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
TAX-FREE INSTRUMENTS 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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ii
TAX-FREE INSTRUMENTS 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.
Tax-Free Instruments Trust (the "Trust") will hold a special meeting of
shareholders on June 30, 2000. 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 an amendment to and a restatement of the Declaration of Trust; and
o a proposed reorganization of Tax-Free Instruments 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 IS THE REORGANIZATION BEING PROPOSED?
Tax-Free Instruments 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 AN AMENDMENT 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.
21
PRELIMINARY
TAX-FREE INSTRUMENTS TRUST
NOTICE OF SPECIAL MEETING
TO BE HELD JUNE 30, 2000
A Special Meeting of the shareholders of Tax-Free Instruments Trust
(the "Trust") will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-7000, at 2:00 p.m. (Eastern time), on June 30, 2000, to consider
proposals:
(1)To elect seven Trustees.
(2)To approve an amendment and a restatement of the Trust's
Declaration of Trust to permit the Board of Trustees to
liquidate the assets of the Trust, or of any series or class
of the Trust, without seeking shareholder approval.
(3)To approve a proposed Agreement and Plan of Reorganization
between the Trust and Money Market Obligations Trust, on
behalf of its series, Tax-Free Instruments 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 May 11, 2000 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
May 24, 2000
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. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
TABLE OF CONTENTS
ABOUT THE PROXY SOLICITATION AND THE MEETING......................
ELECTION OF SEVEN TRUSTEES........................................
ABOUT THE ELECTION OF TRUSTEES....................................
TRUSTEES STANDING FOR ELECTION....................................
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES........................
APPROVAL OF AN AMENDMENT 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 LIMITATIONSII-1
3
PRELIMINARY
PROXY STATEMENT
TAX-FREE INSTRUMENTS 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 of shareholders of the Trust to be held on June 30, 2000, at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (such special
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 May 24, 2000, to shareholders of record at the
close of business on May 11, 2000 (the "Record Date"). On the Record Date, the
Trust had outstanding _____________ shares of beneficial interest.
The Trust's annual report, which includes audited financial statements for
the fiscal year ended March 31, 1999, was previously mailed to shareholders. The
Trust's semi-annual report, which contains unaudited financial statements for
the period ended September 30, 1999, was also previously mailed to shareholders.
The Trust will promptly provide, without charge and upon request, to each person
to whom this Proxy Statement is addressed, a copy of the Trust's annual report
and/or semi-annual report. Requests for the annual report or the semi-annual
report of the Trust may be made by writing to the Trust's principal executive
offices or calling the Trust's toll-free telephone number. 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 SEVEN TRUSTEES
The persons named as proxies intend to vote in favor of the election of
Thomas G. Bigley, Nicholas P. Constantakis, John F. Cunningham, J. Christopher
Donahue, Charles F. Mansfield, Jr., John E. Murray, Jr. and John S. Walsh
(collectively, the "Nominees") as Trustees of the Trust. Messrs. Bigley,
Mansfield, Murray and Walsh are presently serving as Trustees. If elected by
shareholders, Messrs. Constantakis, Cunningham and Donahue are expected to
assume their responsibilities as Trustees effective July 1, 2000. Please see
"ABOUT THE ELECTION OF TRUSTEES" below for current information about the
Nominees, and "OFFICERS AND INCUMBENT TRUSTEES OF THE TRUST" in this Proxy
Statement for current information about the incumbent Trustees who have
previously been elected by shareholders.
Messrs. Bigley and Murray were appointed Trustees of the Trust on November
15, 1994 and February 14, 1995, respectively, to fill vacancies created by the
decision to expand the Board. Messrs. Mansfield and Walsh were appointed
Trustees on January 1, 1999, also to fill vacancies created by the decision to
expand the size of the Board. Likewise, Messrs. Constantakis, Cunningham and
Donahue are being proposed for election as Trustees to fill vacancies resulting
from the decision to expand the size of the Board.
