SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Federated Tax-Free Trust
(Name of Registrant as Specified In Its Charter)
Federated Investors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required. [ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FEDERATED TAX-FREE TRUST
Proxy Statement - Please Vote!
TIME IS OF THE ESSENCE ... VOTING ONLY TAKES A FEW MINUTES AND YOUR
PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL EXPENSE.
Federated Tax-Free Trust (the "Trust") will hold a special meeting of
shareholders on September 23, 1999. It is important for you to vote on the
issues described in this Proxy Statement. We recommend that you read the Proxy
Statement in its entirety; the explanations will help you to decide on the
issues.
Following is an introduction to the proposals and the process.
Why am I being asked to vote?
Mutual funds are required to obtain shareholders' votes for certain types of
changes, like those included in this Proxy Statement. You have a right to vote
on these changes.
What issues am I being asked to vote on?
The proposals include:
o the election of Trustees;
o ratification of independent auditors; and
o a proposed reorganization of Federated Tax-Free Trust into a newly
created portfolio of Money Market Obligations Trust.
Why are individuals recommended for election to the Board of Trustees?
The Trust is devoted to serving the needs of its shareholders, and the Board is
responsible for managing the Trust's business affairs to meet those needs. The
Board represents the shareholders and can exercise all of the Trust's powers,
except those reserved only for shareholders.
Trustees are selected on the basis of their education and professional
experience. Candidates are chosen based on their distinct interest in, and
capacity for understanding the complexities of, the operation of a mutual fund.
These individuals bring considerable experience to the impartial oversight of a
fund's operation.
The Proxy Statement includes a brief description of each nominee's history and
current position with the Trust, if applicable.
Why am I being asked to vote on the ratification of independent auditors?
The independent auditors conduct a professional examination of accounting
documents and supporting data to render an opinion on the material fairness of
the information. Because financial reporting involves discretionary decision
making, the auditors' opinion is an important assurance to both the Trust and
its investors.
The Board of Trustees approved the selection of Deloitte & Touche LLP, long-time
auditors of the Trust, for the current fiscal year and believes that the
continued employment of this firm is in the Trust's best interests.
Why is the Reorganization being proposed?
Federated Tax-Free Trust's Board of Trustees and investment adviser believe that
the Trust's management structure can be simplified by reorganizing as a
portfolio of Money Market Obligations Trust ("MMOT"), another money market
mutual fund. After the Reorganization, the original Trust will be dissolved.
MMOT offers a variety of portfolios investing in money market securities, each
with its own investment objective.
How will the Reorganization affect my investment?
o The shares you own and the value of your investment will not change.
o The Reorganization will be a tax-free event.
o There will not be sales loads, commissions, or transaction charges
with the Reorganization.
o The investment objective will remain the same.
o There will be no increases in the fees payable to the Trust's adviser because
of the Reorganization.
Why are the Trustees recommending amendments to the Declaration of Trust?
The Declaration organizing the Trust was prepared many years ago. Since then,
developments in the investment company industry and changes in the law have
resulted in many improvements. The Board is recommending changes to the
Declaration of Trust that permit the Trust to benefit from these developments.
How do I vote my shares?
You may vote in person at the special meeting of shareholders or complete and
return the enclosed Proxy Card. If you sign and return the Proxy Card without
indicating a preference, your vote will be cast "for" all the proposals.
You may also vote by telephone at 1-800-690-6903, or through the Internet at
www.proxyvote.com. If you choose to help save the Trust time and postage costs
by voting through the Internet or by telephone, please don't return your Proxy
Card. If you do not respond at all, we may contact you by telephone to request
that you cast your vote.
Who do I call if I have questions about the Proxy Statement?
Call your Investment Professional or a Federated Client Service Representative.
Federated's toll-free number is
1-800-341-7400.
After careful consideration, the Board of Trustees has
unanimously approved these proposals. The Board recommends
that you read the enclosed materials
carefully and vote for all proposals.
<PAGE>
19
PRELIMINARY
FEDERATED TAX-FREE TRUST
NOTICE OF SPECIAL MEETING
IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 23, 1999
A Special Meeting in lieu of Annual Meeting of the
shareholders of Federated Tax-Free Trust (the "Trust") will be held at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (Eastern
time), on September 23, 1999 to consider proposals:
(1) To elect four Trustees.
(2) To ratify the selection of the Trust's independent
auditors.
(3) To approve amendments and a restatement of the Trust's
Declaration of Trust:
(a) To require the approval of a majority of the
outstanding voting shares in the event of
the sale and conveyance of the assets of the
Trust to another trust or corporation; and
(b) To permit the Board of Trustees to liquidate
the assets of the Trust without seeking
shareholder approval.
(4) To approve a proposed Agreement and Plan of
Reorganization between the Trust and Money Market
Obligations Trust, on behalf of its series, Federated
Tax-Free Trust (the "New Fund"), whereby the New Fund
would acquire all of the assets of the Trust in
exchange for shares of the New Fund to be distributed
pro rata by the Trust to its shareholders in complete
liquidation and termination of the Trust.
To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Trustees has fixed July 26, 1999 as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Board of Trustees,
John W. McGonigle
Secretary
August 10, 1999
YOU CAN HELP THE TRUST AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL
MEETING IN LIEU OF ANNUAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
About the Proxy Solicitation and the Meeting..................................
Election of Four Trustees.....................................................
About the Election of Trustees................................................
Trustees Standing for Election................................................
Nominee Not Presently Serving as a Trustee....................................
Ratification of the Selection of Independent Auditors.........................
Approval of Amendments and a Restatement of the Trust's Declaration of Trust..
Approval of the Proposed Agreement and Plan of Reorganization.................
Information About the Trust...................................................
Proxies, Quorum and Voting at the Meeting.....................................
Share Ownership of the Trustees...............................................
Trustee Compensation..........................................................
Officers of the Trust.........................................................
Other Matters and Discretion of Attorneys Named in the Proxy..................
Appendix I: Agreement and Plan of Reorganization...........................I-1
Appendix II: Comparison of Investment Policies and Limitations............II-1
<PAGE>
PRELIMINARY
PROXY STATEMENT
FEDERATED TAX-FREE TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
About the Proxy Solicitation and the Meeting
The enclosed proxy is solicited on behalf of the Board of Trustees of
the Trust (the "Board" or "Trustees"). The proxies will be voted at the special
meeting in lieu of annual meeting of shareholders of the Trust to be held on
September 23, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, at 2:00 p.m. (such special meeting in lieu of annual meeting and any
adjournment or postponement thereof are referred to as the "Meeting").
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by the Trust. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Trust or, if necessary, a communications firm retained for this purpose.
Such solicitations may be by telephone, telegraph, through the Internet or
otherwise. Any telephonic solicitations will follow procedures designed to
ensure accuracy and prevent fraud, including requiring identifying shareholder
information, recording the shareholder's instructions, and confirming to the
shareholder after the fact. Shareholders who communicate proxies by telephone or
by other electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instruction as shareholders submitting proxies in
written form. The Trust may reimburse custodians, nominees, and fiduciaries for
the reasonable costs incurred by them in connection with forwarding solicitation
materials to the beneficial owners of shares held of record by such persons.
The Board has reviewed the proposed reorganization (the
"Reorganization") of the Trust, and approved it, subject to shareholder
approval. The purposes of the Meeting are set forth in the accompanying Notice.
The Trustees know of no business other than that mentioned in the Notice that
will be presented for consideration at the Meeting. Should other business
properly be brought before the Meeting, proxies will be voted in accordance with
the best judgment of the persons named as proxies. This proxy statement and the
enclosed proxy card are expected to be mailed on or about August 10, 1999, to
shareholders of record at the close of business on July 26, 1999 (the "Record
Date"). On the Record Date, the Trust had outstanding _____________ shares of
beneficial interest.
The Trust's annual prospectus, which includes audited financial
statements for the fiscal year ended November 30, 1998, was previously mailed to
shareholders. The Trust's semi-annual report, which contains unaudited financial
statements for the period ended May 31, 1999, is expected to be mailed to
shareholders on or about July 31, 1999. The Trust's principal executive offices
are located at Federated Investors Funds, 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7000. The Trust's toll-free telephone number is
1-800-341-7400.
PROPOSAL #1: ELECTION OF FOUR TRUSTEES
The persons named as proxies intend to vote in favor of the election of
John F. Cunningham, J. Christopher Donahue, Charles F. Mansfield, Jr. and John
S. Walsh (collectively, the "Nominees") as Trustees of the Trust. Messrs.
Cunningham, Mansfield and Walsh are presently serving as Trustees. If elected by
shareholders, Mr. Donahue is expected to assume his responsibilities as a
Trustee effective October 1, 1999. Please see "About the Election of Trustees"
below for current information about the Nominees.
Messrs. Cunningham, Mansfield and Walsh were appointed Trustees on January
1, 1999, to fill vacancies created by the decision to expand the size of the
Board. Mr. Donahue is being proposed for election as a Trustee to fill a vacancy
anticipated to result from the resignation of a current Trustee. The anticipated
resignation will not occur if Mr. Donahue is not elected as a Trustee.
All Nominees have consented to serve if elected. If elected, the
Trustees will hold office without limit in time until death, resignation,
retirement, or removal or until the next meeting of shareholders to elect
Trustees and the election and qualification of their successors. Election of a
Trustee is by a plurality vote, which means that the four individuals receiving
the greatest number of votes at the Meeting will be deemed to be elected.
