to
provide growth of principal by investing in foreign equity securities;
o FT International Bond Fund ("International Bond Fund") --seeks to
provide total return through investments in foreign corporate and
foreign government fixed income securities; and
o FT Global Bond Fund ("Global Bond Fund") --seeks to provide total
return by investing in both foreign and U.S. corporate and government
fixed income securities.
For information on how to purchase shares of any of the Funds, please refer to
'Investing in the Funds.' A minimum initial investment of $10,000 is required
for each Fund. This prospectus should be read together with any account
agreement for minimum investment requirements imposed by Fiduciary Trust Company
International or any of its affiliates. See 'Minimum Investment Required.'
Shares of each Fund are sold at net asset value without the imposition of any
sales charge, and are redeemed at net asset value. Information on redeeming
shares may be found under 'Redeeming Shares.' The Funds are advised by
Fiduciary International, Inc.
SPECIAL CONSIDERATIONS. Investors should be aware of the following general
considerations. The market value of fixed income securities, which constitute a
major portion of the investments of several Funds, may vary inversely in
response to changes in prevailing interest rates. The market value of the
equity securities in which the Small Capitalization and International Equity
Funds invest will also fluctuate, and the possibility exists that the value of
common stocks could decline over short or even extended periods of time. The
section entitled 'Risk Factors -- Equity Investment Considerations' also
discloses the potential risks related to small capitalization stocks, in which
the Small Capitalization Fund primarily invests. The International Bond Fund
and the Global Bond Fund may invest in asset-backed and mortgage-backed
securities, which involve unique risks. The foreign securities in which all of
the Funds may invest may be subject to certain risks in addition to those
inherent in U.S. investments, and these risks are more fully discussed in the
section entitled 'Risk Factors -- Foreign Securities Considerations.' The Funds
may make certain investments and employ certain investment techniques that
involve other risks, including entering into repurchase agreements and forward
commitments, lending portfolio securities and entering into futures contracts
and related options as hedges. These risks and those associated with investing
in when-issued securities, options and futures are described under 'Investment
Objective of Each Fund' and 'Portfolio Investments and Strategies.'
EXPENSES OF THE FUNDS--SMALL CAPITALIZATION FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable) None
Redemption Fee (as a percentage of amount redeemed,
if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee %
---
12b-1 Fee (1) %
---
Total Other Expenses %
---
Shareholder Services Fee (after waiver)(2). . . . . %
----
Total Fund Operating Expenses (3) %
---
(1) The Fund has no present intention of paying or accruing the 12b-1 fee
during the period ending November 30, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.75% of its
average daily net assets for the 12b-1 fee. See "FT Funds Information."
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses are estimated to be % absent the
---
anticipated voluntary waiver of the shareholder services fee.
* Total operating expenses are estimated based on average expenses expected
to be incurred during the period ending November 30, 1996. During the
course of this period, expenses may be more or less than the average amount
shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Funds" and "FT Funds Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
Example 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming: (1) 5% annual return; and (2)
redemption at the end of each time period. $ $
----- ------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
EXPENSES OF THE FUNDS--INTERNATIONAL EQUITY FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable) None
Redemption Fee (as a percentage of amount redeemed,
if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee %
---
12b-1 Fee (1) %
---
Total Other Expenses %
---
Shareholder Services Fee (after waiver)(2). . . . . %
----
Total Fund Operating Expenses (3) %
---
(1) The Fund has no present intention of paying or accruing the 12b-1 fee
during the period ending November 30, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.75% of its
average daily net assets for the 12b-1 fee. See "FT Funds Information."
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses are estimated to be % absent the
---
anticipated voluntary waiver of the shareholder services fee.
* Total operating expenses are estimated based on average expenses expected
to be incurred during the period ending November 30, 1996. During the
course of this period, expenses may be more or less than the average amount
shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Funds" and "FT Funds Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
Example 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming: (1) 5% annual return; and (2)
redemption at the end of each time period. $ $
----- ------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
EXPENSES OF THE FUNDS--INTERNATIONAL BOND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable) None
Redemption Fee (as a percentage of amount redeemed,
if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee %
---
12b-1 Fee (1) %
---
Total Other Expenses %
---
Shareholder Services Fee (after waiver)(2). . . . . %
----
Total Fund Operating Expenses (3) %
---
(1) The Fund has no present intention of paying or accruing the 12b-1 fee
during the period ending November 30, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.75% of its
average daily net assets for the 12b-1 fee. See "FT Funds Information."
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses are estimated to be % absent the
---
anticipated voluntary waiver of the shareholder services fee.
* Total operating expenses are estimated based on average expenses expected
to be incurred during the period ending November 30, 1996. During the
course of this period, expenses may be more or less than the average amount
shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Funds" and "FT Funds Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
Example 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming: (1) 5% annual return; and (2)
redemption at the end of each time period. $ $
----- ------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
EXPENSES OF THE FUNDS--GLOBAL BOND FUND
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
as applicable) None
Redemption Fee (as a percentage of amount redeemed,
if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee %
---
12b-1 Fee (1) %
---
Total Other Expenses %
---
Shareholder Services Fee (after waiver)(2). . . . . %
----
Total Fund Operating Expenses (3) %
---
(1) The Fund has no present intention of paying or accruing the 12b-1 fee
during the period ending November 30, 1996. If the Fund were paying or
accruing the 12b-1 fee, the Fund would be able to pay up to 0.75% of its
average daily net assets for the 12b-1 fee. See "FT Funds Information."
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses are estimated to be % absent the
---
anticipated voluntary waiver of the shareholder services fee.
* Total operating expenses are estimated based on average expenses expected
to be incurred during the period ending November 30, 1996. During the
course of this period, expenses may be more or less than the average amount
shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Funds" and "FT Funds Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
Example 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming: (1) 5% annual return; and (2)
redemption at the end of each time period. $ $
----- ------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
PERFORMANCE INFORMATION
From time to time, the Funds may advertise their total returns and yields.
Total return represents the change, over a specified period of time, in the
value of an investment in a Fund after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of a Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
From time to time, advertisements for a Fund may refer to ratings, rankings, and
other information in certain financial publications and/or compare the
performance of the Fund to certain indices.
INVESTMENT OBJECTIVE OF EACH FUND
The investment objective and policies of each Fund appear below. The investment
objective of a Fund cannot be changed without the approval of holders of a
majority of that Fund's shares. While there is no assurance that a Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
Unless indicated otherwise, the investment policies and limitations of a Fund
may be changed by the Trustees without approval of shareholders. Shareholders
will be notified before any material change in these policies and limitations
becomes effective.
Additional information about investment limitations, strategies that one or more
Funds may employ, and certain investment policies mentioned below, appear in the
'Portfolio Investments and Strategies' section of this prospectus and in the
Combined Statement of Additional Information.
SMALL CAPITALIZATION FUND
The investment objective of the Small Capitalization Fund is to provide growth
of principal. The Fund pursues its investment objective by investing primarily
in a broad, diversified range of domestic equity securities comprising the small
to mid-capitalization sector of the United States equity market (companies which
have a market value capitalization between $50 million and $1.5 billion).
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
o common stocks, and securities convertible into common stocks, which
will be primarily composed of issues of small to mid-capitalization
domestic companies. See 'Portfolio Investments and Strategies' and
'Equity Investment Considerations.' Under normal market conditions,
at least 65% of the total assets of the Fund's portfolio will be
invested in equity securities of companies that have a market value
capitalization between $50 million and $1.5 billion;
o preferred stocks, corporate bonds, notes, warrants, and rights;
o American Depositary Receipts ("ADRs"), which are receipts typically
issued by a United States bank or trust company that evidence
ownership of underlying securities issued by a foreign issuer. The
Fund may invest up to 20% of its net assets in ADRs. See 'Depositary
Receipts' in 'Portfolio Investments and Strategies;'
o commercial paper rated A-1 by Standard & Poor's Ratings Group ("S&P"),
Prime-1 by Moody's Investors Service, Inc. ("Moody's") or F-1 by Fitch
Investors Service, Inc. ("Fitch"), and money market instruments
(including commercial paper) which are unrated but deemed to be of
comparable quality by the investment adviser, including Canadian
Commercial Paper and Europaper;
o certificates of deposits, demand and time deposits, savings shares,
bankers' acceptances and other instruments of domestic and foreign
banks, savings and loans and other deposit or thrift institutions
("Bank Instruments");
o shares of other investment companies. See 'Investing in Securities of
Other Investment Companies' in 'Portfolio Investments and Strategies;'
o foreign securities which are traded publicly in the United States.
The Fund may invest up to 10% of its net assets in foreign securities;
and
o securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, including those obligations purchased on a when-
issued or delayed delivery basis ("U.S. Government Securities"). See
'Portfolio Investments and Strategies.'
The Fund may also purchase corporate debt obligations that, at the time of
purchase, are rated in the top four rating categories (i.e., investment grade)
by nationally recognized statistical rating organizations ("NRSROs") such as S&P
or Moody's. Obligations rated in the lowest of the top four rating categories,
such as Baa by Moody's or BBB by S&P or Fitch, have speculative characteristics.
As to securities, changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
higher rated bonds. In the event that any such security is downgraded by an
NRSRO below the fourth highest rating category, the Fund will consider disposing
of the security, but is not required to do so. A description of the rating
categories of NRSROs is contained in the Appendix to the Combined Statement of
Additional Information.
In addition, the Fund may borrow money, lend portfolio securities, invest in
restricted and illiquid securities and repurchase agreements, and engage in
forward commitment and when-issued and delayed delivery transactions. The Fund
may also invest in put and call options, futures, and options on futures, in
order to implement its investment strategy and for hedging purposes. See
'Portfolio Investments and Strategies' for a discussion of these investments, as
well as the potential risks related to small capitalization stocks.
In selecting investments for the Fund's portfolio, the investment adviser seeks
to select small to mid-capitalization companies that it believes are undervalued
in the marketplace or which have earnings that might be expected to grow faster
than the U.S. economy in general. The investment adviser looks to purchase
stocks whose projected growth rates exceed their current
price-earnings ratio. The Fund may also invest in companies which represent the
first opportunity to participate in new products, new services and new
technologies. The adviser will typically seek to select companies for purchase
that exhibit one or more of the following characteristics: consistent high past
growth and predictable projected growth, a unique franchise value, high barriers
to market competitors, a strong balance sheet and cash flow or an exceptional
management team with an equity stake.
INVESTMENT LIMITATIONS. The Fund's investment limitations are discussed below
under 'Borrowing Money,' 'Diversification' and 'Restricted and Illiquid
Securities.'
INTERNATIONAL EQUITY FUND
The investment objective of the International Equity Fund is to provide growth
of principal. The Fund pursues its investment objective through a flexible
policy of investing in a broad, diversified portfolio of stocks and debt
obligations of issuers located outside the United States. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
securities denominated in foreign currencies, including the European Currency
Unit (the "ECU"), of issuers located in at least three different nations outside
of the United States, and at least 65% of the Fund's total assets will be
invested in equity securities, i.e., common stocks and preferred stocks. The
Fund may also invest up to 35% of its total assets in debt securities. The ECU
is a multinational currency unit which represents specified amounts of the
currencies of certain member states of the European Economic Community.
Acceptable Investments. The securities in which the Fund invests include, but
are not limited to:
o common stocks, and securities convertible into common stocks, of
established foreign companies that appear to have growth
potential and are located in economically developed nations. The
Fund may also invest up to 10% of its total assets in common
stocks of issuers located in emerging market nations;
o foreign preferred stocks, warrants and convertible securities;
o ADRs, Global Depositary Receipts ("GDRs"), International
Depositary Receipts ("IDRs") and European Depositary Receipts
("EDRs"). See 'Portfolio Investments and Strategies;'
o fixed income securities of foreign companies or governments that
are rated investment grade by an NRSRO or, if unrated, determined
by the investment adviser to be of comparable quality;
o shares of other investment companies, as described in 'Investing
in Securities of Other Investment Companies,' in 'Portfolio
Investments and Strategies' in this prospectus;
o Bank Instruments, as described above under 'Small Capitalization
Fund,' and U.S. Government Securities. See 'Portfolio
Investments and Strategies;' and
o other money market instruments.
In addition, the Fund may borrow money, lend portfolio securities, invest in
restricted and illiquid securities and repurchase agreements, and engage in
forward commitment and when-issued and delayed delivery transactions. The Fund
may also invest in forward foreign currency exchange contracts, put and call
options, futures and options on futures, in order to implement its investment
strategy and for hedging purposes. See 'Portfolio Investments and Strategies'
for a discussion of these investments, as well as the potential risks related to
foreign securities and investing in emerging market nations. In the event that
any fixed income security owned by the Fund is downgraded by an NRSRO below
investment grade, the Fund will consider disposing of the security, but is not
required to do so.
In seeking to achieve the Fund's investment objective, the investment adviser
believes there are three potential advantages to investing in foreign equity
securities:
o the opportunity to invest in non-U.S. companies believed to
possess superior growth potential;
o the opportunity to invest in foreign nations with business and
economic policies different from those in the United States; and
o the opportunity to reduce portfolio volatility to the extent that
securities markets inside and outside the United States do not
move in harmony.
In managing the Fund's portfolio, the investment adviser, through both
fundamental research and a value screen, will identify foreign equity securities
that it determines to be underpriced, but whose near-term growth and long-term
growth prospects are not being fully valued in the marketplace. The objective
is to create a diversified portfolio emphasizing the higher growth regions of
the world and investing in underpriced, quality growth companies within these
regions. The Fund will invest primarily in foreign industrialized companies
throughout the world that comprise the Morgan Stanley Capital International EAFE
(Europe, Australia, and the Far East) Index.
INVESTMENT LIMITATIONS. The Fund's investment limitations are discussed below
under 'Borrowing Money,' 'Diversification' and 'Restricted and Illiquid
Securities.'
INTERNATIONAL BOND FUND
The investment objective of the International Bond Fund is to provide total
return. The Fund pursues its investment objective by investing primarily in a
broad, diversified portfolio of fixed income obligations of governments and
companies located outside the United States. Under normal market conditions, at
least 65% of the Fund's total assets will be invested in high-quality debt
securities denominated in foreign currencies (including the ECU) of issuers
located in a least three different nations outside of the United States.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
o high-quality fixed income government securities denominated in
the currencies of the nations that are members of the
Organization for Economic Cooperation and Development. These
nations include, but are not limited to, the following:
Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Luxembourg,
The Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom. The Fund may also invest up
to 10% of its total assets in debt securities or other
instruments of issuers located in emerging market nations;
o high-quality fixed income obligations of foreign corporations
located outside the United States;
o fixed income obligations of supranational entities, such as the
International Bank for Reconstruction and Development and the
Inter- American Development Bank. See 'Foreign Government
Securities' in 'Portfolio Investments and Strategies;'
o convertible securities and warrants;
o asset-backed and mortgage-backed securities, including
collateralized mortgage obligations ("CMOS"), rated in one of the
four highest rating categories by an NRSRO (i.e., BBB, Baa or
higher) or, if unrated, determined by the investment adviser to
be of comparable quality. See 'Asset-Backed Securities' in
'Portfolio Investments and Strategies;'
o shares of other investment companies. See 'Investing in
Securities of Other Investment Companies' in 'Portfolio
Investments and Strategies;'
o debt obligations of national, state or "quasi-governmental
agencies" which are not supported by the full faith and credit or
general taxing power of such entities. See 'Foreign Government
Securities' in 'Portfolio Investments and Strategies;'
o Bank Instruments, as described above under 'Small Capitalization
Fund;' and
o other money market instruments.
In addition, the Fund may borrow money, lend portfolio securities, invest in
restricted and illiquid securities and repurchase agreements, and engage in
forward commitment and when-issued and delayed delivery transactions. The Fund
may also invest in forward foreign currency exchange contracts, put and call
options, futures and options on futures, in order to implement its investment
strategy and for hedging purposes. See 'Portfolio Investments and Strategies'
for a discussion of these investments, as well as the potential risks related to
foreign securities, asset-backed and mortgage-backed securities and investing in
emerging market nations.
The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by S&P or Moody's, or, if unrated, will
be judged by the Fund's investment adviser to be of comparable quality. Because
the average quality of the Fund's portfolio investments should remain constantly
between A and AAA, the Fund will seek to avoid the adverse consequences that may
arise for some debt securities in difficult economic circumstances. In the
event that a security held by the Fund is downgraded by an NRSRO below the
quality parameters discussed above, the Fund may consider disposing of the
security, but is not required to do so.
The Fund's portfolio of debt securities will be comprised mainly of foreign
government, foreign governmental agency or supranational institution bonds. In
addition, the Fund will also invest in high-quality debt securities issued by
corporations in the currencies specified above and subject to the quality
limitations listed above.
It is anticipated that the average portfolio duration of the Fund will be in the
three-to-ten year range. See 'Duration' in 'Portfolio Investments and
Strategies.' The prices of fixed income securities generally fluctuate
inversely to the direction of interest rates.
In managing the Fund's portfolio, the investment adviser actively manages
country and currency allocations and maturity structure according to the
fundamental economic and interest-rate outlook for each foreign nation. The
objective is to combine the most appropriate bond markets with the strongest
foreign currencies to create a portfolio with above average return potential.
INVESTMENT LIMITATIONS. The Fund's investment limitations are discussed below
under 'Borrowing Money,' 'Diversification' and 'Restricted and Illiquid
Securities.'
GLOBAL BOND FUND
The investment objective of the Global Bond Fund is to provide total return.
The Fund pursues its investment objective by investing primarily in a broad,
diversified portfolio of fixed income securities of both United States and
foreign governments and companies. Under normal market conditions, at least 65%
of the Fund's total assets will be invested in high-quality debt securities of
issuers located in at least three different nations, one of which may be the
United States. Securities of non-U.S. issuers may be denominated in foreign
currencies or multinational currencies, such as the ECU.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
o high-quality debt securities of foreign and United States
issuers. The Fund may also invest up to 10% of total assets in
debt securities and other instruments of issuers located in
emerging market nations;
o convertible securities and warrants. See 'Convertible
Securities' in 'Portfolio Investments and Strategies;'
o asset-backed and mortgage-backed securities, including CMOS,
rated in one of the four highest rating categories by an NRSRO
(i.e., BBB, Baa or higher) or, if unrated, determined by the
investment adviser to be of comparable quality. See 'Asset-
Backed Securities' in 'Portfolio Investments and Strategies;'
o U.S. Government Securities. See 'Portfolio Investments and
Strategies;'
o debt securities of supranational entities. See 'Foreign
Government Securities' in this prospectus;
o Bank Instruments, as described above under 'Small Capitalization
Fund;'
o shares of other investment companies. See 'Investing in
Securities of Other Investment Companies' in 'Portfolio
Investments and Strategies;' and
o other money market instruments.
In addition, the Fund may borrow money, lend portfolio securities, invest in
restricted and illiquid securities and repurchase agreements, and engage in
forward commitment and when-issued and delayed delivery transactions. The Fund
may also invest in forward foreign currency exchange contracts, put and call
options, futures and options on futures, in order to implement its investment
strategy and for hedging purposes. See 'Portfolio Investments and Strategies'
for a discussion of these investments, as well as the potential risks related to
foreign securities, asset-backed and mortgage-backed securities and investing in
emerging market nations.
The investment adviser's approach to selecting investments for the Fund is
oriented to country selection and is value driven. In selecting fixed income
instruments for the Fund, the investment adviser identifies those nations' fixed
income markets which it believes will provide the United States' domiciled
investor the highest return over a market cycle, through a combining of income
sources, while also offering capital gain and currency appreciation. The
investment adviser conducts extensive fundamental research on a global basis,
and it is through this effort that attractive fixed income markets are selected
for investment. The outlook for each foreign market is compared to the returns
available in the U.S. market. The focus is on selecting those nations whose
fixed income fundamentals are superior to those available domestically.
It is anticipated that the average portfolio maturity of the Fund will be in the
three-to-ten year range. See 'Duration' in 'Portfolio Investments and
Strategies.' The prices of fixed income securities generally fluctuate
inversely to the direction of interest rates.
INVESTMENT LIMITATIONS. The Fund's investment limitations are discussed below
under 'Borrowing Money,' 'Diversification' and 'Restricted and Illiquid
Securities.'
PORTFOLIO INVESTMENTS AND STRATEGIES
BORROWING MONEY
The Funds will not borrow money directly or through reverse repurchase
agreements (arrangements in which a Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set date) or
pledge securities except, under certain circumstances, a Fund may borrow money
up to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings. These limitations cannot be
changed by a Fund without shareholder approval.
DIVERSIFICATION
With respect to 75% of the value of its total assets, each Fund will not invest
more than 5% in securities of any one issuer other than cash, cash items or
securities issued or guaranteed by the Government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by U.S.
Government Securities. The Funds will not acquire more than 10% of the
outstanding voting securities of any one issuer. These limitations cannot be
changed by a Fund without shareholder approval.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in restricted securities. Restricted securities are any
securities in which a Fund may invest pursuant to its investment objective and
policies but which are subject to restriction on resale under federal securities
law. The Funds will limit investment in illiquid securities (including certain
restricted securities not determined by the Trustees to be liquid, non-
negotiable time deposits, over-the-counter options, and repurchase agreements
providing for settlement in more than seven days after notice) to 15% of their
respective net assets.
A Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law, and is generally sold to institutional investors, such as one of the Funds,
which agrees to purchase the paper for investment purposes and not with a view
to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Funds believe that Section 4(2) commercial paper and
certain other restricted securities, which meet the criteria for liquidity
established by the Trustees, are quite liquid. Therefore, the Funds intend to
treat these securities as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because these securities are
liquid, the Funds will not subject such securities to the limitation otherwise
applicable to restricted securities.
REPURCHASE AGREEMENTS
The securities in which each Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. Government
Securities or other securities to a Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that
the original seller does not repurchase the securities from a Fund, that Fund
could receive less than the repurchase price on any sale of such securities.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' investment adviser to be creditworthy pursuant to guidelines
established by the Trustees.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which a Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete the transaction may cause a Fund to miss a price or yield considered to
be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, a Fund may pay more or less than the
market value of the securities on the settlement date.
FORWARD COMMITMENTS
Forward commitments are contracts to purchase securities for a fixed price at a
date beyond customary settlement time. The International Equity, the
International Bond and the Global Bond Funds may enter into these contracts if
liquid securities in amounts sufficient to meet the purchase price are
segregated on the Funds' records at the trade date and maintained until the
transaction has been settled. Risk is involved if the value of the security
declines before settlement. Although the Funds enter into forward commitments
with the intention of acquiring the securities, they may dispose of the
commitments prior to settlement and realize short-term profits or losses.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each Fund may lend portfolio securities
on a short-term or long-term basis, or both, up to one-third the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. A Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the Funds' investment adviser has determined
are creditworthy under guidelines established by the Trustees and will receive
collateral in the form of cash or U.S. Government Securities equal to at least
100% of the value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
CONVERTIBLE SECURITIES
The Small Capitalization Fund may invest in convertible securities rated, at the
time of purchase, BBB or better by S&P, Moody's, or Fitch, or, if unrated, are
of comparable quality as determined by the Fund's adviser. (If a security's
rating is reduced below the required minimum after the Small Capitalization Fund
has purchased it, the Fund may consider disposing of the security, but is not
required to do so.) The International Equity, International Bond and the
Global Bond Funds may also invest in convertible securities and warrants.
