Reg. No.333-
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811-1890
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
that it elects to register an indefinite amount of securities under the
Securities Act of 1933, as amended, and filed the Notice required by that Rule
for Registrant's fiscal year ended March 31, 1995 on May 15, 1995 and filed the
Notice required by Rule 24e-2 for its fiscal year ended March 31, 1996 on May
15, 1996. Accordingly, no filing fee is submitted herewith.
The Registrant hereby amends this Registration on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the Federated
Registrant Fund and the State Bond Fund
6.Information About the Information About the Federated Fund
Company Being Acquired and the State Bond Fund
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
Dear Shareholder:
The Board of Directors and management of State Bond U.S. Government and
Agency Securities Fund (the `State Bond Fund'') are pleased to submit for your
vote a proposal to transfer all of the assets of the State Bond Fund to
Federated Fund for U.S. Government Securities, Inc. (the "Federated Fund"), a
mutual fund advised by Federated Advisers. The Federated Fund has an investment
objective similar to that of the State Bond Fund in that it seeks current income
by investing in a professionally managed diversified portfolio limited to U.S.
Government securities. As part of the transaction, holders of shares in the
State Bond Fund would receive Class A Shares of the Federated Fund equal in
value to their shares in the State Bond Fund and the State Bond Fund would be
liquidated. Shareholders receiving Class A Shares of the Federated Fund as a
result of the proposed reorganization would not have to pay a sales load upon
receiving such Shares, nor would they be subject to any contingent deferred
sales charges in connection with the exercise of exchange rights or redemptions
of such Shares.
The Board of Directors of the State Bond Fund, as well as ARM Capital
Advisors, Inc., the State Bond Fund's manager, and ARM Financial Services, Inc.,
the State Bond Fund's distributor, believe the proposed agreement and plan of
reorganization is in the best interests of State Bond Fund shareholders for the
following reasons:
-- The reorganization of the State Bond Fund into the Federated
Fund may provide operating efficiencies as a result of the size
of the Federated Fund which were not available to State Bond
Fund shareholders due to the smaller size of the State Bond
Fund.
-- The Federated Fund has an investment objective similar to
that of the State Bond Fund and offers an investment portfolio
which invests in U.S. Government securities to achieve current
income.
The Federated Fund is managed by Federated Advisers, a subsidiary of
Federated Investors. Federated Investors was founded in 1955 and is located in
Pittsburgh, Pennsylvania. Federated Advisers and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. With over $90 billion invested across more than
250 funds under management and/or administration by its subsidiaries, Federated
Investors is one of the largest mutual fund investment managers in the United
States. With more than 2,000 employees, Federated continues to be led by the
management who founded the company in 1955. Federated funds are presently at
work in and through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Federated Investors also has an excellent reputation for customer
servicing, having received a #1 rating for five years in a row by Dalbar, Inc.
The shareholder services for the Federated funds include advanced technological
systems that result in quick shareholder access to a broad spectrum of
information.
We believe the transfer of the State Bond Fund's assets in this
transaction presents an exciting investment opportunity for our shareholders.
Your vote on the transaction is critical to its success. The transfer will be
effected only if approved by a majority of all of the State Bond Fund's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote.
THE BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTEREST OF THE STATE BOND FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
Dale C. Bauman
President
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND:
A Special Meeting of Shareholders of State Bond U.S. Government and
Agency Securities Fund, a portfolio of State Bond Income Funds, Inc. (the
`State Bond Fund'') will be held at 4:00 p.m. on December , 1996 at: 100
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North Minnesota Street, New Ulm, Minnesota 56073-0069, for the following
purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the State Bond Fund and Federated Fund for U.S.
Government Securities, Inc. (the "Federated Fund"), whereby the Federated Fund
would acquire all of the net assets of the State Bond Fund in exchange for the
Federated Fund's Class A Shares to be distributed pro rata by the State Bond
Fund to the holders of its shares in complete liquidation of the State Bond
Fund; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Dated: November , 1996 Kevin L. Howard
--
Secretary
Shareholders of record at the close of business on October 11, 1996, are
entitled to vote at the meeting. Whether or not you plan to attend the meeting,
please sign and return the enclosed proxy card. Your vote is important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF YOU
ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
NOVEMBER , 1996
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Acquisition of the Assets of
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND,
a portfolio of
STATE BOND INCOME FUNDS, INC.
100 North Minnesota Street
P.O. Box 69
New Ulm, Minnesota 56073-0069
Telephone Number: 1-800-328-4735
By and in exchange for Class A Shares of
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Federated Fund for U.S. Government
Securities, Inc., a Maryland corporation (the "Federated Fund"), would acquire
all of the net assets of State Bond U.S. Government and Agency Securities Fund,
a portfolio of State Bond Income Funds, Inc., a Maryland corporation (the
`State Bond Fund''), in exchange for the Federated Fund's Class A Shares to be
distributed pro rata by the State Bond Fund to the holders of its shares, in
complete liquidation of the State Bond Fund. As a result of the Plan, each
shareholder of the State Bond Fund will become the owner of the Federated Fund's
Class A Shares having a total net asset value equal to the total net asset value
of his or her holdings in the State Bond Fund.
THE BOARD OF DIRECTORS OF THE STATE BOND FUND UNANIMOUSLY RECOMMENDS APPROVAL
OF THE PLAN.
The shares of each of the Federated Fund and the State Bond Fund
represent interests in separate open-end, diversified management investment
companies. The Federated Fund's investment objective is to provide current
income by investing in a professionally managed diversified portfolio limited to
U.S. Government securities. The State Bond Fund's investment objective is to
maximize current income to the extent consistent with preservation of capital by
investing primarily in obligations issued or guaranteed by the U.S. Government
or by its agencies or instrumentalities. For a comparison of the investment
policies of the Federated Fund and the State Bond Fund, see "Summary-Investment
Objectives, Policies and Limitations."