If any Nominee for election as a Trustee named above shall by reason of
death or for any other reason become unavailable as a candidate at the Meeting,
votes pursuant to the enclosed proxy will be cast for a substitute candidate by
the proxies named on the proxy card, or their substitutes, present and acting at
the Meeting. Any such substitute candidate for election as a Trustee who is an
"interested person" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Trust shall be nominated by the Executive
Committee. The selection of any substitute candidate for election as a Trustee
who is not an "interested person" shall be made by a majority of the Trustees
who are not "interested persons" of the Trust. The Board has no reason to
believe that any Nominee will become unavailable for election as a Trustee.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE TO ELECT AS TRUSTEES THE NOMINEES FOR
ELECTION TO THE BOARD OF TRUSTEES OF THE TRUST
About the Election of Trustees
When elected, the Trustees will hold office during the lifetime of the
Trust except that: (a) any Trustee may resign; (b) any Trustee may be removed by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal; (c) any Trustee who requests to be retired or who has become
mentally or physically incapacitated may be retired by written instrument signed
by a majority of the other Trustees; and (d) a Trustee may be removed at any
special meeting of the shareholders by a vote of two-thirds of the outstanding
shares of the Trust. In case a vacancy shall exist for any reason, the remaining
Trustees will fill such vacancy by appointment of another Trustee. The Trustees
will not fill any vacancy by appointment if, immediately after filling such
vacancy, less than two-thirds of the Trustees then holding office would have
been elected by the shareholders. If, at any time, less than a majority of the
Trustees holding office have been elected by the shareholders, the Trustees then
in office will call a shareholders' meeting for the purpose of electing Trustees
to fill vacancies. Otherwise, there will normally be no meeting of shareholders
called for the purpose of electing Trustees.
Set forth below is a listing of: (i) Trustees standing for election,
and (ii) the Nominee standing for election who is not presently serving as a
Trustee, along with their addresses, birthdates, present positions with the
Trust, if applicable, and principal occupations during the past five years:
Trustees Standing for Election
John F. Cunningham
353 El Brillo Way
Palm Beach, FL
Birthdate: March 5, 1943
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
Chairman, President and Chief Executive Officer, Cunningham & Co., Inc.
(specialized financial consulting organization); Trustee Associate, Boston
College; Director, EMC Corporation; formerly, Director, Redgate Communications.
Charles F. Mansfield, Jr.
80 South Road
Westhampton, NY
Birthdate: April 10, 1945
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
management consultant.
John S. Walsh
2007 Sherwood Drive
Valparaiso, IN
Birthdate: November 28, 1957
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
President and Director, Heat Wagon, Inc.; President and Director, Manufacturers
Products, Inc.; President, Portable Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly, Inc.; formerly, Vice President, Walsh &
Kelly, Inc.
Nominee Not Presently Serving as a Trustee
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc.; President and Trustee, Federated Investment
Management Company, Federated Management, and Federated Research; President and
Director, Federated Research Corp. and Federated Global Research Corp.,
President, Passport Research, Ltd.; Trustee, Federated Shareholder Services
Company; Director, Federated Services Company. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
PROPOSAL #2: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The 1940 Act requires that the Trust's independent auditors be selected
by the Board, including a majority of those Board members who are not
"interested persons" (as defined in the 1940 Act) of the Trust, and submitted
for ratification or rejection at the next succeeding meeting of shareholders.
The Board of the Trust, including a majority of its members who are not
"interested persons" of the Trust, approved the selection of Deloitte & Touche
LLP (the "Auditors") for the current fiscal year at a Board meeting held on
February 15, 1999.
The selection by the Board of the Auditors as independent auditors for
the current fiscal year is submitted to the shareholders for ratification. Apart
from their fees as independent auditors and certain consulting fees, neither the
Auditors nor any of their partners have a direct, or material indirect,
financial interest in the Trust or its investment adviser. The Auditors are a
major international independent accounting firm. The Board believes that the
continued employment of the services of the Auditors for the current fiscal year
would be in the Trust's best interests.
Representatives of the Auditors are not expected to be present at the
Meeting. If a representative is present, he or she will have the opportunity to
make a statement and would be available to respond to appropriate questions. The
ratification of the selection of the Auditors will require the affirmative vote
of a majority of the shares present and voting on the proposal at the Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE TO RATIFY THE SELECTION OF INDEPENDENT AUDITORS
PROPOSAL #3: TO APPROVE AMENDMENTS AND A RESTATEMENT OF THE TRUST'S DECLARATION
OF TRUST
Mutual funds, such as the Trust, are required to organize under the
laws of a state and to create and be bound by organizational documents outlining
how they will operate. In the case of the Trust, these organizational documents
are the Declaration of Trust and the By-Laws. Since the adoption of the Trust's
current Declaration of Trust, the market for mutual funds has evolved, requiring
mutual funds to be more flexible in their operation to respond quickly to
changes in the market. Certain items in the current Declaration of Trust,
described below, prohibit the Trust from responding quickly and favorably to
changing markets without going to the expense and delay of holding a shareholder
meeting.
Accordingly, the Trustees have approved, and have authorized the
submission to the Trust's shareholders for their approval, certain amendments to
the Trust's Declaration of Trust. The approval of each amendment will require
the affirmative vote of a majority of the outstanding voting shares of the Trust
as described in the Declaration of Trust. (See "Proxies, Quorum and Voting at
the Meeting" below.)
PROPOSAL #3(a): TO AMEND AND RESTATE THE TRUST'S DECLARATION OF
TRUST TO REQUIRE THE APPROVAL OF A MAJORITY OF THE OUTSTANDING VOTING SHARES
IN THE EVENT OF THE SALE AND CONVEYANCE OF THE ASSETS OF THE TRUST TO
ANOTHER TRUST OR CORPORATION
Article XII, Section 4(b) of the Declaration of Trust currently
requires the approval of the holders of at least two-thirds of the outstanding
shares of the Trust to approve any sale and conveyance of assets of the Trust to
another open-end management investment company. To reduce the likelihood of
greater expenses in a proposed solicitation for the approval of any sale and
conveyance (including the Reorganization that is described in Proposal #4 of
this Proxy Statement), the Trustees have adopted an amendment that would permit
a majority vote to approve such a transaction. A majority vote means the
affirmative vote of: (a) 67% or more of the voting securities present at the
meeting if the holders of more than 50% of the outstanding voting securities are
present or represented by proxy; or (b) more than 50% of the outstanding voting
securities, whichever is less. The amendment would provide the Trust with
greater flexibility, and in the event circumstances warrant the approval of the
Board, the Trustees could determine that a sale and conveyance of assets would
be in the best interest of the Trust. The Trustees are recommending that
shareholders approve the adoption of this proposed amendment to the Declaration
of Trust.
Proposal #4 on the agenda of the Meeting is a recommendation by the
Board that the shareholders approve a proposed reorganization of the Trust with
and into an affiliated open-end management investment company. If this Proposal
#3(a) is approved by shareholders at the Meeting, the amendment will become
effective immediately and will be deemed to govern the approval of Proposal #4.
If approved by shareholders, Article XII, Section 4(b) of the
Declaration of Trust would be amended to read as follows:
"(b) The Trustees, with the approval of a Majority Shareholder Vote,
may sell and convey the assets of the Trust to another trust or
corporation organized under the laws of any state of the United States,
which is a diversified open-end management investment company as
defined in the 1940 Act, for an adequate consideration which may
include the assumption of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust and which may include
shares of beneficial interest or stock of such trust or corporation.
Upon making provision for the payment of all such liabilities, by such
assumption or otherwise, the Trustees shall distribute the remaining
proceeds ratably among the holders of the Shares of the Trust then
outstanding. For purposes of this provision, a "Majority Shareholder
Vote" means the affirmative vote of the lesser of: (a) more than 50% of
the outstanding voting securities entitled to vote upon the matter, or
(b) 67% or more of the voting securities present at the meeting if the
holders of 50% or more of the outstanding voting securities entitled to
vote on the matter are present at the meeting in person or by proxy."
In the event that the amendment to Article XII, Section 4(b) is not
approved by shareholders, this section of the Declaration of Trust will remain
as it currently exists, and the Board of Trustees will consider what action, if
any, should be taken. In such event, the approval of the Reorganization
described in Proposal #4 of this Proxy Statement will then require the
affirmative vote of two-thirds of the shares of the Trust entitled to be voted
upon the matter.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #3(b): TO AMEND AND RESTATE THE TRUST'S DECLARATION OF
TRUST TO PERMIT THE BOARD OF TRUSTEES TO LIQUIDATE THE ASSETS
OF THE TRUST WITHOUT SEEKING SHAREHOLDER APPROVAL
Shareholders are being asked to approve an amendment to the Trust's
Declaration of Trust to permit the Trustees to sell and convert into money
(i.e., liquidate) all the assets of the Trust and then redeem all outstanding
shares of the Trust. Currently, a majority vote of shareholders is required to
liquidate the Trust. The Trustees have determined that the current restriction
presents a cumbersome structure under which the best interests of all of the
Trust's shareholders may not be served. By requiring the Trustees to solicit a
shareholder vote, by means of a proxy solicitation and special meeting of
shareholders, the Declaration of Trust greatly hinders the Trustees' ability
to effectively act on decisions about the continued viability of the Trust. If
it is determined that it is no longer advisable to continue the Trust, it may
not be in the best interests of shareholders to incur the substantial
additional expense of a shareholder meeting when it is more important to
preserve those assets that remain. If this proposal is approved by
shareholders, the Trustees will be authorized to liquidate the Trust by Board
action without a further shareholder vote.