Convertible securities are fixed income securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to be
employed for a variety of different investment strategies. In selecting a
convertible security, the Funds' investment adviser evaluates the investment
characteristics of the convertible security as a fixed income investment, and
the investment potential of the underlying security for capital appreciation.
ASSET-BACKED SECURITIES
The International Bond Fund and the Global Bond Fund may invest in mortgage-
backed and asset-backed securities. Asset-backed securities are created by the
grouping of certain governmental, government-related and private loans,
receivables and other lender assets into pools. Interests in these pools are
sold as individual securities. These securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Asset-backed
securities, however, provide periodic payments which generally consist of both
interest and principal payments. The estimated life of an asset-backed security
and the average maturity of a portfolio including such assets vary with the
prepayment experience with respect to the underlying debt instruments. The
credit characteristics of asset-backed securities also differ in a number of
respects from those of traditional debt securities.
The credit quality of most asset-backed securities depends primarily upon the
credit quality of the assets underlying such securities, how well the entity
issuing the securities is insulated from the credit risk of the originator or
any other affiliated entities, and the amount and quality of any credit support
provided to such securities.
NON-MORTGAGE RELATED ASSET-BACKED SECURITIES. Non-mortgage related asset-backed
securities include, but are not limited to, interests in pools of receivables,
such as motor vehicle installment purchase obligations and credit card
receivables. These securities may be in the form of pass-through instruments or
asset-backed bonds. The securities, all of which are issued by non-governmental
entities and carry no direct or indirect government guarantee, are structurally
similar to CMOS and mortgage pass-through securities, which are described below.
MORTGAGE-RELATED ASSET-BACKED SECURITIES. The International Bond and the Global
Bond Funds may also invest in various mortgage-related asset-backed securities.
These types of investments may include ARMS, CMOS and REMICs (as such terms are
defined below), or other securities collateralized by or representing an
interest in real estate mortgages (collectively, "mortgage securities"). The
mortgage securities may have interest rates which reset at least annually and
generally will be issued or guaranteed by government agencies.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through mortgage
securities with adjustable rather than fixed interest rates. The ARMS in which
the International Bond and the Global Bond Funds may invest are issued by the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC")
and are actively traded. The underlying mortgages which collateralize ARMS
issued by GNMA are fully guaranteed by the Federal Housing Administration or
Veterans Administration, while those collateralized by ARMS issued by FHLMC or
FNMA are typically conventional residential mortgages conforming to strict
underwriting, size and maturity constraints.
Unlike conventional bonds, ARMS pay back principal over the life of the ARMS
rather than at maturity. Thus, a holder of the ARMS, such as the International
Bond or Global Bond Funds, would receive monthly scheduled payments of principal
and interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. At the time that a holder of the ARMS
reinvests the payments and any unscheduled prepayments of principal that it
receives, the holder may receive a rate of interest which is actually lower than
the rate of interest paid on the existing ARMS. As a consequence, ARMS may be a
less effective means of "locking in" long-term interest rates than other types
of U.S. government securities.
Like other U.S. government securities, the market value of ARMS will generally
vary inversely with changes in market interest rates. Thus, the market value of
ARMS generally declines when interest rates rise and generally rises when
interest rates decline.
While ARMS generally entail less risk of a decline during periods of rapidly
rising rates, ARMS may also have less potential for capital appreciation than
other similar investments (e.g., investments with comparable maturities) because
as interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if ARMS are purchased at a premium, mortgage foreclosures
and unscheduled principal payments may result in some loss of a holder's
principal investment to the extent of the premium paid. Conversely, if ARMS are
purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal would increase current and total returns and
would accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOS are a form of asset-backed
security issued by single-purpose, stand-alone finance subsidiaries or trusts of
financial institutions, government agencies, investment banks, or companies
related to the construction industry.
The International Bond and Global Bond Funds will invest only in CMOS which are
rated BBB or higher by an NRSRO and which may be: (a) collateralized by pools
of mortgages in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. Government; (b)
collateralized by pools of mortgages in which payment of principal and interest
is guaranteed by the issuer and such guarantee is collateralized by U.S.
Government Securities; or (c) securities in which the proceeds of the issuance
are invested in mortgage securities and payment of the principal and interest
are supported by the credit of any agency or instrumentality of the U.S.
Government.
CONSIDERATIONS FOR MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed
and asset-backed securities generally pay back principal and interest over the
life of the security. At the time either the International Bond Fund or the
Global Bond Fund reinvests the payments and any unscheduled prepayments of
principal received, the Fund may receive a rate of interest which is actually
lower than the rate of interest paid on these securities ("prepayment risks").
Mortgage-backed and asset-backed securities are subject to higher prepayment
risks than most other types of debt instruments with prepayment risks because
the underlying mortgage loans or the collateral supporting asset-backed
securities may be prepaid without penalty or premium. Prepayment risks on
mortgage-backed securities are also affected by other factors, such as the
frequency with which people sell their homes or elect to make unscheduled
payments on their mortgages. Although asset-backed securities generally are
less likely to experience substantial prepayments than are mortgage-backed
securities, certain of the factors that affect the rate of prepayments on
mortgage-backed securities also affect the prepayments on asset-backed
securities.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same security interest in the related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. Most issuers of asset-backed securities
backed by motor vehicle installment purchase obligations permit the servicer of
such receivables to retain possession of the underlying obligations. If the
servicer sells these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. Further, if a vehicle is registered in one
state, and is then reregistered because the owner and obligor moves to another
state, such reregistration could defeat the original security interest in the
vehicle in certain cases. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on these securities.
DEPOSITARY RECEIPTS. Both the Small Capitalization and International Equity
Funds may invest in foreign issuers by purchasing sponsored or unsponsored ADRs,
and the International Equity Fund may also purchase sponsored and unsponsored
GDRs, IDRs and EDRs. ADRs evidence ownership of underlying securities issued by
a foreign corporation, and are generally issued by a United States bank or trust
company. EDRs, GDRs and IDRs are typically issued by foreign banks or trust
companies, although they also may be issued by United States banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation. ADRs, EDRs, GDRs and IDRs are
collectively known as "Depositary Receipts." Generally, Depositary Receipts in
registered form are designed for use in the United States securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Ownership of unsponsored Depositary Receipts may not entitle
the International Equity Fund to financial or other reports from the issuer of
the underlying security, to which it would be entitled as the owner of sponsored
Depositary Receipts.
FOREIGN GOVERNMENT SECURITIES. The foreign government securities in which the
International Equity, the International Bond and Global Bond Funds may invest
generally consist of obligations supported by national, state or provincial
governments or similar political subdivisions. Foreign government securities
also include debt obligations of supranational entities, which include
international organizations designed or supported by governmental entities to
promote economic reconstruction or development, international banking
institutions and related government agencies. Examples of these include, but
are not limited to, the International Bank for Reconstruction and Development
(the World Bank), the Asian Development Bank, the European Investment Bank and
the Inter-American Development Bank.
Foreign government securities also include debt securities of "quasi-
governmental agencies." Debt securities of quasi-governmental agencies are
either debt securities issued by entities which are owned by a national, state
or equivalent government or are obligations of a political unit that are not
backed by the national government's full faith and credit and general taxing
powers. Further, foreign government securities include mortgage-related
securities issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.
U.S. GOVERNMENT SECURITIES
The U.S Government Securities in which the Funds may invest include: direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds), and
obligations issued by U.S. Government agencies or instrumentalities, including
securities that are supported by the full faith and credit of the United States
(such as GNMA certificates); securities that are supported by the right of the
issuer to borrow from the U.S. Treasury (such as securities of Federal Home Loan
Banks); and securities that are supported by the credit of the instrumentality
(such as FNMA and FHLMC).
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Due to restrictions on direct investment by foreign entities in certain foreign
nations, investment in other investment companies may be the most practical or
only manner in which the Funds can invest in securities markets of certain
foreign countries. The Funds may invest in the securities of other investment
companies, but they will not own more than 3% of the total outstanding voting
stock of any investment company, invest more than 5% of their respective total
assets in any one investment company, or invest more than 10% of their
respective total assets in investment companies in general. Such investments
may involve the payment of substantial premiums above the net asset value of
such issuers' portfolio securities, and may be constrained by market
availability. There can be no assurance that investment companies for investing
in certain foreign nations will be available for investment. The Funds will
invest in such companies when, in the investment adviser's judgment, the
potential benefits of such investment justify the payment of any applicable
premium or sales charge. While it is the investment adviser's policy to waive
its investment advisory fee on assets invested in securities of open-end
investment companies, it should be noted that investment companies incur certain
expenses, such as custodian and transfer agent fees, and therefore, any
investment by the Funds in shares of another investment company would be subject
to such duplicate expenses. The Funds will, however, continue to pay their own
investment advisory fees and other expenses with respect to investments in
shares of closed-end companies.
RISK FACTORS
EQUITY INVESTMENT CONSIDERATIONS. With respect to the Small Capitalization
Fund, as with other mutual funds that invest primarily in equity securities, the
Fund is subject to market risks. Since equity markets tend to be cyclical, the
possibility exists that the value of common stocks could decline over short or
even extended periods of time. Furthermore, because the Fund invests primarily
in small capitalization stocks, there are some additional risk factors
associated with investments in this Fund.
Small capitalization stocks have historically been more volatile in price than
larger capitalization stocks, such as those included in the Standard & Poor's
Daily Stock Price Index of 500 Common Stocks (the "S&P 500 Index"). This is
because, among other things, smaller companies have a lower degree of liquidity
in the equity market and tend to have a greater sensitivity to changing economic
conditions. In addition to exhibiting greater volatility, these stocks may, to
some degree, fluctuate independently of the stocks of large companies. That is,
the stocks of small capitalization companies may decline in price as the price
of large company stocks rise, or vice versa. Therefore, investors should expect
that there will be periods of time when the Fund will exhibit greater volatility
from broad stock market indices such as the S&P 500 Index.
FOREIGN SECURITIES CONSIDERATIONS. Investing in foreign securities carries
substantial risks in addition to those associated with investments in domestic
securities. The risks associated with investments in foreign securities relate
to political and economic developments abroad, as well as those that result from
the differences between the regulation of domestic securities and issuers and
foreign securities and issuers. In an attempt to reduce some of these risks,
the International Equity, the International Bond and the Global Bond Funds will
attempt to distribute their investments broadly among foreign nations. The
securities of at least three different foreign nations will always be
represented in the Funds' portfolios.
The economies of foreign countries may differ from the U.S. economy in such
respects as growth of gross national product, the rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency, and balance of
payments position. Further, the economies of emerging market nations generally
are heavily dependent on international trade and, accordingly, have been, and
may continue to be, adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been, and may continue to be, adversely affected by economic
conditions in the countries with which they trade. The usual risks of investing
in foreign securities of developed nations are magnified when investing in
emerging market nations. As a general matter, emerging market investments are
more volatile and exhibit greater and more rapid fluctuations in value. The
International Equity, the International Bond, and the Global Bond Funds may each
invest up to 10% its respective total assets in issuers located in emerging
market nations, and this component of the Funds' investment portfolios should be
considered speculative.
With reference to investment in foreign securities of both developed and
emerging market nations, prior governmental approval for such investments may be
required under certain circumstances, and the extent of foreign investment in
certain debt or equity securities and domestic companies may be subject to
limitation. Foreign ownership limitations also may be imposed by the charters
of individual companies to prevent, among other concerns, violation of foreign
investment limitations.
Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
countries. The International Equity, the International Bond and the Global Bond
Funds could be adversely affected by delays in, or a refusal to grant, any
required governmental registration or approval for such repatriation. Any
investment subject to such repatriation controls will be considered illiquid by
a Fund if it appears reasonably likely that this process will take more than
seven days.
With respect to any foreign nation, there is the possibility of currency
fluctuations, nationalization, expropriation or confiscatory taxation, political
changes, governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Funds' investments in those countries. In addition, because of
differences in the legal systems, it may be more difficult to obtain and enforce
a contractual obligation or court judgment in a court outside of the U.S.
Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of the International Equity, the International Bond and the Global
Bond Funds to make intended security purchases due to settlement problems could
cause the Funds to miss attractive investment opportunities. Inability to
dispose of a portfolio security due to settlement problems could result either
in losses to a Fund due to subsequent declines in value of the portfolio
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include:
o less publicly available information about foreign issuers;
o credit risks associated with certain foreign governments;
o the lack of uniform accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. companies;
o less readily available market quotations on foreign issues;
o differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
o the limited size of many foreign securities markets and limited
trading volume in issuers, compared to the volume of trading in U.S.
securities, could cause prices to be erratic for reasons apart from
factors that affect the quality of securities;
o the likelihood that securities of foreign issuers may be less liquid
or more volatile;
o unreliable mail service between countries;
o political or financial changes which adversely affect investments in
some nations;
o increased risk of delayed settlements of portfolio transactions or
loss of certificates for portfolio securities;
o certain markets may require payment for securities before delivery;
o religious and ethnic instability; and
o certain national policies which may limit the use or transfer of Fund
assets, or may restrict the Funds' investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive
to national interests.
U.S. Government Policies. In the past, U.S. Government policies have
discouraged or restricted certain investments abroad by investors similar to the
International Equity, the International Bond and the Global Bond Funds.
Investors are advised that when such policies are instituted, the Funds will
abide by them.
Currency Risks. Because the majority of the debt and equity securities
purchased by the International Equity, the International Bond and the Global
Bond Funds are denominated in currencies other than the U.S. Dollar, changes in
foreign currency exchange rates will affect the Funds' net asset values; the
value of interest earned; gains and losses realized on the sale of securities;
and net investment income and capital gains, if any, to be distributed to
shareholders by the Funds. If the value of a foreign currency rises against the
U.S. Dollar, the value of Fund assets denominated in that currency will
increase; correspondingly, if the value of a foreign currency declines against
the U.S. Dollar, the value of Fund assets denominated in that currency will
decrease. Under the United States Internal Revenue Code, as amended (the
"Code"), the Funds are required to separately account for the foreign currency
component of gains or losses, which will usually be viewed under the Code as
items of ordinary and distributable income or loss, thus affecting the Funds'
distributable income (see 'Federal Income Tax' in this prospectus).
The exchange rates between the U.S. Dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental interpretation, speculation and
other economic and political conditions. Although the International Equity, the
International Bond and the Global Bond Funds value their assets daily in U.S.
Dollars, the Funds will not convert their holdings of foreign currencies to U.S.
Dollars daily. When a Fund converts its holdings to another currency, it may
incur conversion costs. Foreign exchange dealers may realize a profit on the
difference between the price at which they buy and sell currencies.
The Funds will engage in foreign currency exchange transactions in connection
with their investments in foreign securities. The Funds will conduct their
foreign currency exchange transactions either on a spot (i.e. cash) basis at the
spot rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies.
The Funds' investment adviser believes that active management of currency risks
through a variety of hedging vehicles and strategies can considerably limit the
risk of capital loss through movements in the foreign exchange markets, such as
those described above. The investment adviser will not engage in hedging for
speculative purposes.
Allocation. With respect to the International Equity, the International Bond,
and the Global Bond Funds, the allocation of each Fund's respective assets in a
particular market and currency will be based on a fundamental assessment of the
economic strength of each relevant country combined with considerations of
credit quality and currency and interest rate trends. These factors are
reviewed on a regular basis by the investment adviser in order to derive
specific interest rate and currency forecasts, which are quantified in terms of
total return. The market and currency allocation of the Funds will vary to
achieve an optimal mix of investments to achieve the investment objectives of
the Funds.
HEDGING VEHICLES AND STRATEGIES
Hedging Vehicles. The International Equity, the International Bond and the
Global Bond Funds may use the following hedging vehicles in an attempt to manage
the currency and interest rate risks describe above:
o forward foreign currency exchange contracts;
o options contracts; and
o futures contracts.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. When a Fund enters into a contract for
the purchase or sale of a security denominated in a foreign currency, it may
want to establish the U.S. Dollar cost or proceeds, as the case may be. By
entering into a forward contract in U.S. Dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, a
Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the U.S. Dollar and such foreign currency. However, this tends to limit
potential gains which might result from a positive change in such currency
relationships.
There is no limitation as to the percentage of a Fund's assets that may be
committed under forward foreign currency exchange contracts. The Funds do not
enter into such forward contracts or maintain a net exposure in such contracts
where the Funds would be obligated to deliver an amount of foreign currency in
excess of the value of the Funds' portfolio securities or other assets
denominated in that currency or, in the case of a "cross-hedge" (see "Hedging
Strategies" below), denominated in a currency or currencies that the investment
adviser believes will reflect a high degree of correlation with the currency
with regard to price movements. The Funds generally do not enter into a forward
foreign currency exchange contract with a term longer than one year.
Options. The Funds may deal in options on foreign currencies, foreign currency
futures, securities, and securities indices, which options may be listed for
trading on a national securities exchange or traded over-the-counter. (The
Small Capitalization Fund will deal solely in options on domestic securities,
including ADRs, in which the Fund can invest directly.) The Funds may write
covered call options and secured put options on up to 25% of their respective
net assets and may purchase put and call options provided that no more than 5%
of the fair market value of their respective net assets may be invested in
premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by a Fund is exercised, the Fund forgoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that the Funds may
be required to take delivery of the underlying asset at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of non-performance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event a Fund may
experience material losses. However, in writing options the premium is paid in
advance by the dealer of OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and a wider range of expiration dates
and exercise prices, than are exchange traded options.
Futures. Futures contracts are contracts that obligate the long or short holder
to take or make delivery of a specified quantity of an asset, such as a
currency, a security, or the cash value of a securities index at a specified
future date at a specified price. The Funds may engage in futures transactions,
but will not participate in futures contracts if the sum of their initial margin
deposits on open contracts will exceed 5% of the fair market value of each
Fund's respective net assets.
HEDGING STRATEGIES
Currency Hedging. In the case of the International Equity, the International
Bond and the Global Bond Funds, when the investment adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. Dollar, it may enter into a forward contract to sell an amount
of that foreign currency for a fixed U.S. Dollar amount approximating the value
of some or all of a Fund's portfolio securities denominated in such foreign
currency (i.e., "hedge"). A Fund may, as an alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S. Dollar amount
where the investment adviser believes that the U.S. Dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. Dollar value of the currency in which portfolio securities
of the Fund are denominated (i.e., "cross-hedge"). A cross-hedge can be
achieved not only by using a "proxy" currency in which Fund securities are
denominated, but also by using the Canadian Dollar as a "proxy" currency for the
U.S. Dollar. This strategy may be beneficial because the level of divergence in
the exchange rates of U.S. and Canadian currencies has historically tended to be
relatively small.
Interest Rate Hedging. The International Equity, the International Bond and the
Global Bond Funds may engage in futures transactions and may use options in an
attempt to hedge against the effects of fluctuations in interest rates and other
market conditions.
General. The Funds might not employ any of the techniques or strategies
described above, and there can be no assurance that any technique or strategy
(or combination thereof) used will succeed. The use of these techniques and
strategies involves certain risks, including:
o dependence on the investment adviser's ability to predict movements in
the prices of assets being hedged or movements in interest rates and
currency markets;
o imperfect correlation between the hedging instruments and the
securities or currencies being hedged;
o the fact that skills needed to use these instruments are different
from those needed to select the Funds' securities;
o the possible absence of a liquid secondary market for any particular
instrument at any particular time;
o possible impediments to effective portfolio management or the ability
to meet redemption requests or other short-term obligations because of
the percentage of the Funds' assets segregated to cover its
obligations; and
o the possible need to defer closing out hedged positions to avoid
adverse tax consequences.
New futures contracts, options thereon and other financial products and risk
management techniques continue to be developed. The Funds may use these
investments and techniques to the extent consistent with their investment
objectives and regulatory and federal tax considerations.
Duration. In the case of the International Bond and Global Bond Funds, duration
measures the magnitude of the change in the price of a debt security relative to
a given change in the market rate of interest. The duration of a debt security
depends primarily upon the security's coupon rate, maturity date, and level of
market interest rates for similar debt securities. There will be no limit on
the duration of any one individual issue purchased by the International Bond and
Global Bond Funds, except that the purchase of an issue that has no final
maturity date shall not be permitted. The weighted average duration of the
Funds shall not exceed ten years and shall not be less than one year, but will
normally fall within a range of three to seven years. The investment adviser
regards that range as being consistent with a prudent attitude towards risk.
Shifts outside this range would be made only under unusual circumstances.
Portfolio Turnover. Although the Funds do not intend to invest for the purpose
of seeking short-term profits, securities in their portfolios will be sold
whenever the investment adviser believes it is appropriate to do so in light of
each Fund's investment objective, without regard to the length of time a
particular security may have been held. The rate of portfolio turnover for each
Fund may exceed that of certain other mutual funds with the same investment
objective. A higher rate of portfolio turnover involves correspondingly greater
transaction expenses which must be borne directly by a Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to a Fund's shareholders, are taxable to them. (Further information
is contained in the Trust's Combined Statement of Additional Information under
the sections 'Brokerage Transactions' and 'Tax Status.') Nevertheless,
transactions for each Fund's portfolio will be based only upon investment
considerations and will not be limited by any other considerations when the
investment adviser deems it appropriate to make changes in a Fund's portfolio.
It is currently anticipated that the Funds' annual rates of portfolio turnover
will be: 100% for the Small Capitalization Fund; 80% for the International
Equity Fund; 200% for the International Bond Fund; and 240% for the Global Bond
Fund.
FT FUNDS INFORMATION
MANAGEMENT OF FT FUNDS
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the
"Trustees"). The Trustees are responsible for managing the business affairs of
the Trust and for exercising all the Trust's powers except those reserved for
the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Trust are made by Fiduciary International, Inc.
("Fiduciary"), the Trust's investment adviser (the "Adviser"), subject to
direction by the Trustees. The Adviser continually conducts investment research
and supervision for each Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the assets of
each Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal to
0.70 of 1% of each of the Global and International Bond Funds' respective
average daily net assets, and 1.00% of each of the Small Capitalization and
International Equity Funds' respective average daily net assets. The advisory
fees paid by the Small Capitalization and International Equity Funds, while
higher than the advisory fees paid by other mutual funds in general, are
comparable to fees paid by other mutual funds with similar objectives and
policies to the Funds. The investment advisory contract provides for the
voluntary waiver of expenses by the Adviser from time to time. The Adviser can
terminate this voluntary waiver of expenses at any time with respect to a Fund
at its sole discretion. The Adviser has also undertaken to reimburse the Funds
for operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Fiduciary International, Inc. ("FII") is a New York
corporation that was organized in 1982 as Fir Tree Advisers, Inc. FII is a
wholly-owned subsidiary of Fiduciary Investment Corporation, which, in turn, is
a wholly-owned subsidiary of Fiduciary Trust Company International ("FTCI").
FTCI has more than 60 years of investment experience, including more than 30
years experience in managing pooled investment vehicles which invest in the
international markets. FII is an indirect subsidiary of FTCI. FTCI is a New
York state-chartered bank specializing in investment management activities. As
of December 31, 1994, FTCI had total assets of approximately $350 million, and
total assets under management of approximately $30 billion. These assets
included investments managed for individuals and institutional clients,
including employee benefit plans of corporations, public retirement systems,
unions, endowments, foundations and others.
FII is a registered investment adviser under the Investment Advisers Act of
1940. The Adviser and its officers, affiliates, and employees may act as
investment managers for parties other than the Trust, including other investment
companies. FII presently serves as investment adviser or subadviser to the Van
Eck Global Balanced Fund, the Blanchard Global Growth Fund, the Prudential
Securities Target Program's International Bond Portfolio, the Frank Russell
Investment Company's Equity II Fund, and the International Income Fund.
