1933 Act File No. 33-63621
1940 Act File No. 811-7369
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 1 ................. X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 2 ............................... X
FTI FUNDS
(formerly, 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)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
----------------
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
filed the Notice required by that Rule on or
X intends to file the Notice required by that Rule on or about January
15, 1997; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019-6092
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of FTI Funds (formerly,
FT Funds), which consists of four portfolios: (1) FTI Small
Capitalization Equity Fund, (2) FTI International Equity Fund, (3) FTI
International Bond Fund, and (4) FTI 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 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) FTI Funds Information;
(1,2,3,4) Management of FTI 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) Effect of Banking Laws;
(1,2,3,4) Tax Information; (1,2,3,4)
Federal Income Tax.
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) 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; (1,2,3,4) Massachusetts
Partnership Law.
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) FTI 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 Plan and
Shareholder Services Agreement.
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.....(Filed in Part A)
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- --------------------------------------------------------------------------------
FTI FUNDS
PROSPECTUS
FTI 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:
- FTI Small Capitalization Equity Fund;
- FTI International Equity Fund;
- FTI International Bond Fund; and
- FTI 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 22, 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 22, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES 2
- ------------------------------------------------------
INVESTMENT OBJECTIVE OF EACH FUND 6
- ------------------------------------------------------
Small Capitalization Fund 6
International Equity Fund 7
International Bond Fund 9
Global Bond Fund 10
PORTFOLIO INVESTMENTS AND STRATEGIES 12
- ------------------------------------------------------
Borrowing Money 12
Diversification 12
Restricted and Illiquid Securities 12
Repurchase Agreements 13
When-Issued and Delayed Delivery
Transactions 13
Forward Commitments 13
Lending of Portfolio Securities 13
Convertible Securities 14
Asset-Backed Securities 14
Depositary Receipts 16
Foreign Government Securities 17
U.S. Government Securities 17
Investing in Securities of Other
Investment Companies 17
Risk Factors 18
Hedging Vehicles and Strategies 21
Derivative Contracts and Securities 23
Duration 23
Portfolio Turnover 24
FTI FUNDS INFORMATION 24
- ------------------------------------------------------
Management of FTI Funds 24
Distribution of Shares of the Funds 26
Administrative Arrangements 27
Administration of the Funds 27
Brokerage Transactions 28
Expenses of the Funds 28
NET ASSET VALUE 29
- ------------------------------------------------------
INVESTING IN THE FUNDS 29
- ------------------------------------------------------
Share Purchases 29
Minimum Investment Required 30
What Shares Cost 30
Certificates and Confirmations 30
Dividends 31
Capital Gains 31
EXCHANGE PRIVILEGE 31
- ------------------------------------------------------
Requirements for Exchange 31
Tax Consequences 32
REDEEMING SHARES 32
- ------------------------------------------------------
Accounts with Low Balances 33
SHAREHOLDER INFORMATION 33
- ------------------------------------------------------
Voting Rights 33
EFFECT OF BANKING LAWS 34
- ------------------------------------------------------
TAX INFORMATION 34
- ------------------------------------------------------
Federal Income Tax 34
PERFORMANCE INFORMATION 36
- ------------------------------------------------------
FINANCIAL STATEMENT 37
- ------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 38
- ------------------------------------------------------
ADDRESSES 39
- ------------------------------------------------------
SYNOPSIS
- --------------------------------------------------------------------------------
The Trust, an open-end, management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated October 18,
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:
- FTI Small Capitalization Equity Fund ("Small Capitalization Fund")--seeks
to provide growth of principal by investing primarily in domestic equity
securities of small capitalization companies having a market value
capitalization below $1.5 billion;
- FTI International Equity Fund ("International Equity Fund")--seeks to
provide growth of principal by investing in foreign equity securities;
- FTI International Bond Fund ("International Bond Fund")--seeks to provide
total return through investments in foreign corporate and foreign
government fixed income securities; and
- FTI 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 AND RISK FACTORS. Investors should be aware of the
following general considerations and risk factors. 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."
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Deferred Sales Load (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................................................................................. 1.00%
12b-1 Fee (1).................................................................................. 0.00%
Total Other Expenses (after waiver/reimbursement) (2).......................................... 0.50%
Shareholder Services Fee (after waiver)(3)................................... 0.00%
Total Fund Operating Expenses (after waiver/reimbursement) (2)............................. 1.50%
</TABLE>
(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. When the Fund begins to pay or accrue its 12b-1 fee,
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc. See "FTI Funds Information."
(2) The total other expenses and the total operating expenses are estimated to
be 1.10% and 2.10%, respectively, absent the anticipated voluntary waiver of
fees and/or reimbursement of expenses by the administrator, and the voluntary
waiver of the shareholder services fee.
(3) The Fund has no present intention of paying or accruing the shareholder
services fee during the period ending November 30, 1996. The maximum shareholder
services fee is 0.25%.
* 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 "FTI Funds Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period............................. $ 15 $47
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Deferred Sales Load (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................................................................................. 1.00%
12b-1 Fee (1).................................................................................. 0.00%
Total Other Expenses (after waiver/reimbursement) (2).......................................... 0.60%
Shareholder Services Fee (after waiver) (3).................................. 0.00%
Total Fund Operating Expenses (after waiver/reimbursement) (2)............................. 1.60%
</TABLE>
(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. When the Fund begins to pay or accrue its 12b-1 fee,
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc. See "FTI Funds Information."
(2) The total other expenses and the total operating expenses are estimated to
be 1.48% and 2.48%, respectively, absent the anticipated voluntary waiver of
fees and/or reimbursement of expenses by the administrator, and the voluntary
waiver of the shareholder services fee.
(3) The Fund has no present intention of paying or accruing the shareholder
services fee during the period ending November 30, 1996. The maximum shareholder
services fee is 0.25%.
* 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 "FTI Funds Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period............................. $ 16 $51
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Deferred Sales Load (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................................................................................. 0.70%
12b-1 Fee (1).................................................................................. 0.00%
Total Other Expenses (after waiver/reimbursement) (2).......................................... 0.50%
Shareholder Services Fee (after waiver) (3).................................. 0.00%
Total Fund Operating Expenses (after waiver/reimbursement) (2)............................. 1.20%
</TABLE>
(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. When the Fund begins to pay or accrue its 12b-1 fee,
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc. See "FTI Funds Information."
(2) The total other expenses and the total operating expenses are estimated to
be 1.40% and 2.10%, respectively, absent the anticipated voluntary waiver of
fees and/or reimbursement of expenses by the administrator, and the voluntary
waiver of the shareholder services fee.
(3) The Fund has no present intention of paying or accruing the shareholder
services fee during the period ending November 30, 1996. The maximum shareholder
services fee is 0.25%.
* 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 "FTI Funds Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period............................. $ 12 $38
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Deferred Sales Load (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................................................................................. 0.70%
12b-1 Fee (1).................................................................................. 0.00%
Total Other Expenses (after waiver/reimbursement) (2).......................................... 0.50%
Shareholder Services Fee (after waiver) (3).................................. 0.00%
Total Fund Operating Expenses (after waiver/reimbursement) (2)............................. 1.20%
</TABLE>
(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. When the Fund begins to pay or accrue its 12b-1 fee,
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc. See "FTI Funds Information."
(2) The total other expenses and the total operating expenses are estimated to
be 1.40% and 2.10%, respectively, absent the anticipated voluntary waiver of
fees and/or reimbursement of expenses by the administrator, and the voluntary
waiver of the shareholder services fee.
(3) The Fund has no present intention of paying or accruing the shareholder
services fee during the period ending November 30, 1996. The maximum shareholder
services fee is 0.25%.
* 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 "FTI Funds Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period............................. $ 12 $38
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1996.
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 seeks to achieve its investment objective by investing
primarily in the common stock of small capitalization companies with total
market capitalizations below $1.5 billion. Dividend income is not a
consideration in the selection of investments. In selecting investments for the
Fund's portfolio, the adviser seeks to select companies 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 also looks
to purchase stocks whose expected growth rates exceed their current
price-earnings ratio. These companies typically possess a relatively high rate
of return on invested capital so that future growth can be internally financed.
These companies may offer the possibility of accelerating earnings growth
because they often represent the first opportunity to participate in new
products, new services and new technologies. Companies in which the Fund is
likely to invest are those that have a unique franchise opportunity, exhibit
high barriers of entry to competitors, have strong balance sheets and cash flow,
and have an exceptional management team. The securities of these companies may
have more limited marketability and may be subject to more abrupt market
movements than securities of larger, more established companies or the market
averages in general. There is no assurance that the adviser's attempts to pursue
these approaches will result in benefits to the Fund.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
- common stocks, and securities convertible into common stocks, which will
be primarily composed of issues of small 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 the common
stock of small capitalization companies, which the Fund defines as those
having a market value capitalization below $1.5 billion. Small
capitalization companies would generally be those stocks included in the
Russell 2000 Index or the Standard & Poor's Small Cap 600 Index, or have
characteristics similar to the stocks in those indices;
- preferred stocks, corporate bonds, notes, warrants, and rights;
- 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;"
- 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;
- 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");
- shares of other investment companies. See "Investing in Securities of
Other Investment Companies" in "Portfolio Investments and Strategies;"
- 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
- 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 these 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.
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 ECU
is a multinational currency unit which represents specified amounts of the
currencies of certain member states of the European Economic Community. The Fund
may also invest up to 35% of its total assets in debt securities.