If approved by shareholders, Article XII, Section 4(c) of the
Declaration of Trust will be amended to read as follows:
"The Trustees may at any time sell and convert into money all the
assets of the Trust, without shareholder approval, unless otherwise
required by applicable law. Upon making provision for the payment of
all outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Trust, the Trustees shall distribute the remaining
assets of the Trust ratably among the holders of the outstanding
Shares."
The Trustees believe that the interests of Trust shareholders are
adequately protected by this provision, as the liquidation would require the
conversion of the assets of the Trust to cash, which will thereafter be
distributed to shareholders pro rata. It is believed that this will result in
the return to shareholders of substantially the same value as would be provided
to the shareholders by a redemption resulting in the payment to the shareholders
of the then current net asset value of the shares owned by the shareholders.
Accordingly, the Trustees have approved, and have authorized the submission to
the Trust's shareholders for their approval, an amendment to the Trust's
Declaration of Trust.
In the event that the amendment to the Declaration of Trust to allow
the Trustees to liquidate assets is not approved by the shareholders, the
Declaration of Trust will remain as it currently exists, and the Trustees will
consider what action, if any, should be taken.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL
PROPOSAL #4: TO APPROVE THE PROPOSED REORGANIZATION
The Board of Trustees of the Trust has voted to recommend to
shareholders of the Trust the approval of an Agreement and Plan of
Reorganization (the "Reorganization Agreement") whereby Money Market Obligations
Trust, a Massachusetts business trust ("MMOT"), on behalf of its portfolio,
Federated Tax-Free Trust (the "New Fund"), would acquire all of the assets
(subject to the liabilities) of the Trust in exchange for shares of beneficial
interest of the New Fund to be distributed pro rata by the Trust to its
shareholders in complete liquidation and dissolution of the Trust (the
"Reorganization"). As a result of the Reorganization, each shareholder of the
Trust will become the owner of New Fund shares having a total net asset value
equal to the total net asset value of his or her holdings in the Trust on the
date of the Reorganization.
MMOT is an open-end management investment company that, immediately
prior to the Reorganization, will include eighteen portfolios, each of which has
its own investment objective. The New Fund is a newly-organized portfolio of
MMOT (initially a "shell" portfolio) with the same investment objective as the
Trust. The permissible investments for the New Fund are the same as the
permissible investments for the Trust, and the New Fund uses comparable
investment strategies. The New Fund's investment objective, like the Trust's
investment objective, is to provide for its shareholders dividend income exempt
from Federal regular income taxes while seeking relative stability of principal.
The New Fund and the Trust pursue their investment objectives by investing in a
portfolio of short-term municipal securities maturing in 397 days or less. The
average maturity of money market instruments in the New Fund's and the Trust's
portfolios, computed on a dollar weighted basis, will be 90 days or less. Both
the New Fund and the Trust are money market mutual funds which seek to stabilize
their offering and redemption prices at $1.00 per share, although there can be
no assurance that either the New Fund or the Trust will be able to do so. (See
"Comparison of Investment Policies and Risk Factors" below.) Investments in the
New Fund and the Trust are neither insured nor guaranteed by the U.S.
government.
As a condition to the Reorganization transactions, the Trust and MMOT
will receive an opinion of counsel that the Reorganization will be considered a
tax-free "reorganization" under applicable provisions of the Internal Revenue
Code, so that no gain or loss for federal income tax purposes will be recognized
by either the Trust or MMOT or by the shareholders of the New Fund or the Trust.
The tax basis of the New Fund shares received by Trust shareholders will be the
same as the tax basis of their shares in the Trust.
Significant components of the Reorganization and provisions of the
Reorganization Agreement are summarized below; however, this summary of the
Reorganization Agreement is qualified in its entirety by reference to the full
text of the Reorganization Agreement between the Trust and MMOT, a copy of
which is attached as Appendix I to this Proxy Statement.
Description of the Reorganization Agreement
The Reorganization Agreement provides that all of the assets of the
Trust will be transferred to the New Fund, subject to the liabilities of the
Trust. Each holder of shares of the Trust will receive the same number (with
the same aggregate value) of shares of the New Fund as the shareholder had in
the Trust immediately prior to the Reorganization. The Trust's shareholders
will not pay a sales charge, commission or other transaction cost in
connection with their receipt of the shares of the New Fund.
Following the transfer of assets and assumption of liabilities of the
Trust to and by the New Fund, and the issuance of shares by the New Fund to the
Trust, the Trust will distribute the shares of the New Fund received by the
Trust among the shareholders of the Trust in proportion to the number of shares
each such shareholder holds in the Trust. In addition to receiving the shares of
the New Fund, each shareholder of the Trust will have a right to receive any
declared and unpaid dividends or other distributions of the Trust. Following the
Reorganization, shareholders of the Trust will be shareholders of the New Fund.
Upon the completion of the Reorganization, the Trust will be deregistered as an
investment company under the 1940 Act and its existence terminated under state
law. The stock transfer books of the Trust will be permanently closed after the
Reorganization. MMOT will not issue share certificates with respect to shares of
the New Fund issued in connection with the Reorganization.
The Reorganization is subject to certain conditions, including:
approval of the Reorganization Agreement and the transactions and exchange
contemplated thereby as described in this Proxy Statement by the shareholders of
the Trust; the receipt of a legal opinion described in the Reorganization
Agreement regarding tax matters; the receipt of certain certificates from the
parties concerning the continuing accuracy of the representations and warranties
in the Reorganization Agreement and other matters; and the parties' performance,
in all material respects, of the agreements and undertakings in the
Reorganization Agreement. Assuming satisfaction of the conditions in the
Reorganization Agreement, the Reorganization is expected to occur on or after
November 1, 1999.
The Trust's investment adviser is responsible for the payment of
expenses of the Reorganization incurred by either party, whether or not the
Reorganization is consummated. Such expenses include, but are not limited to,
legal fees, registration fees, transfer taxes (if any), the fees of banks and
transfer agents and a portion of the costs of preparing, printing, copying and
mailing proxy solicitation materials to the Trust's shareholders.
The Reorganization may be terminated at any time prior to its
consummation by either the Trust or MMOT if circumstances should develop that,
in the opinion of either the Board of the Trust or the Board of Trustees of
MMOT, make proceeding with the Reorganization Agreement inadvisable. The
Reorganization Agreement provides further that at any time prior to the
consummation of the Reorganization: (i) the parties thereto may amend or modify
any of the provisions of the Reorganization Agreement provided that such
amendment or modification would not have a material adverse effect on the
benefits intended under the Reorganization Agreement and it would be consistent
with the best interests of the shareholders of the Trust and the New Fund; and
(ii) either party may waive any of the conditions set forth in the
Reorganization Agreement if, in the judgment of the waiving party, such waiver
will not have a material adverse effect on the benefits intended under the
Reorganization Agreement to the shareholders of the Trust or the shareholders of
the New Fund, as the case may be.
Reasons for the Proposed Reorganization
The Trust was established as a Massachusetts business trust in 1978.
Although the Board has been satisfied with the Trust's performance, it, and the
Trust's distributor and administrator, believe that reorganizing the Trust as a
portfolio of MMOT could improve the Trust's distribution and streamline
administration. Accordingly, the Trust's distributor and administrator have
recommended to the Board of Trustees of MMOT that the New Fund be organized for
the purpose of acquiring the Trust's assets and thereby reorganizing the Trust
as a portfolio of MMOT. The Trust's distributor and administrator similarly
recommended to the Trustees of the Trust that the Trust's assets be transferred
to MMOT, on behalf of the New Fund, in order to reorganize it as a separate
portfolio of MMOT. In connection with this proposal, the Trust's distributor and
administrator emphasized the comparable advisory services provided the Trust and
the New Fund, the identical investment objectives and similar investment
policies of the Trust and the New Fund, and the administrative convenience and
simplification of management achievable by operating the Trust as a portfolio of
MMOT.
Board of Trustees' Considerations and Recommendations
The Trust's Board of Trustees, at its meeting on February 15, 1999,
concluded that the reorganization of the Trust as a portfolio of MMOT could
provide for improved distribution and streamlined administration. The Trust's
Trustees also noted that Trust shareholders would continue to receive the same
quality of investment management services from the New Fund's investment
adviser, which is also the Trust's current investment adviser. The Trust's Board
of Trustees, including a majority of the Trustees who are not "interested
persons," additionally determined that participation in the Reorganization is in
the best interests of the Trust and that the interests of the Trust shareholders
would not be diluted as a result of its effecting the Reorganization. Based upon
the foregoing considerations, and the fact that shareholders of the Trust will
not suffer any adverse federal income tax consequences as a result of the
Reorganization, the Board of Trustees of the Trust unanimously voted to approve,
and recommended to Trust shareholders the approval of, the Reorganization.
The Board of Trustees of MMOT, including the Trustees who are not
"interested persons," at the Board's meeting on February 15, 1999 unanimously
concluded that consummation of the Reorganization is in the best interests of
MMOT and the shareholders of the New Fund, and that the interests of New Fund
shareholders would not be diluted as a result of effecting the Reorganization.
As a consequence, the Board of Trustees of MMOT unanimously approved the
Reorganization Agreement.
Under the current terms of the Declaration of Trust, the approval of
the Reorganization requires the affirmative vote of two-thirds of the
outstanding voting shares of the Trust. If Proposal #3(a) described in this
Proxy Statement is approved, however, that amendment to the Declaration of Trust
will become effective immediately, and this Proposal #4 to approve the
Reorganization will require the affirmative vote of a majority of the
outstanding voting shares of the Trust as described in this Proxy Statement.