This Prospectus/Proxy Statement should be retained for future reference.
It sets forth concisely the information about the Federated Fund that a
prospective investor should know before investing. This Prospectus/Proxy
Statement is accompanied by the Prospectus of the Federated Fund dated May 31,
1996, which is incorporated herein by reference. Statements of Additional
Information for the Federated Fund dated May 31, 1996 (relating to the Federated
Fund's prospectus of the same date) and November , 1996 (relating to this
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Prospectus/Proxy Statement) and the Annual Report to Shareholders dated March
31, 1996, all containing additional information, have been filed with the
Securities and Exchange Commission and are incorporated herein by reference.
Copies of the Statements of Additional Information and the Annual Report may be
obtained without charge by writing or calling the Federated Fund at the address
and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page No.
Summary of Expenses
Summary
About the Proposed Reorganization
Investment Objectives, Policies and Limitations
Advisory and Other Fees
Distribution Arrangements
Purchase, Exchange and Redemption Procedures
Dividends
Tax Consequences
Risk Factors
Information About the Reorganization
Background and Reasons for the Proposed Reorganization
Agreement Among ARM, ARM Capital and Federated
Description of the Plan of Reorganization
Description of Federated Fund Shares
Federal Income Tax Consequences
Comparative Information on Shareholder Rights and Obligations
Capitalization
Information About the Federated Fund and the State Bond Fund
Federated Fund for U.S. Government Securities, Inc.
State Bond U.S. Government and Agency Securities Fund
Voting Information
Outstanding Shares and Voting Requirements
Dissenter's Right of Appraisal
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A
SUMMARY OF EXPENSES
Federated State Pro
Fund Bond Forma
(Class A Fund Combined
Shares)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases 4.50%(1) 5.00% 4.50%(1)
(as a percentage of offering
price)...........................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of None None None
offering price)................
Contingent Deferred Sales Charge
(as a percentage of original
purchase 0.00%(2) 0.00% 0.00%(2)
price or redemption proceeds, as
applicable)......................
Redemption Fee (as a percentage of
amount redeemed, if None None None
applicable)(3)...................
Exchange Fee..................... None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................... 0.56%(4) 0.15%(5) 0.56%(4)
12b-1 Fee........................ None 0.25% None
Total Other Expenses............. 0.39%(6) 0.60% 0.39%(6)
Total Operating 0.95% 1.00% 0.95%
Expenses(7)......................
(1) This sales charge would not be applicable to shares of the Federated Fund
acquired under the proposed reorganization.
(2) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge and
not distributed by Federated Securities Corp. may be charged a contingent
deferred sales charge of 0.50 of 1% for redemptions made within one full year of
purchase. For a more complete description see ``ummary - Distribution
Arrangements.'' This contingent deferred sales charge would not be applicable
to shares of the Federated Fund acquired under the proposed reorganization.
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund of
less than $5,000 may be subject to additional fees. A $10.00 fee will be
charged for certain redemptions of State Bond Fund shares by wire transfer.
(4) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.25% of the
first $500 million in average daily net assets, 0.225% of the second $500
million in average daily net assets, 0.20% of average daily net assets in excess
of $1 billion, plus 4.50% of the Federated Fund's annual gross income (excluding
any capital gains or losses).
(5) The management fee is net of expense reimbursements. Without such
reimbursements, the management fee would have been 0.40%.
(6) Total other expenses for the Federated Fund and the Pro Forma Combined Fund
include a shareholder services fee of 0.15%. The shareholder services fee has
been reduced to reflect the voluntary waiver of a portion of the shareholder
services fee. The shareholder service provider can terminate this voluntary
waiver at any time at its sole discretion. The maximum shareholder services fee
is 0.25%.
(7) The total operating expenses for Class A Shares of the Federated Fund are
based on expenses expected during the fiscal year ending March 31, 1997. The
total operating expenses were 0.95% for the fiscal year ended March 31, 1996,
and would have been 1.06% absent the voluntary waivers of portions of the
management fee and the shareholder services fee. The total operating expenses
for the State Bond Fund are based upon expenses incurred by the State Bond Fund
during its fiscal year ended October 31, 1995. The total operating expenses
were 1.00% for the fiscal year ending October 31, 1995, and would have been
1.25% without expense reimbursements.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of shares of each of the Federated
Fund, the State Bond Fund and the pro forma combined fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses see "Summary - Advisory and Other Fees" and "Summary - Distribution
Arrangements."
Long-term shareholders of the State Bond Fund may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
EXAMPLE
The Example below is intended to assist an investor in understanding the
various costs that an investor will bear directly or indirectly. The Example
assumes payment of operating expenses at the levels set forth in the table
above. The Example does not include sales charges or contingent deferred sales
charges since such sales charges are not applicable to Federated Fund Shares
received as a result of the proposed reorganization. Shares purchased
subsequent to the reorganization may be subject to sales charges. For a
complete description of sales charges, contingent deferred sales charges and
exemptions from such charges, reference is hereby made to the Prospectus of the
Federated Fund dated May 31, 1996 and the Prospectus of the State Bond Fund
dated March 1, 1996, each of which is incorporated herein by reference thereto.
An investor would pay the 1 year 3 years 5 years 10 years
following expenses on a $1,000
investment, assuming (1) 5%
annual return and (2) redemption
at the end of each time period.
Expenses would be the same if
there were no redemption at the
end of each time period.
Federated Fund................... $10 $30 $53 $117
State Bond Fund.................. $10 $32 $55 $122
Pro Forma Combined............... $10 $30 $53 $117
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus of the Federated Fund dated May 31, 1996, the Statement of Additional
Information of the Federated Fund dated May 31, 1996, the Prospectus of the
State Bond Fund dated March 1, 1996, the Statement of Additional Information of
the State Bond Fund dated March 1, 1996, and the Plan, a copy of which is
attached to this Prospectus/Proxy Statement as Exhibit A.