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 seven 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
The Declaration of Trust provides that Trustees will continue in office
until their respective successors are elected, and therefore, 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 Nominees standing for election who are not presently serving as
Trustees, along with their addresses, birthdates, present positions with the
Trust, if applicable, and principal occupations during the past five years:
TRUSTEES STANDING FOR ELECTION
THOMAS G. BIGLEY
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Federated Fund Complex; Director and Member of
Executive Committee, Children's Hospital of Pittsburgh; Director, Robroy
Industries, Inc. (coated steel conduits/computer storage equipment); formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc. (physician
practice management); Director and Member of Executive Committee, University of
Pittsburgh.
CHARLES F. MANSFIELD, JR.
80 South Road
Westhampton Beach, NY
Birthdate: April 10, 1945
Trustee
Director or Trustee of some of the Funds in the Federated Fund Complex;
Executive Vice President, Legal and External Affairs, Dugan Valva Contess, Inc.
(marketing, communications, technology and consulting); formerly: Management
Consultant. Previous Positions: Chief Executive Officer, PBTC International
Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President,
Marine Midland Bank; Vice President, Citibank; Assistant Professor of Banking
and Finance, Frank G. Zarb School of Business, Hofstra University.
JOHN E. MURRAY, JR., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Federated Fund Complex; President, Law Professor,
Duquesne University; Consulting Partner, Mollica & Murray; Director, Michael
Baker Corp. (engineering, construction, operations and technical services).
Previous Positions: Dean and Professor of Law, University of Pittsburgh School
of Law; Dean and Professor of Law, Villanova University School of Law.
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. (manufacturer of construction temporary
heaters); President and Director, Manufacturers Products, Inc. (distributor of
portable construction heaters); President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly, Inc. (heavy highway
contractor); formerly, Vice President, Walsh & Kelly, Inc.
NOMINEES NOT PRESENTLY SERVING AS TRUSTEES
NICHOLAS P. CONSTANTAKIS
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Director or Trustee of the Federated Fund Complex; Director, Michael Baker
Corporation (engingeering, construction, operations and technical services);
formerly, Partner, Andersen Worldwide SC.
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.
(strategic business consulting); Trustee Associate, Boston College; Director,
Iperia Corp. (communications/software); formerly: Director, Redgate
Communications and EMC Corporation (computer storage systems). Previous
Positions: Chairman of the Board and Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First
National Bank of Boston; Director, Apollo Computer, Inc.
J. CHRISTOPHER DONAHUE
Federated Investors Tower
1001 Liberty Avenue
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, Chief
Executive Officer and Director, Federated Investors, Inc.; President, Chief
Executive Officer and Trustee, Federated Investment Management Company; Trustee,
Federated Investment Counseling; President, Chief Executive Officer and
Director, Federated Global Investment Management Corp.; President and Chief
Executive Officer, Passport Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services Company; formerly: President,
Federated Investment Counseling. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
PROPOSAL #2: 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
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 operations to respond quickly to
changes in the market. An item in the current Declaration of Trust, described
below, prohibits the Trust from responding quickly and favorably to changing
markets without going to the expense and delay of holding a shareholder meeting.
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, or of any series or class of the
Trust, and then redeem all outstanding shares of the Trust, or of any such
series or class of the Trust. Currently, a majority vote of shareholders is
required to liquidate the Trust, or any series or class of 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, or of any series or class
of 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, or of any Series or Class 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, belonging to each Series or Class, the
Trustees shall distribute the remaining assets belonging to each Series or
Class ratably among the holders of the outstanding Shares of that Series
or Class."
The Trustees 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, or of any series or class 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 of the Trust, or of any series or class of the
Trust, 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 #3: 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, Tax-Free
Instruments 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 consists of a
number of 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
current income exempt from federal income tax consistent with stability of
principal. The New Fund and the Trust pursue their investment objectives by
investing in a portfolio of tax-exempt securities maturing in thirteen months 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 the New Fund or by the shareholders of 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 subject to liabilities of the Trust to
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. 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 July 1, 2000.