(See "Proxies, Quorum and Voting at the Meeting" below.)
Federal Income Tax Consequences
As a condition to the Reorganization transactions, the Trust and MMOT,
on behalf of the New Fund, will receive an opinion from Dickstein Shapiro Morin
& Oshinsky LLP, special counsel to the Trust and MMOT, to the effect that, on
the basis of the existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), current administrative rules and court decisions, for
federal income tax purposes: (1) the Reorganization as set forth in the
Reorganization Agreement will constitute a tax-free reorganization under section
368(a)(1)(F) of the Code; (2) no gain or loss will be recognized by the New Fund
upon its receipt of the Trust's assets in exchange for New Fund shares; (3) no
gain or loss will be recognized by the Trust upon the transfer of its assets to
the New Fund in exchange for New Fund shares or upon the distribution (whether
actual or constructive) of the New Fund shares to the Trust shareholders in
exchange for their shares of the Trust; (4) no gain or loss will be recognized
by shareholders of the Trust upon exchange of the Trust shares for New Fund
shares; (5) the holding period and tax basis for the Trust's assets acquired by
the New Fund will be the same as the holding period and the tax basis to the
Trust immediately prior to the Reorganization; (6) the holding period of New
Fund shares received by shareholders of the Trust pursuant to the Reorganization
Agreement will be the same as the holding period of Trust shares held by such
shareholders immediately prior to the Reorganization, provided the Trust shares
were held as capital assets on the date of the Reorganization; and (7) the tax
basis of New Fund shares received by shareholders of the Trust pursuant to the
Reorganization Agreement will be the same as the tax basis of Trust shares held
by such shareholders immediately prior to the Reorganization.
The Trust and MMOT have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of
counsel discussed in the previous paragraph. That opinion is not binding on
the IRS and does not preclude the IRS from adopting a contrary position.
Shareholders should consult their own advisers concerning the potential tax
consequences to them, including state and local income taxes.
Comparison of Investment Policies and Risk Factors
The investment objective of the Trust is identical to the investment
objective of the New Fund. Investments in the Trust and the New Fund are not
insured or guaranteed by the U.S. government. Since the Trust and the New Fund
are managed to maintain a constant net asset value, the Trust and the New Fund
have little risk of principal loss. However, investments in the Trust and the
New Fund are subject to certain risks, which include, but are not limited to,
the following: the possibility that issuers of securities owned by the Trust
and the New Fund will have their credit ratings downgraded; the ability of the
issuers of securities owned by the Trust and the New Fund to meet their
obligations for payment of principal and interest when due or to repurchase
such securities as previously agreed; interest rate or market risk, which is
the potential for fluctuations in the prices of debt securities owned by the
Trust and the New Fund, due to changing interest rates (e.g., when interest
rates rise, bond prices generally decline); and prepayment or call risk, which
is the likelihood that, during periods of falling interest rates, debt
securities will be prepaid (or "called") prior to maturity, requiring the
proceeds to be invested by the Trust and the New Fund at a generally lower
interest rate. These risks could result in a loss of value of an investment in
the Trust, or in the New Fund when it commences operations.
The investment policies and restrictions of the New Fund have been
established so as to be comparable to the current investment policies and
restrictions of the Trust. The differences between the investment policies and
restrictions of the Trust and those of the New Fund result, in part, from the
standardization of certain investment policies and restrictions among the
Federated Funds, including the New Fund, and the elimination of certain
investment limitations which govern the Trust and had been previously required
under state law. A number of these investment limitations have been preempted
and are no longer applicable, and hence, the New Fund is not required to adopt
such limitations. Additionally, certain of the Trust's investment policies
were originally adopted as fundamental policies, when there is no legal
requirement that they be fundamental. Consequently, the New Fund is subject to
identical (or nearly identical) non-fundamental investment policies. Appendix
II to this Proxy Statement identifies the differences in the investment
policies and restrictions of the Trust and the New Fund. The investment
adviser to the Trust and the New Fund does not believe that the differences in
investment policies and restrictions are material. In addition, the adviser
believes that the level of risk of an investment in the Trust is comparable
to, and does not materially differ from, the level of risk of an investment in
the New Fund.
Comparative Information on Shareholder Rights and Obligations
Each of the Trust and MMOT is organized as a business trust pursuant to
a Declaration of Trust under the laws of the Commonwealth of Massachusetts. The
rights of shareholders of the Trust and of shareholders of MMOT relating to
voting, distributions and redemptions, as set forth in the applicable
Declaration of Trust and By-Laws, are substantively identical. Set forth below
is a brief summary of the significant rights of shareholders of the Trust and of
MMOT.
Neither the Trust nor MMOT are required to hold annual meetings of
shareholders. Shareholder approval is necessary only for certain changes in
operations or the election of Trustees under certain circumstances. A special
meeting of shareholders of either the Trust or MMOT for any permissible purpose
shall be called by the Trustees upon the written request of the holders of at
least 10% of the outstanding shares of the Trust or MMOT, as the case may be.
Each share of the Trust and MMOT is entitled to one vote. All shares of MMOT
have equal voting rights, except that only shares of the New Fund are entitled
to vote on matters only affecting the New Fund.
Under certain circumstances, shareholders of the Trust and shareholders
of the New Fund may be held personally liable as partners under Massachusetts
law for obligations of the Trust or of MMOT, respectively. To protect their
shareholders, the Trust and MMOT have filed legal documents with the
Commonwealth of Massachusetts that expressly disclaim the liability of their
shareholders for such acts or obligations of the Trust or MMOT. These documents
require that notice of this disclaimer be given in each agreement, obligation or
instrument that the Trust or MMOT or their Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's or the New Fund's obligations, each of the Trust and the New Fund is
required to use its property to protect or compensate the shareholder. On
request, the Trust or the New Fund will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the New Fund.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust or MMOT cannot meet its obligations to indemnify shareholders
and pay judgments against them from the assets of the Trust or MMOT.
Purchase and Redemption Information, Exchange Privileges, Distribution and
Pricing
The purchase, redemption, exchange privileges and distribution
policies of the Trust and the New Fund are identical.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE TRUST VOTE
"FOR" APPROVAL OF THE
REORGANIZATION AGREEMENT
INFORMATION ABOUT THE TRUST
Proxies, Quorum and Voting at the Meeting
Only shareholders of record on the Record Date will be entitled to vote
at the Meeting. Each share of the Trust is entitled to one vote. Fractional
shares are entitled to proportionate shares of one vote. Under both the
Investment Company Act of 1940 and the Declaration of Trust, the favorable vote
of a "majority of the outstanding voting shares" of the Trust means: (a) the
holders of 67% or more of the outstanding voting securities present at the
Meeting, if the holders of 50% or more of the outstanding voting securities of
the Trust are present or represented by proxy; or (b) the vote of the holders of
more than 50% of the outstanding voting securities, whichever is less. The
election of the Trustees and the ratification of the selection of the Auditors
are subject to specific vote requirements described under the respective
Proposals in this Proxy Statement. The favorable vote of a majority of the
outstanding voting shares of the Trust is required to approve each of the
proposed amendments to the Declaration of Trust. If Proposal #3(a) is approved
by shareholders, then the favorable vote of a majority of the outstanding voting
shares of the Trust will be required to approve the Reorganization. If Proposal
#3(a) is not approved by shareholders, then the favorable vote of at least
two-thirds of the outstanding voting shares of the Trust will be required to
approve the Reorganization.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a written notice
of revocation to the Secretary of the Trust. In addition, although mere
attendance at the Meeting will not revoke a proxy, a shareholder present at the
Meeting may withdraw his or her proxy and vote in person. All properly executed
and unrevoked proxies received in time for the Meeting will be voted in
accordance with the instructions contained in the proxies. If no instruction is
given on the proxy, the persons named as proxies will vote the shares
represented thereby in favor of the matters set forth in the attached Notice.
In order to hold the Meeting, a "quorum" of shareholders must be
present. Holders of one-fourth of the total number of outstanding shares of the
Trust and entitled to vote, present in person or by proxy, shall be required to
constitute a quorum for the purpose of voting on the Proposals.
For purposes of determining a quorum for transacting business at the
Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are present but which have not been voted. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of some of the proposals.
If a quorum is not present, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of one or more of
the proposals have not been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies with respect to such proposal(s). All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote AGAINST any such adjournment those proxies which they are required to vote
against the proposal and will vote in FAVOR of the adjournment other proxies
which they are authorized to vote. A shareholder vote may be taken on other
proposals in this Proxy Statement prior to any such adjournment if sufficient
votes have been received for approval.
As referred to in this Proxy Statement, the "Federated Fund Complex,"
"The Funds" or "Funds" include the following investment companies: Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.; CCB
Funds; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
Tax-Free Instruments Trust; The Planters Funds; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; World Investment Series, Inc.;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; High Yield Cash Trust;
Investment Series Trust; Targeted Duration Trust; The Virtus Funds; and Trust
for Financial Institutions.
Share Ownership of the Trustees
Officers and Trustees of the Trust own less than 1% of the Trust's outstanding
shares.