About the Proposed Reorganization
The Board of Directors of the State Bond Fund has voted to recommend to
holders of the shares of the State Bond Fund the approval of the Plan whereby
the Federated Fund would acquire all of the assets of the State Bond Fund in
exchange for the Federated Fund's Class A Shares to be distributed pro rata by
the State Bond Fund to its shareholders in complete liquidation and dissolution
of the State Bond Fund (the "Reorganization"). As a result of the
Reorganization, each shareholder of the State Bond Fund will become the owner of
the Federated Fund's Class A Shares having a total net asset value equal to the
total net asset value of his or her holdings in the State Bond Fund on the date
of the Reorganization, i.e., the Closing Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated Fund
and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Internal Revenue Code of 1986, as amended (the `Code''), so
that no gain or loss will be recognized by either the Federated Fund or the
State Bond Fund or the shareholders of the State Bond Fund. The tax basis of
the Federated Fund's Class A Shares received by State Bond Fund shareholders
will be the same as the tax basis of their shares in the State Bond Fund. After
the acquisition is completed, the State Bond Fund will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to provide current
income by investing in a professionally managed diversified portfolio limited to
U.S. Government securities. This investment objective may not be changed
without the affirmative vote of a majority of the outstanding voting securities
of the Federated Fund, as defined in the Investment Company Act of 1940, as
amended (the `1940 Act'').
The investment objective of the State Bond Fund is to seek to maximize
current income to the extent consistent with preservation of capital by
investing at least 75% of the value of its assets in obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities. This
investment objective may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the State Bond Fund, as defined
in the 1940 Act.
The Federated Fund invests only in securities which are primary or
direct obligations of the U.S. Government, its agencies or instrumentalities, or
which are guaranteed as to the payment of principal and interest by the U.S.
Government, its agencies, or instrumentalities, and in certain collateralized
mortgage obligations (`CMOs''). The U.S. Government securities in which the
Federated Fund invests include: direct obligations of the U.S. Treasury such as
U.S. Treasury bills, notes, and bonds; and obligations of U.S. Government
agencies or instrumentalities such as: the Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; and Federal National
Mortgage Association (`FNMA''). The Federated Fund also invests in CMOs, which
are debt obligations collateralized by mortgage loans or mortgage pass-through
securities. The Federated Fund will invest only in CMOs which are rated AAA by
a recognized rating agency and which may be: (i) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. Government; (ii)
collateralized by pools of mortgages in which payment of principal and interest
is guaranteed by the issuer and such guarantee is collateralized by U.S.
Government securities; or (iii) securities in which the proceeds of the issuance
are invested in mortgage securities and payment of the principal and interest
are supported by the credit of an agency or instrumentality of the U.S.
Government. CMOs in which the Federated Fund invests are issued by agencies or
instrumentalities of the U.S. Government. The Federated Fund may enter into
repurchase agreements, purchase securities on a when-issued or delayed delivery
basis, and lend portfolio securities. Unless otherwise designated, the
investment policies of the Federated Fund may be changed by the Board of
Directors without shareholder approval, although shareholders will be notified
before any material change becomes effective.
The State Bond Fund invests at least 75% of the value of its assets in
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities (`U.S. Government Securities''). U.S. Government Securities
in which the State Bond Fund may invest include Government National Mortgage
Association (`GNMA'') certificates, FNMA certificates, Federal Home Loan
Mortgage Corporation (`FHLMC'') certificates and U.S. Treasury notes, bills or
bonds. U.S. Government Securities may also include CMOs that are issued by an
agency or instrumentality of the U.S. Government. The State Bond Fund may enter
into repurchase agreements relating to U.S. Government Securities and privately-
issued CMOs which are collateralized by or represent an interest in U.S.
Government Securities, purchase securities on a when-issued basis, and lend
portfolio securities. Unless otherwise designated, the investment policies of
the State Bond Fund may be changed by the Board of Directors without shareholder
approval.
Both the Federated Fund and the State Bond Fund are subject to certain
investment limitations. For the Federated Fund, these include investment
limitations which prohibit it from (1) borrowing money except, under certain
circumstances, the Federated Fund may borrow up to 10% of the value of its total
assets; or (2) owning securities of open-end or closed-end investment companies,
except under certain circumstances and subject to certain limitations not
exceeding 10% of its net assets. The first investment limitation listed above
cannot be changed without shareholder approval; the other limitation may be
changed by the Board of Directors without shareholder approval, although
shareholders will be notified before any material change becomes effective.
The State Bond Fund has investment limitations which prohibit it from
(1) borrowing money, except for temporary purposes in an aggregate amount not in
excess of 10% of the value of the total assets of the State Bond Fund; provided,
that borrowings in excess of 5% of such value are permitted from banks only, and
the State Bond Fund will not purchase additional portfolio securities while its
borrowings exceed 5%; (2) purchasing securities of any issuer if immediately
thereafter more than 5% of total assets at market value would be invested in the
securities of any one issuer, except that this limitation does not apply to
obligations issued or guaranteed as to principal and interest either by the U.S.
Government or its agencies or instrumentalities; (3) making loans except that to
the extent the purchase of bills, notes, bonds or other debt obligations or the
entry into of repurchase agreements may be considered loans; provided, however,
that the State Bond Fund may lend portfolio securities to brokers or dealers if
the aggregate market value of the securities loaned does not exceed 10% of the
value of the State Bond Fund's total assets; (4) mortgaging or pledging assets,
except that up to 10% of the value of the State Bond Fund's total assets can be
used to secure borrowings; and (5) investing more than 10% of the value of the
State Bond Fund's net assets in any combination of illiquid securities,
including repurchase agreements maturing in more than seven days. The above
investment limitations of the State Bond Fund cannot be changed without
shareholder approval.