In seeking to achieve the Fund's investment objective, the investment adviser
believes there are three potential advantages to investing in foreign equity
securities:
- the opportunity to invest in non-U.S. companies believed to possess
superior growth potential;
- the opportunity to invest in foreign nations with business and economic
policies different from those in the United States; and
- 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. The adviser uses fundamental analysis to
assess the world economies and makes projections regarding the likely future
trends in economic activity. It will use these projections to determine whether
current securities prices are reflecting the level of anticipated economic
activity that it foresees. In selecting securities based on this analysis, the
adviser will chose securities whose near-term growth and long-term growth
prospects are not being fully valued in the marketplace. The goal 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. There is no assurance that the adviser's
attempts to pursue these approaches will result in benefits to the Fund.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
- 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;
- foreign preferred stocks, warrants and convertible securities;
- ADRs, Global Depositary Receipts ("GDRs"), International Depositary
Receipts ("IDRs") and European Depositary Receipts ("EDRs"). See
"Portfolio Investments and Strategies;"
- 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;
- shares of other investment companies, as described in "Investing in
Securities of Other Investment Companies," in "Portfolio Investments and
Strategies" in this prospectus;
- Bank Instruments, as described above under "Small Capitalization Fund,"
and U.S. Government Securities. See "Portfolio Investments and
Strategies;" and
- 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.
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 at least three different nations outside of the United States. 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 goal is to
combine the most appropriate bond markets with the strongest foreign currencies
to create a portfolio with above average return potential. There is no assurance
that the adviser's attempts to pursue these approaches will result in benefits
to the Fund.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
- 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;
- high-quality fixed income obligations of foreign corporations located
outside the United States;
- 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;"
- convertible securities and warrants;
- 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, which
may comprise up to 35% of the Fund's assets. See "Asset-Backed Securities"
in "Portfolio Investments and Strategies;"
- shares of other investment companies. See "Investing in Securities of
Other Investment Companies" in "Portfolio Investments and Strategies;"
- 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;"
- Bank Instruments, as described above under "Small Capitalization Fund;"
and
- 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, or 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.
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. 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.
There is no assurance that the adviser's attempts to pursue these approaches
will result in benefits to the Fund.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include, but
are not limited to:
- 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;
- convertible securities and warrants. See "Convertible Securities" in
"Portfolio Investments and Strategies;"
- 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, which may comprise up to 35% of the Fund's assets. See
"Asset-Backed Securities" in "Portfolio Investments and Strategies;"
- U.S. Government Securities. See "Portfolio Investments and Strategies;"
- debt securities of supranational entities. See "Foreign Government
Securities" in this prospectus;
- Bank Instruments, as described above under "Small Capitalization Fund;"
- shares of other investment companies. See "Investing in Securities of
Other Investment Companies" in "Portfolio Investments and Strategies;" and
- 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 or 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.
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.
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. No Fund will 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 each may enter into these contracts
if liquid securities in amounts sufficient to meet the purchase price (but not
to exceed, in the aggregate, 10% of its assets) are segregated on a Fund's
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 a Fund enters into forward commitments with the intention of acquiring
the securities, it 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 Funds may invest in convertible securities rated, at the time of purchase,
BBB or better by S&P or Fitch or Baa by Moody's, 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 a Fund has purchased it, the Fund
may consider disposing of the security, but is not required to do so.)
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 that collateralize ARMS issued
by GNMA are fully guaranteed by the Federal Housing Administration or Veterans
Administration, while mortgages that collateralize 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 Baa 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 Small
Capitalization and International Equity
Funds to financial or other reports from the issuer of the underlying security,
to which they 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 but are not
limited to: 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 that invest in certain
foreign nations will be available. 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
than 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% of 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:
- less publicly available information about foreign issuers;
- credit risks associated with certain foreign governments;
- the lack of uniform accounting, auditing, and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to U.S. companies;
- less readily available market quotations on foreign issues;
- differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
- 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;
- the likelihood that securities of foreign issuers may be less liquid or
more volatile;
- unreliable mail service between countries;
- political or financial changes which adversely affect investments in some
nations;
- increased risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities;
- certain markets may require payment for securities before delivery;
- religious and ethnic instability; and
- 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 in pursuit of the Funds' investment objective.
HEDGING VEHICLES AND STRATEGIES
HEDGING VEHICLES. As noted in "Investment Objective of Each Fund," the Funds may
use the following hedging vehicles in an attempt to manage the currency and
interest rate risks described above:
- forward foreign currency exchange contracts;
- options contracts; and
- 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. While OTC options may not be continuously
liquid, they 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:
- 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;
- imperfect correlation between the hedging instruments and the securities
or currencies being hedged;
- the fact that skills needed to use these instruments are different from
those needed to select the Funds' securities;
- the possible absence of a liquid secondary market for any particular
instrument at any particular time;
- 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
- 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. A Fund may use these investments
and techniques to the extent consistent with its investment objective and
regulatory and federal tax considerations.
DERIVATIVE CONTRACTS AND SECURITIES
The term "derivative" has traditionally been applied to certain contracts
(including, futures, forward, option and swap contracts) that "derive" their
value from changes in the value of an underlying security, currency, commodity
or index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as "derivatives." The
term has also been applied to securities "derived" from the cash flows from
underlying securities, mortgages or other obligations.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance. While the response of
certain derivative contracts and securities to market changes may differ from
traditional investments, such as stock and bonds, derivatives do not necessarily
present greater market risks than traditional investments. The Funds will only
use derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that a Fund invests in securities that could be
characterized as derivatives, such as futures, asset-backed and mortgage-backed
securities, it will only do so in a manner consistent with its investment
objective, policies and limitations.
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. 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.
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; 60% for the International Equity Fund; 150% for the
International Bond Fund; and 150% for the Global Bond Fund. A portfolio turnover
rate exceeding 100% is considered to be high.
FTI FUNDS INFORMATION
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MANAGEMENT OF FTI 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 those 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, and the Frank Russell Investment Company's Equity II Fund.
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 0.75 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 ARRANGEMENTS. The Trust and FII have entered into a
Shareholder Services Agreement (the "Services Agreement") with respect to the
shares of the Funds to provide administrative support services to 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, FII (or a financial
institution which has an agreement with FII) 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 Agreement because the Services Agreement will not be activated unless
and until a second, "trust" class of shares of the Funds (which would not have a
Services Agreement) 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:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- --------------------- -----------------------------------
<S> <C>
.150 of 1% on the first $250 million
.125 of 1% on the next $250 million
.100 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $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 TRUST. Legal counsel to the Trust is provided by Dewey
Ballantine, New York, New York and Dickstein, Shapiro & Morin, L.L.P.,
Washington, D.C.
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 equity 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. Foreign securities quoted in foreign currencies are
translated into U.S. Dollars at the foreign exchange rate in effect at noon,
Eastern time, on the day the value of the foreign security is determined.
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 "FTI
Funds" (and identify the appropriate Fund) to: Federated Services Company, P.O.
Box 8609, Boston, Massachusetts 02266-8609. Orders by mail are considered
received after payment by check is converted into federal funds. This is
normally the next business day after the Fund 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: Account Number 550000100
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 International, Inc.
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 determined as of the close of trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange, Monday through Friday, except on: (i) days
on which there are not sufficient changes in the value of 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 whose investment
objectives have changed, shareholders of the Funds 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. Prior to any exchange, the shareholder must receive a copy of the
current prospectus of the fund into which an exchange is to be effected. 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: Federated Services Company, P.O. Box 8609, Boston, Massachusetts 02266-8609.
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 should be sent by insured mail with the
written request to Federated Services Company.
SIGNATURES. Shareholders requesting 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:
- 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");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- 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
- 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 the Trustees or by 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.
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 intend 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.
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.
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.
FTI GLOBAL BOND FUND
(A PORTFOLIO OF FTI FUNDS)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 19, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Cash $100,000
- ---------------------------------------------------------------------------------- --------
LIABILITIES:
- ----------------------------------------------------------------------------------
Net Assets for 10,000 shares of beneficial interest outstanding $100,000
- ---------------------------------------------------------------------------------- --------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ----------------------------------------------------------------------------------
$100,000 / 10,000 shares of beneficial interest outstanding $ 10.00
- ---------------------------------------------------------------------------------- --------
</TABLE>
NOTES:
(1) The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated October 18, 1995, and has had no operations
since that date other than those relating to organizational matters,
including the issuance on December 18, 1995, of 10,000 shares at $10.00 per
share to Federated Services Co. Expenses of organization incurred by the
Fund, estimated at $44,655, were borne initially by Federated
Administrative Services, Administrator to the Fund. The Fund has agreed to
reimburse the Administrator for the organization expenses initially borne
by the Administrator during the five year period following the date the
Fund's registration statement first became effective.
(2) Reference is made to "Management of FTI Funds" (on page 24), "Administration
of the Funds" (on page 27), and "Tax Information" (on pages 34 and 35) in
this prospectus for a description of the investment advisory fee,
administrative and other services and federal tax aspects of the Fund.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FTI Funds:
We have audited the accompanying statement of assets and liabilities of FTI
Global Bond Fund as of December 19, 1995. This statement of assets and
liabilities is the responsibility of the Fund's management. Our responsibility
is to express an opinion on this statement of assets and liabilities based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
present fairly, in all material respects, the net assets of FTI Global Bond
Fund, as of December 19, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 19, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FTI Funds
FTI Small Capitalization Equity Fund Federated Investors Tower
FTI International Equity Fund Pittsburgh, Pennsylvania 15222-3779
FTI International Bond Fund
FTI Global Bond Fund
- -------------------------------------------------------------------------------------------------------
Distributor
Edgewood Services, Inc. Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897
- -------------------------------------------------------------------------------------------------------
Investment Adviser
Fiduciary International, Inc. Two World Trade Center
New York, New York 10048-0772
- -------------------------------------------------------------------------------------------------------
Custodian
Fiduciary Trust Company International Two World Trade Center
New York, New York 10048-0772
- -------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------------
Legal Counsel
Dewey Ballantine 1301 Avenue of the Americas
New York, New York 10019-6092
- -------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L. Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FTI FUNDS
PROSPECTUS
An Open-End, Management
Investment Company
FTI Small Capitalization Fund
FTI International Equity Fund
FTI International Bond Fund
FTI Global Bond Fund
Prospectus dated December 22, 1995
EDGEWOOD SERVICES, INC.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 302649108
302649207
302649306
302649405
G01548-02 (1/96)
Fiduciary International, Inc.