The Trust's investment adviser is responsible for the payment of all
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 1981.
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 __________________,
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 ________________, 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 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, 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, and the Trust and the New Fund each will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (2) no gain or
loss will be recognized by the New Fund upon its receipt of the Trust's assets
(subject to the liabilities of the Trust) in exchange for New Fund shares; (3)
no gain or loss will be recognized by the Trust upon the transfer of its assets
(subject to the liabilities of the Trust) 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 the
exchange of their Trust shares for New Fund shares; (5) the tax basis of the
Trust's assets acquired by the New Fund will be the same as the tax basis of
such assets to the Trust immediately prior to the Reorganization; (6) the tax
basis of New Fund shares received by each shareholder of the Trust pursuant to
the Reorganization will be the same as the tax basis of Trust shares held by
such shareholder immediately prior to the Reorganization; (7) the holding period
of the assets of the Trust in the hands of the New Fund will include the period
during which those assets were held by the Trust; and (8) the holding period of
New Fund shares received by each shareholder of the Trust pursuant to the
Reorganization will include the period during which the Trust shares exchanged
therefor were held by such shareholder, provided the Trust shares were held as
capital assets on the date of 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 is subject to the specific vote requirement described in Proposal #1 in
this Proxy Statement. The favorable vote of a majority of the shares of all
series and classes of the Trust then outstanding and entitled to vote thereon is
required to approve the proposed amendment to the Declaration of Trust, as
described in Proposal #2, and the Reorganization of the Trust, as described in
Proposal #3.
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 more than fifty percent of the total number of outstanding shares of
all series and classes of the Trust 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 plurality 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: Cash Trust Series
II; Cash Trust Series, Inc.; CCB Funds; 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 Fixed
Income Securities, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; 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 Investment Series
Funds, Inc.; Federated Managed Allocation Portfolios; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Securities Income Trust; Federated Short-Term Municipal 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.; FirstMerit Funds; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Marshall Funds, Inc.; Money Market Obligations Trust; Regions
Funds; RIGGS Funds; SouthTrust Funds; Tax-Free Instruments Trust; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; and World
Investment Series, Inc.
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, to the
knowledge of management, more than 5% of the outstanding shares of the Trust:
[TO BE INSERTED]
<TABLE>
<CAPTION>
<S> <C> <C>
TRUSTEE COMPENSATION
NAME AND POSITION AGGREGATE TOTAL COMPENSATION PAID
WITH TRUST COMPENSATION FROM FUND COMPLEX+
FROM TRUST
1 #
- ----------------------------------------------------------------------------------