In addition to the policies and limitations set forth above, both the
Federated Fund and the State Bond Fund are subject to certain additional
investment policies and limitations, described in the Federated Fund's Statement
of Additional Information dated May 31, 1996 and the State Bond Fund's Statement
of Additional Information dated March 1, 1996. Reference is hereby made to the
Federated Fund's Prospectus and Statement of Additional Information, each dated
May 31, 1996, and to the State Bond Fund's Prospectus and Statement of
Additional Information, each dated March 1, 1996, which set forth in full the
investment objective, policies and investment limitations of each of the
Federated Fund and the State Bond Fund, all of which are incorporated herein by
reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 0.25 of 1%
of the first $500 million in average daily net assets of the Federated Fund,
0.225 of 1% of the second $500 million in average daily net assets of the
Federated Fund, 0.20 of 1% of average daily net assets of the Federated Fund in
excess of $1 billion, plus 4.50% of the Federated Fund's gross income (excluding
any capital gains or losses). The investment adviser to the Federated Fund,
Federated Advisers ("Federated Advisers"), a subsidiary of Federated Investors,
may voluntarily choose to waive a portion of its advisory fee or reimburse the
Federated Fund for certain operating expenses. This voluntary reimbursement of
expenses may be terminated by Federated Advisers at any time in its sole
discretion. Federated Advisers has also undertaken to reimburse the Federated
Fund for operating expenses in excess of limitations established by certain
states. The maximum annual management fee for the State Bond Fund is 0.40 of 1%
of the average daily net assets of the State Bond Fund. The State Bond Fund's
investment manager, ARM Capital Advisors, Inc.(`ARM Capital''), a wholly-owned
subsidiary of ARM Financial Group, Inc. (`ARM''), has voluntarily agreed to
reimburse the State Bond Fund for any expenses incurred by it in excess of 1% of
the average daily net assets of the State Bond Fund. ARM Capital has also
undertaken to reimburse the State Bond Fund for operating expenses in excess of
limitations established by certain states.
Federated Services Company, an affiliate of Federated Advisers,
provides certain administrative personnel and services necessary to operate the
Federated Fund at an annual rate based upon the average aggregate daily net
assets of all funds advised by Federated Advisers and its affiliates. The rate
charged is 0.15 of 1% on the first $250 million of all such funds' average
aggregate daily net assets, 0.125 of 1% on the next $250 million, 0.10 of 1% on
the next $250 million and 0.075 of 1% of all such funds' average aggregate daily
net assets in excess of $750 million, with a minimum annual fee per portfolio of
$125,000 plus $30,000 for each additional class of shares of any such portfolio.
Federated Services Company may choose voluntarily to waive a portion of its fee.
The administrative fee expense for the Federated Fund's most recent fiscal year
was $1,153,399. Administrative personnel and other services necessary to
operate the State Bond Fund are currently provided by ARM Capital and are
included in the annual management fee for the State Bond Fund, as discussed
above.
The Federated Fund has entered into a Shareholder Services Agreement
under which it may make payments of up to 0.25 of 1% of the average daily net
asset value of the Class A Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts. The Shareholder
Services Agreement provides that Federated Shareholder Services ("FSS"), an
affiliate of Federated Advisers, will either perform shareholder services
directly or will select financial institutions to perform such services.
Financial institutions will receive fees based upon shares owned by their
clients or customers. The schedule of such fees and the basis upon which such
fees will be paid is determined from time to time by the Federated Fund and FSS.
Other than in connection with payments under a Rule 12b-1 plan as described
below, the State Bond Fund does not make payments to obtain similar shareholder
services.
The total annual operating expenses for Class A Shares of the Federated
Fund were 0.95% of average daily net assets (after waivers) for its most recent
fiscal year. The total annual operating expenses for shares of the State Bond
Fund were 1.00% of average daily net assets (after expense reimbursements) for
its most recent fiscal year. Without such waivers or reimbursements, the expense
ratio of the Federated Fund and the State Bond Fund would be higher by 0.11% and
0.25%, respectively, of average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated Advisers,
is the principal distributor for shares of the Federated Fund. The Federated
Fund does not have a Rule 12b-1 plan in effect with respect to its Class A
Shares and, accordingly, does not, nor does FSC, compensate brokers and dealers
for sales and administrative services performed in connection with sales of
Class A Shares of the Federated Fund pursuant to a plan of distribution adopted
pursuant to Rule 12b-1. FSC will pay financial institutions, at the time of
purchase, from its assets, an amount equal to 0.50 of 1% of the net asset value
of Class A Shares purchased by their clients or customers under certain
qualified plans as approved by FSC. (Such payments are subject to a reclaim
from the financial institution should the assets leave the program within 12
months after purchase.) In addition, FSC, from its own assets, may pay
financial institutions supplemental fees as financial assistance for providing
substantial sales services, distribution-related support services or shareholder
services with respect to the Federated Fund. Such assistance will be predicated
upon the amount of Class A Shares the financial institution sells or may sell,
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by FSC may be reimbursed by Federated
Advisers or its affiliates. If a financial institution elects to waive receipt
of this payment, the Federated Fund will waive any applicable contingent
deferred sales charge (such contingent deferred sales charges are discussed
below).