Investment Adviser
FTI
FUNDS
Supplement to Prospectus
dated December 22, 1995
FTI SMALL CAPITALIZATION
EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
FTI INTERNATIONAL BOND FUND
FTI GLOBAL BOND FUND
June 30, 1996
[LOGO]
Cusip 302927108
Cusip 302927207
Cusip 302927306
Cusip 302927405
G01710-02 (6/96)
[LOGO]
A. Please insert the following "Financial Highlights" table as page 6 of the
prospectus:
FTI SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
This table should be read in conjunction with the Fund's financial statements
and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1996(A)
(UNAUDITED)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net operating loss (0.02)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.17
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 2.15
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 12.15
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 21.50%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.50%*
- --------------------------------------------------------------------------------------------
Net operating loss (0.89%)*
- --------------------------------------------------------------------------------------------
Expense reimbursement (c) 3.94%*
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 11,753
- --------------------------------------------------------------------------------------------
Average commission rate paid $ 0.0273
- --------------------------------------------------------------------------------------------
Portfolio turnover 31%
- --------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 10, 1996 (date of initial
public investment) to May 31, 1996.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
B. Please insert the following "Financial Highlights" table as page 7 of the
prospectus:
FTI INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
This table should be read in conjunction with the Fund's financial statements
and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1996(A)
(UNAUDITED)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.06
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.63
- -------------------------------------------------------------------------------------------- -------
Total from investment operations 0.69
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.69
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 6.90%
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.60%*
- --------------------------------------------------------------------------------------------
Net investment income 2.40%*
- --------------------------------------------------------------------------------------------
Expense reimbursement (c) 9.92%*
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 4,879
- --------------------------------------------------------------------------------------------
Average commission rate paid $ 0.0512
- --------------------------------------------------------------------------------------------
Portfolio turnover 11%
- --------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 16, 1996 (date of initial
public investment) to May 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
C. Please insert the following "Financial Highlights" table as page 8 of the
prospectus:
FTI INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
This table should be read in conjunction with the Fund's financial statements
and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1996(A)
(UNAUDITED)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.14
- ----------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency (0.29)
- ---------------------------------------------------------------------------------------------- -------
Total from investment operations (0.15)
- ---------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.85
- ---------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) (1.50%)
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.20%*
- ----------------------------------------------------------------------------------------------
Net investment income 4.15%*
- ----------------------------------------------------------------------------------------------
Expense reimbursement (c) 8.03%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,807
- ----------------------------------------------------------------------------------------------
Portfolio turnover 108%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 16, 1996 (date of initial
public investment) to May 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
D. Please insert the following "Financial Highlights" table as page 9 of the
prospectus:
FTI GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
This table should be read in conjunction with the Fund's financial statements
and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1996(A)
(UNAUDITED)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.18
- --------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency (0.34)
- -------------------------------------------------------------------------------------------- -------
Total from investment operations (0.16)
- -------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 9.84
- -------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) (1.60%)
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.20%*
- --------------------------------------------------------------------------------------------
Net investment income 5.69%*
- --------------------------------------------------------------------------------------------
Expense reimbursement (c) 61.28%*
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $989
- --------------------------------------------------------------------------------------------
Portfolio turnover 94%
- --------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 8, 1996 (date of initial
public investment) to May 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
E. Please add the following information as a final sentence of the first
paragraph under the sub-heading "Voting Rights" under the heading
"Shareholder Information" which begins on page 33:
"As of June 4, 1996, Fiduciary Trust Company International may for certain
purposes be deemed to control the Funds because it is owner of record of certain
shares of the Funds."
FTI 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 FTI Funds (the
"Trust"):
o FTI Small Capitalization Equity Fund;
o FTI International Equity Fund;
o FTI International Bond Fund; and
o FTI Global Bond Fund.
This Combined Statement of Additional Information should be read with
the combined prospectus for the Funds dated December 22, 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 22, 1995
EDGEWOOD SERVICES, INC.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE TRUST 4
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS 4
TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES 4
REPURCHASE AGREEMENTS 4
REVERSE REPURCHASE AGREEMENTS 5
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS 5
LENDING PORTFOLIO SECURITIES 6
RESTRICTED AND ILLIQUID SECURITIES 7
U.S. GOVERNMENT SECURITIES 8
BANK INSTRUMENTS 8
CONVERTIBLE SECURITIES 9
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS") 10
INVESTING IN NEW ISSUERS 10
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS 10
FOREIGN CURRENCY OPTIONS 11
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS 12
FUTURES CONTRACTS 14
OPTIONS ON FUTURES CONTRACTS 16
FOREIGN CURRENCY FUTURES TRANSACTIONS 17
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS
AND RELATED OPTIONS 17
OPTIONS ON SECURITIES 18
OVER-THE-COUNTER OPTIONS 20
OPTIONS ON SECURITIES INDICES 21
REGULATORY RESTRICTIONS 23
ADDITIONAL RISK CONSIDERATIONS 23
PORTFOLIO TURNOVER 24
INVESTMENT LIMITATIONS 24
FTI FUNDS MANAGEMENT 30
OFFICERS AND TRUSTEES 30
TRUST OWNERSHIP 33
TRUSTEES COMPENSATION 33
TRUSTEE LIABILITY 34
INVESTMENT ADVISORY SERVICES 34
ADVISER TO THE TRUST 34
ADVISORY FEES 34
ADMINISTRATIVE SERVICES 35
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO
RECORDKEEPER 35
CUSTODIAN 36
BROKERAGE TRANSACTIONS 36
PURCHASING SHARES 37
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT 37
CONVERSION TO FEDERAL FUNDS 38
DETERMINING NET ASSET VALUE 39
DETERMINING MARKET VALUE OF SECURITIES 39
TRADING IN FOREIGN SECURITIES 40
REDEEMING SHARES 40
REDEMPTION IN KIND 41
MASSACHUSETTS PARTNERSHIP LAW 41
TAX STATUS 42
THE FUNDS' TAX STATUS 42
FOREIGN TAXES 42
SHAREHOLDERS' TAX STATUS 43
CAPITAL GAINS 43
TOTAL RETURN 43
YIELD 43
PERFORMANCE COMPARISONS 44
APPENDIX 49
GENERAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust, under a
Declaration of Trust dated October 18, 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: FTI
Small Capitalization Equity Fund ("Small Capitalization Fund"), FTI
International Equity Fund ("International Equity Fund"), FTI International
Bond Fund ("International Bond Fund"), and FTI 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. A
Fund's investment objective 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 from
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 a Fund in achieving its investment
objective. 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' respective 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 will 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.
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 a
Fund's investment objective, 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 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 RESTRICTED SECURITIES
The Funds will not invest more than 10% 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 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 more than 5% of their respective net assets
in warrants. No more than 2% of a Fund's net assets, to be included
within the overall 5% limit on investments in warrants, may be
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange. (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 associations having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."
FTI FUNDS MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, birthdates, present
positions with FTI Funds and principal occupations.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 22, 1930
President, Treasurer, and Trustee
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services; Trustee or Director of
certain investment companies distributed, organized, or advised by
Federated Investors and its affiliates (Federated Funds); Executive Vice
President, President, or Trustee of the Federated Funds.
Peter A. Aron
Lafayette Enterprises, Inc.
126 E. 56th Street
New York, NY 10022
Birthdate: May 26, 1946
Trustee
Vice President, Lafayette Enterprises, Inc. (privately owned Investment
Advisory Company); President, J. Aron Charitable Foundation, Inc.
Nancy L. Close
12 Pheasant Run
73 Weaver Street
Greenwich, CT 06831
Birthdate: December 2, 1946
Trustee
Trustee, Asset Manager, and Treasurer of The Esther M. Mertz Trust.
James C. Goodfellow *
Fiduciary Trust Company International
Two World Trade Center
New York, NY 10048
Birthdate: April 6, 1945
Trustee
Executive Vice President, Fiduciary Trust Company International, Managing
Director - J.P. Morgan and Co.
Burton J. Greenwald
2009 Spruce Street
Philadelphia, PA 19103
Birthdate: December 6, 1929
Trustee
Managing Director, B. J. Greenwald Associates, Management Consultants to
the Financial Services Industry.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 22, 1962
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Federated Funds.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors; prior to January 1991, Associate
Counsel, The Boston Company Advisors, Inc.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of each
Fund.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
THE TRUST THE TRUST*#
Edward C. Gonzales
President, Treasurer,
and Trustee $ 0
Peter A. Aron
Trustee $ 14,000
Nancy L. Close
Trustee $ 14,000
James C. Goodfellow
Trustee $ 0
Burton J. Greenwald
Trustee $ 14,000
*Information is estimated for the period from December 20, 1995, the date
of the organizational meeting of the Board of Trustees of the Trust, to
November 30, 1996. The Trust is the only investment company in the fund
complex.
#The aggregate compensation is provided for the Trust which is comprised of
four portfolios.
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, plus transaction charges. 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 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 PLAN AND SHAREHOLDER SERVICES AGREEMENT
As explained in the prospectus, the Funds have adopted a Distribution Plan
pursuant to Rule 12b-1 of the Investment Company Act of 1940 (the "1940
Act") and a Shareholder Services Agreement. These arrangements permit the
payment of fees to financial institutions, Edgewood Services, Inc., the
Trust's distributor, and FII 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 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. Foreign securities quoted in foreign currencies
are translated into U.S. Dollars at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign security is
determined.