John F. Donahue*@ $0 $0 for the Trust and 43 other
Chairman and Trustee investment companies in the Fund Complex
Thomas G. Bigley $______ $116,760.63 for the Trust and 43 other
Trustee investment companies in the Fund Complex
John T. Conroy, Jr. $______ $128,455.37 for the Trust and 43 other
Trustee investment companies in the Fund Complex
Lawrence D. Ellis, M.D.* $______ $116,760.63 for the Trust and 43 other
Trustee investment companies in the Fund Complex
Peter E. Madden $______ $109,153.60 for the Trust and 43 other
Trustee investment companies in the Fund Complex
Charles F. Mansfield, Jr. $______ $102,573.91 for the Trust and 40 other
Trustee investment companies in the Fund Complex
John E. Murray, Jr., J.D., $______ $128,455.37 for the Trust and 43 other
S.J.D. @ investment companies in the Fund Complex
Trustee
Marjorie P. Smuts $______ $116,760.63 for the Trust and 43 other
Trustee investment companies in the Fund Complex
John S. Walsh $______ $94,536.85 for the Trust and 39 other
Trustee investment companies in the Fund Complex
</TABLE>
1 Information is furnished for the fiscal year ended March 31, 2000.
# 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.
During the fiscal year ended March 31, 2000, 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, Madden and
Murray served on the Audit Committee. These Trustees are not interested persons
of the Trust. During the fiscal year ended March 31, 2000, there were two
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 AND INCUMBENT TRUSTEES 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, as well as of
the incumbent Trustees who have previously been elected by shareholders, and
their principal occupations during the last five years, are set forth below:
John F. Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Date Became a Trustee/Officer: November 17, 1981/November 18, 1982
Chief Executive Officer and Director or Trustee of the Federated Fund Complex;
Chairman and Director, Federated Investors, Inc.; Chairman, Federated Investment
Management Company, Federated Global Investment Management Corp. and Passport
Research, Ltd.; formerly: Trustee, Federated Investment Management Company and
Chairman and Director, Federated Investment Counseling. Mr. Donahue is the
father of J. Christopher Donahue, Nominee for Trustee and Executive Vice
President of the Trust.
John T. Conroy, Jr.
Grubb & Ellis/Investment
Properties Corporation
3201 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Date Became a Trustee: November 13, 1991
Director or Trustee of the Federated Fund Complex; President, Investment
Properties Corporation; Senior Vice President, John R. Wood and Associates,
Inc., Realtors; Partner or Trustee in private real estate ventures in Southwest
Florida; formerly: President, Naples Property Management, Inc. and Northgate
Village Development Corporation.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue
Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Date Became a Trustee: August 26, 1987
Director or Trustee of the Federated Fund Complex; Professor of Medicine,
University of Pittsburgh; Medical Director, University of Pittsburgh Medical
Center-Downtown; Hematologist, Oncologist, and Internist, University of
Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society
of America.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Date Became a Trustee: November 13, 1991
Director or Trustee of the Federated Fund Complex; formerly: Representative,
Commonwealth of Massachusetts General Court; President, State Street Bank and
Trust Company and State Street Corporation. Previous Positions: Director, VISA
USA and VISA International; Chairman and Director, Massachusetts Bankers
Association; Director, Depository Trust Corporation. Director, The Boston Stock
Exchange.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Date Became a Trustee: February 24, 1984
Director or Trustee of the Federated Fund Complex; Public
Relations/Marketing/Conference Planning. Previous Positions: National
Spokesperson, Aluminum Company of America; television producer; business owner.
J. Christopher Donahue
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
Date Became an Officer: June 1, 1995
President or Executive Vice President of the Federated Fund Complex; Director or
Trustee of some of the Funds in the Federated Fund Complex; President, Chief
Executive Officer and Director, Federated Investors, Inc.; President, Chief
Executive Officer and Trustee, Federated Investment Management Company; Trustee,
Federated Investment Counseling; President, Chief Executive Officer and
Director, Federated Global Investment Management Corp.; President and Chief
Executive Officer, Passport Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services Company; formerly: President,
Federated Investment Counseling. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
Glen R. Johnson
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: May 2, 1929
President
Date Became an Officer: November 18, 1982
President of some of the Funds in the Federated Fund Complex; Staff member,
Federated Securities Corp.; formerly: Trustee or Director of some of the Funds
in the Federated Fund Complex.
Edward C. Gonzales
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Date Became an Officer: June 1, 1995
President, Executive Vice President and Treasurer of some of the Funds in the
Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Trustee,
Federated Administrative Services; formerly: Trustee or Director of some of the
Funds in the Federated Fund Complex; Chief Executive Officer and Chairman,
Federated Administrative Services; Vice President, Federated Investment
Management Company, Federated Investment Counseling, Federated Global Investment
Management Corp. and Passport Research Ltd.; Director and Executive Vice
President, Federated Securities Corp.; Director, Federated Services Company;
Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Date Became an Officer: November 18, 1982
Executive Vice President and Secretary of the Federated Fund Complex; Executive
Vice President, Secretary, and Director, Federated Investors, Inc.; formerly:
Trustee, Federated Investment Management Company and Federated Investment
Counseling; Director, Federated Global Investment Management Corp., Federated
Services Company and Federated Securities Corp.