At the close of business on the Record Date, the following persons owned 5% or
more of the Trust's outstanding shares: [TO BE INSERTED]
<TABLE>
<CAPTION>
<S> <C> <C>
Trustee Compensation
Name, Aggregate Total Compensation Paid
Position With Compensation From Fund Complex+
Trust From
Trust1#
- ---------------------------------- -------------------------- ----------------------------------------------------------
John F. Donahue@* $0 $0 for the Trust and
Chairman and Trustee 54 other investment companies in the Fund Complex
Thomas G. Bigley $1,398.10 $113,860.22 for the Trust and
Trustee 54 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,538.14 $125,264.48 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Nicholas P. Constantakis $881.26 $47,958.02 for the Trust and
Trustee 29 other investment companies in the Fund Complex
William J. Copeland $1,538.14 $125,264.48 for the Trust and
Trustee 54 other investment companies in the Fund Complex
John F. Cunningham** $0 $0 for the Trust and
Trustee 26 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $1,398.10 $113,860.22 for the Trust and
Trustees 54 other investment companies in the Fund Complex
Peter E. Madden $1,398.10 $113,860.22 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Charles F. Mansfield, Jr.** $0 $0 for the Trust and
Trustee 25 other investment companies in the Fund Complex
John E. Murray, Jr., J.D., S.J.D. $1,398.10 $113,860.22 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Marjorie P. Smuts $1,398.10 $113,860.22 for the Trust and
Trustee 54 other investment companies in the Fund Complex
John S. Walsh** $0 $0 for the Trust and
Trustee 22 other investment companies in the Fund Complex
</TABLE>
1 Information is furnished for the fiscal year November 30, 1998.
# The aggregate compensation is provided for the Trust which is comprised of one
portfolio.
+ The information is provided for the last calendar year.
* The Trustee is deemed to be an "interested person" as defined in the 1940 Act.
@ Member of the Executive Committee.
** Messrs. Cunningham, Mansfield and Walsh became members of the Board of
Trustees on January 1, 1999. They did not earn any fees for serving the Fund
Complex since these fees are reported as of the end of the last calendar
year. They did not receive any fees as of the fiscal year end of the Trust.
During the fiscal year ended November 30, 1998, there were four
meetings of the Board of Trustees. The interested Trustees, other than Dr.
Ellis, do not receive fees from the Trust. Dr. Ellis is an interested person by
reason of the employment of his son-in-law by Federated Securities Corp. All
Trustees were reimbursed for expenses for attendance at Board of Trustees
meetings.
The Executive Committee of the Board of Trustees handles the
responsibilities of the Board between meetings of the Board. Other than its
Executive Committee, the Trust has one Board committee, the Audit Committee.
Generally, the function of the Audit Committee is to assist the Board of
Trustees in fulfilling its duties relating to the Trust's accounting and
financial reporting practices and to serve as a direct line of communication
between the Board of Trustees and the independent auditors. The specific
functions of the Audit Committee include recommending the engagement or
retention of the independent auditors, reviewing with the independent auditors
the plan and the results of the auditing engagement, approving professional
services provided by the independent auditors prior to the performance of such
services, considering the range of audit and non-audit fees, reviewing the
independence of the independent auditors, reviewing the scope and results of the
Trust's procedures for internal auditing, and reviewing the Trust's system of
internal accounting controls.
For the most recently completed fiscal year, Messrs. Conroy and
Copeland served on the Audit Committee. These Trustees are not interested
Trustees of the Trust. During the fiscal year ended November 30, 1998, there
were four meetings of the Audit Committee. All of the members of the Audit
Committee were present for each meeting. Each member of the Audit Committee
receives an annual fee of $100 plus $25 for attendance at each meeting and is
reimbursed for expenses of attendance.
Officers of the Trust
The executive officers of the Trust are elected annually by the Board
of Trustees. Each officer holds the office until qualification of his successor.
The names and birthdates of the executive officers of the Trust and their
principal occupations during the last five years are as follows:
John F. Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Trust and
Nominee for Trustee.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors, Inc.; staff member, Federated Securities Corp.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds in the Federated Fund Complex;
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; 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 Shareholder Services Company.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President and
Director, Federated Investors, Inc.; President and Trustee, Federated Advisers,
Federated Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company; Director,
Federated Services Company. Mr. Donahue is the son of John F. Donahue, Chairman
and Trustee of the Trust.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary, and Director, Federated Investors, Inc.; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Director,
Federated Services Company; Director, Federated Securities Corp.
Richard J. Thomas
Federated Investors Tower
Pittsburgh, PA
Birthdate: June 17, 1954
Treasurer
Treasurer of the Federated Fund Complex; Vice President - Funds Financial
Services Division, Federated Investors, Inc.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds in the Federated Fund Complex;
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.; Chairman and Director,
Federated Securities Corp.
William D. Dawson, III
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 3, 1949
Chief Investment Officer
Chief Investment Officer of the Trust and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling;
Federated Global Research Corp., Federated Investment Management Company,
Federated Management, Federated Research, and Passport Research, Ltd.;
Registered Representative, Federated Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice President, Federated Investors, Inc.
Mary Jo Ochson
Federated Investors Tower
Pittsburgh, PA
Birthdate: September 12, 1953
Vice President
Senior Vice President, Federated Investment Management Company.
None of the Officers of the Trust received salaries from the Trust
during the fiscal year ended November 30, 1998.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
The Trust is not required, and does not intend, to hold regular annual
meetings of shareholders. Shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for the next meeting of
shareholders should send their written proposals to Federated Tax-Free Trust,
Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, so that they are received within a reasonable time before any such
meeting.
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named on the enclosed proxy card will vote on such matters
according to their best judgment in the interests of the Trust.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Trustees,
John W. McGonigle
Secretary
August 10, 1999
<PAGE>
FEDERATED TAX-FREE TRUST
Investment Adviser
FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Administrator
FEDERATED SERVICES COMPANY
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Cusip
(_____/99)
<PAGE>
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
Federated Tax-Free Trust (the "Trust"), hereby appoint Patricia F. Conner, Gail
Cagney, William Haas, Elisabeth A. Miller and Ann M. Scanlon, or any one of
them, true and lawful attorneys, with the power of substitution of each, to vote
all shares of the Trust which the undersigned is entitled to vote at the Special
Meeting in lieu of Annual Meeting of Shareholders (the "Meeting") to be held on
September 23, 1999, at 5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00
p.m. and at any adjournment thereof.
The attorneys named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. Discretionary authority
is hereby conferred as to all other matters as may properly come before the
Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FEDERATED TAX-FREE
TRUST. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS.
By checking the box "FOR" below, you will vote to approve each of the proposed
items in this proxy, and to elect each of the nominees as Trustees of the Trust
FOR [ ]
Proposal 1 To elect John F. Cunningham, J. Christopher Donahue,
Charles F. Mansfield, Jr. and John S.
Walsh as Trustees of the Trust
FOR [ ]
WITHHOLD AUTHORITY
TO VOTE [ ]
VOTE FOR ALL EXCEPT [ ]
If you do not wish your shares to be voted "FOR"
a particular nominee, mark the "VOTE FOR ALL
EXCEPT" box and strike a line through the name of
each nominee for whom you are NOT voting. Your
shares will be voted for the remaining nominees.
Proposal 2 To ratify the selection of Deloitte & Touche LLP as the
Trust's independent auditors
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 3 To approve amendments and a restatement of the Trust's Declaration of
Trust:
3(a) To approve an amendment and restatement of the Trust's
Declaration of Trust to require the approval by a majority of
the outstanding voting shares in the event of the sale or
conveyance of the assets of the Trust to another trust or
corporation
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3(b) To approve an amendment and restatement of the Trust's
Declaration of Trust to permit the Board of Trustees to
liquidate assets of the Trust without seeking shareholder
approval
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 4 To approve a proposed Agreement and Plan of Reorganization
between the Trust and Money Market Obligations Trust, on
behalf of its series, Federated Tax-Free Trust (the "New
Fund"), whereby the New Fund would acquire all of the assets
of the Trust in exchange for shares of the New Fund to be
distributed pro rata by the Trust to its shareholders in
complete liquidation and termination of the Trust
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS
IMPORTANT Please
complete, sign and
return this card
as soon as
possible.
Dated
Signature
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Trust.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
You may also vote your shares by touchtone phone
by calling 1-800-690-6903 or through the
Internet at www.proxyvote.com
<PAGE>
I-4
I-1
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of March 1, 1999
(the "Agreement") between Federated Tax-Free Trust, a Massachusetts business
trust (the "Fund"), with its principal place of business at 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7000, and Money Market Obligations Trust,
a Massachusetts business trust (the "Trust"), with its principal place of
business located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000,
on behalf of its newly-organized portfolio, Federated Tax-Free Trust (the
"Successor Fund").
WHEREAS, the Board of Trustees of the Fund and the Board of
Trustees of the Trust have determined that it is in the best interests of the
Fund and the Trust, respectively, that the assets of the Fund be acquired by the
Successor Fund pursuant to this Agreement; and
WHEREAS, the parties desire to enter into a plan of exchange which
would constitute a reorganization within the meaning of Section 368(a)(1)(F) of
the Internal Revenue Code of 1986, as amended (the "Code"):
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Plan of Exchange.
(a) Subject to the terms and conditions set forth herein, on
the Exchange Date (as defined herein) the Fund shall assign, transfer and convey
its assets, including all securities and cash held by the Fund (subject to the
liabilities of the Fund) to the Successor Fund, and the Successor Fund shall
acquire all of the assets of the Fund (subject to the liabilities of the Fund)
in exchange for full and fractional shares of beneficial interest of the
Successor Fund (the "Successor Fund Shares"), to be issued by the Trust, having
an aggregate net asset value equal to the value of the net assets of the Fund.