Fiduciary Trust International Limited, another wholly-owned subsidiary of
Fiduciary Trust Company International, serves as a sub-adviser to International
Income Fund, an open-end investment company.
Yvette Bockstein, Helen Degener and Catherine Fischetti are primarily
responsible for the day-to-day investment management of the Small Capitalization
Fund. Both Ms. Bockstein and Ms. Degener are Senior Vice Presidents of FTCI
and, along with Ms. Fischetti, serve on its Small Cap Investment Committee. Ms.
Bockstein has been with FTCI since 1978. Prior to joining the Adviser, she was
with Davis, Palmer & Biggs and The Bank of New York. Ms. Degener has been with
FTCI since 1994. Prior to FTCI, she spent thirteen years at Morgan Guaranty
Trust Company as a Vice President and manager of several small capitalization
equity funds. Ms. Fischetti is a Vice President of FTCI and has been with the
Adviser since 1992. Prior to Fiduciary, Ms. Fischetti worked for two years with
Babcock & Brown Capital Markets and two years with Praxis Partners.
Sheila Coco, William Yun and Steven Miller are primarily responsible for the
day-to-day investment management of the International Equity Fund. Ms. Coco and
Mr. Yun are both Senior Vice Presidents of FTCI and Chartered Financial
Analysts. Along with Mr. Miller, they serve on the Adviser's Global Investment
Committee. Ms. Coco has been with FTCI since 1980 and had previously spent four
years in the investment division of Morgan Guaranty Trust Company. Mr. Yun
joined Fiduciary in 1992, and has nine years of prior investment experience with
CB Commercial Holdings, The First Boston Corp. and Blyth Eastman Paine Webber,
Inc. He is a member of the New York Society of Security Analysts. Mr. Miller
joined FTCI in 1994 and is a Vice President. Previously, he had spent seven
years with Vital Forsikring, a Norwegian life insurance company, and Heller
Financial.
Stuart Hochberger and Anthony Gould are primarily responsible for the day-to-day
investment management of both the International Bond Fund and Global Bond Fund.
Mr. Hochberger is an Executive Vice President of FTCI and is Director of its
Fixed Income Group. He also serves as the Chairman of the Adviser's Fixed
Income Policy Committee and is a member of both the Global Investment Committee
and the Investment Policy Committee. Mr. Hochberger joined FTCI in 1981 from
Morgan Guaranty Trust Company. Mr. Gould joined FTCI in 1995 and is currently a
Vice President and global portfolio manager. Previously, he had spent six years
with BZW Investment Management, the asset management subsidiary of the Barclays
Group, as a global bond manager. Prior to BZW, he was employed by J.P. Morgan,
London. Mr. Gould is a Chartered Financial Analyst and a member of the New York
Society of Security Analysts.
DISTRIBUTION OF SHARES OF THE FUNDS
Edgewood Services, Inc. is the principal distributor (the "Distributor") for
shares of the Funds. Edgewood Services, Inc. is a New York corporation and a
wholly-owned subsidiary of Federated Investors. The Distributor is a registered
broker/dealer. Its principal offices are at Clearing Operations, P.O. Box 897,
Pittsburgh, PA 15230-0897.
Distribution Plan. Under a distribution plan adopted in accordance with the
Investment Company Act of 1940's Rule
12b-1 (the "Plan"), the Funds may pay to the Distributor an amount computed at
an annual rate of 0.25 of 1% of the average daily net asset value of each Fund's
shares to finance any activity which is principally intended to result in the
sale of shares subject to the Plan. However, the Plan will not be activated,
and the Distributor has no present intention to collect any fees pursuant to the
Plan, unless and until such time as a second "trust" class of shares of the
Funds is created for shareholders that are trust clients.
The Distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the shares exceed such lower expense limitation as
the Distributor may, by notice to the Trust, voluntarily declare to be
effective.
The Distributor may select financial institutions, such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide distribution and/or administrative services as agents for their
clients or customers. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client inquiries;
assisting clients in changing dividend options, account designations, and
addresses; and providing such other services as may reasonably be requested.
The Distributor will pay financial institutions a fee based upon shares subject
to the Plan and owned by their clients or customers. The schedules of such fees
and the basis upon which such fees will be paid will be determined from time to
time by the Distributor.
The Funds' Plan is a compensation type plan. As such, the Funds make no
payments to the Distributor except as described above. Therefore, the Funds do
not pay for unreimbursed expenses of the Distributor, including amounts expended
by the Distributor in excess of amounts received by it from the Funds, interest,
carrying or other financing charges in connection with excess amounts expended,
or the Distributor's overhead expenses. However, the Distributor may be able to
recover such amounts or may earn a profit from future payments made by the Funds
under the Plan.
Furthermore, the Distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Funds. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution.
Any payments made by the Distributor may be reimbursed by the Adviser or its
affiliates.
Shareholder Services Plan. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") with respect to the shares of the Funds. Under the
Services Plan, financial institutions will enter into shareholder service
agreements with the Trust to provide administrative support services to their
customers who from time to time may be owners of record or beneficial owners of
the Funds' shares. In return for providing these support services, a financial
institution may receive payments from a Fund at a rate not exceeding 0.25 of 1%
of the average daily net assets of the shares beneficially owned by the
financial institution's customers for whom it is holder of record or with whom
it has a servicing relationship. These administrative services may include, but
are not limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel, including clerical, supervisory,
and computer, as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries regarding the Funds; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Funds reasonably request. Certain trust clients, including ERISA plans, will
not be affected by the Services Plan because the Services Plan will not be
activated unless and until a second, "trust" class of shares of the Funds (which
would not have a Services Plan) is created and such trust clients' investments
in a Fund are converted to such trust class.
ADMINISTRATIVE ARRANGEMENTS
The Distributor may pay financial institutions and other financial service
providers, such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers, a fee based upon the average net asset value of
shares of their customers for providing administrative services. This fee, if
paid, will be reimbursed to the Distributor by the Adviser and not the Funds.
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Funds with certain administrative personnel
and services necessary to operate each Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below:
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least $75,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee.
Custodian. Fiduciary Trust Company International, Two World Trade Center, New
York, New York 10048-0772, is custodian for the securities and cash of the
Funds. Foreign instruments purchased by the Funds are held by foreign banks
participating in a network coordinated by Fiduciary Trust Company International.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO RECORDKEEPER. Federated
Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
with offices in Boston, Massachusetts, is transfer agent for the shares of the
Funds and dividend disbursing agent for the Funds. Federated Services Company
also provides certain accounting and recordkeeping services with respect to the
portfolio investments of the Funds.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
LEGAL COUNSEL TO THE FUNDS. Legal counsel to the Funds is provided by Dewey
Ballantine, New York, New York.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Funds' investment adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the investment adviser
will generally utilize those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. In selecting among firms believed to meet these criteria,
the investment adviser may give consideration to those firms which have sold or
are selling shares of the Funds and other funds distributed by Edgewood
Services, Inc. or Federated Securities Corp. The investment adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
EXPENSES OF THE FUNDS
The Funds pay all of their own expenses and their allocable share of Trust
expenses. These expenses include, but are not limited to, the costs of:
organizing the Trust and continuing its existence; Trustees' fees; investment
advisory and administrative services; printing prospectuses and other Fund
documents for shareholders; registering the Trust, the Funds and shares of the
Funds; taxes and commissions; issuing, purchasing, repurchasing, and redeeming
shares; fees for custodian, transfer agent, dividend disbursing agent,
shareholder servicing agents, and registrars; printing, mailing, auditing,
accounting, and legal expenses; reports to shareholders and government agencies;
meetings of Trustees and shareholders and proxy solicitations therefor;
insurance premiums; association membership dues; and such nonrecurring and
extraordinary items as may arise. However, the Funds' investment adviser may
voluntarily waive and/or reimburse some expenses.
NET ASSET VALUE
The net asset value per share of each Fund fluctuates. Net asset value is
determined by dividing the sum of the market value of all securities and other
assets of a Fund, less liabilities, by the number of Fund shares outstanding.
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. As a result, in computing the net asset
values of the International Equity, the International Bond and the Global Bond
Funds, the Funds value foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the New
York Stock Exchange. Certain foreign currency exchange rates may also be
determined at the latest rate prior to the closing of the New York Stock
Exchange. Foreign securities quoted in foreign currencies are translated into
U.S. Dollars at current rates. Occasionally, events that effect these values
and exchange rates may occur between the times at which they are determined and
the closing of the New York Stock Exchange. If such events materially affect
the value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Trustees, although the actual
calculation may be done by others.
INVESTING IN THE FUNDS
SHARE PURCHASES
Shares of the Funds are sold on days on which both the New York Stock Exchange
and the Federal Reserve Wire System are open for business. Shares of the Funds
may be purchased through Fiduciary International, Inc. or through authorized
broker/dealers. In connection with the sale of shares of the Funds, Edgewood
Services, Inc. may, from time to time, offer certain items of nominal value to
any shareholder or investor. The Funds reserve the right to reject any purchase
request.
THROUGH FIDUCIARY INTERNATIONAL, INC. An investor may write or call Fiduciary
International, Inc. to place an order to purchase shares of a Fund. Call
212/466-4100. Representatives are available from 9:00 a.m. to 5:00 p.m.
(Eastern time). Payment may be made either by mail or federal funds. Purchase
orders must be received by Fiduciary International, Inc. before 3:00 P.M.
(Eastern time). Payment is normally required on the next business day. Texas
residents must purchase shares through Edgewood Services, Inc. at 1-800/356-
2805.
BY MAIL. To purchase shares of a Fund by mail, send a check made payable to "FT
Funds" (and identify the appropriate Fund) to Fiduciary International, Inc., Two
World Trade Center, New York, New York 10048-0772, Attn: Mutual Funds. Orders
by mail are considered received after payment by check is converted by Fiduciary
International, Inc. into federal funds. This is normally the next business day
after Fiduciary receives the check.
BY WIRE. To purchase shares of a Fund by wire, call 212/466-4100. Payment by
wire must be received by Fiduciary International, Inc. before 3:00 p.m. (Eastern
time) on the next business day after placing the order. Fiduciary Trust Company
International is on-line with the Federal Reserve Bank of New York.
Accordingly, to purchase shares of the Funds by wire, wire funds as follows:
Fiduciary Trust Company International
ABA #026007922
Credit:
Further credit to: (Name of Fund)
Re: (customer name)
Shares of the Funds cannot be purchased by Federal Reserve Wire on Columbus
Day, Veterans' Day, or Martin Luther King Day.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of a Fund. Shares will be
purchased at the net asset value next determined after the Fund receives the
purchase request from Fiduciary International, Inc. Purchase requests through
authorized brokers and dealers must be received by Fiduciary and transmitted to
the Fund before 3:00 p.m. (Eastern time) in order for shares to be purchased at
that day's public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in shares of each Fund is $10,000. This
prospectus should be read together with any account agreement for minimum
investment requirements imposed by Fiduciary Trust Company International or its
affiliates.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Funds. The net asset value
of each Fund is calculated at 4:00 P.M. (Eastern time) or at the close of
trading on the New York Stock Exchange, Monday through Friday, except on: (i)
days on which there are not sufficient changes in the value of a Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares of a Fund are tendered for redemption and no orders
to purchase shares are received; or (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued
unless requested in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. In addition, shareholders will receive statements showing all
account activity for the statement period.
DIVIDENDS
For shareholders invested in the Funds on the record date, dividends are
declared and paid semi-annually. Dividends are automatically reinvested in
additional shares of a Fund on the payment date, at the ex-dividend date net
asset value, unless shareholders request cash payments on the new account form
or by writing to the appropriate Fund. All shareholders on the record date are
entitled to the dividend. If shares are redeemed or exchanged prior to the
record date, or purchased after the record date, those shares are not entitled
to that dividend. A portion of distributions to shareholders could, under some
circumstances, be reclassified as a return of capital for income tax purposes
(See "Federal Income Tax").
CAPITAL GAINS
Capital gains realized by a Fund, if any, will be distributed at least once
every twelve months.
EXCHANGE PRIVILEGE
In order to provide greater flexibility to shareholders of the Funds whose
investment objectives have changed, shareholders may exchange all or some of
their shares in one Fund for shares in other Funds in the Trust. Shareholders
of the Funds may also exchange into certain money market funds for which
affiliates or subsidiaries of Federated Investors serve as investment adviser
and/or principal underwriter ("Federated Money Funds"). These exchanges are
made at net asset value. None of the Funds imposes any additional fees on
exchanges. Shareholders in certain Federated Money Funds may exchange their
shares in the Federated Money Funds for shares in the Funds.
REQUIREMENTS FOR EXCHANGE
A shareholder may exchange shares of one Fund for shares of any of the other
Funds in the Trust by calling 212/466-4100 or by writing to Fiduciary
International, Inc. Shares purchased by check are eligible for exchange after
seven days.
Orders to exchange shares of one Fund for shares of any of the other Funds will
be executed by redeeming the shares owned and purchasing shares of any of the
other Funds at the net asset value determined after the exchange request is
received. Orders for exchanges received by a Fund prior to 3:00 p.m. (Eastern
time) on any day the Funds are open for business will be executed as of the
close of business that day. Orders for exchanges received after 3:00 p.m.
(Eastern time) on any business day will be executed at the close of the next
business day.
An authorization form permitting a Fund to accept telephone exchange requests
must first be completed. It is recommended that investors request this
privilege on the account application at the time of their initial application.
If not completed at the time of initial application, authorization forms and
information on this service can be obtained through Fiduciary International,
Inc. Telephone exchange instructions may be recorded. If reasonable procedures
are not followed by a Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange request,
reserves the right to modify or terminate the exchange privilege at any time.
Shareholders would be notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold.
Further information on the exchange privilege and prospectuses for certain
Federated Money Funds are available by contacting the Trust.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
REDEEMING SHARES
Each Fund redeems shares at their net asset value next determined after
Fiduciary International, Inc. receives the redemption request. Redemptions will
be made on days on which both the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Telephone or written requests for
redemption must be received in proper form by Fiduciary International, Inc.
BY TELEPHONE. A shareholder may redeem shares of a Fund by calling Fiduciary
International, Inc. to request a redemption. (Call 212/466-4100 to redeem
shares.) Shares will be redeemed at the net asset value next determined after a
Fund receives the redemption request from Fiduciary International, Inc.
Although Fiduciary does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of less than
$5,000, or in excess of one per month. Fiduciary is responsible for promptly
submitting redemption requests and providing proper written redemption
instructions to a Fund. If, at any time, a Fund should determine it necessary
to terminate or modify this method of redemption, shareholders would be promptly
notified. A redemption request must be received by Fiduciary International,
Inc. before 3:00 p.m. (Eastern time) in order for shares to be redeemed at that
day's net asset value.
An authorization form permitting a Fund to accept telephone redemption requests
must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the
time of initial application, authorization forms and information on this service
can be obtained from the Trust. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by a Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as by mail, should be considered.
BY MAIL. Shareholders may redeem shares of a Fund by sending a written request
to Fiduciary International, Inc. at Two World Trade Center, New York, New York
10048-0772, Attn: Mutual Funds. The written request should include the
shareholder's name, the Fund name, the account number, and the share or dollar
amount requested, and should be signed by each registered owner exactly as the
shares are registered. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request to Fiduciary International, Inc.
Signatures. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
a Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the Federal
Deposit Insurance Company ("FDIC");
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
o a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and their transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and the transfer agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $10,000 due to
shareholder redemptions. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each Fund in
the Trust have equal voting rights, except that in matters affecting only a
particular Fund, only shares of that Fund are entitled to vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the operation of the Trust or a Fund and for the election of Trustees
under certain circumstances.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of shareholders upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares
entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required to use its property to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder (above and
beyond the loss of Trust property) will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from its
assets.
EFFECT OF BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, or distributing securities. However, such banking
laws and regulations do not prohibit such a holding company affiliate or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of such customer. Fiduciary is subject to such banking laws
and regulations.
Fiduciary believes, based on the advice of its counsel, that Fiduciary may
perform the services for any Fund contemplated by its advisory agreement with
the Trust without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. Changes in either federal or state statutes and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent Fiduciary from continuing to perform all or a part of the above services
for its customers and/or a Fund. If it were prohibited from engaging in these
customer-related activities, the Trustees would consider alternative advisers
and means of continuing available investment services. In such event, changes
in the operation of a Fund may occur, including possible termination of any
automatic or other Fund share investment and redemption services then being
provided by Fiduciary. It is not expected that existing shareholders would
suffer any adverse financial consequences (if another adviser with equivalent
abilities to Fiduciary is found) as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.
TAX INFORMATION
FEDERAL INCOME TAX
The Funds anticipate that they will pay no federal income tax because each Fund
expects to meet requirements of the Code, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by one
Fund will not be combined for tax purposes with those realized by any of the
other Funds.
Investment income received by the Funds from sources within foreign countries
may be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Funds to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted, since the amount of Fund assets to be invested within
various countries is unknown. However, the Funds intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
Due to differences in the book and tax treatment of fixed-income securities
denominated in foreign currencies, it is difficult to project currency effects
on an interim basis. Therefore, to the extent that currency fluctuations can
not be anticipated, a portion of distributions to shareholders could later be
designated as a return of capital, rather than income, for income tax purposes,
which may be of particular concern to simple trusts.
If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns.
The Code may limit a shareholder's ability to claim a foreign tax credit.
Furthermore, shareholders who elect to deduct their portion of a Fund's foreign
taxes rather than take the foreign tax credit must itemize deductions on their
income tax returns.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
The Trust is not subject to Pennsylvania corporate or personal property taxes.
Shares of the Fund may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the extent
that the portfolio securities held by the Funds would be subject to such taxes
if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws, including treatment of
distributions as income or return of capital.
ADDRESSES
FT FUNDS
FT Small Capitalization Federated Investors Tower
Equity Fund Pittsburgh, Pennsylvania 15222-3779
FT International Equity
Fund
FT International Bond Fund
FT Global Bond Fund
DISTRIBUTOR
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania
15230-0897
INVESTMENT ADVISER
Fiduciary International, Two World Trade Center
Inc. New York, New York 10048-
0772
CUSTODIAN
Fiduciary Trust Company Two World Trade Center
International New York, New York 10048-
0772
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND PORTFOLIO
RECORDKEEPER
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
INDEPENDENT AUDITORS
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania
15219
LEGAL COUNSEL TO THE FUNDS
Dewey Ballantine 1301 Avenue of the Americas
New York, New York 10019-
0092
FT FUNDS
COMBINED PROSPECTUS
FT Funds
An Open-End, Management
Investment Company
FT Small Capitalization Equity Fund
FT International Equity Fund
FT International Bond Fund
FT Global Bond Fund
Prospectus dated December , 1995
----
Fiduciary International, Inc.
Investment Adviser
Edgewood Services, Inc.
Distributor
FT FUNDS
Combined Statement of Additional Information
This Combined Statement of Additional Information relates to the following four
separate investment portfolios (individually referred to as the "Fund," and
collectively as the "Funds") of FT Funds (the "Trust"):
FT Small Capitalization Equity Fund;
FT International Equity Fund;
FT International Bond Fund; and
FT Global Bond Fund.
This Combined Statement of Additional Information should be read with the
combined prospectus for the Funds dated December , 1995. This Statement is
--
not a prospectus itself. To receive a copy of the prospectus, write or call the
Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December , 1995
---
EDGEWOOD SERVICES, INC.
Distributor
A subsidiary of FEDERATED INVESTORS
OF CONTENTS
AL INFORMATION ABOUT THE TRUST 1
TMENT OBJECTIVES AND POLICIES OF THE FUNDS 1
es of Investments and
nvestment Techniques 2
urchase Agreements 2
erse Repurchase Agreements 2
n-Issued and Delayed Delivery
ransactions 3
ding Portfolio Securities 4
tricted and Illiquid
ecurities 5
. Government Securities 7
k Instruments 8
vertible Securities 9
l Estate Mortgage Investment
onduits ("REMICS") 10
esting in New Issuers 11
ward Foreign Currency
xchange Contracts 11
eign Currency Options 13
cial Risks Associated with
oreign Currency Options 14
ures Contracts 16
ions on Futures Contracts 19
eign Currency Futures
ransactions 20
ical Risks Associated with
oreign Currency Futures
ontracts and Related Options 21
ions on Securities 22
r-the-Counter Options 24
ions on Securities Indices 26
ulatory Restrictions 28
itional Risk Considerations 30
ation 30
tfolio Turnover 31
estment Limitations 32
NDS MANAGEMENT 40
icers and Trustees 40
stee Liability 41
TMENT ADVISORY SERVICES 41
iser to the Trust 41
isory Fees 42
ISTRATIVE SERVICES 43
FER AGENT, DIVIDENT
RSING AGENT AND
OLIO RECORDKEEPER 43
DIAN 43
RAGE TRANSACTIONS 44
ASING SHARES 46
tribution and Shareholder
ervice Plans 46
MINING NET ASSET VALUE 48
ermining Market Value of
ecurities 48
ding in Foreign Securities 50
MING SHARES 50
emption in Kind 51
TATUS 52
Funds' Tax Status 52
eign Taxes 53
ital Gains 54
RETURN 54
55
RMANCE COMPARISONS 55
DIX 63
GENERAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust, under a
Declaration of Trust dated October 19, 1995. As of the date of this
Combined Statement of Additional Information, the Trust consists of four
separate portfolios of securities (the "Funds"), which are as follows:
FT Small Capitalization Equity Fund ("Small Capitalization Fund"), FT
International Equity Fund ("International Equity Fund"), FT International
Bond Fund ("International Bond Fund"), and FT Global Bond Fund ("Global
Bond Fund").
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The prospectus discusses the objective of each Fund and the policies it
employs to achieve those objectives. The following discussion
supplements the description of the Funds' investment objectives in the
prospectus. The investment objectives of the Funds cannot be changed
without the approval of shareholders. The investment policies described
below may be changed by the Board of Trustees (the "Trustees") without
shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS
The Funds or their custodian will take possession of the securities
subject to repurchase agreements and these securities will be marked to
market daily. In the event that a defaulting seller filed for bankruptcy
or became insolvent, disposition of such securities by a Fund might be
delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of a Fund and allow retention or
disposition of such securities. The Funds will only enter into
repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase
agreements may enable a Fund to avoid selling portfolio instruments at a
time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that a Fund will
be able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated on the Fund's records at the trade date. These
assets are marked to market daily and maintained until the transaction is
settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may engage in when-issued and delayed delivery transactions.
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of a
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. A Fund may dispose of a commitment prior to settlement if the
investment adviser deems it appropriate to do so. In addition, a Fund
may enter into transactions to sell its purchase commitments to third
parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. A Fund may
realize short-term profits or losses upon the sale of such commitments.
As a matter of policy, the Funds do not intend to engage in when-issued
and delayed delivery transactions to an extent that would cause the
segregation of more 20% of the total value of their respective assets.
LENDING PORTFOLIO SECURITIES
A Fund may lend its portfolio securities to broker-dealers, banks, or
other institutional borrowers of securities. A Fund will only enter into
loan arrangements with broker-dealers, banks, or other institutions which
the investment adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral equal to at least
100% of the value of the securities loaned.
The collateral received when a Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the
particular Fund. During the time portfolio securities are on loan, the
borrower pays a Fund any dividends or interest paid on such securities.