Richard B. Fisher
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Date Became an Officer: November 18, 1982
President or Vice President of some of the Funds in the Federated Fund Complex;
Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.;
formerly: Director or Trustee of some of the Funds in the Federated Fund
Complex; Executive Vice President, Federated Investors, Inc. and Director and
Chief Executive Officer, Federated Securities Corp.
Richard J. Thomas
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: June 17, 1954
Treasurer
Date Became an Officer: November 19, 1998
Treasurer of the Federated Fund Complex; Senior Vice President, Federated
Administrative Services; formerly: Vice President, Federated Administrative
Services; held various management positions within Funds Financial Services
Division of Federated Investors, Inc.
William D. Dawson, III
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: March 3, 1949
Chief Investment Officer
Date Became an Officer: November 19, 1998
Chief Investment Officer of the Company and various other Funds in the Federated
Fund Complex; Executive Vice President, Federated Investment Counseling,
Federated Global Research Corp., Federated Investment Management Company and
Passport Research, Ltd.; Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative Services; Vice President, Federated
Investors, Inc.; formerly: Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional Portfolio Management Services
Division; Senior Vice President, Federated Research Corp., Federated Advisers,
and Passport Research, Ltd.
Jeff A. Kozemchak
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA
Birthdate: January 15, 1960
Vice President
Date Became an Officer: November 18, 1998
Senior Vice President of Federated Investment Management Company; formerly, Vice
President of Federated Investment Management Company.
None of the Officers of the Trust received salaries from the Trust during
the fiscal year ended March 31, 2000.
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 Tax-Free Instruments 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
May 24, 2000
TAX-FREE INSTRUMENTS 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
(_____/00)
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of Tax-Free
Instruments Trust (the "Trust"), hereby appoint Gail Cagney, William Haas,
Suzanne W. Land, Cathy Ryan 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 of
Shareholders (the "Meeting") to be held on June 30, 2000, 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 TAX-FREE
INSTRUMENTS 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 THOMAS G. BIGLEY, NICHOLAS P. CONSTANTAKIS, JOHN F.
CUNNINGHAM, J. CHRISTOPHER DONAHUE, CHARLES F. MANSFIELD, JR., JOHN E.
MURRAY, 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 APPROVE AN AMENDMENT AND A 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 3 TO APPROVE A PROPOSED AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE TRUST AND MONEY MARKET OBLIGATIONS TRUST, ON BEHALF OF ITS
SERIES, TAX-FREE INSTRUMENTS 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
I-5
I-1
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of ___________, 2000 (the
"Agreement") between Tax-Free Instruments 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, Tax-Free Instruments 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, 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 computed as of the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on the
Exchange Date (such time and date being hereinafter called the "Valuation Time"
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 on the Exchange Date (as defined herein). 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 Exchange Date shall be _____________, 2000, 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 Exchange 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 "Tax-Free Instruments Trust" and "Board of
Trustees of Tax-Free Instruments 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.
TAX-FREE INSTRUMENTS TRUST
ATTEST:
Title: Assistant Secretary Title: Executive Vice President
MONEY MARKET OBLIGATIONS
TRUST, on behalf of its portfolio,
Tax-Free Instruments Trust
ATTEST:
Title: Assistant Secretary Title: Executive Vice President
II-7
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
PORTFOLIO MATURITY
THE TRUST: "The Trust invests in municipal securities with remaining maturities
of 397 days or less at the time of purchase by the Trust."
THE NEW FUND: The New Fund is subject to a non-fundamental investment policy
that provides: "The Fund invests in municipal securities with remaining
maturities of 397 days or less at the time of purchase by the Fund."
INVESTMENTS IN TAX-EXEMPT SECURITIES
THE TRUST: "The Trust invests its assets so that at least 80% of its annual
interest income is exempt from federal income tax."