ARM Financial Services, Inc. (`ARMFS''), an affiliate of ARM Capital,
is the principal distributor for shares of the State Bond Fund. The State Bond
Fund has adopted a Rule 12b-1 Distribution Plan (the "Rule 12b-1 Plan") pursuant
to which the State Bond Fund pays ARMFS an amount equal to an annual rate of
0.25 of 1% of the average daily net assets of the State Bond Fund. The fee may
be used by ARMFS to (i) provide initial and ongoing sales compensation to its
investment executives and to other broker-dealers in connection with the sale of
State Bond Fund shares and to pay for other advertising and promotional expenses
in connection with the sale of State Bond Fund shares, and (ii) to provide
compensation to entities in connection with the provision of certain personal
and account maintenance services to State Bond Fund shareholders including, but
not limited to, responding to shareholder inquiries and providing information on
their investments. The Federated Fund will not assume any liabilities or make
any voluntary reimbursements on account of the State Bond Fund's Rule 12b-1
Plan.
Certain costs exist with respect to the purchase and sale of Federated
Fund and State Bond Fund shares. Class A Shares of the Federated Fund and
shares of the State Bond Fund are sold at their net asset value next determined
after an order is received, plus a maximum sales charge of 4.50% and 5.00%,
respectively. No sales charge will be imposed in connection with the issuance
of Federated Fund shares to State Bond Fund shareholders as a result of the
Reorganization. Class A Shares of the Federated Fund purchased with the
proceeds of a redemption of shares of an unaffiliated investment company
purchased or redeemed with a sales charge and not distributed by FSC may be
charged a contingent deferred sales charge of 0.50 of 1% for redemptions made
within one full year of purchase. Any such charge will be imposed on the lesser
of the net asset value of the redeemed shares at the time of purchase or
redemption. The contingent deferred sales charges are not imposed in connection
with the exercise of exchange rights, nor will they be imposed on redemptions of
Federated Fund shares received by shareholders of the State Bond Fund as a
result of the consummation of the Reorganization. For a complete description of
sales charges, contingent deferred sales charges and exemptions from such
charges, reference is hereby made to the Prospectus of the Federated Fund dated
May 31, 1996 and the Prospectus of the State Bond Fund dated March 1, 1996, each
of which is incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated Fund
is Federated Shareholder Services Company (formerly called Federated Services
Company). The transfer agent and dividend disbursing agent for the State Bond
Fund is ARM Transfer Agency, Inc. Procedures for the purchase, exchange and
redemption of the Federated Fund's Class A Shares differ slightly from
procedures applicable to the purchase, exchange and redemption of the State Bond
Fund's shares. Any questions about such procedures may be directed to, and
assistance in effecting purchases, exchanges or redemptions of the Federated
Fund's Class A Shares or the State Bond Fund's shares may be obtained from FSC,
principal distributor for the Federated Fund, at 1-800-341-7400 or from ARMFS,
principal distributor for the State Bond Fund, at 1-800-328-4735.
Reference is made to the Prospectus of the Federated Fund dated May 31,
1996, and the Prospectus of the State Bond Fund dated March 1, 1996, for a
complete description of the purchase, exchange and redemption procedures
applicable to purchases, exchanges and redemptions of Federated Fund and State
Bond Fund shares, respectively, each of which is incorporated herein by
reference thereto. Set forth below is a brief listing of the significant
purchase, exchange and redemption procedures applicable to the Federated Fund's
Class A Shares and the State Bond Fund's shares.
Purchases of Class A Shares of the Federated Fund may be made through a
financial institution who has an agreement with FSC or, once an account has been
established, by wire or check. Purchases of shares of the State Bond Fund may
be made through ARMFS and through certain broker-dealers under contract with
ARMFS or directly by wire or check once an account has been established. The
minimum initial investment in the Federated Fund is $500, except for retirement
accounts for which the minimum is $50. Subsequent investments must be in
amounts of at least $100, except for retirement accounts for which the minimum
is $50. The minimum initial investment in the State Bond Fund is $500.
Subsequent investments must be in an amount of at least $50. The Federated Fund
and the State Bond Fund each reserve the right to reject any purchase request.
In connection with the sale of Class A Shares of the Federated Fund, FSC may
from time to time offer certain items of nominal value to any shareholder.
The purchase price of the Federated Fund's Class A Shares and the State
Bond Fund's shares is based on net asset value plus a sales charge. The net
asset value per share for each of the Federated Fund and the State Bond Fund is
calculated as of the close of trading (normally 4:00 p.m., Eastern time) on the
New York Stock Exchange, Inc. (the `NYSE'') on each day on which the Federated
Fund and the State Bond Fund compute their net asset value. Purchase and
redemption orders for the Federated Fund received from broker/dealers before
5:00 p.m. (Eastern time) and from financial institutions before 4:00 p.m.
(Eastern time) may be entered at that day's price. Purchase orders for shares
of the State Bond Fund received from authorized broker/dealers will be executed
at the offering price next determined after the receipt of the order by the
broker/dealer, provided that the broker/dealer promptly transmits the order to
ARMFS the same day. Redemption orders for shares of the State Bond Fund
received by the State Bond Fund's transfer agent from authorized dealers or
representatives of ARMFS prior to the close of the NYSE will be entered at that
day's price; such redemption orders received after the close of the NYSE will be
entered at the net asset value determined at the close of the NYSE on the next
trading day. Federated Fund purchase orders by wire are considered received
upon receipt of payment by wire. Federated Fund purchase orders received by
check are considered received after the check is converted into federal funds,
which normally occurs the business day after receipt.