Loans are subject to termination at the option of a Fund or the borrower.
A Fund may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker. A
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (the "SEC") Staff position set forth in the adopting release
for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a non-exclusive, safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Trust, on behalf of the Funds, believes that the Staff of the SEC has
left the question of determining the liquidity of all restricted
securities (eligible for resale under Rule 144A) for determination to the
Trustees. The Trustees consider the following criteria in determining
the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace
trades.
Notwithstanding the foregoing, securities of foreign issuers which are
not listed on a recognized domestic or foreign exchange or for which a
bona fide market does not exist at the time of purchase or subsequent
transaction shall be treated as illiquid securities by the Trustees.
When a Fund invests in certain restricted securities determined by the
Trustees to be liquid, such investments could have the effect of
increasing the level of Fund illiquidity to the extent that the buyers in
the secondary market for such securities (whether in Rule 144A resales or
other exempt transactions) become, for a time, uninterested in purchasing
these securities.
U.S. GOVERNMENT SECURITIES
The types of U.S. Government securities in which Funds may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. Government agencies or instrumentalities. These securities are
backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; or
o the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities whose obligations are
permissible investments but may not always receive financial support form
the U.S. Government are: Federal Land Banks; Central Bank for
Cooperatives; Federal Intermediate Credit Banks; Federal Home Loan Banks;
Farmers Home Administration; and Federal National Mortgage Association.
BANK INSTRUMENTS
The Funds may invest in the instruments of banks and savings and loans
whose deposits are insured by the Bank Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation ("FDIC"), or
the Savings Association Insurance Fund, which is administered by the
FDIC, such as certificates of deposit, demand and time deposits, savings
shares, and bankers' acceptances. These instruments are not necessarily
guaranteed by those organizations.
In addition, the Funds may invest in:
o Eurodollar Certificates of Deposits ("ECDs") issued by foreign
branches of U.S. or foreign banks;
o Eurodollar Time Deposits ("ETDs"), which are U.S. Dollar-
denominated deposits in foreign branches of U.S. or foreign
banks;
o Canadian Time Deposits, which are U.S. Dollar-denominated
deposits issued by branches of major Canadian banks located in
the United States; and
o Yankee Certificates of Deposit ("Yankee CDs"), which are U.S.
Dollar-denominated certificates of deposit issued by U.S.
branches of foreign banks and held in the United States.
CONVERTIBLE SECURITIES
The convertible bonds and convertible preferred stocks in which the Funds
may invest generally retain the investment characteristics of fixed
income securities until they have been converted but also react to
movements in the underlying equity securities. The prices of fixed
income securities fluctuate inversely to the direction of interest rates.
The holder is entitled to receive the fixed income of a bond or the
dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that
can be used in whole or in part, customarily at full face value, in lieu
of cash to purchase the issuer's common stock.
Convertible securities are senior to equity securities, and therefore
have a claim to assets of the corporation prior to the holders of common
stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same
company. The interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than nonconvertible securities of
similar quality. The Funds will exchange or convert the convertible
securities held in their portfolios into shares of the underlying common
stocks when, in the Funds' investment adviser's opinion, the investment
characteristics of the underlying common shares will assist the Funds in
achieving their investment objectives. Otherwise, the Funds will hold or
trade the convertible securities.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
The International Bond and the Global Bond Funds may invest in REMICS.
REMICS are offerings of multiple class real estate mortgage-backed
securities which qualify and elect treatment as such under provisions of
the Internal Revenue Code. Issuers of REMICS may take several forms,
such as trusts, partnerships, corporations, associations, or a segregated
pool of mortgages. Once REMIC status is elected and obtained, the entity
is not subject to federal income taxation. Instead, income is passed
through the entity and is taxed to the person or persons who hold
interest in the REMIC. A REMIC interest must consist of one or more
classes of "regular interests," some of which offer adjustable rates, and
a single class of "residual interests." To qualify as a REMIC,
substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
INVESTING IN NEW ISSUERS
The Funds will not invest more than 5% of their total assets in
securities of issuers that have records of less than three years of
continuous operations, including the operation of any predecessor.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Each of the International Equity, the International Bond and the Global
Bond Funds may enter into forward foreign currency exchange contracts in
order to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. Dollar and a foreign currency
involved in an underlying transaction. As an example of the Funds'
ability to engage in hedging strategies, a Fund may invest in securities
denominated in a Western European currency, such as the French Franc, and
seek to hedge against the effect of an increase in the value of the U.S.
Dollar against that currency by entering into a forward foreign currency
exchange contract to sell the lower yielding German Mark, which has
historically had price movements that tend to correlate closely with
those of the French Franc, thereby creating a hedge similar to the simple
Dollar/Franc hedge, but at a possibly lower cost. In addition, the Fund
might arrange to sell those Marks against Canadian Dollars in an effort
to minimize hedging costs. It should be noted that forward foreign
currency exchange contracts may limit potential gains which could result
from a positive change in such currency relationships. The investment
adviser believes that it is important to have the flexibility to enter
into forward foreign currency exchange contracts whenever it determines
that it is in a Fund's best interest to do so. The Funds will not
speculate in foreign currency exchange.
There is no limitation as to the percentage of a Fund's assets that may
be committed to such contracts. The International Equity, the
International Bond and the Global Bond Funds do not enter into forward
foreign currency exchange contracts or maintain a net exposure in such
contracts when the Funds would be obligated to deliver an amount of
foreign currency in excess of the value of the Funds' portfolio
securities or other assets denominated in that currency or, in the case
of a 'cross-hedge,' denominated in a currency or currencies that the
investment adviser believes will tend to be closely correlated with that
currency with regard to price movements. Generally, a Fund does not
enter into a forward foreign currency exchange contract with a term
longer than one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option
has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation, to sell
the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates
in value.
Although purchasing a foreign currency option can protect a Fund against
an adverse movement in the value of a foreign currency, the option will
not limit the movement in the value of such currency. For example, if a
Fund were holding securities denominated in a foreign currency that was
appreciating and had purchased a foreign currency put to hedge against a
decline in the value of the currency, the Fund would not have to exercise
its put option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in a foreign currency and, in conjunction
with that purchase, were to purchase a foreign currency call option to
hedge against a rise in value of the currency, and if the value of the
currency instead depreciated between the date of purchase and the
settlement date, the Fund would not have to exercise its call. Instead,
the Fund could acquire in the spot market the amount of foreign currency
needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
additional risks associated with foreign currency options. The markets
in foreign currency options are relatively new, and the Funds' ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Funds will not
purchase or write such options unless and until, in the opinion of the
investment adviser, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater
than the risks in connection with the underlying currency, there can be
no assurance that a liquid secondary market will exist for a particular
option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to U.S. Dollars. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a
foreign security. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may
be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 millon) for the underlying
foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e. less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market subject to significant price and rate
movements.
FUTURES CONTRACTS
The International Equity, the International Bond and the Global Bond
Funds may enter into contracts for the future delivery of a financial
instrument, such as an amount of foreign currency, a security, or the
cash value of a securities index during a specified future period at a
specified price. In addition, the Small Capitalization Fund may enter
into contracts for the future delivery of securities of small to mid-
capitalization issuers. This investment technique is designed primarily
to hedge against anticipated future changes in foreign exchange rates,
interest rates or market conditions, all of which might otherwise have an
adverse effect upon the value of securities or other assets which the
Funds hold or intend to purchase. A "sale" of a futures contract means
the undertaking of a contractual obligation to deliver the underlying
foreign currency, security or cash value of a securities index called for
by the contract at a specified price during a specified delivery period.
A "purchase" of a futures contract means the undertaking of a contractual
obligation to acquire the underlying foreign currency, security or cash
value of a securities index at a specified price during a specified
delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value resulting from the delivery of securities with a
different interest rate than the rate specified in the contract. In some
cases, securities called for by a futures contract may not have been
issued at the time the contract was written.
Although some futures contracts by their terms call for the actual
delivery or acquisition of assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (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, if effected through
a member of an exchange, cancels the obligation to make or take delivery
of the underlying assets. All transactions in the futures market are
made, offset or fulfilled through a clearing house associated with the
exchange on which the contracts are traded. Brokerage fees will be
incurred by a Fund when it purchases or sells contracts, and the Fund
will be required to maintain margin deposits. At the time a Fund enters
into a futures contract, it is required to deposit with its custodian, on
behalf of the broker, a specified amount of cash or eligible securities,
called "initial margin." The initial margin required for a futures
contract is set by the exchange on which the contract is traded.
Subsequent payments, which are called "variation margin," to and from the
broker are made on a daily basis as the market price of the futures
contract fluctuates. The costs incurred in connection with futures
transactions could reduce the Funds' returns.
Futures contracts entail risks. If the investment adviser's judgment
about the general direction of interest rates, markets or exchange rates
is wrong, the overall performance may be poorer than if no such contracts
had been entered into. An imperfect correlation may exist between
movements in the prices of futures contracts and portfolio assets being
hedged. Further, the market prices of futures contracts may be affected
by certain factors. For example, the normal relationship between the
assets and futures markets could be distorted if participants in the
futures market were to elect to close out their contracts through
offsetting transactions rather than by meeting margin requirements.
Price distortions also could result if investors in futures contracts
were to decide to make or take delivery of underlying assets rather than
engaging in closing transactions because of the resultant liquidity of
the futures market. Further, increased participation by speculators in
the futures market could cause temporary price distortions because, as
perceived by speculators, margin requirements in the futures market are
less onerous than margin requirements in the cash market. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in the prices of securities or other assets
and movements in the prices of futures contracts, a correct forecast of
market trends by the investment adviser still may not result in a
successful hedging transaction. If one of these events were to occur, a
Fund could lose money on the futures contracts as well as on its
portfolio assets.
OPTIONS ON FUTURES CONTRACTS
The Funds may engage in futures transactions and may use options in an
attempt to hedge against the effects of fluctuations in interest rates
and other market conditions. For example, if a Fund owned long-term
bonds and interest rates were expected to rise, it could sell futures
contracts or the cash value of a securities index. If interest rates did
increase, the value of the bonds owned by the Fund would decline, but
this decline would be offset in whole or in part by an increase in the
value of the Fund's futures contracts or the cash value of the securities
index.
If, on the other hand, long-term interest rates were expected to decline,
the Fund could hold short-term debt securities and benefit from the
income earned by holding such securities, while at the same time the Fund
could purchase futures contracts on long-term bonds or the cash value of
a securities index. Thus, the Fund could take advantage of the
anticipated rise in the value of long-term bonds without actually buying
them. The futures contracts and short-term debt securities could then be
liquidated and the cash proceeds used to buy long-term bonds.
The Fund may also purchase and write call and put options on futures
contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract at a specified price at any time during the period of the
option. When the option is exercised, the writer of the option delivers
the futures contract to the holder at the exercise price. With regard to
put and call options on futures contracts written by a Fund, the Fund
would be required to deposit initial and maintenance margin with the
custodian. Options on futures contracts involve risks similar to those
discussed above that relate to transactions in futures contracts.
Furthermore, an option on a futures contract purchased by a Fund may
expire as worthless, which would cause the Fund to lose the premium paid
for the option.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such
contracts, the International Equity, the International Bond and the
Global Bond Funds may be able to achieve many of the same objectives as
they would through the use of forward foreign currency exchange
contracts. The Funds may be able to achieve these objectives possibly
more effectively and at a lower cost by using futures transactions
instead of forward foreign currency exchange contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition,
there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
To reduce this risk, the International Equity, the International Bond and
the Global Bond Funds will not purchase or write options on foreign
currency futures contracts unless and until, in the investment adviser's
opinion, the market for such options has developed sufficiently that the
risks in connection with such options are not greater than the risks in
connection with transactions in the underlying foreign currency futures
contracts. Compared to the purchase or sale of foreign currency futures
contracts, the purchase of call or put options on futures contracts
involves less potential risk to a Fund because the maximum amount at risk
is the premium paid for the option (plus transaction costs). However,
there may be circumstances when the purchase of a call or put option on a
futures contract would result in a loss, such as when there is no
movement in the price of the underlying currency or futures contract.
OPTIONS ON SECURITIES
A Fund may write (sell) covered call options on securities if it owns
securities that are acceptable for escrow purposes. Additionally, a Fund
may write secured put options on securities. When writing a secured put
option, a Fund will invest an amount not less than the exercise price of
the put option in eligible securities, so long as the Fund is obligated
as a writer of a put option. A call option gives the purchaser the right
to buy, and the writer the obligation to sell, the underlying security at
the exercise price during the option period. A put option gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during the option period. The
premium received for writing an option will reflect such factors as the
current market price of the underlying security, the relationship of the
exercise price to such market price, the option period, supply and
demand, and interest rates. The exercise price of an option may be
below, equal to or above the current market value of the underlying
security at the time that the option is written. The Funds may also
write or purchase spread options. A spread option is an option for which
the exercise price may be a fixed dollar spread or yield spread between
the security underlying the option and another security that a Fund does
not own but uses as a benchmark.
The purchase of a put option by the owner of the related security
protects the purchaser against any decline in the related security's
price below the exercise price (less the amount paid for the option).
The ability of a Fund to purchase put options allows it to protect
capital gains in an appreciated security without actually requiring the
Fund to sell the appreciated security. On occasion, a Fund would like to
establish a position in a security upon which call options are available.
The purchase of a call option enables the Fund to fix the cost of
acquiring the security, which would be the cost of the call plus the
exercise price of the option. In addition, this method of acquiring
securities provides some protection from an unexpected downturn in the
market. This is because the Fund is at risk only for the amount of the
premium paid for the call option, which it can allow to lapse, if it so
chooses.
During the option period, the covered call writer gives up the potential
for capital appreciation above the exercise price if the underlying asset
rises in value, and the secured put writer retains the risk of loss if
the underlying asset declines in value. For the covered call writer,
substantial appreciation in the value of the underlying asset would
result in the asset being "called away." For the secured put writer,
substantial depreciation in the value of the underlying asset could
result in the asset being "put to" the writer. If a covered call option
expired unexercised, the writer of the call would realize a gain and the
buyer would realize a loss in the amount of the premium. If the covered
call option writer had to sell the underlying asset because of the
exercise of the call option, it would realize a gain or loss from the
sale of the underlying asset, with the proceeds being increased by the
amount of the premium.
If a secured put option expired unexercised, the writer would realize a
gain and the buyer would realize a loss on the amount of the premium. If
the secured put writer would have to buy the underlying asset because of
the exercise of the put option, the writer would incur an unrealized loss
to the extent that the current market value of the underlying asset is
less than the exercise price of the put option, less the premium
received.
OVER-THE-COUNTER OPTIONS
The Funds may deal in over-the-counter traded options ("OTC options") in
addition to exchange-traded options. OTC options differ from exchange-
traded options in several respects. First, they are transacted with
dealers rather than a clearing corporation. Second, a risk of
nonperformance by the dealer exists, whether as a result of the
insolvency of the dealer or otherwise, which could cause a Fund to
experience material losses; however, in writing OTC options, the premium
is paid in advance by the dealer. Third, in contrast to exchange-traded
options, OTC options are available for a greater variety of securities
and wider range of expiration dates and exercise prices. Because there
is no exchange in the case of OTC options, pricing is normally done with
reference to information from market makers, which is carefully monitored
by the investment adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of
OTC options, there cannot be any assurance that a continuous liquid
secondary market will exist for any particular option at any given time.
As a result, a Fund may be able to realize the value of an OTC option it
has purchased only by exercising it or by entering into a closing sale
transaction with the dealer that issued it. Likewise, in cases where a
Fund writes an OTC option, it generally can close out that option prior
to its expiration only by entering into a closing purchase transaction
with the dealer to whom the Fund wrote the option. If a covered call
option writer is unable to effect a closing transaction, it cannot sell
the underlying asset until the option either expires or is exercised.
Thus, a covered call option writer of an OTC option may not be able to
sell an underlying asset even though it might otherwise be advantageous
to do so. Moreover, a secured put writer of an OTC option may be unable
to sell the assets pledged to secure the put for other investment
purposes so long as it is obligated as a put writer, and a purchaser of
the put or call option might also find it difficult to terminate its
position on a timely basis when no secondary market exists.
OPTIONS ON SECURITIES INDICES
The International Equity, the International Bond and the Global Bond
Funds also may purchase and write call and put options on securities
indices in order to hedge against market conditions which affect the
values of securities that the Funds own or intend to purchase. The Funds
will not purchase and write such options for speculation. By writing and
purchasing index options, a Fund may be able to achieve many of the same
objectives as through the purchasing and writing of options on individual
securities. Options on securities indices are similar to options on
individual securities. However, unlike an option on an individual
security, which gives the right to take or make delivery of a security at
a specified price, an option on a securities index gives the holder upon
exercise the right to receive an amount of cash if the closing level of
the securities index upon which the option is based exceeds, in the case
of a call, or is less than, in the case of a put, the exercise price of
the option. Upon exercise of the option, the amount of cash received by
the holder is equal to the difference between the closing price of the
index and the exercise price of the option. In consideration for the
premium received, the writer of the option has an obligation to make
delivery of the amount of cash resulting from the exercise of the option.
Unlike options on individual securities, all settlements are in cash, and
the gain or loss depends upon price movements in the market generally or
in a segment of the market, rather than upon price movements in
individual securities.
The Funds cover call options written on a securities index through the
ownership of securities whose changes in price, in the opinion of the
investment adviser, are anticipated to be similar to the price changes of
the index, or in such other manner or may be in conformance with
applicable laws, regulations and exchange rules. Any changes in the
prices of the securities owned by a Fund probably will not be perfectly
correlated with the securities index. A Fund will secure put options
written on a securities index by means of segregating liquid high-grade
securities equal to the exercise price, or in such other manner as may be
in conformance with applicable laws, regulations and exchange rules.
Upon writing an option on a securities index, a Fund will be required to
deposit with its custodian and mark-to-market eligible securities that
are equal in value to at least 100% of the exercise price in the case of
a put or, in the case of a call, the value of the contract.
Additionally, if a Fund writes a call option on a securities index at a
time when the value of the contract is greater than the exercise price,
the Fund will segregate and mark-to-market, until such time as the option
expires or is closed out, cash or a cash equivalent equal in value to the
excess of the contract value.
In addition, a Fund may purchase and write options on other appropriate
indices, as available (e.g., foreign currency indices).
Index options involve risks similar to those associated with transactions
in futures contracts, as described above. Also, an option purchased by a
Fund may expire as worthless. In such case, the Fund could lose the
premium paid for the option.
REGULATORY RESTRICTIONS
To the extent required to comply with SEC Release No. 10666, when
purchasing a futures contract, writing a put option or entering into a
delayed delivery purchase or forward foreign currency exchange purchase,
the Funds will establish and maintain a segregated account consisting of
cash or liquid high-grade securities equal to the value of such
contracts.
To the extent required to comply with federal or state regulations, and
thereby avoid status as a "commodity pool operator," the Funds will not
enter into a futures contract, or purchase an option thereon, if
immediately thereafter the initial margin deposits for futures contracts
held by a Fund, plus premiums paid by it for open options of futures,
would exceed 5% of the total assets of the Fund. The Funds will not
engage in transactions in futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market
conditions affecting the values of assets which a Fund holds or intends
to purchase. When futures contracts or options thereon are purchased in
order to protect against a price increase on securities or other assets
intended to be purchased later, it is anticipated that at least 75% of
such intended purchases will be completed. When other futures contracts
or options thereon are purchased, the underlying value of such contracts
will at all times not exceed the sum of (1) accrued profit on such
contracts held by the broker; (2) cash or high-quality money market
instruments set aside in an identifiable manner; and (3) cash proceeds
from investments due in 30 days or less.
ADDITIONAL RISK CONSIDERATIONS
In the case of the International Equity, the International Bond and the
Global Bond Funds, the Trustees consider at least annually the likelihood
of the imposition by any foreign government of exchange control
restrictions which would affect the liquidity of a Fund's assets
maintained with custodians in foreign countries, as well as the degree of
risk from political acts of foreign governments to which such assets may
be exposed. The Trustees also consider the degree of risk involved
through the holding of portfolio securities in domestic and foreign
securities depositories. However, in the absence of willful misfeasance,
bad faith or gross negligence on the part of the investment adviser, any
losses resulting from the holding of the Funds' portfolio securities in
foreign countries and/or with securities depositories will be at the risk
of shareholders. No assurance can be given that the Trustees' appraisal
of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments might not occur.
DURATION
With reference to the International Bond and Global Bond Funds, duration
is a measure of a debt security's price sensitivity expressed in years
and is a measure of the interest rate risk of a debt security, taking
into consideration that there may be cash flows before the maturity date
and that the cash flows must be considered in terms of their present
value. Duration is similar to, but more precise than, average life. It
is a measure of the number of years until the average dollar--in present
value terms--is received from coupon and principal payments. As such, it
is one measure of systematic risk. Average life, on the other hand, is a
measure of the time to receive a dollar of principal--it takes into
consideration neither interest payments nor present value. Duration is
computed by multiplying each principal and interest payment by its
present value, summing these products, and dividing the sum by the full
price of the debt security. A more complete description of this
calculation is available upon request from the Trust.
PORTFOLIO TURNOVER
Although the Funds do not intend to invest for the purpose of seeking
short-term profits, securities in their portfolios will be sold whenever
the investment adviser believes it is appropriate to do so in light of
the Funds' investment objectives, without regard to the length of time a
particular security may have been held.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Funds will not issue senior securities, except that a Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount
borrowed; and except to the extent that a Fund may enter into futures
contracts. The Funds will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling a Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. A Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding. During
the period any reverse repurchase agreements are outstanding, a Fund will
restrict the purchase of portfolio securities to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements, but only to the extent necessary to assure completion of the
reverse repurchase agreements.
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as are necessary for
clearance of purchases and sale of securities. The deposit or payment by
the Funds of initial or variation margin in connection with futures
contracts or related options transactions is not considered the purchase
of a security on margin.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets, except to
secure permitted borrowings. In these cases, the Funds may pledge assets
having a value of 15% of assets taken at cost. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with the
writing of covered put or call options and the purchase of securities on
a when-issued basis, and (b) collateral arrangements with respect to (i)
the purchase and sale of stock options and (ii) initial or variation
margin for futures contracts, will not be deemed to be pledges of a
Fund's assets. Margin deposits for the purchase and sale of futures
contracts and related options are not deemed to be a pledge.
LENDING CASH OR SECURITIES
The Funds will not lend any of their respective assets except portfolio
securities up to one-third of the value of total assets. This shall not
prevent a Fund from purchasing or holding U.S. government obligations,
money market instruments, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a Fund's
investment objective, policies, and limitations, or the Trust's
Declaration of Trust.
INVESTING IN RESTRICTED SECURITIES
The Funds will not invest more than 15% of their respective net assets in
securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted securities which meet
the criteria for liquidity as established by the Trustees.
INVESTING IN COMMODITIES
None of the Funds will invest in commodities, except to the extent that
the Funds may engage in transactions involving futures contracts or
options on futures contracts.
INVESTING IN REAL ESTATE
None of the Funds will purchase or sell real estate, including limited
partnership interests, although the Funds may invest in securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, each Fund will not
purchase securities issued by any other issuer (other than cash, cash
items or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities), if, as a result, more than 5% of the
value of its total assets would be invested in the securities of that
issuer. No Fund will acquire more than 10% of the outstanding voting
securities of any one issuer.