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 MUNICIPAL SECURITIES
THE TRUST: "The municipal securities in which the Trust invests are rated within
the two highest short-term municipal obligation rating categories issued by
Moody's Investors Service, Inc. (MIG-1/VMIG-1/P-1 or MIG-2/VMIG-2/P-2), Standard
& Poor's Corporation (A-1/SP-1 or A-2/SP-2), or Fitch Investors Service, Inc.
(F-1 or F-2); or rated within the two highest long-term municipal obligation
rating categories issued by Moody's Investors Service, Inc. (Aaa or Aa), or
Standard & Poor's Corporation (AAA or AA), or Fitch Investors Service, Inc. (AAA
or AA); or unrated and of high quality as determined by the Board of Trustees
prior to purchase by the Trust."
THE NEW FUND: The New Fund is subject to NON-fundamental investment policy that
provides "The municipal securities in which the Fund invests must be rated in
the two highest short-term rating categories or long-term rating categories by
one or more nationally recognized rating services or be of comparable quality to
securities having such ratings."
PERMISSIBLE INVESTMENTS
THE TRUST: "The municipal securities in which the Trust invests are: debt
obligations, issued by or on behalf of any state, territory, or possession of
the United States - including the District of Columbia - or any political
subdivision therein, from which the interest is, in the opinion of bond counsel
for the issuer or in the opinion of officers of and/or the investment adviser to
the Trust, exempt from Federal income tax; and participation interests, as
described below, in any of the above obligations.
"The Trust may purchase participation interests from financial
institutions such as commercial banks, savings and loan associations, and
insurance companies. These participation interests give the Trust an undivided
interest in municipal securities. The municipal securities subject to the
participation interests are not limited to maturities of one year or less, so
long as the participation interests include the right to demand payment,
typically within seven days, from the issuers of those interests. The Trust will
purchase only participation interests which have a demand feature. The financial
institutions from which the Trust purchases participation interests frequently
provide or secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Board of Trustees of the Trust
will determine that participation interests meet the prescribed quality
standards for the Trust.
"Some of the municipal securities which the Trust purchases may have
variable interest rates. Variable interest rates are ordinarily stated as a
percentage of the prime rate of a bank or some similar standard, such as the
91-day U.S. Treasury bill rate. Many variable rate municipal securities are
subject to payment of principal on demand by the Trust (usually in not more than
seven days) which is considered in computing maturity. While some variable rate
municipal securities without this demand feature may not be considered liquid by
the Trust's adviser, the Trust's investment limitations provide that it will not
invest more than 10% of its total assets in illiquid securities. All variable
rate municipal securities will meet the quality standards for the Trust. The
investment adviser has been instructed by the Trust's Board of Trustees to
monitor the pricing, quality, and liquidity of the variable rate municipal
securities, including participation interests, held by the Trust on the basis of
published financial information and reports of the rating agencies and other
analytical services."
THE NEW FUND: The New Fund is subject to identical NON-fundamental investment
- --- policies.
TEMPORARY INVESTMENTS
THE TRUST: "From time to time on a temporary basis, or when the investment
adviser determines that market conditions call for a temporary defensive
posture, the Trust may invest in short-term tax-exempt or taxable temporary
investments. These temporary investments include: obligations issued by or on
behalf of municipal or corporate issuers having the same quality characteristics
as municipal securities purchased by the Trust; marketable obligations issued or
guaranteed by the U.S. government, its agencies, or instrumentalities;
instruments issued by a U.S. branch of a domestic bank or savings and loan
having capital, surplus and undivided profits in excess of $100,000,000 at the
time of investment; repurchase agreements (arrangements in which the
organization selling the Trust a temporary investment agrees at the time of sale
to repurchase it at a mutually agreed upon time and price); and prime 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. Although the Trust is
permitted to make taxable, temporary investments, there is no current intention
of generating income subject to federal income tax."