The value of the assets of the Fund and the net asset value per share of the
Successor Fund Shares shall be determined as of the Valuation Date (as defined
herein) in accordance with the procedures for determining the value of the
Successor Fund's assets set forth in the Successor Fund's organizational
documents and the then-current prospectus and statement of additional
information for the Successor Fund that forms a part of the Successor Fund's
Registration Statement on Form N-1A (the "Registration Statement"). In lieu of
delivering certificates for the Successor Fund Shares, the Trust shall credit
the Successor Fund Shares to the Fund's account on the share record books of the
Trust and shall deliver a confirmation thereof to the Fund. The Fund shall then
deliver written instructions to the Trust's transfer agent to establish accounts
for the shareholders on the share record books relating to the Successor Fund.
(b) Delivery of the assets of the Fund to be transferred shall
be made not later than the next business day following the Valuation Date (the
"Exchange Date"). Assets transferred shall be delivered to State Street Bank and
Trust Company, the Trust's custodian (the "Custodian"), for the account of the
Trust and the Successor Fund with all securities not in bearer or book entry
form duly endorsed, or accompanied by duly executed separate assignments or
stock powers, in proper form for transfer, with signatures guaranteed, and with
all necessary stock transfer stamps, sufficient to transfer good and marketable
title thereto (including all accrued interest and dividends and rights
pertaining thereto) to the Custodian for the account of the Trust and the
Successor Fund free and clear of all liens, encumbrances, rights, restrictions
and claims. All cash delivered shall be in the form of immediately available
funds payable to the order of the Custodian for the account of the Trust and the
Successor Fund.
(c) The Fund will pay or cause to be paid to the Trust any
interest received on or after the Exchange Date with respect to assets
transferred from the Fund to the Successor Fund hereunder and to the Trust and
any distributions, rights or other assets received by the Fund after the
Exchange Date as distributions on or with respect to the securities transferred
from the Fund to the Successor Fund hereunder. All such assets shall be deemed
included in assets transferred to the Successor Fund on the Exchange Date and
shall not be separately valued.
(d) The Valuation Date shall be _____________, 1999, or such
earlier or later date as may be mutually agreed upon by the parties.
(e) As soon as practicable after the Exchange Date, the Fund
shall distribute all of the Successor Fund Shares received by it among the
shareholders of the Fund in proportion to the number of shares each such
shareholder holds in the Fund and shall take all other steps necessary to effect
its dissolution and termination. After the Exchange Date, the Fund shall not
conduct any business except in connection with its dissolution and termination.
2. The Fund's Representations and Warranties. The Fund represents and
warrants to and agrees with the Trust on behalf of the Successor Fund as
follows:
(a) The Fund is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and, subject
to the approval of its shareholders as contemplated hereby, to carry out this
Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by the Fund and is valid and binding on the Fund, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this Agreement does not and
will not, and the consummation of the transactions contemplated by this
Agreement will not, violate the Fund's Declaration of Trust or By-Laws or any
agreement or arrangement to which it is a party or by which it is bound.
(c) The Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and such registration has not been revoked or rescinded and is in full force and
effect.
(d) Except as shown on the audited financial statements of the
Fund for its most recently completed fiscal period and as incurred in the
ordinary course of the Fund's business since then, the Fund has no known
liabilities of a material amount, contingent or otherwise, and there are no
legal, administrative or other proceedings pending or, to the Fund's knowledge,
threatened against the Fund.
(e) On the Exchange Date, the Fund will have full right, power
and authority to sell, assign, transfer and deliver the Fund's assets to be
transferred by it hereunder.
3. The Trust's Representations and Warranties. The Trust, on behalf of
the Successor Fund, represents and warrants to and agrees with the Fund as
follows:
(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by the Trust and is valid and binding on the Trust, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this Agreement does not and
will not, and the consummation of the transactions contemplated by this
Agreement will not, violate the Trust's Declaration of Trust or By-Laws or any
agreement or arrangement to which it is a party or by which it is bound.
(c) The Trust is registered under the 1940 Act as an open-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect.
(d) The Successor Fund does not have any known liabilities of
a material amount, contingent or otherwise, and there are no legal,
administrative or other proceedings pending or, to the Trust's knowledge,
threatened against the Successor Fund. Other than organizational activities, the
Successor Fund has not engaged in any business activities.
(e) At the Exchange Date, the Successor Fund Shares to be
issued to the Fund (the only Successor Fund Shares to be issued as of the
Exchange Date) will have been duly authorized and, when issued and delivered
pursuant to this Agreement, will be legally and validly issued and will be fully
paid and non-assessable. No Trust or Successor Fund shareholder will have any
preemptive right of subscription or purchase in respect thereof.
4. The Trust's Conditions Precedent. The obligations of the Trust
hereunder shall be subject to the following conditions:
(a) The Fund shall have furnished to the Trust a statement of
the Fund's assets, including a list of securities owned by the Fund with their
respective tax costs and values determined as provided in Section 1 hereof, all
as of the Valuation Date.
(b) As of the Exchange Date, all representations and
warranties of the Fund made in this Agreement shall be true and correct as if
made at and as of such date, and the Fund shall have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such date.
(c) A vote of the shareholders of the Fund approving this
Agreement and the transactions and exchange contemplated hereby shall have been
adopted by the vote required by applicable law.
5. The Fund's Conditions Precedent. The obligations of the Fund
hereunder with respect to the Fund shall be subject to the condition that as of
the Exchange Date all representations and warranties of the Trust made in this
Agreement shall be true and correct as if made at and as of such date, and that
the Trust shall have complied with all of the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such date.
6. The Trust's and the Fund's Conditions Precedent. The obligations of
both the Trust and the Fund hereunder shall be subject to the following
conditions:
(a) The post-effective amendment to the Trust's Registration
Statement on Form N-1A relating to the Successor Fund under the Securities Act
of 1933, as amended, and the 1940 Act, if applicable, shall have become
effective, and any additional post-effective amendments to such Registration
Statement as are determined by the Trustees of the Trust to be necessary and
appropriate shall have been filed with the Commission and shall have become
effective.
(b) No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency which seeks to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transaction contemplated herein.
(c) Each party shall have received an opinion of Dickstein
Shapiro Morin & Oshinsky LLP to the effect that the reorganization contemplated
by this Agreement qualifies as a "reorganization" under Section 368(a)(1)(F) of
the Code.
Provided, however, that at any time prior to the Exchange Date, any of
the foregoing conditions in this Section 6 may be waived by the parties if, in
the judgment of the parties, such waiver will not have a material adverse effect
on the benefits intended under this Agreement to the shareholders of the Fund.
7. Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated and abandoned by resolution of the Board
of Trustees of the Fund or the Board of Trustees of the Trust at any time prior
to the Exchange Date (and notwithstanding any vote of the shareholders of the
Fund) if circumstances should develop that, in the opinion of either the Board
of Trustees of the Fund or the Board of Trustees of the Trust, make proceeding
with this Agreement inadvisable.
If this Agreement is terminated and the exchange contemplated hereby is
abandoned pursuant to the provisions of this Section 7, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto or the Trustees, officers or shareholders of the Trust or the Trustees,
officers or shareholders of the Fund, in respect of this Agreement.
8. Waiver and Amendments. At any time prior to the Exchange Date, any
of the conditions set forth in Section 4 may be waived by the Board of the
Trust, and any of the conditions set forth in Section 5 may be waived by the
Board of the Fund, if, in the judgment of the waiving party, such waiver will
not have a material adverse effect on the benefits intended under this Agreement
to the shareholders of the Fund or the shareholders of the Successor Fund, as
the case may be. In addition, prior to the Exchange Date, any provision of this
Agreement may be amended or modified by the Boards of the Fund and the Trust if
such amendment or modification would not have a material adverse effect upon the
benefits intended under this Agreement and would be consistent with the best
interests of shareholders of the Fund and the Successor Fund.
9. No Survival of Representations. None of the representations and
warranties included or provided for herein shall survive consummation of the
transactions contemplated hereby.
10. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflict of laws; provided, however, that the due
authorization, execution and delivery of this Agreement, in the case of the Fund
and the Trust, shall be governed and construed in accordance with the laws of
the Commonwealth of Massachusetts without giving effect to principles of
conflict of laws.
11. Capacity of Trustees, Etc.
(a) (i) The names "Federated Tax-Free Trust" and "Board of
Trustees of Federated Tax-Free Trust" refer, respectively, to the trust created
and the trustees, as trustees but not individually or personally, acting from
time to time under the Fund's Declaration of Trust, which is hereby referred to
and a copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Fund. The
obligations of the Fund entered into in the name or on behalf thereof by any of
the trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the trustees, shareholders or
representatives of the Fund personally, but bind only the trust property, and
all persons dealing with any portfolio of shares of the Fund must look solely to
the trust property belonging to such portfolio for the enforcement of any claims
against the Fund.
(ii) Both parties specifically acknowledge and agree that any liability of
the Fund under this Agreement, or in connection with the transactions
contemplated herein, shall be discharged only out of the assets of the Fund and
that no other portfolio of the Fund shall be liable with respect thereto.
(b) (i) The names "Money Market Obligations Trust" and "Board
of Trustees of Money Market Obligations Trust" refer, respectively, to the trust
created and the trustees, as trustees but not individually or personally, acting
from time to time under the Trust's Declaration of Trust, which is hereby
referred to and a copy of which is on file at the office of the State Secretary
of the Commonwealth of Massachusetts and at the principal office of the Trust.