CONCENTRATION OF INVESTMENTS
No Fund will invest 25% or more of the value of its respective total
assets in any one industry (other than securities issued by the U.S.
government, its agencies, or instrumentalities or repurchase agreements
collateralized by these securities).
UNDERWRITING
A Fund will not underwrite any issue of securities, except as a Fund may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
The above investment limitations cannot be changed with respect to a Fund
without the approval of the holders of a majority of that Fund's shares.
The following limitations may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 15% of the value of their respective
net assets in illiquid securities, including: repurchase agreements
providing for settlement more than seven days after notice; over-the-
counter options; and certain restricted securities not determined by the
Trustees to be liquid.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds will limit their respective investment in other investment
companies to no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of their total assets in any
one investment company, or invest more than 10% of their total assets in
investment companies in general. The Funds will purchase securities of
closed-end investment companies only in open market transactions
involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a
merger, consolidation, reorganization, or acquisition of assets.
INVESTING IN NEW ISSUERS
A Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
OF THE TRUST
A Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Funds' investment adviser,
owning individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN MINERALS
A Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase the
securities of issuers which invest in or sponsor such programs.
ARBITRAGE TRANSACTIONS
A Fund will not enter into transactions for the purpose of engaging in
arbitrage.
INVESTING IN PUTS AND CALLS
The Funds may not write or purchase options, except that a Fund may write
covered call options and secured put options on up to 25% of its net
assets and may purchase put and call options, provided that no more than
5% of a Fund's net assets may be invested in premiums on such options.
PURCHASING SECURITIES TO EXERCISE CONTROL
A Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Funds will not invest in warrants, except that the Funds may invest
not more than 5% of their respective net assets in warrants, including
those acquired in units or attached to other securities. To comply with
certain state restrictions, the Funds will limit their investment in such
warrants not listed on the New York or American Stock Exchanges to 2% of
their respective net assets. (If state restrictions change, this latter
restriction may be revised without notice to shareholders.) For purposes
of this investment restriction, warrants will be valued at the lower of
cost or market, except that warrants acquired by the Funds in units with
or attached to securities may be deemed to be without value.
Except with respect to the Funds' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or
net assets will not result in a violation of such restriction.
The Funds have no present intention to borrow money or pledge securities
in excess of 5% of the value of their respective net assets.
To comply with registration requirements in certain states, each Fund (1)
will limit the aggregate value of the assets underlying covered call
options or put options written by the Fund to not more than 25% of its
net assets, (2) will limit the premiums paid for options purchased by the
Fund to 5% of its net assets, and (3) will limit the margin deposits on
futures contracts entered into by the Fund to 5% of its net assets. (If
state requirements change, these restrictions may be revised without
shareholder notification.)
For purposes of its policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."
FT FUNDS MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal
occupations over the past five years and their present positions,
including any with FT Funds, including any affiliation with Fiduciary
International, Inc., Federated Investors, Federated Administrative
Services, Edgewood Services, Inc., Federated Services Company, and their
various affiliates and subsidiaries.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE TRUST
The Trust's investment adviser is Fiduciary International, Inc. (the
"Adviser" or "Fiduciary"). Fiduciary is a New York corporation, and is a
registered investment adviser under the Investment Advisers Act of 1940.
The Adviser shall not be liable to the Trust, a Fund, or any shareholder
of any of the Funds for any losses that may be sustained in the purchase,
holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
ADVISORY FEES
For its advisory services, Fiduciary receives an annual investment
advisory fee as described in the prospectus.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If a Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the Adviser will reimburse a
Fund for its expenses over the limitation. If a Fund's monthly projected
operating expenses exceed this limitation, the investment advisory fee
paid will be reduced by the amount of the excess, subject to an annual
adjustment. If the expense limitation is exceeded, the amount to be
reimbursed by the Adviser will be limited, in any single fiscal year, by
the amount of the investment advisory fee. This arrangement is not part
of the investment advisory contract and may be amended or rescinded in
the future.
ADMINISTRATIVE SERVICES
Federated Administrative Services, which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds
for a fee as described in the prospectus.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND
PORTFOLIO RECORDKEEPER
Federated Services Company ("FServ") serves as transfer agent and
dividend disbursing agent for the Funds. The FServ fee is based on the
size, number of accounts and transactions made by the Funds'
shareholders.
FServ also maintains the Funds' accounting records. The FServ fee paid
for this service is based upon the level of the Funds' average net assets
for the period, plus out-of-pocket expenses.
CUSTODIAN
For its services as custodian, Fiduciary Trust Company International (the
"Custodian") receives an annual fee, payable monthly, based upon the
Funds' average aggregate daily net assets. The Custodian is reimbursed
for out-of-pocket expenses.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments for the Funds, the Adviser looks for prompt
execution of the order at a favorable price. In working with dealers,
the Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution
of the order can be obtained elsewhere. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The Adviser may select brokers
and dealers who offer brokerage and research services. These services
may be furnished directly to the Funds or to the Adviser, and may
include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or its
affiliates in advising certain other accounts. To the extent that
receipt of these services may supplant services for which the Adviser
might otherwise have paid, it would tend to reduce its expenses.
Investment decisions for the Funds will be made independently from those
of any fiduciary or other accounts that may be managed by the Adviser or
its subsidiaries. If, however, such accounts and the Funds are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. This system
may adversely affect the price the Funds pay or receive, or the size of
the positions they obtain.
The Adviser may engage in other non-U.S. transactions that may have
adverse effects on the market for securities in the Funds' portfolios.
The Adviser is not obligated to obtain any material non-public ("inside")
information about any securities issuer, or to base purchase or sale
recommendations on such information.
PURCHASING SHARES
Shares of the Funds are sold at their net asset value on days on which
the New York Stock Exchange and the Federal Reserve Wire are open for
business. The procedure for purchasing shares of the Funds is explained
in the prospectus under 'Investing in the Funds.'
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
As explained in the prospectus, the Funds have adopted a Shareholder
Services Plan and Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 (the "1940 Act"). These arrangements
permit the payment of fees to financial institutions, Edgewood Services,
Inc., the Trust's distributor, and Federated Shareholder Services to
stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholders'
particular circumstances and goals. These activities may include, but
are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Funds
will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Funds in pursuing their investment
objectives. By identifying potential investors whose needs are served by
the Funds' objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative activity;
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
CONVERSION TO FEDERAL FUNDS
It is the Funds' policy to be as fully invested as possible so that
maximum income may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds
before shareholders begin to earn dividends. Fiduciary acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
DETERMINING NET ASSET VALUE
The net asset values of the Funds generally change each day. The days on
which net asset value is calculated by the Funds are described in the
prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The market or appraised values of the Funds' portfolio securities are
determined as follows:
o for equity securities, according to the last sale price on a
national securities exchange, if available;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;
o for unlisted equity securities, the latest bid prices;
o for bonds and other fixed income securities, as determined by
an independent pricing service;
o for short-term obligations, according to the mean between the
bid and asked prices as furnished by an independent pricing
service or for short-term obligations with remaining maturities
of 60 days or less at the time of purchase, at amortized cost;
or
o for all other securities, at fair value as determined in good
faith by the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
The Funds will value futures contracts, options and put options on
futures at their market values established by the exchanges at the close
of option trading on such exchanges, unless the Trustees determine in
good faith that another method of valuing option positions is necessary
to appraise fair value.
TRADING IN FOREIGN SECURITIES
Trading in foreign cities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset
values, the Funds value foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing of
the New York Stock Exchange. Certain foreign currency exchange rates may
also be determined at the latest rate prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. Dollars at current rates.
Occasionally, events that affect values and exchange rates may occur
between the times at which they are determined and the closing of the New
York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value
as determined in good faith by the Trustees, although the actual
calculation may be done by others.
REDEEMING SHARES
Each Fund redeems shares at the next computed net asset value after
Fiduciary receives the redemption request. Redemption procedures are
explained in the prospectus under 'Redeeming Shares.'
Since portfolio securities of the Funds may be traded on foreign
exchanges which trade on Saturdays or on holidays on which the Funds will
not make redemptions, the net asset values of the Funds may be
significantly affected on days when shareholders do not have an
opportunity to redeem their shares.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price, in whole
or in part, by a distribution of securities from a Fund's portfolio. The
Trust has elected to be governed by Rule 18f-1 of the 1940 Act, under
which the Trust is obligated to redeem shares for any one shareholder in
cash only up to the lesser of $250,000 or 1% of a Fund's net asset value
during any 90-day period. Any redemption beyond this amount will also be
in cash unless the Trustees determine that further cash payments will
have a materially adverse effect on remaining shareholders. In such a
case, the Fund will pay all or a portion of the remainder of the
redemption in portfolio instruments, valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a manner that the Trustees deem fair and equitable.
Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net
asset value and selecting the securities in a manner the Trustees
determine to be fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of
their securities and could incur certain transaction costs.
TAX STATUS
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, each Fund must, among other requirements:
o derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
FOREIGN TAXES
Investment income on certain foreign securities in which the Funds may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Funds would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. The Funds' dividends, and
any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-
term capital gains distributed to them regardless of how long they
have held shares in the Funds.
TOTAL RETURN
The Funds' average annual total return is the average compounded rate of
return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the offering price per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, less any
applicable sales load, adjusted over the period by any additional shares,
assuming the reinvestment, as applicable, of all dividends and
distributions.
Cumulative total return reflects total performance over a specific period
of time.
YIELD
The yield for the Funds is determined by dividing the net investment
income per share (as defined by the SEC) earned by a Fund over a thirty-
day period by the maximum offering price per share on the last day of the
period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day
period is assumed to be generated each month over a 12-month period and
is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments
required by the SEC and, therefore, may not correlate to the dividends or
other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment in
a Fund, the performance will be reduced for those shareholders paying
those fees.
PERFORMANCE COMPARISONS
The performance of each Fund depends upon such variables as:
o portfolio quality;
o average portfolio maturity,
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in each Fund's expenses; and
o various other factors.
Investors may use financial publications and/or indices to obtain a more
complete view of the Funds' performance. When comparing performance,
investors should consider all relevant factors, such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Funds use in advertising may include:
SMALL CAPITALIZATION FUND:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account
any change in offering price over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in
advertising and sales literature.
o MORNINGSTAR, INC., an independent rating service, is the
publisher of the bi-weekly Mutual Fund Values. Mutual Fund
Values rates more than 1,000 NASDAQ-listed mutual funds of all
types, according to their risk-adjusted returns. The maximum
rating is five stars, and ratings are effective for two weeks.
o RUSSELL 2000 INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can
be used to compare to the total returns of funds whose
portfolios are invested primarily in small capitalization
stocks.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index
representing share prices of major industrial corporations,
public utilities, and transportation companies. Produced by
the Dow Jones & Company, it is cited as a principal indicator
of market conditions.
o STANDARD & POOR'S MIDCAP 400 INDEX is a diversified index
consisting of 400 domestic stocks chosen for market size
(median market capitalization of about $993 million, as of
February 1995), liquidity, and industry group representation.
It is a market-weighted index with each stock affecting the
index in proportion to its market value.
o STANDARD & POOR'S SMALLCAP 600 INDEX is an index consisting of
600 domestic stocks chosen for market size (median market
capitalization of $264 million, as of February 1995),
liquidity, and industry group representation. It is a market-
weighted index, with each stock affecting the index in
proportion to its market value.
o STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX covers 500
industrial, utility, transportation, and financial companies in
the United States market (mostly New York Stock Exchange
("NYSE") issues). The index represents about 75% of NYSE
market capitalization and 30% of all NYSE issues. It is a
capitalization-weighted index calculated on a total return
basis with dividends reinvested.
o RUSSELL MIDCAPTM INDEX consists of the smallest 800 securities
in the Russell 1000 Index, as ranked by total market
capitalization. This index captures the medium-sized universe
of securities and represents approximately 35% of the Russell
1000 total market capitalization.
INTERNATIONAL EQUITY FUND:
o MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, AND FAR
EAST INDEX (EAFE) is a market capitalization-weighted foreign
securities index, which is widely used to measure the
performance of European, Australian and New Zealand and Far
Eastern stock markets. The index covers approximately 1,020
companies drawn from 18 countries in the above regions. The
index values its securities daily in both U.S. Dollars and
local currency, and calculates total returns monthly. EAFE
U.S. Dollar total return is a net dividend figure less
Luxembourg withholding tax. The EAFE is monitored by Capital
International, S.A., Geneva, Switzerland.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account
any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper rating in
advertising and sales literature.
o FT-ACTUARIES EUROPE & PACIFIC INDEX is a subindex based on the
FT-Actuaries World Index, excluding Canada, Mexico, South
Africa and the United States. The subindex contains
approximately 1,600 securities in 20 countries.
GLOBAL BOND:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account
any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper rating in
advertising and sales literature.
O SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is a market
capitalization-weighted index consisting of government bond
markets of the following countries: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, The
Netherlands, Spain, Sweden, the United Kingdom and the United
States (collectively, the "WGBI Countries").
o J.P. MORGAN GLOBAL GOVERNMENT BOND INDEX is a market
capitalization-weighted index consisting of the government bond
markets of the following countries: Australia, Belgium,
Canada, Denmark, France, Germany, Italy, Japan, The
Netherlands, Spain, Sweden, the United Kingdom and United
States (collectively the "JPMGGB Countries"). Issue and
country eligibility are based on market capitalization and
investability criteria. All issues have a remaining maturity
of at least one year, and the index is rebalanced monthly.
o LEHMAN BROTHERS AGGREGATE BOND INDEX is composed of securities
from the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed
Securities Index. Total return comprises price
appreciation/depreciation and income as a percentage of the
original investment. Each of these indexes are rebalanced
monthly by market capitalization.
INTERNATIONAL BOND:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account
any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper rating in
advertising and sales literature.
o SALOMON BROTHERS NON-US DOLLAR WORLD GOVERNMENT BOND INDEX The
indexes of nonbase currency sectors exclude respective base
currency bond markets from the calculation and, in turn, are
stated in terms of the base currency. Therefore, the Non-US
Dollar World Government Bond Index includes all WGBI Countries,
except the United States, and is stated in US Dollar terms.
o J.P. MORGAN NON-US GOVERNMENT BOND INDEX consists of the JPMGGB
Countries, excluding the United States market.
Advertisements and sales literature for a Fund may quote total returns
which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment
in the Fund based on reinvestment of dividends over a specified period of
time.
APPENDIX
STANDARD & POOR'S RATINGS GROUP LONG-TERM DEBT RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA-Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
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 to be 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.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
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.
A-2-Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree or safety is not as high as
for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-1-Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well-established industries;
o High rates of return on funds employed;
o Conservative capitalization structures with moderate reliance
on debt and ample asset protection;
o Broad margins in earning coverage of fixed financial charges
and high internal cash generation; and
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2-Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above,
but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (to be filed by Amendment)
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the Registrant; +
(2) Copy of By-Laws of the Registrant; +
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant; (to be filed by Amendment)
(5) Form of Investment Advisory Contract of the Registrant; +
(6) Form of Distributor's Contract of the Registrant; +
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the Registrant;
(to be filed by Amendment)
(9) (i)Form of Administrative Services Agreement; +
(ii)Conformed copy of Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement; +
(iii)Form of Shareholder Services Agreement; +
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered; (to be filed by
Amendment)
(11) Conformed Copy of Consent of Independent Auditors; (to be
filed by Amendment)
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding; (to be
filed by Amendment)
(14) Not applicable;
(15) (i)Form of Distribution Plan; +
(ii)Copy of 12b-1 Agreement; +
(16) Copy of Schedule for Computation of Fund Performance Data;
(17) Not applicable;
(18) Not applicable;
(19) Conformed Copy of Power of Attorney; +
Item 25. Persons Controlled by or Under Common Control with Registrant
None
+ All exhibits have been filed electronically.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of
Shares of beneficial interest
(no par value)
FT Small Cap Equity Fund (not yet effective)
FT International Equity Fund (not yet effective)
FT International Bond Fund (not yet effective)
FT Global Bond Fund (not yet effective)
Item 27. Indemnification:
Indemnification is provided to Officers and Trustees of the Registrant
pursuant to Section 4 of Article XI of Registrant's Declaration of Trust.
The Investment Advisory Contract between the Registrant and Fiduciary
International, Inc. ("Adviser") provides that, in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
obligations or duties under the Investment Advisory Contract on the part
of Adviser, Adviser shall not be liable to the Registrant or to any
shareholder 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 Investment Trust Errors and Omissions Policy.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, Officers, and controlling
persons of the Registrant by the Registrant pursuant to the Declaration of
Trust or otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by
Trustees, Officers, or controlling persons of the Registrant in connection
with the successful defense of any act, suit, or proceeding) is asserted
by such Trustees, Officers, or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
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 Investment Adviser:
(a)For a description of the other business of the investment adviser, see
the section entitled "FT Funds Information - Management of FT Funds"
in Part A.
(1) (2) (3)
Position with Other Substantial
Fiduciary Business, Profession,
Name International, Inc. Vocation or Employment
For information as to the business, profession, vocation, and employment of a
substantial nature of directors and officers Fiduciary International, Inc.,
reference is made to Fiduciary International, Inc.'s current Form ADV (File No.
801-18352) filed under the Investment Advisers Act of 1940, as amended, which
is incorporated herein by reference.
Item 29. Principal Underwriters:
(a)Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-
end investment companies: UST Master Funds, Inc. and UST Master Tax-
Exempt Funds, Inc.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
James J. Dolan Trustee and President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Senior Vice President and --
Federated Investors Tower Trustee, Edgewood Services,
Pittsburgh, PA 15222-3779 Inc.
Douglas L. Hein Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Frank E. Polefrone Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Newton Heston, III Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Charles H. Field Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Jeannette Fisher-Garber Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Fiduciary International, Inc. Two World Trade Center
("Adviser") New York, NY 10048-0772
Fiduciary Trust Company International Two World Trade Center
("Custodian") New York, NY 10048-0772
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of Registrant's 1933 Act Registration
Statement.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of Trustees and
the calling of special shareholder meetings by shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FT FUNDS, 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 23rd day of October, 1995
FT FUNDS
BY: /s/ Peter J. Germain
Peter J. Germain, Secretary
Attorney in Fact for Jay S. Neuman
October 23, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
NAME TITLE DATE
By:/s/ Peter J. Germain
Peter J. Germain Attorney In Fact October 23, 1995
SECRETARY For the Persons
Listed Below
NAME TITLE
Jay S. Neuman* President and Trustee
(Chief Executive Officer)
Peter J. Germain* Secretary and Trustee
Craig Churman* Trustee and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT 1 UNDER FORM N-1A
EXHIBIT 3(A) UNDER ITEM 601/REG. S-K
FT FUNDS
DECLARATION OF TRUST
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 ..................................2
Section 3. Investment in the Trust ..............................3
Section 4. No Pre-emptive Rights; Action by Shareholder..........3
Section 5. Establishment and Designation of Series or Class .....3
ARTICLE IV. THE TRUSTEES .............................................5
Section 1. Management of the Trust ..............................5
Section 2. Election of Trustees by Shareholders .................5
Section 3. Term of Office of Trustees ...........................5
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 ......6
Section 7. Ownership of Assets ..................................6
Section 8. Teleconference Meetings; Action by Consent ............6
ARTICLE V. POWERS OF THE TRUSTEES ...................................6
Section 1. Powers ...............................................6
Section 2. Principal Transactions ...............................9
Section 3. Trustees and Officers as Shareholders.................9
Section 4. Parties to Contract...................................9
Page
ARTICLE VI. TRUSTEES' EXPENSES AND COMPENSATION .....................10
Section 1. Trustee Reimbursement...............................10
Section 2. Trustee Compensation ...............................10
ARTICLE VII. INVESTMENT ADVISER, ADMINISTRATIVE SERVICES, PRINCIPAL
UNDERWRITER AND TRANSFER AGENT .............................11
Section 1. Investment Adviser .................................11
Section 2. Administrative Services ............................11
Section 3. Principal Underwriter ..............................11
Section 4. Transfer Agent .....................................12
ARTICLE VIII. SHAREHOLDERS' VOTING POWERS AND MEETINGS ................12
Section 1. Voting Powers ......................................12
Section 2. Meetings............................................12
Section 3. Quorum and Required Vote ...........................13
Section 4. Action by Written Consent ..........................13
Section 5. Additional Provisions ..............................13
ARTICLE IX. CUSTODIAN ...............................................13
ARTICLE X. DISTRIBUTIONS AND REDEMPTIONS ...........................13
Section 1. Distributions ......................................13
Section 2. Redemptions and Repurchases ........................14
Section 3. Net Asset Value of Shares...........................15
Section 4. Suspension of the Right of Redemption...............15
Section 5. Trust's Right to Redeem Shares .....................15
ARTICLE XI. LIMITATION OF LIABILITY AND INDEMNIFICATION .............15
Section 1. Limitation of Personal Liability and Indemnification of
Shareholders ...............................................15
Section 2. Limitation of Personal Liability and Indemnification of
Trustees, Officers, Employees or Agents of the Trust .......16
Section 3. Express Exculpatory Clauses and Instruments ........16
Page
ARTICLE XII. MISCELLANEOUS............................................17
Section 1. Trust is not a Partnership .........................17
Section 2. Trustee Action Binding, Expert Advice, No Bond or Surety
............................................................17
Section 3. Establishment of Record Dates ......................17
Section 4. Termination of Trust ...............................18
Section 5. Offices of the Trust, Filing of Copies, Headings,
Counterparts ...............................................18
Section 6. Applicable Law .....................................18
Section 7. Amendments -- General ..............................19
Section 8. Amendments -- Series and Classes....................19
Section 9. Use of Name ........................................20
FT FUNDS
DECLARATION OF TRUST
Dated October 18, 1995
DECLARATION OF TRUST made October 18, 1995, by the undersigned, and by the
holders of shares of beneficial interest to be issued hereunder as
herinafter 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 the FT Funds, 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," "Majority Shareholder Vote" (the 67% or 50%
requirement of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" 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 and Class established hereunder;
(c) "Class" refers to a class of Shares established and designated under
or in accordance with the provisions of Article III;
(d) "Series" refers to a series of Shares established and designated
under or in accordance with the provisions of Article III;
(e) "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;
(f) "Shareholder" means a record owner of Shares of any Series or Class;
(g) "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;
(h) "Shares" 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 or Class of Shares is authorized by
the Trustees, the equal proportionate units into which each Series
or Class of Shares shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
(i) 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
(j) "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 Shares, without par
value. Subject to the provisions of Section 5 of this Article III, each
Share shall have voting rights as provided in Article VIII hereof, and
holders of the Shares of any Series shall be entitled to receive
dividends, when and as declared with respect thereto in the manner
provided in Article X, Section 1 hereof. The Shares of any Series may be
issued in one or more Classes, as the Trustees may authorize pursuant to
Article XII, Section 8 hereof. Unless the Trustees have authorized the
issuance of Shares of a Series in two or more Classes, each Share 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
Share of the same Series, none having priority or preference over
another. If the Trustees have authorized the issuance of Shares of a
Series in two or more Classes, then the Classes may have such variations
as to dividend, redemption, and voting rights, net asset values, expenses
borne by the Classes, and other matters as the Trustees have authorized
provided that each Share of a Class shall represent an equal
proportionate interest in the assets and liabilities and the income and
the expenses of the Class with each other Share of the same Class, none
having priority or preference over another. The number of Shares
authorized shall be unlimited. The Trustees may from time to time divide
or combine the Shares of any Series or Class into a greater or lesser
number without thereby changing the proportionate beneficial interests in
the Series or Class.