Holders of Class A Shares of the Federated Fund have exchange privileges
with respect to Class A Shares in certain of the funds for which affiliates of
Federated Investors serve as investment adviser or principal underwriter
(collectively, the "Federated Funds"), each of which has different investment
objectives and policies. Class A Shares in the Federated Fund may be exchanged
for Class A Shares of certain Federated Funds at net asset value without a
contingent deferred sales charge. To the extent a shareholder exchanges Class A
Shares of the Federated Fund for Class A Shares in other Federated Funds, the
time for which the exchanged-for shares are to be held will be added to the time
for which exchanged-from shares were held for purposes of satisfying the
applicable holding period. Class A Shares to be exchanged must have a net asset
value which meets the minimum investment requirement for the fund into which the
exchange is being made. Holders of shares of the State Bond Fund have exchange
privileges with respect to shares in certain of the other funds for which ARM
Capital serves as investment manager (collectively, the `State Bond Group''),
each of which has different investment objectives and policies. Any exchange
for shares of other funds in the State Bond Group will be at the respective net
asset values next determined after receipt of the request for exchange.
Exercise of the exchange privilege is treated as a sale for federal income tax
purposes and, accordingly, may have tax consequences for the shareholder.
Information on share exchanges may be obtained from the Federated Fund or the
State Bond Fund, as appropriate.
Redemptions of Federated Fund Class A Shares may be made through a
financial institution, by telephone, by mailing a written request or through the
Federated Fund's Systematic Withdrawal Program. Redemptions of State Bond Fund
shares may be made through an authorized dealer or representative of ARMFS, by
mailing a written request to the State Bond Fund's transfer agent or through the
State Bond Fund's quick redemption service or check redemption service. Class A
Shares of the Federated Fund are redeemed at their net asset value, less any
applicable contingent deferred sales charge, next determined after the
redemption request is received. Shares of the State Bond Fund are redeemed at
their net asset value, determined at the close of the NYSE on the date the
redemption request is received. Proceeds will ordinarily be distributed by
check within seven days after receipt of a redemption request.
Dividends
Each of the Federated Fund's and the State Bond Fund's current policy is
to pay dividends monthly from net investment income and to make annual
distributions of net realized capital gains, if any. With respect to both the
Federated Fund and the State Bond Fund, unless a shareholder otherwise
instructs, dividends and capital gain distributions will be reinvested
automatically in additional shares at net asset value, subject to no sales
charge.
Tax Consequences
As a condition to the Reorganization transactions, the Federated Fund
and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under applicable
provisions of the Code so that no gain or loss will be recognized by either the
Federated Fund or the State Bond Fund or the shareholders of the State Bond
Fund. The tax basis of the Federated Fund shares received by State Bond Fund
shareholders will be the same as the tax basis of their shares in the State Bond
Fund.
RISK FACTORS
As with other mutual funds that invest in U.S. Government securities and
CMOs, the Federated Fund is subject to market risks. Although some obligations
issued or guaranteed by agencies or instrumentalities of the U.S. Government,
such as GNMA participation certificates, are backed by the full faith and credit
of the U.S. Treasury, no assurances can be given that the U.S. Government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. The prices of fixed-income government securities
generally fluctuate inversely in relation to the direction of interest rates.
The prices of longer term securities fluctuate more widely in response to market
interest rate changes. Furthermore, there is no limit to portfolio maturity.
Generally, the values of the securities in which the Federated Fund will invest,
and accordingly the value of the Federated Fund's shares, will fall as interest
rates rise and rise as interest rates fall. Since the State Bond Fund also
invests primarily in U.S. Government securities, in addition to investing in
CMOs, these risk factors are generally also present in an investment in the
State Bond Fund. A full discussion of the risks inherent in investment in the
Federated Fund and the State Bond Fund is set forth in the Federated Fund's
Prospectus and Statement of Additional Information, each dated May 31, 1996 and
the State Bond Fund's Prospectus and Statement of Additional Information, each
dated March 1, 1996, each of which is incorporated herein by reference thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
On June 14, 1995, SBM Company, which was then the investment adviser to
the State Bond Fund, completed the sale of substantially all of its business
operations to ARM (the `1995 Transaction''). In connection with the 1995
Transaction, ARM Capital became the investment manager of the State Bond Fund.
In addition, ARM acquired all of the outstanding stock of SBM Financial
Services, Inc., the predecessor in interest to ARMFS, the current distributor of
shares of the State Bond Fund.
Considerations of the Board of Directors of the State Bond Fund. On
June 6, 1996, ARM management advised the Board of Directors of the State Bond
Fund that ARM was considering redirecting its corporate strategy away from the
management and distribution of retail mutual funds in order to concentrate more
fully on its core businesses. Moreover, ARM management stated that due to the
relatively small net assets in the State Bond Fund and the other mutual funds in
the State Bond Group, ARM and its affiliates were not in a position to provide
the value-added shareholder services, technological advancements, comprehensive
distribution networks and diversified product choices that many larger mutual
fund complexes offer. As a result, management stated that ARM was engaged in
the identification and analysis of various potential alternatives for the State
Bond Fund and the other funds in the State Bond Group.
After conducting a screening process, ARM determined that in its
judgment, the proposed Reorganization was the most desirable alternative
involving the State Bond Fund that was reasonably available and that it should
be presented to the State Bond Fund's Board of Directors for its consideration.
A meeting of the entire Board of Directors was held on August 16, 1996,
at which Federated (as defined below) presented to the Board information
relating to the overall reputation, financial strength and stability of
Federated Investors, the parent company of Federated Advisers (together with its
affiliates, `Federated''). Federated, founded in 1955, is among the seven
largest mutual fund sponsors, with over $90 billion invested across more than
250 funds under management and/or administration by its subsidiaries, and over
2,000 employees. Federated's management also discussed the growth of assets
under management and/or administration by Federated from approximately $35
billion in 1989 to over $90 billion as of August 1996. Federated's management
explained to the Board that the majority of this growth came from within
Federated through its multiple distribution channels. The Board was also
informed of the variety of investment products available through Federated,
including international funds and an array of domestic funds broader than
currently offered in the State Bond Group, the exchange privileges that would be
available to former State Bond Fund shareholders if the Reorganization is
consummated, and the multiple sales charge (or `load'') structures available to
prospective shareholders. The Board took into account that if the
Reorganization takes place, shareholders of the State Bond Fund would exchange
their shares for Shares of the Federated Fund without the imposition of any
sales charge.