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.
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.
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
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 net asset value 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.
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:
oLIPPER 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 may quote its Lipper ranking in advertising and sales
literature.
oMORNINGSTAR, 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.
oRUSSELL 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.
oDOW 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.
oSTANDARD & 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.
oSTANDARD & 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.
oSTANDARD & 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.
oRUSSELL 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:
oMORGAN 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 Morgan Stanley
Capital International, S.A., Geneva, Switzerland.
oLIPPER 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 may quote its Lipper rating in advertising and sales
literature.
oFT-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:
OLIPPER 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 may quote its Lipper rating in advertising and sales
literature.
OSALOMON 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").
oJ.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.
oLEHMAN 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:
oLIPPER 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 may quote its Lipper rating in advertising and sales
literature.
oSALOMON 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.
oJ.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.
FTI FUNDS
SUPPLEMENT TO THE COMBINED STATEMENT OF ADDITIONAL INFORMATION DATED
DECEMBER 22, 1995
A. Please add the following information to the sub-section entitled
Cusip 302649 10 8
302649 20 7
302649 30 6
302649 40 5
G01548-03 (1/96)
"Officers and Trustees" which begins on page 11:
C. Christine Thomson
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: September 1, 1957
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Federated Funds.
B. Please add the following information to the section "Trust Ownership"
which appears on page 12:
"As of June 4, 1996, the following shareholder of record owned 5% or
more of the outstanding shares of FTI Small Capitalization Equity Fund:
Fiduciary Trust Company International, New York, New York, on behalf of
certain underlying accounts, owned approximately 960,818 shares
(98.14%).
As of June 4, 1996, the following shareholders of record owned 5% or
more of the outstanding shares of FTI International Equity Fund:
Fiduciary Trust Company International, New York, New York, on behalf of
certain underlying accounts, owned approximately 450,583 shares
(94.52%); Northern Trust Bank of Florida, N.A., Miami, Florida, on
behalf of certain underlying accounts, owned approximately 26,115 shares
(5.48%).
As of June 4, 1996, the following shareholder of record owned 5% or more
of the outstanding shares of FTI International Bond Fund: Fiduciary
Trust Company International, New York, New York, on behalf of certain
underlying accounts, owned approximately 386,385 shares (100%).
As of June 4, 1996, the following shareholders of record owned 5% or
more of the outstanding shares of FTI Global Bond Fund: Fiduciary Trust
Company International, New York, New York, on behalf of certain
underlying accounts, owned approximately 90,521 shares (85.70%);
Federated Administrative Systems, Pittsburgh, Pennsylvania, owned
approximately 10,000 shares (9.47%)."
C.Please add the following as the second paragraph of the section entitled
"Advisory Fees" which appears on page 13:
"For the period from January 10, 1996 (date of initial public
investment) to May 31, 1996, the Adviser earned from FTI Small
Capitalization Equity Fund $19,674. For the period from January 16, 1996
(date of initial public investment) to May 31, 1996, the Adviser earned
from FTI International Equity Fund $11,935. For the period from January
16, 1996 (date of initial public investment) to May 31, 1996, the
Adviser earned from FTI International Bond Fund $9,135. For the period
from February 8, 1996 (date of initial public investment) to May 31,
1996, the Adviser earned from FTI Global Bond Fund $1,019."
D.Please add the following as the first paragraph of the section entitled
"Administrative Services" which appears on page 14:
"For the period from January 10, 1996 (date of initial public
investment) to May 31, 1996, Federated Administrative Services earned
from FTI Small Capitalization Equity Fund $30,943. For the period from
January 16, 1996 (date of initial public investment) to May 31, 1996,
Federated Administrative Services earned from FTI International Equity
Fund $30,328. For the period from January 16, 1996 (date of initial
public investment) to May 31, 1996, Federated Administrative Services
earned from FTI International Bond Fund $28,894. For the period from
February 8, 1996 (date of initial public investment) to May 31, 1996,
Federated Administrative Services earned from FTI Global Bond Fund $23,
361."
E.Please add the following as the second paragraph of the section entitled
"Determining Net Asset Value" which begins on page 15:
"Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have
passed, are recorded as soon as the Trust is informed of the ex-dividend
date."
F.Please add the following as the second paragraph of the section entitled
"Total Return" which appears on page 17:
"Cumulative total return reflects total performance over a specific
period of time. Total return assumes and is reduced by the payment of
the maximum sales charge and contingent deferred sales charge, if
applicable. The cumulative total return for FTI Small Capitalization
Equity Fund for the period between January 10, 1996 (date of initial
public investment) to May 31, 1996, was 21.50%. The cumulative total
return for FTI International Equity Fund for the period between January
16, 1996 (date of initial public investment) to May 31, 1996, was 6.90%.
The cumulative total return for FTI International Bond Fund for the
period between January 16, 1996 (date of initial public investment) to
May 31, 1996, was (1.50%). The cumulative total return for FTI Global
Bond Fund for the period between February 8, 1996 (date of initial
public investment) to May 31, 1996, was (1.60%)."
G.Please add the following as the third paragraph of the section entitled
"Yield" which appears on page 17:
"The SEC yield for the 30-day period ended May 31, 1996 was: 5.42% for
FTI International Bond Fund and 5.02% for FTI Global Bond Fund."
June 30, 1996
Cusip 302927108
Cusip 302927207
Cusip 302927306
Cusip 302927405
G01598-07 (6/96)
EDGEWOOD SERVICES, INC.
Distributor
A subsidiary of FEDERATED INVESTORS
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (filed in Part A)
(b) Exhibits:
(1) (i)Conformed Copy of Declaration of Trust of the
Registrant; (1.)
(ii)Conformed Copy of Amendment No. 1 to the
Declaration of Trust of the Registrant (2);
(2) Copy of By-Laws of the Registrant; (1.)
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant; +
(5) Conformed copy of Investment Advisory Contract of the
Registrant; +
(6) Conformed copy of Distributor's Contract of the
Registrant; +
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant; +
(9) (i)Conformed copy of Administrative Services
Agreement; +
(ii)Conformed copy of Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement; +
(iii)Conformed copy of Shareholder Services Agreement;
+
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered; +
(11) Not applicable to current filing;
(12) Not applicable;
(13) Conformed Copy of Initial Capital
Understanding; (2)
(14) Not applicable;
(15) (i)Conformed copy of Distribution Plan; +
(ii)Copy of 12b-1 Agreement; +
(16) (i) Copy of Schedule for Computation of Fund
Performance Data, FTI Small Capitalization Equity
Fund;+
(ii) Copy of Schedule for Computation of Fund
Performance Data, FTI International Equity Fund;+
(iii)Copy of Schedule for Computation of Fund
Performance Data, FTI International Bond Fund;+
(iv) Copy of schedule for Computation of Fund
Performance Data. FTI Global Bond Fund;+
(17) Not applicable to current filing;
(18) Not applicable to current filing;
(19) Conformed Copy of Power of Attorney; +
+ All exhibits have been filed electronically.
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 23, 1995 (File Nos.
33-63621 and 811-7369).
(2.) Response is incorporated by reference to Registrant's Registration
Statement filed December 20, 1995 (File Nos. 33-63621 and 811-7369).
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of June 4, 1996
Shares of beneficial interest
(no par value)
FTI Small Capitalization Equity Fund 13
FTI International Equity Fund 6
FTI International Bond Fund 5
FTI Global Bond Fund 10
Item 27. Indemnification: (1.)
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 "FTI Funds Information -
Management of FTI 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)Edgewood Services, Inc. the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Excelsior
Institutional Trust (formerly, UST Master Funds, Inc.),
Excelsior Tax-Exempt Funds, Inc. (formerly, UST Master Tax-
Exempt Funds, Inc.), Excelsior Institutional Trust,
Marketvest Funds, and Marketvest Funds, Inc.
(1.) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 23, 1995 (File Nos.
33-63621 and 811-7369).
(b)
(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 comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FTI FUNDS (formerly, FT
FUNDS), has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 28th day of
June, 1996.
FTI FUNDS
(formerly, FT FUNDS)
BY: /s/Jay S. Neuman
Jay S. Neuman, Secretary
Attorney in Fact for Edward C. Gonzales
June 28, 1996
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ Jay S. Neuman
Jay S. Neuman Attorney In Fact June 28, 1996
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* President, Treasurer and Trustee
(Chief Executive Officer and
Principal Financial and
Accounting Officer)
Peter A. Aron* Trustee
Nancy L. Close* Trustee
James C. Goodfellow* Trustee
Burton J. Greenwald* Trustee
* By Power of Attorney
Exhibit (4)under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K
FTI FUNDS
FTI Small Capitalization Equity Fund
Number Shares
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Certain Definitions
Commonwealth of
Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP 302927108
Fully Paid and Non-Assessable Shares of Beneficial Interest of FTI Small
Capitalization Equity Fund portfolio of FTI Funds hereafter called the Trust,
transferable on the books of the Trust by the owner in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: FTI FUNDS
Corporate Seal
(1995)
Massachusetts
/s/Edward C. Gonzales
President and Treasurer
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.
All persons dealing with FTI Funds, a Massachusetts business trust, must look
solely to the Trust property for the enforcement of any claim against the Trust,
as the Trustees, officers, agents or shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.
FTI FUNDS
FTI International Equity Fund
Number Shares
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Certain Definitions
Commonwealth of
Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP 302927207
Fully Paid and Non-Assessable Shares of Beneficial Interest of FTI International
Equity Fund portfolio of FTI Funds hereafter called the Trust, transferable on
the books of the Trust by the owner in person or by duly authorized attorney
upon surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: FTI FUNDS
Corporate Seal
(1995)
Massachusetts
/s/Edward C. Gonzales
President and Treasurer
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.