Section 2. Ownership of Shares. The ownership of Shares shall be recorded in
the books of the Trust or a transfer agent which books shall be
maintained separately for the Shares of each Series or Class. The
Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust or
any transfer agent, as the case may be, shall be conclusive as to who are
the Shareholders of each Series or Class and as to the number of Shares
of each Series or Class 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 the initial public offering of Shares), the
number of Shares 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 or Classes in the manner described in
Section 5(a) of this Article. Subsequent to such initial contribution of
capital, Shares (including Shares which may have been redeemed or
repurchased by the Trust) may be issued or sold at a price which will net
the relevant Series or Class, as the case may be, before paying any taxes
in connection with such issue or sale, not less than the net asset value
(as defined in Article X, Section 3) thereof; provided, however, that the
Trustees may in their discretion impose a sales charge upon investments
in or redemptions from the Trust, and upon reinvestments of dividends and
capital gains in Shares.
Section 4. No Pre-emptive Right; Action by Shareholder. Shareholders shall
have no pre-emptive or other right to subscribe to any additional Shares
or other securities issued by the Trust. No action may be brought by a
Shareholder 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 or Class. Without
limiting the authority of the Trustees set forth in Article XII, Section
8, inter alia, to establish and designate any additional Series or Class
or to modify the rights and preferences of any existing Series or Class,
the initial Series shall be, and are established and designated as, FT
Global Bond Fund, FT International Equity Fund, FT International Bond
Fund, FT Small Cap Equity Fund.
Shares of any Series or Class established in this Section 5 shall have
the following relative rights and preferences:
(a) Assets belonging to Series or Class. All consideration received by
the Trust for the issue or sale of Shares of a particular Series or
Class, 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 or Class 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 or Class. 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 or
Class (collectively "General Assets"), the Trustees shall allocate
such General Assets to, between or among any one or more of the
Series or Classes 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 or Class shall belong to that Series or Class.
Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series or Classes for all purposes.
(b) Liabilities Belonging to Series or Class. The assets belonging to
each particular Series or Class shall be charged with the
liabilities of the Trust in respect to that Series or Class and all
expenses, costs, charges and reserves attributable to that Series or
Class, and any general liabilities of the Trust which are not
readily identifiable as belonging to any particular Series or Class
shall be allocated and charged by the Trustees to and among any one
or more of the Series or Classes 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 or
Class are herein referred to as "liabilities belonging to" that
Series or Class. Each allocation of liabilities belonging to a
Series or Class by the Trustees shall be conclusive and binding upon
the Shareholders of all Series or Classes for all purposes.
(c) Dividends, Distributions, Redemptions, Repurchases
and Indemnification. Notwithstanding any other provisions of this
-
Declaration of Trust, including, without limitation, Article X, no
dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any Series or
Class) with respect to, nor any redemption or repurchase of the
Shares of any Series or Class shall be effected by the Trust other
than from the assets belonging to such Series or Class, nor except
as specifically provided in Section 1 of Article XI hereof, shall
any Shareholder of any particular Series or Class otherwise have any
right or claim against the assets belonging to any other Series or
Class except to the extent that such Shareholder has such a right or
claim hereunder as a Shareholder of such other Series or Class.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration of Trust, including, without limitation, Section 1 of
Article VIII, only Shareholders of a particular Series or Class
shall be entitled to vote on any matters affecting such Series or
Class. Except with respect to matters as to which any particular
Series or Class is affected materially differently or as otherwise
required by applicable law, all of the Shares of each Series or
Class shall, on matters as to which such Series or Class is entitled
to vote, vote with other Series or Classes so entitled as a single
class. Notwithstanding the foregoing, with respect to matters which
would otherwise be voted on by two or more Series or Classes as a
single class, the Trustees may, in their sole discretion, submit
such matters to the Shareholders of any or all such Series or
Classes, separately.
(e) Fraction. Any fractional Share of a Series or Class shall carry
proportionately all the rights and obligations of a whole Share of
that Series or Class, including rights with respect to voting,
receipt of dividends and distributions, redemption of Shares and
termination of the Trust or of any Series or Class.
(f) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have
the right to exchange said Shares for Shares of one or more other
Series or Classes in accordance with such requirements and
procedures as may be established by the Trustees.
(g) Combination of Series or Classes. The Trustees shall have the
authority, without the approval of the Shareholders of any Series or
Class, unless otherwise required by applicable law, to combine the
assets and liabilities belonging to a single Series or Class with
the assets and liabilities of one or more other Series or Classes.
(h) Elimination of Series or Classes. The Trustees shall have the
authority, without the approval of Shareholders of any Series or
Class, unless otherwise required by applicable law, to amend this
Declaration of Trust to abolish that Series or Class 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 the undersigned.
Section 2. Election of Trustees by Shareholders. 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 Shareholders 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 Shareholders of the
Trust by a vote of two-thirds of the outstanding Shares. Any removals
shall be effective as to the Trust and each Series and Class 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 or Class
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 Class
or owned by the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership
interest in any individual asset belonging to any Series or Class or
owned by the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest
in a Series or Class.
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 Shareholders. 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 or Class. 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 or Class in cash, and from time to time to change the
investments of the assets belonging to each Series or Class;
(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 Shareholders;
(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 or
Class 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, Shareholder servicing agents, investment advisers, sub-
investment advisers, principal underwriters, 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 Shares of any Series or Class
either through a Principal Underwriter 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, custodian or underwriter;
(i) To sell or exchange any or all of the assets belonging to one or
more Series or Classes, subject to the provisions of Article XII,
Section 4(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 or Class; 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 or Class;
(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 or Class 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
Shareholders;
(p) To borrow money;
(q) From time to time to issue and sell the Shares of any Series or
Class 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
or Class;
(t) To pay pensions or other compensation for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share purchase,
deferred compensation, savings, thrift and other retirement,
incentive and benefit plans, including the purchase of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust;
(u) To establish any retirement policies for Trustees including, inter
alia, a mandatory retirement age;
(v) To establish an Emeritus status for Trustees, and procedures by
which Trustees achieve Emeritus status, as well as provide for
compensation for a Trustee Emeritus at a rate that may be determined
by approval of a majority of Trustees; and
(w) To take action by written consent and teleconference, as provided in
the By-Laws.
The Trustees shall have all of the powers set forth in this Section 1
with respect to all assets and liabilities of each Series and Class.
Section 2. Principal Transactions. The Trustees shall not cause the Trust on
behalf of any Series or Class to buy any securities (other than Shares)
from or sell any securities (other than Shares) to, or lend any assets
belonging to any Series or Class 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. Trustees and Officers as Shareholders. Any Trustee, officer,
employee or other agent of the Trust may acquire, own and dispose of
Shares of any Series or Class to the same extent as if he were not a
Trustee, officer, employee or agent; and the Trustees may issue and sell
or cause to be issued or sold Shares of any Series or Class to and buy
such Shares from any such person or any firm or company in which he is an
interested person subject only to the general limitations herein
contained as to the sale and purchase of such Shares; and all subject to
any restrictions which may be contained in the By-Laws.
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
shareholders, Trustees, officers, employees or agents of the Trust or
their affiliates may be an officer, director, trustee, partner,
shareholder 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 or Class 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 or Class for all of such
Trustees' expenses as such expenses are allocated to and among any one or
more of the Series or Classes pursuant to Article III, Section 5(b),
including, without limitation, expenses of organizing the Trust or any
Series or Class and continuing its or their existence; fees and expenses
of Trustees and officers of the Trust; fees for investment advisory
services, administrative services and principal underwriting services
provided for in Article VII, Sections 1, 2 and 3; fees and expenses of
preparing and printing Registration Statements under the Securities Act
of 1933 and the 1940 Act and any amendments thereto; expenses of
registering and qualifying the Trust and any Series or Class and the
Shares of any Series or Class under federal and state laws and
regulations; expenses of preparing, printing and distributing
prospectuses and any amendments thereto sent to shareholders,
underwriters, broker-dealers and to investors who may be considering the
purchase of Shares; expenses of registering, licensing or other
authorization of the Trust or any Series or Class as a broker-dealer and
of its or their officers as agents and salesmen under federal and state
laws and regulations; interest expenses, taxes, fees and commissions of
every kind; expenses of issue (including cost of share certificates),
purchases, repurchases and redemptions of Shares, including expenses
attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, Shareholder
servicing agents and registrars; printing and mailing costs; auditing,
accounting and legal expenses; reports to Shareholders and governmental
officers and commissions; expenses of meetings of Shareholders 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 or Class,
including expenses incurred in connection with litigation, proceedings
and claims and the obligations of the Trust under Article XI hereof and
the By-Laws to indemnify its Trustees, officers, employees, shareholders
and agents, and any contract obligation to indemnify Principal
Underwriters 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 or Class prior to any
rights or interests of the Shareholders of any Series or Class. 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 or
Class 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 or Class 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, PRINCIPAL UNDERWRITER AND
TRANSFER AGENT
-
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote by the
relevant Series or Class 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 or Class 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 or Class 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 or Class 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 or 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 or Class 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 or Class
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 or
Class 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. Principal Underwriter. 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 Shares of a Series or Class to
net such Series or Class not less than the amount provided in Article
III, Section 3 hereof, whereby a Series or Class may either agree to sell
the Shares 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 Principal
Underwriters 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 Shares of a Series or Class by such other party
as principal or as agent of the Trust and may provide that the other
party may maintain a market for shares of a Series or Class.
Section 4. Transfer Agent. The Trustees may in their discretion from time
to time enter into transfer agency and Shareholder services contracts
whereby the other party shall undertake to furnish transfer agency and
Shareholder 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
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. Subject to the provisions set forth in Article
III, Section 5(d), the Shareholders 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 or 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 XII, 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 Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or
on behalf of a Shareholder 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 Shareholders, 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 shares of the Trust
(or each Series or Class) owned by the Shareholder. 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 Shares of a Series
or Class are issued, the Trustees may exercise all rights of Shareholders
of such Series or Class with respect to matters affecting such Series or
Class, and may take any action with respect to the Trust or such Series
or Class required or permitted by law, this Declaration of Trust or any
By-Laws of the Trust to be taken by Shareholders.
Section 2. Meetings. A Shareholders' 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
Shareholders 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 Shareholders owning at least one-tenth of the outstanding Shares of
all Series and Classes entitled to vote. Shareholders 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
Shares 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
Shares of the Trust on all other matters permitted by law, in each case,
entitled to vote without regard to Class shall constitute a quorum at any
meeting of the Shareholders, except with respect to any matter which by
law requires the separate approval of one or more Series or Classes, 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 Shares of each Series or Class
entitled to vote separately on the matter shall constitute a quorum.
When any one or more Series or Class is entitled to vote as a single
Series or Class, more than one-half, or one-third, as appropriate, of the
Shares of each such Series or Class entitled to vote shall constitute a
quorum at a Shareholders' meeting of that Series or Class. If a quorum
shall not be present for the purpose of any vote that may properly come
before the meeting, the Shares 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 Shareholders may be
taken without a meeting if a majority of Shareholders 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 Shareholders.
Section 5. Additional Provisions. The By-Laws may include further provisions
for Shareholders' 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 or Class. 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
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions.
(a) The Trustees may from time to time declare and pay dividends to the
Shareholders of any Series or Class, and the amount of such
dividends and the payment of them shall be wholly in the discretion
of the Trustees. The frequency of dividends and distributions to
Shareholders may be determined by the Trustees pursuant to a
standing resolution, or otherwise. Such dividends may be accrued
and automatically reinvested in additional Shares (or fractions
thereof) of the relevant Series or Class or another Series or Class,
or paid in cash or additional Shares of the relevant Series or
Class, all upon such terms and conditions as the Trustees may
prescribe.
(b) The Trustees may distribute in respect of any fiscal year as
dividends and as capital gains distributions, respectively, amounts
sufficient to enable any Series or Class to qualify as a regulated
investment company and to avoid any liability for federal income or
excise taxes in respect of that year.
c) The decision of the Trustees as to what constitutes income and what
constitutes principal shall be final, and except as specifically
provided herein the decision of the Trustees as to what expenses and
charges of any Series or Class shall be charged against principal
and what against the income shall be final. Any income not
distributed in any year may be permitted to accumulate and as long
as not distributed may be invested from time to time in the same
manner as the principal funds of any Series or Class.
(d) All dividends and distributions on Shares of a particular
Series or Class shall be distributed pro rata to the holders of that
Series or Class in proportion to the number of Shares of that Series
or Class held by such holders and recorded on the books of the Trust
or its transfer agent at the date and time of record established for
that payment.
Section 2. Redemptions and Repurchases.
(a) In case any Shareholder of record of any Series or Class at any
time desires to dispose of Shares of such Series or Class recorded
in his name, he may deposit a written request (or such other form of
request as the Trustees may from time to time authorize) requesting
that the Trust purchase his Shares, together with such other
instruments or authorizations to effect the transfer as the Trustees
may from time to time require, at the office of the transfer agent,
or as otherwise provided by the Trustees and the Trust shall
purchase his Shares out of assets belonging to such Series or Class.
The purchase price shall be the net asset value of his shares
reduced by any redemption charge or deferred sales charge as the
Trustees from time to time may determine.
Payment for such Shares shall be made by the Trust to the
Shareholder of record within that time period required under the
1940 Act after the request (and, if required, such other instruments
or authorizations of transfer) is received, subject to the right of
the Trustees to postpone the date of payment pursuant to Section 4
of this Article X. If the redemption is postponed beyond the date
on which it would normally occur by reason of a declaration by the
Trustees suspending the right of redemption pursuant to Section 4 of
this Article X, the right of the Shareholder to have his Shares
purchased by the Trust shall be similarly suspended, and he may
withdraw his request (or such other instruments or authorizations of
transfer) from deposit if he so elects; or, if he does not so elect,
the purchase price shall be the net asset value of his Shares
determined next after termination of such suspension (reduced by any
redemption charge or deferred sales charge), and payment therefor
shall be made within the time period required under the 1940 Act.
(b) The Trust may purchase Shares of a Series or Class by agreement
with the owner thereof at a purchase price not exceeding the net
asset value per Share (reduced by any redemption charge or deferred
sales charge) determined (1) next after the purchase or contract of
purchase is made or (2) at some later time.
(c) The Trust may pay the purchase price (reduced by any redemption
charge or deferred sales charge) in whole or in part by a
distribution in kind of securities from the portfolio of the
relevant Series or Class, taking such securities at the same value
employed in determining net asset value, and selecting the
securities in such manner as the Trustees may deem fair and
equitable.
Section 3. Net Asset Value of Shares. The net asset value of each Share of a
Series or Class outstanding shall be determined at such time or times as
may be determined by or on behalf of the Trustees. The power and duty to
determine net asset value may be delegated by the Trustees from time to
time to one or more of the Trustees or officers of the Trust, to the
other party to any contract entered into pursuant to Section 1 or 2 of
Article VII or to the custodian or to a transfer agent or other person
designated by the Trustees.
The net asset value of each Share of a Series or Class as of any
particular time shall be the quotient (adjusted to the nearer cent)
obtained by dividing the value, as of such time, of the net assets
belonging to such Series or Class (i.e., the value of the assets
belonging to such Series or Class less the liabilities belonging to such
Series or Class exclusive of capital and surplus) by the total number of
Shares outstanding of the Series or Class at such time in accordance with
the requirements of the 1940 Act and applicable provisions of the By-Laws
of the Trust in conformity with generally accepted accounting practices
and principles.
The Trustees may declare a suspension of the determination of net asset
value for the whole or any part of any period in accordance with the 1940
Act.
Section 4. Suspension of the Right of Redemption. The Trustees may declare a
suspension of the right of redemption or postpone the date of payment for
the whole or any part of any period in accordance with the 1940 Act.
Section 5. Trust's Right to Redeem Shares. The Trust shall have the right to
cause the redemption of Shares of any Series or Class in any
Shareholder's account for their then current net asset value and promptly
make payment to the shareholder (which payment may be reduced by any
applicable redemption charge or deferred sales charge), if (a) at any
time the total investment in the account does not have a minimum dollar
value determined from time to time by the Trustees in their sole
discretion, (b) at any time a Shareholder fails to furnish certified
Social Security or Tax Identification Numbers, or (c) at any time the
Trustees determine in their sole discretion that failure to so redeem may
have materially adverse consequences to the other Shareholders or the
Trust or any Series or Class thereof.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Trust
shall have no power to bind any Shareholder of any Series or Class
personally or to call upon such Shareholder for the payment of any sum of
money or assessment whatsoever, other than such as the Shareholder may at
any time agree to pay by way of subscription for any Shares or otherwise.
No Shareholder or former Shareholder of any Series or Class shall be
liable solely by reason of his being or having been a Shareholder 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 or Class arising out of any action taken or omitted for or
on behalf of the Trust or such Series or Class, and the Trust or such
Series or Class shall be solely liable therefor and resort shall be had
solely to the property of the relevant Series or Class of the Trust for
the payment or performance thereof.
Each Shareholder or former Shareholder of any Series or Class (or their
heirs, executors, administrators or other legal representatives or, in
case of a corporation or other entity, its 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 Shareholder or former
Shareholder of such Series or Class shall be held to be personally
liable. Such indemnification shall come exclusively from the assets of
the relevant Series or Class.
The Trust shall, upon request by a Shareholder or former Shareholder,
assume the defense of any claim made against any Shareholder for any act
or obligation of the Trust or any Series or Class 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 or Class) 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.
Section 3. Express Exculpatory Clauses and Instruments.
(a) All persons extending credit to, contracting with or having any
claim against the Trust or a particular Series or Class shall only
look to the assets of the Trust or the assets of that particular
Series or Class for payment under such credit, contract or claim;
and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or
future, shall be liable therefor.
(b) The Trustees shall use every reasonable means to assure that all
persons having dealings with the Trust or any Series or Class shall
be informed that the property of the Shareholders and the Trustees,
officers, employees and agents of the Trust or any Series or Class
shall not be subject to claims against or obligations of the Trust
or any other Series or Class to any extent whatsoever. The Trustees
shall cause to be inserted in any written agreement, undertaking or
obligation made or issued on behalf of the Trust or any Series or
Class (including certificates for Shares of any Series or Class) an
appropriate reference to the provisions of this Declaration of
Trust, providing that neither the Shareholders, the Trustees, the
officers, the employees nor any agent of the Trust or any Series or
Class shall be liable thereunder, and that the other parties to such
instrument shall look solely to the assets belonging to the relevant
Series or Class for the payment of any claim thereunder or for the
performance thereof; but the omission of such provisions from any
such instrument shall not render any Shareholder, Trustee, officer,
employee or agent liable, nor shall the Trustee, or any officer,
agent or employee of the Trust or any Series or Class be liable to
anyone for such omission. If, notwithstanding this provision, any
Shareholder, Trustee, officer, employee or agent shall be held
liable to any other person by reason of the omission of such
provision from any such agreement, undertaking or obligation, the
Shareholder, Trustee, officer, employee or agent shall be
indemnified and reimbursed by the Trust.
ARTICLE XII
MISCELLANEOUS
Section 1. Trust is not a Partnership. It is hereby expressly declared that
a trust and not a partnership is created hereby.
Section 2. 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 XI, 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 XI, 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 3. Establishment of Record Dates. The Trustees may close the Share
transfer books of the Trust maintained with respect to any Series or
Class for a period not exceeding ninety (90) days preceding the date of
any meeting of Shareholders of the Trust or any Series or Class, or the
date for the payment of any dividend or the making of any distribution to
Shareholders, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares of any Series or Class
shall go into effect or the last day on which the consent or dissent of
Shareholders of any Series or Class may be effectively expressed for any
purpose; or in lieu of closing the Share transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding ninety (90) days
preceding the date of any meeting of Shareholders of the Trust or any
Series or Class, or the date for the payment of any dividend or the
making of any distribution to Shareholders of any Series or Class, or the
date for the allotment of rights, or the date when any change or
conversion or exchange of Shares of any Series or Class shall go into
effect, or the last day on which the consent or dissent of Shareholders
of any Series or Class may be effectively expressed for any purpose, as a
record date for the determination of the Shareholders entitled to notice
of, and, to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend or distribution, or to
any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of shares, or to exercise the right
to give such consent or dissent, and in such case such Shareholders and
only such Shareholders as shall be Shareholders 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 dividend or distribution, or to receive
such allotment or rights, or to change, convert or exchange Shares of any
Series or Class, or to exercise such rights, as the case may be,
notwithstanding, after such date fixed aforesaid, any transfer of any
Shares on the books of the Trust maintained with respect to any Series or
Class. Nothing in the foregoing sentence shall be construed as
precluding the Trustees from setting different record dates for different
Series or Classes.
Section 4. Termination of Trust.
(a) This Trust shall continue without limitation of time but
subject to the provisions of paragraphs (b), (c) and (d) of this
Section 4.
(b) The Trustees may, by majority action, with the approval of a
Majority Shareholder Vote of each Series or Class 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 or Class 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 or Class, the Trustees shall
distribute the remaining assets belonging to each Series or Class
ratably among the holders of the outstanding Shares of that Series
or Class. The Trustees shall make a good faith determination that a
conveyance of a part of the assets of a Series or Class is in the
best interest of Shareholders of the relevant Series or Class.
(c) The Trustees may at any time sell and convert into money all
the assets of the Trust or any Series or Class without Shareholder
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
or Class, the Trustees shall distribute the remaining assets
belonging to each Series or Class ratably among the holders of the
outstanding Shares of that Series or Class.
(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 or Class 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 5. 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
Shareholder. 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 6. 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. The Trust shall be of
the type commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 7. Amendments -- General. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of
the right to amend this Declaration of Trust as herein provided, except
that no amendment shall repeal the limitations on personal liability of
any Shareholder or Trustee or repeal the prohibition of assessment upon
the Shareholders without the express consent of each Shareholder or
Trustee involved. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does
not adversely affect the rights of any Shareholder 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 Shareholders 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
Shareholders holding a majority of the Shares 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 5 of this
Article XII. 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 5.
Section 8. Amendments -- Series and Classes. The establishment and
designation of any Series or Class of Shares 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 Shareholder 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 Class, 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 Shareholder approval to:
(a) create one or more Series or Classes of Shares (in addition to
any Series or Classes 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 Shares as Shares of particular Series or
Classes in accordance with such eligibility requirements;
(b) combine two or more Series or Classes of Shares into a single
Series or Class on such terms and conditions as the Trustees shall
determine;
(c) change or eliminate any eligibility requirements for investment
in Shares of any Series or Class, including without limitation the
power to provide for the issue of Shares of any Series or Class 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 or Class of Shares;
(e) change the method of allocating dividends among the various
Series and Classes of Shares;
(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 Classes of Shares; and
(g) specifically allocate assets to any or all Series or Classes of
Shares or create one or more additional Series or Classes of Shares
which are preferred over all other Series or Classes of Shares in
respect of assets specifically allocated thereto or any dividends
paid by the Trust with respect to any net income, however
determined, earned from the investment and reinvestment of any
assets so allocated or otherwise and provide for any special voting
or other rights with respect to such Series or Classes.
Section 9. Use of Name. The Trust acknowledges that Fiduciary International,
Inc. has reserved the right to grant the non-exclusive use of the name
"Fiduciary" 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
or Classes any right to the use of the name "FT FUNDS".