Federated's management advised the Board of its reputation for customer
servicing, noting that it has received a #1 rating for five years in a row by
Dalbar, Inc. Federated's management stated that its shareholder services
include advanced technological systems that result in quick shareholder access
to a broad spectrum of information, including: telephonic automated yield and
performance information; consolidated monthly shareholder statements; no-fee
IRAs; quarterly newsletters; year-end tax reporting information; direct deposit;
and telephonic redemption and exchange.
Federated's management also discussed comparative sales loads with the
Board. In particular, it was noted that the maximum front end sales load of the
Federated Fund is lower than that of the State Bond Fund. Federated's
management described rights of accumulation and other programs that can reduce
sales charges with respect to the Federated Fund.
Federated's management also reviewed with the Board relative asset size
and expense ratios, including relative advisory fees. The Board discussed the
fact that the Federated Fund is larger in asset size than the State Bond Fund
and considered potential economies of scale that might be experienced by former
State Bond Fund shareholders if they were to become shareholders of a larger
fund. Federated's management discussed with the Board expense waiver and
reimbursement arrangements with respect to both the Federated Fund in particular
and to the complex generally.
The Chief Investment Officer, Fixed-Income, of Federated discussed with
the Board the investment philosophy of Federated Advisers for its funds,
including the Federated Fund. He also described the background and significant
investment experience of Federated portfolio managers and other related
personnel issues.
The Board was presented with materials comparing the investment
objectives and policies of the State Bond Fund with those of the Federated Fund,
and determined that they were substantially similar. The Board was also
presented with and discussed materials comparing the performance, Morningstar
ratings and relative risks of the State Bond Fund and the Federated Fund.
Federated's management also presented biographical information about each of the
Directors of the Federated Fund and reviewed with the Board the structure of its
compliance and internal audit departments and the scope of its training
programs.
The Board also considered the potential benefits to ARM if the
Reorganization is consummated. The Board discussed the fact that ARM and ARM
Capital would be compensated for selling the books, records and goodwill
relating to the management of the State Bond Group, agreeing to certain non-
competition arrangements and cooperating in assisting in the transfer of the net
assets of the State Bond Group to the Federated Funds. They also took into
account the proposed payment to ARMFS of 0.25% of the average daily net assets
of the Federated Fund attributable to shareholder accounts serviced by ARMFS, as
well as the possible compensation of ARMFS for distribution of additional
Federated financial products in the future.
The Board noted that the State Bond Fund would not bear any of the costs
involved in the Reorganization, which would be borne entirely by ARM and/or
Federated. In addition, the Board discussed the anticipated tax-free nature of
the Reorganization to the State Bond Fund and its shareholders.
In connection with their consideration of the Reorganization, the Board
also reviewed their fiduciary obligations under state and federal law. They
considered the requirements of Section 15(f) of the 1940 Act, which provides
that an investment manager to an investment company, and the affiliates of such
manager (such as ARM), may receive any amount or benefit in connection with a
sale of any interest in such investment manager which results in an assignment
of an investment management contract if (1) for a period of three years after
such assignment, at least 75% of the board of directors of the investment
company are not `interested persons'' (as defined in the 1940 Act) of the new
investment manager or its predecessor; and (2) no `unfair burden'' (as defined
in the 1940 Act) is imposed on the investment company as a result of the
assignment or any express or implied terms, conditions or understandings
applicable thereto.
With respect to the first condition of Section 15(f) relating to Board
composition, the Board was advised that the Federated Fund's Board of Directors
presently consists of thirteen (13) Directors, only three (3) of whom are
`interested persons.'' With respect to the second condition of Section 15(f),
while there is no specific definition of `unfair burden,'' it includes any
arrangement, for two years after the transaction, pursuant to which the
predecessor or successor adviser is entitled to receive compensation from any
person in connection with the mutual fund's purchase or sale of securities,
other than bona fide ordinary compensation as principal underwriter. The
definition of unfair burden also includes any payments from the fund for other
than bona fide investment advisory or other services. The Board considered the
fact that representations were made by Federated and ARM that the agreement
among Federated, ARM and ARM Capital would contain representations and covenants
that the Reorganization would not impose an unfair burden on the State Bond
Group.
After reviewing and considering all of the information provided by
Federated and ARM, including the terms of the Reorganization, the Board,
including all of the Directors who are not interested persons of the State Bond
Fund or ARM Capital, voted unanimously at a special telephonic meeting held on
August 26, 1996, to approve the Reorganization and to recommend it to the
shareholders of the State Bond Fund for their approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund. The
Board of Directors of the Federated Fund, including a majority of the
independent Directors, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Federated Fund and the
shareholders of the Federated Fund and that the interests of Federated Fund
shareholders would not be diluted as a result of effecting the Reorganization
and have unanimously voted to approve the Plan.
Agreement Among ARM, ARM Capital and Federated
The Reorganization is being proposed as part of an agreement by and
among Federated, ARM, and ARM Capital, pursuant to which ARM and ARM Capital
would be compensated for selling to Federated the books, records and goodwill
relating to the management of the State Bond Group and cooperating in
facilitating the transaction contemplated by the agreement. As part of that
agreement, ARM Capital and its affiliates have agreed not to compete with
Federated by providing investment advisory services to certain investment
companies. Following the Reorganization, ARM or its affiliates have agreed to
provide certain services to shareholders for which ARM or its affiliates may
receive fees paid by Federated and/or mutual funds in which the shareholders are
invested.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the net
assets of the State Bond Fund in exchange for the Federated Fund's Class A
Shares to be distributed pro rata by the State Bond Fund to its shareholders in
complete liquidation of the State Bond Fund on or about December , 1996 (the
---
"Closing Date"). Shareholders of the State Bond Fund will become shareholders
of the Federated Fund as of the close of business on the Closing Date, and will
be entitled to the Federated Fund's next dividend distribution.