All persons dealing with FTI Funds, a Massachusetts business trust, must look
solely to the Trust property for the enforcement of any claim against the Trust,
as the Trustees, officers, agents or shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.
FTI FUNDS
FTI International Bond Fund
Number Shares
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Certain Definitions
Commonwealth of
Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP 302927306
Fully Paid and Non-Assessable Shares of Beneficial Interest of FTI International
Bond Fund portfolio of FTI Funds hereafter called the Trust, transferable on the
books of the Trust by the owner in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: FTI FUNDS
Corporate Seal
(1995)
Massachusetts
/s/Edward C. Gonzales
President and Treasurer
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.
All persons dealing with FTI Funds, a Massachusetts business trust, must look
solely to the Trust property for the enforcement of any claim against the Trust,
as the Trustees, officers, agents or shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.
FTI FUNDS
FTI Global Bond Fund
Number Shares
Account No. Alpha Code Organized Under the See Reverse Side For
Laws of the Certain Definitions
Commonwealth of
Massachusetts
THIS IS TO CERTIFY THAT is the owner of
CUSIP 302927405
Fully Paid and Non-Assessable Shares of Beneficial Interest of FTI Global Bond
Fund portfolio of FTI Funds hereafter called the Trust, transferable on the
books of the Trust by the owner in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.
Dated: FTI FUNDS
Corporate Seal
(1995)
Massachusetts
/s/Edward C. Gonzales
President and Treasurer
Countersigned: Federated Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- -----------------------------------------------------------------------------
shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.
All persons dealing with FTI Funds, a Massachusetts business trust, must look
solely to the Trust property for the enforcement of any claim against the Trust,
as the Trustees, officers, agents or shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.
EXHIBIT 5 UNDER FORM N-1A
EXHIBIT 10(i) UNDER ITEM 601/REG. S-K
FTI FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 20th day of December, 1995, between
Fiduciary International, Inc., a registered investment adviser having its
principal place of business in New York City (the "Adviser"), and FTI
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
Statement 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 Statement under the Securities Act of 1933 and
the Investment Company Act of 1940, as amended (the "1940 Act"), 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. Subject to the requirements of the 1940 Act, 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.
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. For purposes of calculating such fees, the value of each
Fund's net assets shall be determined pursuant to the applicable provisions
of the portfolio's prospectus and statement of additional information.
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: (a) the Trustees of the Trust or by a vote of the shareholders
of that Fund on sixty (60) days' written notice to Adviser; or (b) the
Adviser on one hundred eighty (180) days' written notice to the Trust.
Termination of this Contract with respect to any given Fund shall in no way
affect the continued validity of this Contract of the performance
thereunder with respect to any other Fund.
9. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment, as defined in the
1940 Act.
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.
14. The Trust understands that Adviser now acts, and that from time
to time hereafter Adviser may act, as investment adviser to one or more
other investment companies and fiduciary or other managed accounts, and the
Trust has no objection to Adviser so acting, provided that when the
purchase or sale of securities of the same issuer is suitable for the
investment objectives of two or more companies or accounts managed by
Adviser which have available funds for investment, the available securities
will be allocated in a manner believed by Adviser to be equitable to each
company or account. It is recognized that in some cases this procedure may
adversely affect the price paid or received by one or more Funds or the
size of the position obtainable for or disposed of by one or more Funds.
In addition, it is understood that the persons employed by
Adviser to assist in the performance of Adviser's duties hereunder will not
devote their full time to such service and nothing contained herein shall
be deemed to limit or restrict Adviser's right or the right of any of
Adviser's affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
15. This Contract shall be construed in accordance with and governed
by the laws of the State of New York.
16. 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
FTI 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 1.00% 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 daily at the rate of 1/365th of 1.00% 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 20th day of December, 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Attest: FTI FUNDS
/s/ Max F. Miller By:/s/ Joseph S. Machi
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
FTI 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 .70 of 1% 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 daily at the rate of 1/365th 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 20th day of December, 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Attest: FTI FUNDS
/s/ Max F. Miller By:/s/ Joseph S. Machi
Assistant Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
FTI 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 .70 of 1% 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 daily at the rate of 1/365th 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 20th day of December, 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Attest: FTI FUNDS
/s/ Max F. Miller By:/s/ Joseph S. Machi
Assistant Secretary Vice President
EXHIBIT D
to the
Investment Advisory Contract
FTI SMALL CAPITALIZATION 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 1.00% 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 daily at the rate of 1/365th of 1.00% 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 20th day of December, 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Attest: FTI FUNDS
/s/ Max F. Miller By:/s/ Joseph S. Machi
Assistant Secretary Vice President
EXHIBIT E
to the
Investment Advisory Contract
FTI EMERGING MARKETS 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 1.25% 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 daily at the rate of 1/365th of 1.25% 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 20th day of December, 1995.
Attest: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Attest: FTI FUNDS
/s/ Max F. Miller By:/s/ Joseph S. Machi
Assistant Secretary Vice President
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
BETWEEN
FTI FUNDS
AND
FIDUCIARY TRUST COMPANY INTERNATIONAL
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It......1
2. Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian..............................................2
2.1 Holding Securities....................................2
2.2 Delivery of Securities................................2
2.3 Registration of Securities............................5
2.4 Bank Accounts.........................................6
2.5 Payments for Shares...................................7
2.6 Availability of Federal Funds.........................7
2.7 Collection of Income..................................7
2.8 Payment of Fund Moneys................................8
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased..................................................9
2.10 Payments for Repurchases or Redemptions of Shares of a Fund 9
2.11 Appointment of Agents................................10
2.12 Deposit of Fund Assets in Securities System..........10
2.13 Segregated Account...................................12
2.14 Joint Repurchase Agreements..........................13
2.15 Ownership Certificates for Tax Purposes..............13
2.16 Proxies..............................................13
2.17 Communications Relating to Fund Portfolio Securities.13
2.18 Proper Instructions..................................14
2.19 Actions Permitted Without Express Authority..........14
2.20 Evidence of Authority................................15
2.21 Notice to Trust by Custodian Regarding Cash Movement.15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.............15
4. Records ..................................................16
5. Opinion of Funds' Independent Public Accountants/Auditors.16
6. Reports to Trust by Independent Public Accountants/Auditors17
7. Compensation of Custodian.................................17
8. Responsibility of Custodian...............................17
9. Effective Period, Termination and Amendment...............19
10. Successor Custodian.......................................20
11. Interpretive and Additional Provisions....................21
12. Massachusetts Law to Apply................................22
13. Notices ..................................................22
14. Counterparts..............................................22
15. Limitations of Liability..................................22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporations or have such other form of
organization as may be indicated, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund")
of the Trust, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and FIDUCIARY TRUST COMPANY
INTERNATIONAL, a New York bank and trust company, having its principal
place of business at Two World Trade Center, New York, New York 10048-0772,
hereinafter called the "Custodian."
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It; Eligible
Subcustodians
1.1Establishment of Account. The Trust hereby employs the Custodian
as the custodian of the assets of each of the Funds of the Trust.
Except as otherwise expressly provided herein, the securities and
other assets of each of the Funds shall be segregated from the
assets of each of the other Funds and from all other persons and
entities. The Trust will deliver to the Custodian all securities
and cash owned by the Funds and all payments of income, payments
of principal or capital distributions received by them with
respect to all securities owned by the Funds from time to time,
and the cash consideration received by them for shares ("Shares")
of beneficial interest/capital stock of the Funds as may be issued
or sold from time to time. The Custodian shall not be responsible
for any property of the Funds held or received by the Funds and
not delivered to the Custodian.
1.2Eligible Subcustodians. Upon receipt of "Proper Instructions"
(within the meaning of Section 2.18), the Custodian may hold Fund
assets in accounts established by the Custodian with (a) a
securities system, (b) a branch of a qualified U.S. bank
(including the Custodian), an eligible foreign custodian or an
eligible foreign securities depository or (c) a subcustodian of an
eligible foreign custodian, that itself is an eligible foreign
custodian or an eligible foreign securities depository with which
that subcustodian has entered into an agreement for the custody of
Fund assets. For purposes of this Contract, "qualified U.S.
bank," "eligible foreign custodian," and "eligible foreign
securities depository" shall have the meanings provided in Rule
17f-5 under the Investment Company Act of 1940 as interpreted by
the staff of the Securities and Exchange Commission (the "1940
Act") and a "securities system" shall mean a clearing agency
registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as
a securities depository, or a book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies.