IN WITNESS WHEREOF, the undersigned have executed this instrument as of the
day and year first above written.
/s/ Craig P. Churman
Craig P. Churman
/s/ Peter J. Germain /s/ Jay S. Neuman
Peter J. Germain Jay S. Neuman
COMMONWEALTH OF PENNSYLVANIA )
: ss:
COUNTY OF ALLEGHENY )
I hereby certify that on October 18th, 1995, before me, the subscriber, a
Notary Public of the Commonwealth of Pennsylvania, in for the County of
Allegheny, personally appeared who acknowledged the foregoing
Declaration of Trust to be their act.
Witness my hand and notarial seal the day and year above written.
/s/ Mary Jo Wagner
Notary Public
Notarial Seal
Mary Jo Wagner, Notary Public
Pittsburgh, Allegheny County
My Commission Expires February 21, 1998
EXHIBIT 2 UNDER FORM N-1A
EXHIBIT 3(B) UNDER ITEM 601/REG. S-K
FT FUNDS
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 ..............................................2
ARTICLE III: POWERS 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: SHAREHOLDERS' 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
Page
ARTICLE V: TRUSTEES' MEETINGS.........................................4
Section 1 Number and Qualifications of Trustees ...............4
Section 2 Special Meetings ....................................5
Section 3 Regular Meetings ....................................5
Section 4 Quorum and Vote .....................................5
Section 5 Notices .............................................5
Section 6 Place of Meeting ....................................5
Section 7 Telephonic Meeting ..................................5
Section 8 Special Action ......................................5
Section 9 Action by Consent ...................................6
Section 10 Compensation of Trustees ............................6
ARTICLE VI: SHARES....................................................6
Section 1 Certificates ..........................................6
Section 2 Transfer of Shares ....................................6
Section 3 Equitable Interest Not Recognized .....................6
Section 4 Lost, Destroyed or Mutilated Certificates..............6
Section 5 Transfer Agent and Registrar: Regulations..............7
ARTICLE VII: INSPECTION OF BOOKS.......................................7
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 .................................8
ARTICLE IX: INDEMNIFICATION OF TRUSTEES AND OFFICERS...................8
Section 1 General ...............................................8
Section 2 No Indemnification ....................................8
Section 3 Conditions for Indemnification ........................8
Section 4 Advancement of Expenses ...............................8
Section 5 Non-Exclusivity .......................................9
ARTICLE X: SEAL........................................................9
ARTICLE XI: FISCAL YEAR................................................9
ARTICLE XII: AMENDMENTS................................................9
Page
ARTICLE XIII: WAIVERS OF NOTICE........................................9
ARTICLE XIV: REPORT TO SHAREHOLDERS....................................9
ARTICLE XV: BOOKS AND RECORDS.........................................10
ARTICLE XVI: TERMS....................................................10
FT FUNDS
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 for any Trustee or
other officer to be a holder of shares in any Series or Class 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 Shareholders 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
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 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
Shareholders 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 shareholder of
each Series or Class 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 or Class to
such custodian or sub-custodian as may be employed by the Trust for
any Series or Class. The Treasurer shall perform such duties
additional to the 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. 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 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 dividends, issue
shares or recommend to shareholders any action requiring shareholder
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 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
SHAREHOLDERS' MEETINGS
Section 1. Special Meetings. A special meeting of the shareholders of the
Trust or of a particular Series or Class 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 shares of the Trust or of the relevant Series or Class,
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 shareholders 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 shareholders of the Trust or a particular Series or
Class, shall be given by the Secretary by delivering or mailing,
postage prepaid, to each shareholder 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 shareholder. No notice of any meeting to
shareholders need be given to a shareholder if a written waiver of
notice, executed before or after the meeting by such shareholder or
his or her 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 shareholders of the Trust or
a particular Series or Class, 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.
Section 4. Action by Consent. Any action required or permitted to be
taken at any meeting of shareholders may be taken without a meeting,
if a consent in writing, setting forth such action, is signed by a
majority of the shareholders entitled to vote on the subject matter
thereof, and such consent is filed with the records of the Trust.
Section 5. Proxies. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic
means including facsimile, or by proxy. Every written proxy shall be
subscribed by the shareholder 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 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.
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 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
Section 1. Certificates. If certificates for shares are issued, all
certificates for shares shall be signed by the Chairman, President or
any Vice President and by the Treasurer or 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 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. Share certificates of
each Series or Class 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. Transfer of Shares. The shares of each Series and Class of the
Trust shall be transferable, so as to affect the rights of the Trust
or any Series or Class, only by transfer recorded on the books of the
Trust or its transfer agent, in person or by attorney.
Section 3. Equitable Interest Not Recognized. The Trust shall be entitled
to treat the holder of record of any share or shares of a Series or
Class 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 a Series or Class 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 is lost, mutilated or destroyed, the Trustees
may issue a new certificate in place thereof upon indemnity to the
relevant Series or Class 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 and may appoint a Transfer
Agent and/or Registrar of certificates for shares of each Series or
Class, and may require all such share 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 and Class or any of them shall be open to the
inspection of the shareholders of any Series or Class; and no
shareholder 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 or Class in which he is a
Shareholder or the Trust generally, such Shareholder shall have such
right of inspection as conferred by laws or authorized by the Trustees
or by resolution of the Shareholders of the relevant Series or Class.
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 or Class, 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 or Class 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, 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.
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,
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders 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 penalities), 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 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), 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 Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disreagrd 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 Shareholders 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 liabile to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved inthe 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 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
FISCAL YEAR
The fiscal year of the Trust and each Series or Class 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 provisons 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 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 SHAREHOLDERS
The Trustees, so long as required by applicable law, shall at least
semi-annually submit to the shareholders of each Series or Class a
written financial report of the transactions of that Series or Class
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 or Class, including
the stock ledger or ledgers, 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.
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
EXHIBIT 5 UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
FT FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1st day of , 1995, between Fiduciary
International, Inc., a registered investment adviser having its principal place
of business in New York City (the "Adviser"), and FT Funds, a Massachusetts
business trust having its principal place of business in Pittsburgh,
Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that term
is defined in the Investment Company Act of 1940, as amended, and is
registered as such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment advisory
and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the direction of the
Trustees of the Trust, Adviser shall provide investment research and supervision
of the investments of the Funds and conduct a continuous program of investment
evaluation and of appropriate sale or other disposition and reinvestment of each
Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds
will be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws of
the Trust and as set forth in the Registration Statements and exhibits as may be
on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Trust expenses, including, without limitation, the
expenses of organizing the Trust and continuing its existence; fees and expenses
of Trustees and officers of the Trust; fees for investment advisory services and
administrative personnel and services; expenses incurred in the distribution of
its shares ("Shares"), including expenses of administrative support services;
fees and expenses of preparing and printing its Registration Statements under
the Securities Act of 1933 and the Investment Company Act of 1940, as amended,
and any amendments thereto; expenses of registering and qualifying the Trust,
the Funds, and Shares of the Funds under federal and state laws and regulations;
expenses of preparing, printing, and distributing prospectuses (and any
amendments thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares, including
expenses attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing and mailing costs, auditing, accounting, and
legal expenses; reports to shareholders and governmental officers and
commissions; expenses of meetings of Trustees and shareholders and proxy
solicitations therefor; insurance expenses; association membership dues and such
nonrecurring items as may arise, including all losses and liabilities incurred
in administering the Trust and the Funds. Each Fund will also pay its allocable
share of such extraordinary expenses as may arise including expenses incurred in
connection with litigation, proceedings, and claims and the legal obligations of
the Trust to indemnify its officers and Trustees and agents with respect
thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered to
each Fund by Adviser hereunder, the fees set forth in the exhibits attached
hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Fund, voluntarily
declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this Contract) for two years from the date of
this Contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party cast in person at a meeting called for that purpose;
and (b) Adviser shall not have notified a Fund in writing at least sixty (60)
days prior to the anniversary date of this Contract in any year thereafter that
it does not desire such continuation with respect to that Fund. If a Fund is
added after the first approval by the Trustees as described above, this Contract
will be effective as to that Fund upon execution of the applicable exhibit and
will continue in effect until the next annual approval of this Contract by the
Trustees and thereafter for successive periods of one year, subject to approval
as described above.
8. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of the shareholders of that Fund on sixty
(60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation, or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under this Contract on the part
of Adviser, Adviser shall not be liable to the Trust or to any of the Funds or
to any shareholder 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.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a majority of
the Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose, and, where required by Section 15(a)(2) of the Act, on
behalf of a Fund by a majority of the outstanding voting securities of such Fund
as defined in Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Adviser agrees to submit any proposed sales literature for the Trust (or any
Fund) or for itself or its affiliates which mentions the Trust (or any Fund) to
the Trust's distributor for review and filing with the appropriate regulatory
authorities prior to the public release of any such sales literature, provided,
however, that nothing herein shall be construed so as to create any obligation
or duty on the part of the Adviser to produce sales literature for the Trust (or
any Fund). The Trust agrees to cause its distributor to promptly review all such
sales literature to ensure compliance with relevant requirements, to promptly
advise Adviser of any deficiencies contained in such sales literature, to
promptly file complying sales literature with the relevant authorities, and to
cause such sales literature to be distributed to prospective investors in the
Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees that
the obligations pursuant to this Contract of a particular Fund and of the Trust
with respect to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any such obligation
from any other Fund, the shareholders of any Fund, the Trustees, officers,
employees or agents of the Trust, or any of them.
16. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
17. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
FT INTERNATIONAL EQUITY FUND
For all services rendered by Adviser hereunder, the above-named Fund of the
Trust shall pay to Adviser and Adviser agrees to accept as full compensation for
all services rendered hereunder, an annual investment advisory fee equal to of
the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued monthly at the rate of 12/365th of 1.00 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of , 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
By:
Secretary Executive Vice President
Attest: FT FUNDS
By:
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
FT GLOBAL BOND FUND
For all services rendered by Adviser hereunder, the above-named Fund of the
Trust shall pay to Adviser and Adviser agrees to accept as full compensation for
all services rendered hereunder, an annual investment advisory fee equal to of
the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued monthly at the rate of 12/365th of .70 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of , 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
By:
Secretary Executive Vice President
Attest: FT FUNDS
By:
Assistant Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
FT INTERNATIONAL BOND FUND
For all services rendered by Adviser hereunder, the above-named Fund of the
Trust shall pay to Adviser and Adviser agrees to accept as full compensation for
all services rendered hereunder, an annual investment advisory fee equal to of
the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued monthly at the rate of 12/365th of .70 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of , 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
By:
Secretary Executive Vice President
Attest: FT FUNDS
By:
Assistant Secretary Vice President
EXHIBIT D
to the
Investment Advisory Contract
FT SMALL CAP EQUITY FUND
For all services rendered by Adviser hereunder, the above-named Fund of the
Trust shall pay to Adviser and Adviser agrees to accept as full compensation for
all services rendered hereunder, an annual investment advisory fee equal to of
the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the Fund
shall be accrued monthly at the rate of 12/365th of 1.00 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser monthly.
Witness the due execution hereof this 1st day of , 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
By:
Secretary Executive Vice President
Attest: FT FUNDS
By:
EXHIBIT 6 UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
FT FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of , 1995 by and between FT Funds
(the "Trust"), a Massachusetts business trust, and Edgewood Services,
Inc. ("EDGEWOOD"), a New York Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints EDGEWOOD as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the
"Funds") consisting of one or more classes (the "Classes") of shares
(the "Shares"), as described and set forth on one or more exhibits to
this Agreement, at the current offering price thereof as described and
set forth in the current Prospectuses of the Trust. EDGEWOOD hereby
accepts such appointment and agrees to provide such other services for
the Trust, if any, and accept such compensation from the Trust, if any,
as set forth in the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the Trust it is in its best interest to do so.
3. Neither EDGEWOOD nor any other person is authorized by the Trust to give
any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses,
or Statements of Additional Information ("SAIs") filed with the
Securities and Exchange Commission, as the same may be amended from time
to time, or in any supplemental information to said Prospectuses or SAIs
approved by the Trust. EDGEWOOD agrees that any other information or
representations other than those specified above which it or any dealer
or other person who purchases Shares through EDGEWOOD may make in
connection with the offer or sale of Shares, shall be made entirely
without liability on the part of the Trust. No person or dealer, other
than EDGEWOOD, is authorized to act as agent for the Trust for any
purpose. EDGEWOOD agrees that in offering or selling Shares as agent of
the Trust, it will, in all respects, duly conform to all applicable
state and federal laws and the rules and regulations of the National
Association of Securities Dealers, Inc., including its Rules of Fair
Practice. EDGEWOOD will submit to the Trust copies of all sales
literature before using the same and will not use such sales literature
if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term
of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Trustees of the Trust including a
majority of the members of the Board of Trustees of the Trust who are
not interested persons of the Trust and have no direct or indirect
financial interest in the operation of any Distribution Plan relating to
the Trust or in any related documents to such Plan ("Disinterested
Trustees") cast in person at a meeting called for that purpose. If a
Class is added after the first annual approval by the Trustees as
described above, this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in effect until
the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a particular
Fund or Class by EDGEWOOD on sixty (60) days' written notice to the
Trust.
6. This Agreement may not be assigned by EDGEWOOD and shall automatically
terminate in the event of an assignment by EDGEWOOD as defined in the
Investment Company Act of 1940, as amended, provided, however, that
EDGEWOOD may employ such other person, persons, corporation or
corporations as it shall determine in order to assist it in carrying out
its duties under this Agreement.
7. EDGEWOOD shall not be liable to the Trust for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed by
this Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested
Trustees of the Trust cast in person at a meeting called for that
purpose.
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless EDGEWOOD and each person, if any, who
controls EDGEWOOD within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Act of
1934, as amended, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and
all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectuses or SAIs
(as from time to time amended and supplemented) or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Trust about
EDGEWOOD by or on behalf of EDGEWOOD expressly for use in the
Registration Statement, any Prospectuses and SAIs or any amendment
or supplement thereof.
If any action is brought against EDGEWOOD or any controlling person
thereof with respect to which indemnity may be sought against the
Trust pursuant to the foregoing paragraph, EDGEWOOD shall promptly
notify the Trust in writing of the institution of such action and
the Trust shall assume the defense of such action, including the
employment of counsel selected by the Trust and payment of
expenses. EDGEWOOD or any such controlling person thereof shall
have the right to employ separate counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of
EDGEWOOD or such controlling person unless the employment of such
counsel shall have been authorized in writing by the Trust in
connection with the defense of such action or the Trust shall not
have employed counsel to have charge of the defense of such action,
in any of which events such fees and expenses shall be borne by the
Trust. Anything in this paragraph to the contrary notwithstanding,
the Trust shall not be liable for any settlement of any such claim
of action effected without its written consent. The Trust agrees
promptly to notify EDGEWOOD of the commencement of any litigation
or proceedings against the Trust or any of its officers or Trustees
or controlling persons in connection with the issue and sale of
Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.
(b) EDGEWOOD agrees to indemnify and hold harmless the Trust, each of
its Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust
within the meaning of Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions, if any, made in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof in reliance upon, and in conformity with,
information furnished to the Trust about EDGEWOOD by or on behalf
of EDGEWOOD expressly for use in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof. In case
any action shall be brought against the Trust or any other person
so indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and with
respect to which indemnity may be sought against EDGEWOOD, EDGEWOOD
shall have the rights and duties given to the Trust, and the Trust
and each other person so indemnified shall have the rights and
duties given to EDGEWOOD by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the duties of
such person or by reason of the reckless disregard by such person
of the obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Trustees, officers, EDGEWOOD and controlling persons
of the Trust by the Trust pursuant to this Agreement, the Trust is
aware of the position of the Securities and Exchange Commission as
set forth in the Investment Company Act Release No. IC-11330.
Therefore, the Trust undertakes that in addition to complying with
the applicable provisions of this Agreement, 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 Disinterested Trustees, 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 Trust
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, EDGEWOOD or controlling person of the
Trust 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 Trust is insured against losses arising
by reason of any lawful advances; or (iii) a majority of a quorum
of non-party Disinterested 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.
11. EDGEWOOD is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be
limited in any case to the Trust and its assets and EDGEWOOD shall not
seek satisfaction of any such obligation from the shareholders of the
Trust, the Trustees, officers, employees or agents of the Trust, or any
of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, EDGEWOOD agrees to adopt compliance standards as to when a
class of shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
FT FUNDS
FT GLOBAL BOND FUND
FT INTERNATIONAL EQUITY FUND
FT INTERNATIONAL BOND FUND
FT SMALL CAP EQUITY FUND
In consideration of the mutual covenants set forth in the
Distributor's Contract dated 1st day of , 1995 between FT Funds
and Edgewood Corporation, FT Funds executes and delivers this Exhibit on
behalf of FT Global Bond Fund, FT International Equity Fund, Fiduciary
International Bond Fund, FT Small Cap Equity Fund and with respect to the
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1995.
ATTEST: FT FUNDS
By:
Secretary Vice President
(SEAL)
ATTEST: Edgewood Services, Inc.
By:
Secretary Vice President
(SEAL)
Exhibit B
to the
Distributor's Contract
FT FUNDS
FT GLOBAL BOND FUND
FT INTERNATIONAL EQUITY FUND
FT INTERNATIONAL BOND FUND
FT SMALL CAP EQUITY FUND
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated 1, 1995, between FT Funds and
Edgewood Services, Inc. with respect to the Class of shares set forth
above.
1. The Trust hereby appoints EDGEWOOD to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, EDGEWOOD is authorized to
select a group of financial institutions ("Financial Institutions") to
sell Shares at the current offering price thereof as described and set
forth in the respective prospectuses of the Trust.
2. During the term of this Agreement, the Trust will pay EDGEWOOD for
services pursuant to this Agreement, a monthly fee computed at the
annual rate of of the average aggregate net asset value of the Shares
held during the month. For the month in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the month.
3. EDGEWOOD may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Class' expenses
exceed such lower expense limitation as EDGEWOOD may, by notice to the
Trust, voluntarily declare to be effective.
4. EDGEWOOD will enter into separate written agreements with various firms
to provide certain of the services set forth in Paragraph 1 herein.
EDGEWOOD, in its sole discretion, may pay Financial Institutions a
periodic fee in respect of Shares owned from time to time by their
clients or customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time to time by
EDGEWOOD in its sole discretion.
5. EDGEWOOD will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated 1, 1995 between FT Funds and Edgewood
Corporation, FT Global Bond Fund, FT International Equity Fund, FT
International Bond Fund, FT Small Cap Equity Fund, and with respect to
the thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of , 1995.
ATTEST: FT FUNDS
By:
Secretary Vice President
(SEAL)
ATTEST: Edgewood Services, Inc.
By:
Secretary Vice President
EXHIBIT 9(I) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
FT FUNDS
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st
day of , 1995, between FT Funds, a Massachusetts business
trust (herein called the "Fund"), and Federated Administrative
Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Fund is a Massachusetts business trust consisting
of one or more portfolios, which operates as an open-end management
investment company and will so register 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:
(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 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 continuous offering of its shares;
(c) prepare, negotiate, and administer contracts on behalf of the
Fund with, among others, the Fund's investment adviser,
distributor, custodian, and transfer agent;
(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, distributor, 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 Trust 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
.15% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
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, $75,000, 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.
7. Duration and Termination. The initial term of this Agreement
shall commence on the date hereof, and extend until 1,
1997. Thereafter, this Agreement shall be automatically renewed
each year for an additional term of one year, unless notice of
termination has been delivered by either party to the other no
less than one year before the beginning of any such additional
term.
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: FT Funds (Fund); Fiduciary
International, Inc. (Adviser),Two World Trade Center, New York, NY
10048-0772 , Attention: and if delivered to FAS at Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention: Edward C.
Gonzales, President.
12. Miscellaneous. 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.
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.
FT Funds
By:
------------------------
[Title]
Attest:
----------------------
Secretary
Federated Administrative Services
By:
------------------------
[Title]
Attest:
----------------------
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
FOR
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of December 1, 1994, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust may desire to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company is willing to furnish such services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer agent,
dividend disbursing agent if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept
such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved list
of qualified banks if so indicated on Exhibit 1, and the Company desires to
accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Trust's Board of Trustees or
Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent pricing
services selected by the Company in consultation with the adviser, or
sources selected by the adviser, and reviewed by the board; secondarily,
if a designated pricing service does not provide a price for a security
which the Company believes should be available by market quotation, the
Company may obtain a price by calling brokers designated by the
investment adviser of the fund holding the security, or if the adviser
does not supply the names of such brokers, the Company will attempt on
its own to find brokers to price those securities; thirdly, for
securities for which no market price is available, the Pricing Committee
of the Board will determine a fair value in good faith. Consistent with
Rule 2a-4 of the 40 Act, estimates may be used where necessary or
appropriate. The Company's obligations with regard to the prices
received from outside pricing services and designated brokers or other
outside sources, is to exercise reasonable care in the supervision of
the pricing agent. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to the
Fund for potential errors in valuing a Fund's assets or calculating the
net asset value per share of such Fund or Class when the calculations
are based upon such prices. All of the above sources of prices used as
described are deemed by the Company to be authorized sources of security
prices. The Company provides daily to the adviser the securities prices
used in calculating the net asset value of the fund, for its use in
preparing exception reports for those prices on which the adviser has
comment. Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board and
as set forth in the Prospectus and Statement of Additional Information
("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as required
under Section 31(a) of the 1940 Act and the Rules thereunder in
connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained by Rule 31a-1 under the 1940 Act in connection
with the services provided by the Company. The Company further agrees
that all such records it maintains for the Trust are the property of the
Trust and further agrees to surrender promptly to the Trust such records
upon the Trust's request;
G. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the Trust.
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for its services rendered pursuant
to Section One of this Agreement in accordance with the fees agreed upon
from time to time between the parties hereto. Such fees do not include
out-of-pocket disbursements of the Company for which the Funds shall
reimburse the Company upon receipt of a separate invoice. Out-of-pocket
disbursements shall include, but shall not be limited to, the items
agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute
or any similar organization; transfer agency expenses; investment
advisory expenses; costs of printing and mailing stock certificates,
Prospectuses, reports and notices; administrative expenses; interest on
borrowed money; brokerage commissions; taxes and fees payable to
federal, state and other governmental agencies; fees of Trustees or
Directors of the Trust; independent auditors expenses; Federated
Administrative Services and/or Federated Administrative Services, Inc.
legal and audit department expenses billed to Federated Services Company
for work performed related to the Trust, the Funds, or the Classes; law
firm expenses; or other expenses not specified in this Article 3 which
may be properly payable by the Funds and/or classes.
C. The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the full
month period. Upon any termination of this Agreement before the end of
any month, the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For
purposes of determining fees payable to the Company, the value of the
Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in performing
services under this Section One. Such person or persons may be third-
party service providers, or they may be officers and employees who are
employed by both the Company and the Funds. The compensation of such
person or persons shall be paid by the Company and no obligation shall
be incurred on behalf of the Trust, the Funds, or the Classes in such
respect.
SECTION TWO: SHAREHOLDER RECORDKEEPING.
ARTICLE 4. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the Trust,
or the Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Trust, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
ARTICLE 5. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the "Custodian").