The obligations of the Trust entered into in the name or on behalf of the
Successor Fund by any of the trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders or representatives of the Trust personally, but bind only
the Successor Fund's trust property, and all persons dealing with any portfolio
of shares of the Trust must look solely to the trust property belonging to such
portfolio for the enforcement of any claims against the Trust.
(ii) Both parties specifically acknowledge and agree that any liability of
the Trust under this Agreement, or in connection with the transactions
contemplated herein, shall be discharged only out of the assets of the Successor
Fund and that no other portfolio of the Trust shall be liable with respect
thereto.
12. Counterparts. This Agreement may be executed in counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, the Fund and the Trust have caused this Agreement
and Plan of Reorganization to be executed as of the date above first written.
FEDERATED TAX-FREE TRUST
ATTEST:
Title: Assistant Secretary Title: Executive Vice President
MONEY MARKET OBLIGATIONS
TRUST, on behalf of its portfolio,
Federated Tax-Free Trust
ATTEST:
Title: Assistant Secretary Title: Executive Vice President
<PAGE>
II-8
II-1
APPENDIX II
COMPARISON OF INVESTMENT POLICIES
AND LIMITATIONS
Set forth below is a comparison of the investment policies and
restrictions of the Trust and the New Fund:
FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS
Investments in Tax-Exempt Securities
The Trust: "As a fundamental investment policy, at least 80% of the Trust's
annual interest income will be exempt from Federal regular income tax except in
extraordinary circumstances when, for example, management feels that market
conditions dictate a defensive posture in temporary investments."
The New Fund: "As a fundamental investment policy, under normal market
circumstances, at least 80% of the Fund's annual interest income will be exempt
from Federal regular income tax."
Ratings of Tax-Exempt Securities
The Trust: "The securities in which the Trust invests are rated in the highest
short-term rating category by one or more nationally recognized rating services
or will be of comparable quality to securities having such ratings. A rating
service's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated SP-1+ or SP-1 by
Standard & Poor's ("S&P"), MIG-1 by Moody's Investors Service, Inc. ("Moody's"),
or F-1+ or F-1 by Fitch Investors Service, Inc. ("Fitch") are all considered
rated in the highest short-term rating category. Longer term securities that
have a remaining maturity of 397 days or less and that have not received a
short-term rating must be rated within the two highest long-term rating
categories by one or more rating services. The Trust will follow applicable
regulations in determining whether a security rated by more than one rating
service can be treated as being in the highest short-term rating category;
currently, such securities must be rated by two rating services at their highest
rating category." The Trust follows applicable regulations with respect to
unrated securities.
The New Fund: The New Fund is subject to non-fundamental investment policy that
provides "The securities in which the Fund invests must be rated in the highest
short-term rating category by one or more nationally recognized rating services
or be of comparable quality to securities having such ratings. The Trust follows
applicable regulations with respect to unrated securities.
Permissible Investments
The Trust: "The Trust seeks to achieve its investment objective by investing in
a diversified portfolio of short-term Municipal Securities - obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest from which is, in the opinion of bond counsel
for the issuer, or in the opinion of officers to the Trust and/or the
[investment a]dviser to the Trust, exempt from Federal regular income tax.
Municipal Securities also include participation interests in the above
obligations ("Municipal Securities"). Interest income of the Trust which is
exempt from Federal regular income tax will retain its tax-free status when
distributed to shareholders. Such income may be subject to state and local tax.
All of the Trust's investment assets will consist of Municipal Securities,
Temporary Investments, as described below, and cash. The Trust will invest only
in Municipal Securities, including Industrial Revenue Bonds which are rated
within the two highest ratings for Municipal Securities by Moody's Investors
Services ("Moody's") -- Aaa or Aa -- or by Standard & Poor's Corporation, Inc.
("S&P") -- AAA or AA; or which at the time of purchase are guaranteed by the
U.S. Government as to the payment of principal and interest, such as Tax-Exempt
Project Notes; or are (1) rated within Moody's short-term municipal obligations
highest rating of MIG 1 or S&P's highest municipal commercial paper rating of
A-1, or (2) unrated (where the issuer has not sought such a rating) if the Board
of Trustees determines prior to the purchase thereof that such Municipal
Securities are of "high quality." Subsequent to its purchase by the Trust, an
issue of Municipal Securities may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Trust. Neither event requires the
elimination of such obligation from the Trust's portfolio, but the [Trust's
investment a]dviser will consider such an event in its determination of whether
the Trust should continue to hold such obligation in its portfolio. To the
extent the ratings accorded by S&P or Moody's for Municipal Securities change as
a result of changes in these rating systems, the Trust will attempt to use
similar ratings as standards. In the future, the Trust may also use similar
ratings of services other than S&P or Moody's."
The New Fund: The New Fund is subject to a set of non-fundamental investment
policies governing its permissible investments that are substantially similar,
and that provide:
"The Fund seeks to achieve its investment objective by investing in a
diversified portfolio of short-term tax-exempt securities - obligations issued
by or on behalf of states, territories and possessions of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest from which is, in the opinion of bond counsel
for the issuer, or in the opinion of officers to the Fund and/or the Fund's
investment adviser, exempt from Federal regular income tax and from the federal
alternative minimum tax. Short-term tax-exempt securities also include
participation interests in the above obligations ("Municipal Securities").
All of the Fund's investment assets will consist of Municipal Securities,
temporary investments and cash. The Fund will invest only in Municipal
Securities, which are rated within the two highest ratings for Municipal
Securities by Moody's Investors Services ("Moody's") or Standard & Poor's
Ratings Group ("S&P"), or which at the time of purchase are guaranteed by the
U.S. Government as to the payment of principal and interest; or are (1) rated
within Moody's short-term municipal obligations highest rating or S&P's highest
municipal commercial paper rating, or (2) unrated (where the issuer has not
sought such a rating) if the Board of Trustees determines prior to the purchase
thereof that such Municipal Securities are of "high quality." Subsequent to its
purchase by the Fund, an issue of Municipal Securities may cease to be rated or
its rating may be reduced below the minimum required for purchase by the Fund.
Neither event requires the elimination of such obligation from the Fund's
portfolio, but the Fund's investment adviser will consider such an event in its
determination of whether the Fund should continue to hold such obligation in its
portfolio. To the extent the ratings accorded by S&P or Moody's for Municipal
Securities change as a result of changes in these rating systems, the Fund will
attempt to use similar ratings as standards. In the future, the Fund may also
use similar ratings of services other than S&P or Moody's."
Temporary Investments
The Trust: "From time to time on a temporary basis or for defensive purposes,
the Trust may invest in `temporary investments' which mature in the same manner
as the Municipal Securities in which the Trust can invest, consisting of: other
obligations issued by or on behalf of municipal or corporate issuers; U.S.
Treasury Bills, all other marketable obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities; [instruments of banks [or]
savings and loans which are members of the Federal Deposit Insurance Corporation
(FDIC) or Federal Savings and Loan Insurance Corporation (FSLIC) (such as
certificates of deposit, demand and time deposits, savings shares and bankers'
acceptances); these instruments are not necessarily guaranteed by the FDIC or
the FSLIC)]; repurchase agreements (an instrument where the seller agrees to
repurchase the security at the time of sale at a mutually agreed upon time and
price), and prime commercial paper (as set forth below) including variable
amount demand master note[s] represent[ing] a borrowing arrangement under a
letter agreement between a commercial paper issuer and an institutional lender
such as the Trust. The Trust will not invest in instruments issued by banks or
savings and loans unless at the time of investment such banks and savings and
loans have capital, surplus and undivided profits in excess of $100,000,000 (as
of the date of their most recently published financial statements). Commercial
paper investments will be limited to commercial paper rated A-1 by Standard &
Poor's Corporation, Prime 1 by Moody's Investors Services, Inc. or F-1 by Fitch
Investors Service. The Trust may invest in these temporary investments, for
example, due to market conditions or pending investment of proceeds of sales of
shares or proceeds from the sale of portfolio securities or in anticipation of
redemptions. However, the Trust generally expects to invest the proceeds
received from the sale of Trust shares in Municipal Securities as soon as
reasonably possible. The rating requirements for the Trust's investments in
Municipal Securities will not be applicable to Temporary Investments. However,
management will limit Temporary Investments to the standards set forth above. In
addition, no Temporary Investments in municipal securities or corporate
obligations will be purchased unless they meet the ratings described in the
Trust's Investment Policies. Interest income from temporary investments may be
taxable to shareholders as ordinary income."
The New Fund: The New Fund is subject to a non-fundamental investment policy
that provides "During adverse market conditions, the Fund may temporarily depart
from its principal investment strategies by investing in securities subject to
federal regular income tax. Temporary investments will be of comparable quality
to other securities in which the Fund invests."
When-Issued and Delayed Delivery Transactions
The Trust: "The Trust may also purchase and sell short-term Municipal Securities
on a when-issued or delayed delivery basis. When-issued and delayed delivery
transactions arise when securities are bought or sold with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Trust at the time of entering into the
transactions. When engaging in when-issued and delayed delivery transactions,
the Trust relies on the buyer or seller, as the case may be, to consummate the
transactions. Failure to do so may result in the Trust missing the opportunity
of obtaining a price or yield considered to be advantageous. When-issued and
delayed delivery transactions ordinarily occur within a month before delivery is
due, however no payment or delivery will be made by the Trust before it receives
payment or delivery from the other party to the transaction. There are no fees
or other expenses associated with these types of transactions other than normal
transaction costs. Engaging in when-issued or delayed delivery transactions are
normal methods of buying and selling portfolio securities by the Trust in
pursuit of its investment objective of providing dividend income exempt from
Federal regular income taxes which seeking relative stability of principal."