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 purchase short-term municipal securities on a
when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Trust relies on the seller to complete the transaction. The
seller's failure to deliver the securities may cause the Trust to miss a price
or yield considered to be advantageous."
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.
DIVERSIFICATION OF INVESTMENTS
THE TRUST: "With respect to securities comprising 75% of its assets, the Trust
will not invest more than 5% of its total assets in the securities of any one
issuer. Under this limitation, each governmental subdivision, including states
and the District of Columbia, territories, possessions of the United States, or
their political subdivisions, agencies, authorities, instrumentalities, or other
similar entities, will be considered a separate issuer if its assets and
revenues are separate from those to the governmental body creating it and the
security is backed only by its own assets and revenues. Industrial development
bonds backed only by the assets and revenues of a non-governmental user are
considered to be issued solely by that user. If in the case of an industrial
development bond or governmental issued security, a governmental or some other
entity guarantees the security, such guarantee would be considered a separate
security issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the 1940 Act."
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 borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of its total assets. In addition, the Trust may enter into reverse
repurchase agreements and otherwise borrow up to one-third of the value of its
total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio securities. This latter practice
is not for investment leverage but solely to facilitate management of the
portfolio by enabling the Trust to meet redemption requests when the liquidation
of portfolio securities would be inconvenient or disadvantageous. Interest paid
on borrowed funds will serve to reduce the Trust's income. The Trust will
liquidate any borrowings as soon as possible and may not purchase any portfolio
instruments while any borrowings are outstanding."
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 sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of securities."
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, although it may
invest in municipal securities secured by real estate or interests in real
estate."
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 OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS
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 mortgage, pledge, or hypothecate its assets
except to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding 10% of the value of total assets at the time
of the pledge."
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 lend any of its assets, except that it may
acquire publicly or non-publicly issued municipal securities or temporary
investments or enter into repurchase agreements, as permitted by its investment
objective and policies. "
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 will not purchase securities (other than securities issued
or guaranteed by the U.S. government, its agencies, or instrumentalities) if, as
a result of such purchase, more than 25% of the value of its assets would be
invested in any one industry. This policy applies to securities which are
related in such a way that an economic, business, or political development
affecting one security would also affect the other securities (such as
securities paid from revenues from selected projects in transportation, public
works, education, or housing)."
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 Trust if the officers and Trustees of the Trust or its investment
adviser individually owning beneficially more than 1/2 of 1% of the issuer's
securities together beneficially own more than 5% of the issuer's 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 acquire the voting securities of any issuer,
except as part of a merger, consolidation, reorganization, or acquisition of
assets. It may 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 IN NEW ISSUERS
THE TRUST: "The Trust will not invest more than 5% of the value of its total
assets in securities of issuers (or in the alternative, guarantors, where
applicable) which have records of less than three years of continuous
operations, including the operation of any predecessor."
THE NEW FUND: The New Fund is not subject to a comparable investment limitation.
INVESTING IN ILLIQUID SECURITIES
THE TRUST: "The Trust will not invest more than 10% of the value of its total
assets in illiquid securities, including repurchase agreements maturing in more
than seven days."
THE NEW FUND: The New Fund is subject to a NON-fundamental operating policy that
states: "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."
INVESTING IN PUTS AND CALLS
THE TRUST: "The Trust will not purchase or sell puts, calls, straddles, spreads,
or any combination of them, except that the Trust may purchase municipal
securities from a bank, broker, dealer, or other person accompanied by the
agreement of the seller to purchase them, at the Trust's option, prior to
maturity."
THE NEW FUND: The New Fund is not subject to a comparable investment limitation.
NON-FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS
INVESTING FOR CONTROL
THE TRUST: "The Trust will not invest in the securities of a company for the
purpose of exercising control."
THE NEW FUND: The New Fund is not subject to a comparable investment limitation.
BORROWING MONEY
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.