The Company shall notify the Fund and the Custodian on a daily
basis of the total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent, shall
countersign and mail by first class mail, a certificate to the
Shareholder at its address as set forth on the transfer books of
the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by the
number of Shares that had been credited to its account upon receipt
of the check or other order, promptly mail a debit advice to the
Shareholder, and notify the Fund and/or Class of its action. In the
event that the amount paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any dividends paid
with respect to such Shares, the Fund and/the Class or its
distributor will reimburse the Company on the amount of such
excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions of
its governing document and the then-current Prospectus of the Fund.
The Company shall prepare and mail or credit income, capital gain,
or any other payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of any such
distribution, notify the Custodian of the estimated amount required
to pay any portion of said distribution which is payable in cash
and request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is entitled to receive
additional Shares by virtue of any such distribution or dividend,
appropriate credits shall be made to the Shareholder's account, for
certificated Funds and/or Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from the
Custodian with respect to any redemption, the Company shall pay or
cause to be paid the redemption proceeds in the manner instructed
by the redeeming Shareholders, pursuant to procedures described in
the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of
the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance
of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund to
the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other
transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed and
mailed and shall withhold such sums as are required to be withheld
under applicable federal and state income tax laws, rules and
regulations.
(3) In addition to and not in lieu of the services set forth above, the
Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or
periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, mailing Shareholder
reports and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other withholding
(including non-resident alien accounts), preparing and filing
reports on U.S. Treasury Department Form 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information;
and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in each
state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky reporting
for each state and (ii) verify the classification of
transactions for each state on the system prior to activation
and thereafter monitor the daily activity for each state. The
responsibility of the Company for each Fund's and/or Class's
state blue sky registration status is limited solely to the
recording of the initial classification of transactions or
accounts with regard to blue sky compliance and the reporting
of such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder Meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
ARTICLE 6. DUTIES OF THE TRUST.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes' Prospectus
and for complying with all applicable requirements of the Securities Act
of 1933, as amended (the "1933 Act"), the 1940 Act and any laws, rules
and regulations of government authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be properly
signed, manually or by facsimile, if authorized by the Trust and shall
bear the seal of the Trust or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Trust authorized to
sign certificates, the Company may continue to countersign certificates
which bear the manual or facsimile signature of such officer until
otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 7. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an annual
maintenance fee for each Shareholder account as agreed upon between the
parties and as may be added to or amended from time to time. Such fees
may be changed from time to time subject to written agreement between
the Trust and the Company. Pursuant to information in the Fund
Prospectus or other information or instructions from the Fund, the
Company may sub-divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the same fees
for each such Class or sub-component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
ARTICLE 8. ASSIGNMENT OF SHAREHOLDER RECORDKEEPING.
Except as provided below, no right or obligation under this Section Two may
be assigned by either party without the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank and
its subsidiary, Boston Financial Data Services, Inc., a Massachusetts
Trust ("BFDS"), which is duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934, as amended, or
any succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS subsidiary
duly registered as a transfer agent pursuant to Section 17A(c)(1), or
(C) a BFDS affiliate, or (D) such other provider of services duly
registered as a transfer agent under Section 17A(c)(1) as Company shall
select; provided, however, that the Company shall be as fully
responsible to the Trust for the acts and omissions of any subcontractor
as it is for its own acts and omissions; or
C. The Company shall upon instruction from the Trust subcontract for the
performance hereof with an Agent selected by the Trust, other than BFDS
or a provider of services selected by Company, as described in (2)
above; provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the Agent.
SECTION THREE: CUSTODY SERVICES PROCUREMENT.
ARTICLE 9. APPOINTMENT.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
ARTICLE 10. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate the nature and the quality of the custodial services provided
by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set forth as
the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for the benefit
of the Trust, with the Trust as a party to each such agreement. The
Company shall not be a party to any agreement with any such Custodian;
D. establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
E. continuously monitor the nature and the quality of services provided by
the Custodians; and
F. periodically provide to the Trust (i) written reports on the activities
and services of the Custodians; (ii) the nature and amount of
disbursement made on account of the Trust with respect to each custodial
agreement; and (iii) such other information as the Board shall
reasonably request to enable it to fulfill its duties and obligations
under Sections 17(f) and 36(b) of the 1940 Act and other duties and
obligations thereof.
ARTICLE 11. FEES AND EXPENSES.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an annual
fee as agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
ARTICLE 12. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Three of this Agreement.
SECTION FOUR: GENERAL PROVISIONS.
ARTICLE 13. DOCUMENTS.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing this
Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the Trust
with a certificate of the Secretary of the Trust as to such
approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the original
issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of any
Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the proper
performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 14. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize it
to enter into and perform its obligations under this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and in
good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws have
been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
ARTICLE 15. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
The Company shall be held to a standard of reasonable care in carrying
out the provisions of this Contract. The Company shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that such
action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless against
any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper form
which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing services
or sources for use in valuing the assets of the Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties contracted
by or approved by the Trust of Fund for use in the performance
of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the Trust.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 15.A. from liability for any act or omission resulting from
the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties of failure to meet the standard of
care set forth in 15.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the
Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the Trust
or the appropriate Fund for any action reasonably taken or omitted by it
in reliance upon such instructions or upon the opinion of such counsel
provided such action is not in violation of applicable federal or state
laws or regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of
the officers of the Trust or the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other
party's prior written consent.
ARTICLE 16. TERMINATION OF AGREEMENT.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its rights
to terminate, all out-of-pocket expenses associated with the movement of
records and materials will be borne by the Trust or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Article 15 shall survive the termination of this Agreement.
ARTICLE 17. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed
by both parties.
ARTICLE 18. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 19. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 20. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
ARTICLE 21. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
ARTICLE 22. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE TRUST.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
ARTICLE 23. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the Trustees
or Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
ARTICLE 24. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
with respect to the Trust or the Funds by either of the parties hereto except
by the specific written consent of the other party.
ARTICLE 25. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
ARTICLE 26. SUCCESSOR AGENT.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Trust held by it
hereunder. If no such successor agent shall be appointed, the Company shall at
its office upon receipt of Proper Instructions deliver such properties in
accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date
when such termination shall become effective, then the Company shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this Agreement.
Thereafter, such bank or trust company shall be the successor of the Company
under this Agreement.
ARTICLE 27. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 28. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to a
successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 29. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)
/s/ John W. McGonigle By: /s/ John F. Donahue
--
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By: /s/ James J. Dolan
-
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
FT FUNDS
FT Global Bond Fund
FT International Equity Fund
FT International Bond Fund
EXHIBIT 9(III) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the 1ST DAY OF , 1995, by and between FT
--------------
FUNDS, a Massahcusets business trust, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"),
on behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Trust set forth in Schedule A hereto, and
Fiduiciary International, Inc., (hereinafter "Fiduciary") a registered
investment adviser having its principal office and place of business in New York
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued Shares of common stock ("Shares"); and
WHEREAS, the Trust wishes to retain Fiduciary to provide certain
shareholder services for each of the portfolios of the Trust, including any
classes of Shares issued by any Fund ("Classes"), on whose behalf the Trust
executes an exhibit to this Agreement and the Fiduciary is willing to furnish
such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, the parties hereto agree as follows:
SECTION ONE: SHAREHOLDER SERVICES
Article 1. Appointment.
The Trust hereby appoints Fiduciary to provide certain shareholder services
to the Funds for the period and on the terms set forth in this Agreement.
Fiduciary accepts such appointment and agrees to furnish the services herein set
forth in return for the compensation as provided in Article 3.
Article 2. Services and Duties.
Subject to the supervision and control of the Trust's Board of Trustees,
Fiduciary will assist the Trust, the Funds, and/or the Classes with regard to
shareholder services and in connection therewith undertakes to do the following
specific services:
A.Establishing new accounts;
B.Processing transactions including purchases, redemptions, and exchanges;
C.Maintaining files, i.e., processing change of addresses, adding/changing
wiring instructions or systematic investment/withdrawal plans;
D.Reviewing the activity in applicable accounts;
E.Providing training and supervision of its personnel;
F.Maintaining and distributing current copies of prospectuses and
shareholder reports to current shareholders;
G.Serving as liaison between Fiduciary, Transfer Agent (or Sub-Transfer
Agent), Portfolio Recordkeepers and Legal Counsel in connection with
shareholder matters;
H.Responding to customers' questions about the Funds and/or Classes;
2
I.Maintaining files of shareholder inquiries and correspondence;
J.Verifying shareholder signatures in conjunction with redemptions or
changes in account classifications; and
K.Surveying shareholders for information concerning satisfaction with
mutual fund products and services.
Nothing contained herein shall be construed to authorize Fiduciary to act
as Transfer Agent of the Funds and/or Classes (it being understood that
Federated Services Company or its designee provides such services) or to perform
any services hereunder primarily intended to result in the sale of shares of the
Trust, the Funds or the Classes.
Article 3. Compensation and Allocation of Expenses.
A.Each Fund will compensate Fiduciary for its services rendered pursuant
to Section One of this Agreement in accordance with the fees set forth
on Fee Schedule B, annexed hereto and incorporated herein. No Fund will
bear out-of-pocket expenses of the Fiduciary.
B.The fee for the period from the effective date of application of this
Agreement with respect to a Fund or a Class to the end of the initial
month shall be prorated according to the proportion that such period
bears to the full month period. Upon any termination of this Agreement
3
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 Fiduciary, the
value of a Fund's net assets shall be computed at the time and in the
manner specified in each Fund's Prospectus.
C.Fiduciary in its sole discretion may from time to time employ or
associate with itself such person or persons as Fiduciary may believe to
be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are
employed by both Fiduciary and the Trust. The compensation of such
person or persons shall be paid by Fiduciary and no obligation shall be
incurred on behalf of the Trust, the Funds, or the Classes in such
respect.
D.Assignment. This Agreement and the rights and duties hereunder shall
not be assignable with respect to the Trust without the prior written
consent of the other party.
Article 4. Representations and Warranties.
A.Representations and Warranties of Fiduciary
Fiduciary represents and warrants to the Trust that:
(1) It is a registered investment adviser duly organized and existing
and in good standing under applicable law.
4
(2) It is duly qualified to carry on its business in the State of New
York.
(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 corporate proceedings required by its Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform 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 will comply with all applicable federal banking and
securities law in connection with the services provided hereunder,
including registration as a transfer or service agent, if required.
B.Representations and Warranties of the Trust
The Trust represents and warrants to Fiduciary that:
(1) It is a Trust duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
(2) It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
5
(3) All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform
this Agreement.
(4) It is an open-end investment company registered under the
Investment Company Act of 1940.
(5) A registration statement under the Securities Act of 1933 is
effective with respect to the Funds and Classes as set forth on schedule
A, and appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
Article 5. Standard of Care/Indemnification.
A.Standard of Care
Fiduciary shall be held to a standard of reasonable care in carrying out
the provisions of this Agreement; provided, however that Fiduciary shall be
held to any higher standard of care which would be imposed upon Fiduciary
by any applicable law or regulation even though such stated standard of
care was not part of this Agreement.
B.Indemnification by the Trust
Fiduciary shall not be responsible for and the Trust shall indemnify and
hold Fiduciary harmless against any and all losses, damages, costs,
6
charges, counsel fees, payments, expenses and liability arising out of or
attributable to: (1) The Trust refusal or failure to comply with the terms
of this
Agreement, or which arise out of the Trust lack of good faith, negligence
or willful misconduct or which arise out of the breach of any
representation or warranty of the Trust hereunder; or (2) The offer or sale
of Shares in violation of any requirement under the federal securities law
or regulations or the securities laws or regulations of any state that such
Shares be registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or in any state with
respect to the offer or sale of such Shares in such state. Provided,
however, that Fiduciary shall not be protected by this Article 5.B. from
liability for any act or omission resulting from Fiduciary's lack of good
faith, negligence, willful misconduct, or failure to meet the standard of
care set forth in Article 5.A., above, or for violations of federal or
state securities law arising out of or attributable to conduct or activity
of Fiduciary.
C.Indemnification by Fiduciary
Fiduciary shall indemnify and hold the Trust harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributed to any action or failure or
omission to act by Fiduciary as a result of Fiduciary's lack of good faith,
negligence, willful misconduct, or failure to meet the standard of care set
forth in Article 5.A above.
7
D.Notification
In order that the indemnification provisions contained in this Article 5
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 6. Termination of Agreement.
This Agreement may be terminated by either party upon sixty (60) days
written notice to the other.
Article 7. Limitations of Liability
A.Limitations of Liability of Trustees, Officers, Employees, Agents and
Shareholders of the Trust.
Fiduciary is expressly put on notice of the limitation of liability as set
forth in the Trust's Declaration of Trust and agrees that the obligations asumed
to be the Trust's pursuant to this agreement shall be limited in any case to the
Trust and its assets and that Fiduciary shall not seek satisfaction of any such
8
obligations from Trustees, Officers, Employees, Agents or Shareholders of the
Trust.
Article 8. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Trustees of the Trust.
Article 9. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, Fiduciary and the Trust
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable Federal or state regulations or any provision of the
Trust's Declaration 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 10. Miscellaneous.
A.Pennsylvania Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Pennsylvania.
9
Article 11. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, or to Fiduciary at Two World Trade
Center, New York, NY 10048-0772, or to such other address as the Trust or
Fiduciary may hereafter specify, shall be deemed to have been properly delivered
or given hereunder to the respective address.
Article 12. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 13. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
10
ATTEST: FT FUNDS
By:
Secretary
Vice President
ATTEST: FIDUCIARY INTERNATIONAL, INC.
By:
Secretary Vice
President
Schedule A
Shareholder Services Agreement
between
FT FUNDS
and
FIDUCIARY INTERNATIONAL, INC.
11
FT FUNDS (the "Trust") consists of the following portfolios and classes:
Name
FT GLOBAL BOND FUND
FT INTERNATIONAL EQUITY FUND
FT INTERNATIONAL BOND FUND
FT SMALL CAP EQUITY FUND
Schedule B
Shareholder Services Agreement
between
FT FUNDS
and
FIDUCIARY INTERNATIONAL, INC.
Compensation for Shareholder Services
12
For the services described in this Agreement, each Fund or class shall pay the
Fiduciary an annual fee of of 1% of its average daily net assets. The
Fiduciary may voluntarily waive all or a portion of its fee at any time without
notice.
EXHIBIT 15(I) UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
FT FUNDS
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of 1, 1995, by
the Board of Trustees of FT Funds (the "Trust"), a Massachusetts business
trust with respect to certain classes of shares ("Classes") of the
portfolios of the Trust (the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("Act"), so as to allow the Trust to make
payments as contemplated herein, in conjunction with the distribution of
Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of Edgewood Services, Inc.
("EDGEWOOD") principally intended to result in the sale of Shares to
include: (a) providing incentives to financial institutions ("Financial
Institutions") to sell Shares; (b) advertising and marketing of Shares
to include preparing, printing and distributing prospectuses and sales
literature to prospective shareholders and with Financial Institutions;
and (c) implementing and operating the Plan. In compensation for
services provided pursuant to this Plan, EDGEWOOD will be paid a fee in
respect of the following Classes set forth on the applicable exhibit.
3. Any payment to EDGEWOOD in accordance with this Plan will be made
pursuant to the "Distributor's Contract" entered into by the Trust and
EDGEWOOD. Any payments made by EDGEWOOD to Financial Institutions with
funds received as compensation under this Plan will be made pursuant to
the "Financial Institution Agreement" entered into by EDGEWOOD and the
Institution.
4. EDGEWOOD has the right (i) to select, in its sole discretion, the
Financial Institutions to participate in the Plan and (ii) to terminate
without cause and in its sole discretion any Financial Institution
Agreement.
5. Quarterly in each year that this Plan remains in effect, EDGEWOOD shall
prepare and furnish to the Board of Trustees of the Trust, and the Board
of Trustees shall review, a written report of the amounts expended under
the Plan and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class (i) after
approval by majority votes of: (a) the Trust's Board of Trustees; (b)
the members of the Board of the Trust who are not interested persons of
the Trust and have no direct or indirect financial interest in the
operation of the Trust's Plan or in any related documents to the Plan
("Disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan; and (c) the outstanding voting securities
of the particular Class , as defined in Section 2(a)(42) of the Act and
(ii) upon execution of an exhibit adopting this Plan with respect to
such Class.
7. This Plan shall remain in effect with respect to each Class presently
set forth on an exhibit and any subsequent Classes added pursuant to an
exhibit during the initial year of this Plan for the period of one year
from the date set forth above and may be continued thereafter if this
Plan is approved with respect to each Class at least annually by a
majority of the Trust's Board of Trustees and a majority of the
Disinterested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan. If this Plan is adopted with respect to
a Class after the first annual approval by the Trustees as described
above, this Plan will be effective as to that Class upon execution of
the applicable exhibit pursuant to the provisions of paragraph 6(ii)
above and will continue in effect until the next annual approval of this
Plan by the Trustees and thereafter for successive periods of one year
subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the Trust and of the Disinterested Trustees, cast
in person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the costs
which the Classes may bear for distribution pursuant to the Plan without
being approved by a majority vote of the outstanding voting securities
of the Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at any
time by: (a) a majority vote of the Disinterested Trustees; or (b) a
vote of a majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of the Act; or (c) by
EDGEWOOD on 60 days' notice to the Trust.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion
of the Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Distribution Plan
FT FUNDS
FT GLOBAL BOND FUND
FT INTERNATIONAL EQUITY FUND
FT INTERNATIONAL BOND FUND
FT SMALL CAP EQUITY FUND
This Distribution Plan is adopted by FT Funds with respect to the
Class of Shares of the portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
EDGEWOOD will be paid a monthly fee computed at the annual rate of . of
1% of the average aggregate net asset value of the of FT Global Bond
Fund, FT International Equity Fund, FT International Bond Fund, FT Small
Cap Equity Fund held during the month.
Witness the due execution hereof this 1st day of , 1995.
FT FUNDS
By:
EXHIBIT 15(II) UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
RULE 12B-1 AGREEMENT
This Agreement is made between the Institution executing this Agreement
("Administrator") and Edgewood Services, Inc. ("EDGEWOOD") for the mutual funds
(referred to individually as the "Fund" and collectively as the "Funds") for
which EDGEWOOD serves as Distributor of shares of beneficial interest or capital
stock ("Shares") and which have adopted a Rule 12b-1 Plan ("Plan") and approved
this form of agreement pursuant to Rule 12b-1 under the Investment Company Act
of 1940. In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. EDGEWOOD hereby appoints Administrator to render or cause to be rendered
sales and/or administrative support services to the Funds and their
shareholders.
2. The services to be provided under Paragraph 1 may include, but are not
limited to, the following:
(a) communicating account openings through computer terminals located
on the Administrator's premises ("computer terminals"), through a toll-
free telephone number or otherwise;
(b) communicating account closings via the computer terminals, through
a toll-free telephone number or otherwise;
(c) entering purchase transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(d) entering redemption transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(e) electronically transferring and receiving funds for Fund Share
purchases and redemptions, and confirming and reconciling all such
transactions;
(f) advertising the availability of its services and products;
(g) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making such
materials accessible to customers and potential customers; and
(h) responding to customers' and potential customers' questions about
the Funds.
The services listed above are illustrative. The Administrator is not required
to perform each service and may at any time perform either more or fewer
services than described above.
3. During the term of this Agreement, EDGEWOOD will pay the Administrator
fees for each Fund as set forth in a written schedule delivered to the
Administrator pursuant to this Agreement. EDGEWOOD's fee schedule for
Administrator may be changed by EDGEWOOD sending a new fee schedule to
Administrator pursuant to Paragraph 12 of this Agreement. For the payment
period in which this Agreement becomes effective or terminates, there shall be
an appropriate proration of the fee on the basis of the number of days that the
Rule 12b-1 Agreement is in effect during the quarter.
2
4. The Administrator will not perform or provide any duties which would
cause it to be a fiduciary under Section 4975 of the Internal Revenue Code, as
amended. For purposes of that Section, the Administrator understands that any
person who exercises any discretionary authority or discretionary control with
respect to any individual retirement account or its assets, or who renders
investment advice for a fee, or has any authority or responsibility to do so, or
has any discretionary authority or discretionary responsibility in the
administration of such an account, is a fiduciary.
5. The Administrator understands that the Department of Labor views ERISA
as prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the Department of
Labor has not issued any exemptive order or advisory opinion that would exempt
fiduciaries from this interpretation. Without specific authorization from the
Department of Labor, fiduciaries should carefully avoid investing discretionary
assets in any fund pursuant to an arrangement where the fiduciary is to be
compensated by the fund for such investment. Receipt of such compensation could
violate ERISA provisions against fiduciary self-dealing and conflict of interest
and could subject the fiduciary to substantial penalties.
6. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited by
management of the Fund or Funds, unless a court of competent jurisdiction shall
have determined that the conduct of a majority of the Board of Directors of the
Fund or Funds constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties. This paragraph 6 will survive the term of
this Agreement.
3
7. With respect to each Fund, this Agreement shall continue in effect for
one year from the date of its execution, and thereafter for successive periods
of one year if the form of this Agreement is approved at least annually by the
Directors of the Fund, including a majority of the members of the Board of
Directors of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Directors ") cast in person at
a meeting called for that purpose.
8. Notwithstanding paragraph 7, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund as defined in
the Investment Company Act of 1940 on not more than sixty (60) days'
written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940 or upon the termination of the
"Administrative Support and Distributor's Contract" or "Distributor's
Contract" between the Fund and EDGEWOOD; and
(c) by either party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to
terminate.
4
9. The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.
10. The Administrator agrees to obtain any taxpayer identification number
certification from its customers required under Section 3406 of the Internal
Revenue Code, and any applicable Treasury regulations, and to provide EDGEWOOD
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
11. This Agreement supersedes any prior service agreements between the
parties for the Funds.
12. This Agreement may be amended by EDGEWOOD from time to time by the
following procedure. EDGEWOOD will mail a copy of the amendment to the
Administrator's address, as shown below. If the Administrator does not object
to the amendment within thirty (30) days after its receipt, the amendment will
become part of the Agreement. The Administrator's objection must be in writing
and be received by EDGEWOOD within such thirty days.
13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.
[ADMINISTRATOR]
5
Address
City State Zip Code
Dated: By:
Authorized Signature
Title
Print Name of Authorized Signature
EDGEWOOD SERVICES, INC.
By:
Newton P. Heston
FT FUNDS
EXHIBIT A to 12b-1 Agreement with
Edgewood Services, Inc. ("EDGEWOOD")
6
Portfolios
EDGEWOOD will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
FT GLOBAL BOND FUND
FT INTERNATIONAL EQUITY FUND
FT INTERNATIONAL BOND FUND
FT SMALL CAP EQUITY FUND
Administrative Fees
1. During the term of this Agreement, EDGEWOOD will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the annual
rate of OF 1% of the average net asset value of Shares held during the
quarter in accounts for which the Administrator provides services under this
Agreement, so long as the average net asset value of Shares in each Fund during
the quarter equals or exceeds such minimum amount as EDGEWOOD shall from time to
time determine and communicate in writing to the Administrator.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.
7
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of FT Funds 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/ Jay S. Neuman President and Trustee October 18, 1995
Jay S. Neuman (Chief Executive Officer)
/s/ Peter J. Germain Secretary and Trustee October 18, 1995
Peter J. Germain
/s/ Craig Churman Trustee and Treasurer October 18, 1995
Craig Churman (Principal Financial and
Accounting Officer)
Sworn to and subscribed before me this 18th day of October , 1995.
- -- -----
(SEAL)
/s/ Marie M. Hamm
--------------------------------------------
Notary Public
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires September 16, 1996