Hereinafter the term "subcustodian" will refer to (a) any
securities system, (b) any branch of a qualified U.S. bank, any
eligible foreign custodian or any eligible foreign securities
depository with which the Custodian has entered into an agreement
of the type contemplated hereunder regarding securities and/or
cash held in or to be acquired for the Funds and (c) any
subcustodian of an eligible foreign custodian with which the
eligible foreign custodian has entered into an agreement like that
between the Custodian and such eligible foreign custodian or an
eligible foreign securities depository in which the subcustodians
participate. The Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any subcustodian so
employed than any such subcustodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than securities
which are maintained in a securities system or an eligible foreign
securities depository, or securities which are subject to a joint
repurchase agreement with affiliated funds pursuant to Section
2.14. The Custodian shall maintain records of all receipts,
deliveries and locations of such securities, together with a
current inventory thereof, and shall conduct periodic physical
inspections of certificates representing stocks, bonds and other
securities held by it under this Contract in such manner as the
Custodian shall determine from time to time to be advisable in
order to verify the accuracy of such inventory. With respect to
securities held by any subcustodian, the Custodian may rely upon
certificates from such subcustodian as to the holdings of such
subcustodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or a subcustodian
only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in
the following cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(4) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(5) To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any
subcustodian appointed pursuant to Section 1.2; or for
exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(6) Upon the sale of such securities for the account of a Fund, to
the broker or its clearing agent, against a receipt, (a) for
examination in accordance with "street delivery custom"; or
(b) in accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
failure to act in accordance with the standard of reasonable
care or any higher standard of care imposed upon the Custodian
by any applicable law or regulation if such above-stated
standard of reasonable care were not part of this Contract;
(7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
(8) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
(9) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by
the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(10) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(11) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions for a Fund;
(12) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction for
a Fund;
(13) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by holders
of Shares for repurchase or redemption; and
(14) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Executive Committee of the Trust
on behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be
made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) may be registered in the name of
the Custodian's nominee or in the name or nominee name of any
subcustodian. All securities accepted by the Custodian on behalf
of a Fund under the terms of this Contract shall be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall maintain such bank accounts
as the Trust may specify in writing from time to time, subject
only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of a Fund, other than cash maintained
in a joint repurchase account with other affiliated funds pursuant
to Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the 1940 Act. Funds held by the Custodian for a Fund may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as shall be approved by vote of a majority of the Board
of Trustees/Directors ("Board") of the Trust in accordance with
the 1940 Act. Such funds shall be deposited by the Custodian in
its capacity as Custodian for the Fund and shall be withdrawable
by the Custodian only in that capacity.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the Custodian
to receive the cash consideration due to each Fund and will
deposit into each Fund's account such payments as are received
from the Transfer Agent. The Custodian will provide timely
notification to the Trust and the Transfer Agent of any receipt by
it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from time
to time by the Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds received in
payment for Shares of the Funds which are deposited into the
Funds' accounts.
2.7Collection of Income.
(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by law
or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to each
Fund's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on securities held hereunder. The
collection of income due the Funds on securities loaned
pursuant to the provisions of Section 2.2 (9) shall be the
responsibility of the Trust. The Custodian will have no duty
or responsibility in connection therewith, other than to
provide the Trust with such information or data as may be
necessary to assist the Trust in arranging for the timely
delivery to the Custodian of the income to which each Fund is
properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of past
due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of each Fund in
the following cases only:
(1) Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of title
to futures contracts, to the Custodian or any subcustodian,
registered in accordance with Section 2.3 hereof or in proper
form for transfer, (b) in accordance with the customary or
established securities trading or securities processing
practices and procedures in the jurisdiction or market in
which the transaction occurs, or (c) in the case of repurchase
agreements entered into between the Trust and any other party,
(i) against delivery of the securities either in certificate
form or through an entry crediting the Custodian's account at
the Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase for the account of
the Fund of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to
repurchase such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by
the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf
of a Fund signed by an officer of the Trust and certified by
its Secretary or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment
is to be made.
2.9Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence of
specific written instructions from the Trust to so pay in advance
(which may be standing instructions for certain jurisdictions or
markets), the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been
received by the Custodian.
Notwithstanding the preceding paragraph, settlement and payment
for securities received or delivered for the account of a Fund may
be effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefore (or an agent for
such purchaser or dealer) against a receipt with the expectation
of receiving later payment for such securities from such purchaser
or dealer.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of Incorporation
and any applicable votes of the Board of the Trust pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders of
shares of such Fund who have delivered to the Transfer Agent a
request for redemption or repurchase of their shares including
without limitation through bank drafts, automated clearinghouse
facilities, or by other means. In connection with the redemption
or repurchase of Shares of the Funds, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming
shareholders.
2.11 Appointment of Subcustodians. The Custodian may at any time or
times in accordance with Section 1.2 appoint (and may at any time
remove) any subcustodian as specified in Section 1.2; provided,
however, that the appointment of any subcustodian shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12 Use of Subcustodian. With respect to securities and other assets
of any Fund which are maintained by the Custodian in the custody
of a subcustodian:
(1) The Custodian will identify on its books as belonging to the
Fund any Fund assets held by such subcustodian.
(2) In the event that a subcustodian permits any of the Fund
assets placed in its care to be held in an eligible foreign
securities depository such subcustodian will be required by
its agreement with the Custodian to identify on its books
such Fund assets as being held for the account of the
Custodian for its customers.
(3) Any Fund assets in the custody account held by a
subcustodian will be subject only to the instructions of the
Custodian or its agents, and any Fund assets held in an
eligible foreign securities depository for the account of a
subcustodian will be subject only to the instructions of
such subcustodian.
(4) The Custodian will only deposit Fund assets other than cash
in an account with a subcustodian which includes exclusively
assets held by the Custodian for its customers, and the
Custodian will cause such account to be designated by such
subcustodian as a special custody account for the exclusive
benefit of customers of the Custodian.
(5) Any agreement the Custodian shall enter into with a
subcustdian with respect to Fund assets shall require that
(i) Fund assets are not subject to any right, charge,
security interest, lien or claim of any kind in favor of
such subcustodian or its creditors except for their safe
custody or administration and (ii) beneficial ownership of
such Fund assets is freely transferable without the payment
of money or value other than for safe custody or
administration; provided, however, that the foregoing shall
not apply to the extent that any of the above-mentioned
rights, charges, etc. result from any compensation or other
expenses arising with respect to the safekeeping of Fund
assets pursuant to such agreement or from any arrangement
made by the Trust with any such subcustodian.
(6) The Custodian shall, subject to restrictions under
applicable law, also obtain from any subcustodian with which
the Custodian maintains the physical possession of any Fund
assets an undertaking to permit independent public
accountants of the Fund such reasonable access to the
records of such subcustodian as may be required in
connection with their examination of the books and records
pertaining to the affairs of the Fund. Upon request, the
Custodian shall use its best efforts to obtain and furnish
the Fund with reports of each subcutodian's external
auditors relating to the subcustodian's system of internal
accounting controls applicable to the subcustodian's duties
with respect to Fund assets.
(7) The Custodian hereby warrants to the Trust that in the
Custodian's opinion, after due inquiry, the established
procedures to be followed by each subcustodian holding Fund
assets outside of the United States pursuant to this
Contract afford protection for such Fund assets at least
equal to the afforded by the Custodian's established
procedures with respect to similar securities held by the
Custodian (and its securities depositories) in New York.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions for a Fund, (ii) for purpose of
segregating cash or government securities in connection with
options purchased, sold or written for a Fund or commodity futures
contracts or options thereon purchased or sold for a Fund, (iii)
for the purpose of compliance by the Trust or a Fund with the
procedures required by any release or releases of the SEC relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board or of
the Executive Committee signed by an officer of the Trust and
certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of the Custodian or Federated Investors
serve as investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund held
by it and in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the
Trust all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Trust desires to take action with respect to any
tender offer, exchange or any other similar transaction, the Trust
shall notify the Custodian in writing at least three business days
prior to the date on which the Custoidan is to take such action.
However, the Custodian shall nevertheless exercise its best
efforts to take such action in the event that notification is
received three business days or less prior to the date on which
action is required.
The Custodian is not the guarantor of the accuracy or completeness
of information received from issuers of securities being held for
the Fund and the Custodian is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating net asset value
per share of such Fund when the calculations are based upon such
information.
2.18 Proper Instructions. Proper Instructions as used throughout this
Contract means a writing signed or initialed by one or more person
or persons as the Board shall have from time to time authorized
("Authorized Persons"). 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
Custodian reasonably believes them to have been given by an
Authorized Person with respect to the transaction involved, and
(b) the Trust promptly causes such oral instructions to be
confirmed in writing. However, the failure of the Custodian to
obtain written confirmation of oral instructions reasonably
believed in good faith to be genuine shall not affect the right of
the Custodian to rely on such oral instructions. Upon receipt of
a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of the Trust accompanied by a detailed
description of procedures approved by the Board, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board
and the Custodian are satisfied that such procedures afford
adequate safeguards for a Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it may
be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of each Fund except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by it
to be genuine and to have been properly executed by an Authorized
Person on behalf of a Fund. The Custodian may receive and accept
a certified copy of a vote of the Board of the Trust as conclusive
evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination of or any action by the
Board pursuant to the Declaration of Trust/Articles of
Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
2.22 Contractual Settlement. With respect to any transaction
involving securities held in or to be acquired for the account of
a Fund, the Custodian shall cause the Fund's account to be
credited on the contractual settlement date with the proceeds of
any sale or exchange of securities from the account and to be
debited on the contractual settlement date for the cost of
securities purchased or acquired for the account. The Custodian
may reverse any such credit or debit if the transaction with
respect to which such credit or debit was made fails to settle
within a reasonable period, determined by the Custodian, in its
discretion, after the contractual settlement date, except, that if
any securities delivered pursuant to this Section 2.22 are
returned by the recipient thereof, the Custodian may cause any
such credits and debits to be reversed at any time.
3. Duties of Custodian With Respect to the Books of Account.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act,
with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, and specifically including identified cost records
used for tax purposes. All such records shall be the property of the
Trust and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of the SEC.
In the event of termination of this Contract, the Custodian will
deliver all such records to the Trust, to a successor Custodian, or to
such other person as the Trust may direct. The Custodian shall supply
daily to the Trust a tabulation of securities owned by a Fund and held
by the Custodian and shall, when requested to do so by the Trust and
for such compensation as shall be agreed upon between the Trust and
the Custodian, include certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with respect
to its activities hereunder in connection with the preparation of the
Fund's registration statement, periodic reports, or any other reports
to the SEC and with respect to any other requirements of such
Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian for the Fund under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Trust, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination and, if there are no such inadequacies, the reports shall
so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Trust and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be responsible for the performance of only such
duties as are set forth herein or contained in Proper Instructions
which are not contrary to the provisions of this Contract. The
Custodian shall be held to a standard of reasonable care in carrying
out the provisions of this Contract; provided, however, that the
Custodian shall be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of this
Contract. The Custodian 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. Subject to the limitations set
forth in Section 14 hereof, the Custodian shall be kept indemnified by
the Trust but only from the assets of the Fund involved in the issue
at hand and be without liability for any action taken or thing done by
it in carrying out the terms and provisions of this Contract in
accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification.