The New Fund: The New Fund is subject to a non-fundamental investment policy
that provides that the Fund may engage in when-issued and delayed delivery
transactions.
Portfolio Trading
The Trust: "The Trust may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations."
The New Fund: The New Fund is not subject to a comparable investment policy.
Diversification of Investments
The Trust: The Trust is not subject to a fundamental investment policy regarding
diversification of its investments; however, the Trust is registered as a
diversified investment company under the 1940 Act, and, as a money market fund,
the Trust operates in accordance with the various requirements of the 1940 Act's
Rule 2a-7 and complies with Rule 2a-7's diversification requirements.
The New Fund: "With respect to securities comprising 75% of the value of its
total assets, the Fund will not purchase securities of any one issuer (other
than cash; cash items; securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities; and securities of other
investment companies) if, as a result, more than 5% of the value of its total
assets would be invested in securities of that issuer, or the Fund would own
more than 10% of the outstanding voting securities of that issuer."
Issuing Senior Securities and Borrowing Money
The Trust: "The Trust will not issue senior securities except that the
Trust may borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Trust will not borrow money, except as a temporary measure for
extraordinary or emergency purposes and then (a) only in amounts not in excess
of five percent (5%) of the value of its total assets or (b) in an amount up to
one-third of the value of its total assets including the amount borrowed in
order to meet redemption requests without immediately selling any portfolio
securities. (This borrowing provision is not for investment leverage but solely
to facilitate management of the portfolio by enabling the Trust to meet
redemption requests where the liquidation of portfolio securities is deemed to
be inconvenient or disadvantageous.) While any such borrowings are outstanding,
no net purchases of investment securities will be made by the Trust. If due to
market fluctuations or other reasons the value of the Trust's assets falls below
300% of its borrowing, the Trust will reduce its borrowing within three business
days."
The New Fund: "The Fund may borrow money, directly or indirectly, and issue
senior securities to the maximum extent permitted under the 1940 Act."
Selling Short and Buying on Margin
The Trust: "The Trust will not make short sales of securities or purchase
any securities on margin, except for such credits as are necessary for the
clearance of transactions."
The New Fund: The New Fund is not subject to an investment limitation regarding
selling securities short. The New Fund is subject to a non-fundamental
investment limitation relating to margin transactions that states: "The Fund
will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of
securities."
Investing in Real Estate
The Trust: "The Trust will not purchase or sell real estate, but this shall
not prevent the Trust from investing in [tax-exempt] Municipal Securities
secured by real estate or interests therein."
The New Fund: "The Fund may not purchase or sell real estate, provided that this
restriction does not prevent the Fund from investing in issuers which invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner."
Investing in Commodities
The Trust: "The Trust will not purchase or sell commodities or commodity
contracts."
The New Fund: "The Fund may not purchase or sell physical commodities,
provided that the Fund may purchase securities of companies that deal in
commodities."
Investing in Minerals
The Trust: "The Trust will not purchase or sell oil, gas or other mineral
exploration or development programs."
The New Fund: The New Fund is not subject to an investment restriction
pertaining to investing in these types of securities.
Pledging Assets
The Trust: "The Trust will not pledge, mortgage, or hypothecate its assets
except that, to secure borrowings permitted [by its investment limitations], it
may pledge securities having a market value at the time of pledge not exceeding
10% of the value of the Trust's total assets."
The New Fund: The New Fund is subject to a non-fundamental investment limitation
pertaining to pledging assets that provides: "The Fund will not mortgage, pledge
or hypothecate any of its assets, provided that this shall not apply to the
transfer of securities in connection with any permissible borrowing or to
collateral arrangements in connection with permissible activities."
Lending Cash or Securities
The Trust: "The Trust will not make loans, except that the Trust may, in
accordance with its investment objective, policies and limitations, acquire
publicly or non-publicly issued [tax-exempt] Municipal Securities or temporary
investments or enter into repurchase agreements."
The New Fund: "The Fund may not make loans, provided that this restriction does
not prevent the Fund from purchasing debt obligations, entering into repurchase
agreements, lending its assets to broker/dealers or institutional investors and
investing in loans, including assignments and participation interests."
Underwriting Securities
The Trust: "The Trust will not underwrite any issue of securities, except
as it 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 New Fund: "The Fund may not underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances where it
may be considered to be an underwriter under the Securities Act of 1933."
Concentration of Investments
The Trust: "The Trust does not generally intend to purchase securities if, as a
result of such purchase, more than 25 percent of the value of its assets would
be invested in the securities of governmental subdivisions located in any one
state, territory, or possession of the United States. The Trust may invest more
than 25 percent of the value of its assets in Short-Term Tax-Exempt Project
Notes which are guaranteed by the U.S. Government regardless of the location of
the issuing municipality. Weakness in a state's ability to raise taxes resulting
from a contraction of its tax based on a rise in delinquencies could influence
the state's ability to support housing programs. In addition, an adverse
economic climate, changes in political sentiment within a state legislature, or
on the part of a state electorate, could also impact such housing programs, and
in turn, the availability of new issues of project notes. At the Federal level,
the decision to curtail [the] Federal budget deficit or both could similarly
reduce the volume of project notes available in auction markets. One effect of
the reduction of the supply of project notes, given continuing growth in demand
for these notes, might be to reduce yields on them to a point that such notes
are relatively noncompetitive with other similar tax-free securities. Further,
were the Congress of the United States to revoke the right of the Department of
Housing and Urban Development to back project notes with the full faith and
credit of the Federal government or alter the law in some other way, suitability
of project notes as investments for the Trust would have to be re-examined and
purchases or holdings of project notes could fall below 25%.
With respect to temporary investments, the Trust will not purchase securities
(other than securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities), if as result of such purchase, more than 25% of the value
of the Trust's assets would be invested in any one industry. However, the Trust
may, at times, invest more than 25 percent of the value of its assets in cash or
cash items (including bank time and demand deposits such as certificates of
deposit), U.S. Treasury bills or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or instruments secured by these
money market instruments, such as repurchase agreements, for defensive purposes.
If, because of changing values, the value of the Trust's assets invested in a
particular industry or in the securities of governmental subdivisions located in
any one state, territory or possession of the United States exceeds 25 percent
of the value of its assets, the Trust will not be required to make any reduction
of its holdings in that particular industry or in the securities of the
governmental body."
The New Fund: "The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily engaged
in the same industry, except that the Fund may concentrate its investments in
short-term tax exempt securities which are guaranteed by the U.S. government,
regardless of the location of the issuing municipality. Government securities,
municipal securities and bank instruments are not deemed to constitute an
industry."
Investing in Issuers Whose Securities are Owned by Officers and Trustees
The Trust: "The Trust will not purchase or retain the securities of any issuer
other than the securities of the Trust, if, to the Trust's knowledge, those
officers and Trustees of the Trust or the [Trust's investment] adviser, who
individually own beneficially more than 1/2 of 1% of the outstanding securities
of such issuer, together own beneficially more than 5% of such outstanding
securities."
The New Fund: The New Fund is not subject to a comparable investment limitation.
Investing in Securities of Other Investment Companies
The Trust: "The Trust will not invest in securities issued by any other
investment company or investment trust."
The New Fund: The New Fund is subject to a non-fundamental investment
policy that provides that "The Fund may invest its assets in securities of other
investment companies."
Investing for Control
The Trust: "The Trust will not acquire voting securities except as part of
a merger, consolidation, reorganization, or acquisition of assets."
The New Fund: The New Fund is not subject to a comparable investment limitation.
Determining Compliance with Investment Policies and Limitations
The Trust: "If any percentage limitation is adhered to at the time of an
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 New Fund: The New Fund is subject to a non-fundamental operating policy that
states: "Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such limitation."
NON-FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS
Permissible Investments
The Trust: "The Trust pursues its investment objective by investing in a
portfolio of Municipal Securities maturing in 397 days or less."
The New Fund: "The Fund pursues its investment objective by investing in a
portfolio of Municipal Securities maturing in 397 days or less."
Investing in Restricted and Illiquid Securities
The Trust: "The Trust may invest in restricted securities. Restricted securities
are any securities in which the Trust may invest pursuant to its investment
objective and policies but which are subject to restrictions on resale under
federal securities law. Under criteria established by the Trustees certain
restricted securities are determined to be liquid. To the extent that restricted
securities are not determined to be liquid, the Trust will limit their purchase,
together with other illiquid securities, to 10% of its net assets."
The New Fund: "The Fund will not purchase securities for which there is no
readily available market, or enter into repurchase agreements or purchase time
deposits maturing in more than seven days, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 10% of the Fund's
net assets."
Borrowing Money and Pledging Securities
The Trust: "The Trust did not borrow money or pledge securities in excess
of 5% of the value of its net assets during the last fiscal year and has no
present intent to do so during the coming fiscal year."
The New Fund: The New Fund is not subject to a comparable investment
limitation.
Regulatory Compliance
The Trust: "The Trust may follow non-fundamental operational policies that are
more restrictive than its fundamental investment limitations, as set forth in
the Trust's prospectus and Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Trust
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Trust will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by rating services, according to Rule 2a-7. The
Trust may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders."
The New Fund: The New Fund is subject to an identical operating policy.
Private Activity Bonds
The Trust: "The Trust will purchase private activity bonds that are not
subject to federal alternative minimum (AMT)."
The New Fund: The New Fund is not subject to a comparable investment
limitation.