The Trust shall have the option to defend the Custodian against any
claim which may be the subject of this indemnification, and in the
event that the Trust so elects it will so notify the Custodian and
thereupon the Trust shall take over complete defense of the claim, and
the Custodian shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this
Section. The Custodian shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to indemnify
the Custodian except with the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection
with the performance of this Contract, except such as may arise from
it or its nominee's own failure to act in accordance with the standard
of reasonable care or any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of this
Contract. To secure any authorized charges and any advances of cash
or securities made by the Custodian to or for the benefit of a Fund
for any purpose which results in the Fund incurring an overdraft at
the end of any business day or for extraordinary or emergency purposes
during any business day, the Trust hereby grants to the Custodian a
security interest in and pledges to the Custodian securities held for
the Fund by the Custodian, in an amount not to exceed 10 percent of
the Fund's gross assets, the specific securities to be designated in
writing from time to time by the Trust or the Fund's investment
adviser. Should the Trust fail to make such designation, or should it
instruct the Custodian to make advances exceeding the percentage
amount set forth above and should the Custodian do so, the Trust
hereby agrees that the Custodian shall have a security interest in all
securities or other property purchased for a Fund with the advances by
the Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes of
the requirements of the Uniform Commercial Code. Should the Trust
fail to cause a Fund to repay promptly any authorized charges or
advances of cash or securities, subject to the provision of the second
paragraph of this Section 8 regarding indemnification, the Custodian
shall be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, and may be amended at any time by mutual agreement of the
parties.
This Contract may be terminated by any party by 60 days' written
notice to the other, sent by registered mail, provided that any
termination by the Trust shall be authorized by a resolution of its
Board of Directors, a certified copy of which shall accompany such
notice of termination, and provided further, that such resolution
shall specify the names of the persons to whom the Custodian shall
deliver Fund assets. If notice of termination is given by the
Custodian, the Trust shall, within 60 days following the giving of
such notice, deliver to the Custodian a certified copy of a resolution
of its Board specifying the names of the persons to whom the Custodian
shall deliver such Fund assets, after deducting therefrom any amounts
which the Custodian determines to be owed to it under this Contract.
If within 60 days following the giving of a notice of termination by
the Custodian, the Custodian does not receive from the Trust a
certified copy of a resolution of Board specifying the names of the
persons to whom the Fund assets shall be delivered, the Custodian, at
its election, may deliver such Fund assets to a bank or trust company
doing business in the state of New York having an aggregate capital,
surplus, and undivided profits, as shown by its last published report,
of not less than $50,000,000 to be held and disposed of pursuant to
the provisions of this Contract, or to Authorized Persons, or may
continue to hold such Fund assets until a certified copy of one or
more resolutions as aforesaid is delivered to the Custodian. The
obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the
termination of this Contract.
10. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may in their
joint opinion be consistent with the general tenor of this Contract.
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
Declaration of Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Contract.
11.New York Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the state of New
York.
12. 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
Custodian at Two World Trade Center, New York, New York 10048-0772, or
to such other address as the Trust or the Custodian may hereafter
specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
13. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
14. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the obligations
and liabilities assumed by the Trust and any Fund pursuant to this
Contract, including, without limitation, any obligation or liability
to indemnify the Custodian pursuant to Section 8 hereof, shall be
limited in any case to the relevant Fund and its assets and that the
Custodian shall not seek satisfaction of any such obligation from the
shareholders of the relevant Fund, from any other Fund or its
shareholders or from the Trustees, Officers, employees or agents of
the Trust, or any of them. In addition, in connection with the
discharge and satisfaction of any claim made by the Custodian against
the Trust, for whatever reasons, involving more than one Fund, the
Trust shall have the exclusive right to determine the appropriate
allocations of liability for any such claim between or among the
Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed effective as of the 20th day of December,
1995.
ATTEST: FTI FUNDS
/s/ Jay S. Neuman By:/s/ Joseph S. Machi
Typed Name: Jay S. Neuman Typed Name: Joseph S. Machi
Title: Secretary Title: Vice President
ATTEST: FIDUCIARY TRUST
COMPANY INTERNATIONAL
/s/ Mary A. Mullin By:/s/ Barry J. McKeon
Typed Name: Mary A. Mullin Typed Name: Barry J. McKeon
Title: Assistant Secretary Title: Senior Vice President
EXHIBIT 1
<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
12/20/95 FTI Funds
</TABLE>
Exhibit 9(ii) under From N-1A
Exhibit 10(iv) under Item 601/Reg. S-K
AGREEMENT
FOR
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of December 20, 1995, 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. Performing the following accounting functions on a daily basis:
(1) Journalizing each Portfolio's investment, capital share and
income and expense activities;
(2) Reconciling cash and investment balances of each Portfolio
with the Custodian;
(3) Maintaining individual ledgers for investment securities;
(4) Maintaining historical tax lots for each investment security;
(5) Calculating various contractual expenses (e.g., advisory
transfer agency, administrative, portfolio accounting fees);
I. Preparing semi-annual financial statements, to include the following
items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
J. Preparing monthly purchase and sales journal;
K. Preparing semi-annual broker security transactions summaries;
L. At the request of the Trust, preparing or assisting with the
preparation of various reports or other financial documents required
by federal, state and other applicable laws and regulations,
including but not limited to providing financial data required in
connection with the Trust's semi-annual reports on Form
N-SAR, annual and semi-annual shareholder reports, proxy statements
and registration statements; and
M. 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 therefor 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, and the Fund's
Investment Adviser, 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.
(7) It is duly registered as a transfer agent pursuant to Section
17A(c) of the Securities Exchange Act of 1934, as amended.
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 (other than the Company) 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.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties of failure to
meet the standard of care set forth in 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 State of New York.
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. 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 25. 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 26. 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 reasonably beyond its control,
natural disaster, governmental action, communication disruption or other
impossibility of performance.
ARTICLE 27. 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 28. 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 Sections One, Two and
Four of 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/ Max F. Miller By:/s/ Joseph S. Machi
Name: Max F. Miller Name: Joseph S. Machi
Title: Assistant Secretary Title: Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/ Thomas J. Ward By:/s/ R. Jeffrey Niss
Name: Thomas J. Ward Name: R. Jeffrey Niss
Title: Secretary Title: President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
12/20/95 FTI FUNDS
FTI Emerging Market Fund
FTI Global Bond Fund
FTI International Equity Fund
FTI International Bond Fund
FTI Small Cap Equity Fund
FEE SCHEDULE
I. FUND ACCOUNTING FEE SCHEDULE
A. ANNUAL
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
B. OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following:
- - Postage (including overnight courier service)
- - Statement Stock
- - Envelopes
- - Telephones
- - Telecommunication Charges (including FAX)
- - Travel
- - Duplicating
- - Forms
- - Supplies
- - Microfiche
- - Computer Access Charges
- - Client Specific System Enhancements
- - Access to the Shareholder Recordkeeping System
- - Security Pricing Services
- - Variable Rate Change Notification Services
- - Paydown Factor Notification Services
II. SHAREHOLDER RECORDKEEPING
A. ANNUAL MAINTENANCE CHARGE
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly basis at
the rate of 1/12 of the annual fee. A charge is made for an account in the
month that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- - Daily Accrual $16.65
- CDSC/Declared Dividend $13.75
Declared Dividend $8.75
Closed Accounts $1.34
MINIMUM CHARGES
-The monthly maintenance charge for each fund will be the actual
account fees or $1000, whichever is greater.
B. OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include but are not limited to: postage,
forms, telephone, microfilm, microfiche, and expenses incurred at the
specific direction of the fund. Postage for mass mailings is due seven
days in advance of the mailing date.
INVESTMENT COMPANIES FEDERATED SERVICES COMPANY
(LISTED ON EXHIBIT 1)
By:/s/ Joseph S. Machi By:/s/ R. Jeffrey Niss
Name: Joseph S. Machi Name: R. Jeffrey Niss
Title: Vice President Title: President
Exhibit 9(iii) under Form N-1A
Exhibit 10(v) under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the 20th day of December, 1995, by and between
FTI FUNDS, a Massachusetts 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 Fiduciary 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:
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;
2
H.Responding to customers' questions about the Funds and/or Classes;
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 toArticle 2 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 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 before the end of any month, the fee for such
3
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.
5
(2) It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this
Agreement.
(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
6
Fiduciary shall not be responsible for and the Trust shall indemnify
and hold Fiduciary harmless against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to: (1) The Trust's refusal or failure to
comply with the terms of this Agreement, or which arise out of the
Trust's 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
8
not seek satisfaction of any such 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.New York Law to Apply
9
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New
York.
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: FTI FUNDS
/s/ Jay S. Neuman By:/s/ Joseph S. Machi
Secretary Vice President
ATTEST: FIDUCIARY INTERNATIONAL, INC.
/s/ Mary A. Mullin By:/s/ Anne M. Tatlock
Secretary President
Schedule A
Shareholder Services Agreement
between
FTI FUNDS
and
FIDUCIARY INTERNATIONAL, INC.
11
FTI FUNDS (the "Trust") consists of the following portfolios and
classes:
Name
FTI GLOBAL BOND FUND
FTI INTERNATIONAL EQUITY FUND
FTI INTERNATIONAL BOND FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI EMERGING MARKETS FUND
Schedule B
Shareholder Services Agreement
between
FTI FUNDS
and
FIDUCIARY INTERNATIONAL, INC.
12
Compensation for Shareholder Services
For the services described in this Agreement, each Fund or class shall pay
the Fiduciary an annual fee of 0.25 of 1% of its average daily net assets.
Fiduciary may voluntarily waive all or a portion of its fee at any time
without notice.
EXHIBIT 15 UNDER FORM N-1A
EXHIBIT 1 UNDER ITEM 601/REG. S-K
FTI FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 20th day of December, 1995 by and between FTI
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. In
addition, the Trust and EDGEWOOD reserve the right to reject any
purchase order.
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 Exchange
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. 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
FTI FUNDS
FTI GLOBAL BOND FUND
FTI INTERNATIONAL EQUITY FUND
FTI INTERNATIONAL BOND FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI EMERGING MARKETS FUND
The following provisions are hereby incorporated and made part of
the Distributor's Contract dated December 20, 1995, between FTI Funds
and Edgewood Services, Inc. with respect to the Funds 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 Funds ("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 0.75% 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 Fund's 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 December 20, 1995 between FTI Funds and
EDGEWOOD, FTI Global Bond Fund, FTI International Equity Fund, FTI
International Bond Fund, FTI Small Capitalization Equity Fund, and FTI
Emerging Markets Fund first set forth in this Exhibit.
Witness the due execution hereof this 20th day of December, 1995.
ATTEST: FTI FUNDS
/s/ Jay S. Neuman By:/s/ Joseph S. Machi
Secretary Vice President
(SEAL)
ATTEST: Edgewood Services, Inc.
/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
Secretary Senior Vice President
(SEAL)
EXHIBIT 15(I) UNDER FORM N-1A
EXHIBIT 1(I) UNDER ITEM 601/REG. S-K
FTI FUNDS
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of the 20th day of
December, 1995, by the Board of Trustees of FTI 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 "Rule 12b-1 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 Rule 12b-1
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
FTI FUNDS
FTI GLOBAL BOND FUND
FTI INTERNATIONAL EQUITY FUND
FTI INTERNATIONAL BOND FUND
FTI SMALL CAPITALIZATION EQUITY FUND
FTI EMERGING MARKETS FUND
This Distribution Plan is adopted by FTI Funds with respect to the
Shares of the portfolios 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 .75
of 1% of the average aggregate net asset value of FTI Global Bond
Fund, FTI International Equity Fund, FTI International Bond Fund, FTI
Small Capitalization Equity Fund, and FTI Emerging Markets Fund held
during the month.
Witness the due execution hereof this 20th day of December, 1995.
FTI FUNDS
By:/s/ Joseph S. Machi
Vice President
Exhibit 15(ii) under Form N-1A
Exhibit 1(ii) 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
2
number of days that the Rule 12b-1 Agreement is in effect during the
quarter.
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
3
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.
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
4
(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.
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.
5
[ADMINISTRATOR]
Address
City State Zip Code
Dated: By:
Authorized Signature
Title
Print Name of Authorized Signature
EDGEWOOD SERVICES, INC.
By:
Newton P. Heston
FTI FUNDS
6
EXHIBIT A to 12b-1 Agreement with
Edgewood Services, Inc. ("EDGEWOOD")
Portfolios
EDGEWOOD will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:
Name Date
FTI GLOBAL BOND FUND DECEMBER 22, 1995
FTI INTERNATIONAL EQUITY FUND DECEMBER 22, 1995
FTI INTERNATIONAL BOND FUND DECEMBER 22, 1995
FTI SMALL CAPITALIZATION EQUITY FUND DECEMBER 22, 1995
FTI EMERGING MARKETS 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 .75 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.
7
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.
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $10,000
Offering
FTI SMALL CAP EQUITY FUND Price/
Share= $10.00
Return Since Inception
ending 5/31/96 $12.15
FYE: NOVEMBER 30
<S> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: SEMI-ANNUAL Reinvest Period Dividend Gain Price Period Ending Invest
PAID: SEMI ANNUAL Dates Shares /Share /Share /Share Shares Price Value
12/22/95 1000.000 0.000000000 0.00000 $0.00 1000.000 $0.00 $0
12/31/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000
1/31/96 1000.000 0.000000000 0.00000 $10.13 1000.000 $10.13 $10,130
2/29/96 1000.000 0.000000000 0.00000 $10.65 1000.000 $10.65 $10,650
3/31/96 1000.000 0.000000000 0.00000 $11.03 1000.000 $11.03 $11,030
4/30/96 1000.000 0.000000000 0.00000 $11.92 1000.000 $11.92 $11,920
5/31/96 1000.000 0.000000000 0.00000 $12.15 1000.000 $12.15 $12,150
$100 (1+T) = End Value
T = 21.50%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $10,000
Offering
FTI INTERNATIONAL EQUITY Price/
Share= $10.00
Return Since Inception
ending 5/31/96 $10.69
FYE: NOVEMBER 30
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: SEMI-ANNUAL Reinvest Period Dividend Gain Price Period Ending Invest
PAID: SEMI ANNUAL Dates Shares /Share /Share /Share Shares Price Value
12/22/95 1000.000 0.000000000 0.00000 $0.00 1000.000 $0.00 $0.00
12/31/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000.00
1/31/96 1000.000 0.000000000 0.00000 $10.20 1000.000 $10.20 $10,200.00
2/29/96 1000.000 0.000000000 0.00000 $10.05 1000.000 $10.05 $10,050.00
3/31/96 1000.000 0.000000000 0.00000 $10.21 1000.000 $10.21 $10,210.00
4/30/96 1000.000 0.000000000 0.00000 $10.68 1000.000 $10.68 $10,680.00
5/31/96 1000.000 0.000000000 0.00000 $10.69 1000.000 $10.69 $10,690.00
$100 (1+T) = End Value
T = 6.90%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $10,000
Offering
FTI INTERNATIONAL BOND FUND Price/
Share= $10.00
Return Since Inception
ending 5/31/96 $9.85
FYE: NOVEMBER 30
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: SEMI-ANNUAL Reinvest Period Dividend Gain Price Period Ending Invest
PAID: SEMI ANNUAL Dates Shares /Share /Share /Share Shares Price Value
12/22/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000.00
12/31/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000.00
1/31/96 1000.000 0.000000000 0.00000 $9.85 1000.000 $9.85 $9,850.00
2/29/96 1000.000 0.000000000 0.00000 $9.85 1000.000 $9.85 $9,850.00
3/31/96 1000.000 0.000000000 0.00000 $9.79 1000.000 $9.79 $9,790.00
4/30/96 1000.000 0.000000000 0.00000 $9.86 1000.000 $9.86 $9,860.00
5/31/96 1000.000 0.000000000 0.00000 $9.85 1000.000 $9.85 $9,850.00
$100 (1+T) = End Value
T = -1.50%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FTI INTERNATIONAL BOND FUND Yield = 2{( $20,754.96 - $3,746.71 )+1)^6-1}=
Computation of SEC Yield 386,431 *( $9.85 - 0.00000)
As of: MAY 31,1996
SEC Yield = 5.42%
Dividend and/or Interest
Inc for the 30 days ended $20,754.96
Net Expenses for $3,746.71
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 386,431
Maxium offering price $9.85
per share as of 5/31/96
Undistributed net income 0.00000
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $10,000
Offering
FTI GLOBAL BOND Price/
Share= $10.00
Return Since Inception
ending 5/31/96 $9.86
FYE: NOVEMBER 30
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: SEMI-ANNUAL Reinvest Period Dividend Gain Price Period Ending Invest
PAID: SEMI ANNUAL Dates Shares /Share /Share /Share Shares Price Value
12/22/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000.00
12/31/95 1000.000 0.000000000 0.00000 $10.00 1000.000 $10.00 $10,000.00
1/31/96 1000.000 0.000000000 0.00000 $9.88 1000.000 $9.88 $9,880.00
2/29/96 1000.000 0.000000000 0.00000 $9.83 1000.000 $9.83 $9,830.00
3/31/96 1000.000 0.000000000 0.00000 $9.77 1000.000 $9.77 $9,770.00
4/30/96 1000.000 0.000000000 0.00000 $9.83 1000.000 $9.83 $9,830.00
5/31/96 1000.000 0.000000000 0.00000 $9.84 1000.000 $9.84 $9,840.00
$100 (1+T) = End Value
T = -1.60%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FTI GLOBAL BOND FUND Yield = 2{( $5,067.15 - $973.20)+1)^6-1}=
Computation of SEC Yield 100,539 *( $9.84 - 0.00000)
As of: MAY 31,1996
SEC Yield = 5.02%
Dividend and/or Interest
Inc for the 30 days ended $5,067.15
Net Expenses for $973.20
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 100,539
Maxium offering price $9.84
per share as of 5/31/96
Undistributed net income 0.00000
</TABLE>
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 FTI Funds and the
Assistant General Counsel of Federated Investors, and each of them, their
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/Edward C. Gonzales President, Treasurer and Trustee December 20,
1995
Edward C. Gonzales (Chief Executive Officer and
Principal Financial and Accounting
Officer)
/s/Peter A. Aron Trustee December 20, 1995
Peter A. Aron
/s/Nancy L. Close Trustee December 20, 1995
Nancy . Close
/s/James C. GoodfellowTrustee December 20, 1995
James C. Goodfellow
/s/Burton J. GreenwaldTrustee December 20, 1995
Burton J. Greenwald
Sworn and subscribed before me this 20th day of December, 1995
/s/Mary A. Mullin
Mary A. Mullin
Notary Public, State of New York
No. 31-4944239
Qualified in New York County
Commission Expires November 14, 1996
Sworn to and subscribed before me this day of , 199 .
---- --------- -
Notary Public