As of or prior to the Closing Date, the State Bond Fund will declare and
pay a dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all taxable income for
the period ending on the Closing Date. In addition, the State Bond Fund's
dividend will include its net capital gains realized in the period ending on the
Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the State Bond Fund and the Federated Fund, as described under
the caption "Federal Income Tax Consequences" below. The Plan may be terminated
and the Reorganization may be abandoned at any time before or after approval by
shareholders of the State Bond Fund prior to the Closing Date by either party if
it believes that consummation of the Reorganization would not be in the best
interests of its shareholders.
Federated Advisers is responsible for the payment of substantially all
of the expenses of the Reorganization incurred by either party, whether or not
the Reorganization is consummated. Such expenses include, but are not limited
to, accountants' fees, registration fees, transfer taxes (if any), the fees of
banks and transfer agents and the costs of preparing, printing, copying and
mailing proxy solicitation materials to the State Bond Fund's shareholders and
the costs of holding the Special Meeting (as hereinafter defined). ARM is
responsible for the payment of the legal fees of the State Bond Fund.
The foregoing description of the Plan entered into between the Federated
Fund and the State Bond Fund, is qualified in its entirety by the terms and
provisions of the Plan, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class A Shares of the Federated Fund will be issued
without the imposition of a sales charge or other fee to the shareholders of the
State Bond Fund in accordance with the procedures described above. Class A
Shares of the Federated Fund to be issued to shareholders of the State Bond Fund
under the Plan will be fully paid and nonassessable when issued and transferable
without restriction and will have no preemptive or conversion rights. Reference
is hereby made to the Prospectus of the Federated Fund dated May 31, 1996
provided herewith for additional information about Class A Shares of the
Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Fund and the State
Bond Fund will receive an opinion from Dickstein Shapiro Morin & Oshinsky LLP,
counsel to the Federated Fund, to the effect that, on the basis of the existing
provisions of the Code, current administrative rules and court decisions, for
federal income tax purposes: (1) the Reorganization as set forth in the Plan
will constitute a tax-free reorganization under section 368(a)(1)(C) of the
Code; (2) no gain or loss will be recognized by the Federated Fund upon its
receipt of the State Bond Fund's assets solely in exchange for Federated Fund
Class A Shares; (3) no gain or loss will be recognized by the State Bond Fund
upon the transfer of its assets to the Federated Fund in exchange for Federated
Fund Class A Shares or upon the distribution (whether actual or constructive) of
the Federated Fund Class A Shares to the State Bond Fund shareholders in
exchange for their shares of the State Bond Fund; (4) no gain or loss will be
recognized by shareholders of the State Bond Fund upon the exchange of their
State Bond Fund shares for Federated Fund Class A Shares; (5) the tax basis of
the State Bond Fund's assets acquired by the Federated Fund will be the same as
the tax basis of such assets to the State Bond Fund immediately prior to the
Reorganization; (6) the tax basis of Federated Fund Class A Shares received by
each shareholder of the State Bond Fund pursuant to the Plan will be the same as
the tax basis of State Bond Fund shares held by such shareholder immediately
prior to the Reorganization; (7) the holding period of the assets of the State
Bond Fund in the hands of the Federated Fund will include the period during
which those assets were held by the State Bond Fund; and (8) the holding period
of Federated Fund Class A Shares received by each shareholder of the State Bond
Fund will include the period during which the State Bond Fund shares exchanged
therefor were held by such shareholder, provided the State Bond Fund shares were
held as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not binding
on the Internal Revenue Service (`IRS'') or any court. The State Bond Fund
does not expect to obtain a ruling from the IRS regarding the consequences of
the Reorganization. Accordingly, if the IRS sought to challenge the tax
treatment of the Reorganization and was successful, neither of which is
anticipated, the Reorganization would be treated as a taxable sale of assets of
the State Bond Fund, followed by the taxable liquidation of the State Bond Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the State Bond Fund are open-end,
diversified management investment companies registered under the 1940 Act, which
continuously offer to sell shares at their current net asset value. The
Federated Fund is organized as a corporation under the laws of the State of
Maryland and is governed by its Articles of Incorporation, Bylaws, and Board of
Directors, in addition to applicable state and Federal law. The State Bond Fund
is organized as a separate series of State Bond Income Funds, Inc. under the
laws of the State of Maryland and is governed by its Articles of Incorporation,
Bylaws, and Board of Directors, in addition to applicable state and Federal law.
Set forth below is a brief summary of the significant rights of shareholders of
the Federated Fund and the State Bond Fund.
Shares of the Federated Fund and the State Bond Fund. The Federated
Fund is authorized to issue 2,000,000,000 shares of common stock, par value
$0.001 per share. The Board of Directors has established three classes of
shares of the Federated Fund, known as Class A Shares, Class B Shares and Class
C Shares. The State Bond Fund has an authorized capital of 10,000,000,000
shares of common stock with a par value of $.00001 per share. The State Bond
Fund is currently the sole investment portfolio of State Bond Income Funds, Inc.
and has only one class of shares. Issued and outstanding shares of both the
Federated Fund and State Bond Fund are fully paid and nonassessable, and freely
transferable.
Voting Rights. Neither the Federated Fund nor the State Bond Fund is
required to hold annual meetings of shareholders, except as required under the
1940 Act. Shareholder approval is necessary only for certain changes in
operations or the election of directors under certain circumstances. The
Federated Fund requires that a special meeting of shareholders be called for any
permissible purpose upon the written request of the holders of at least 10% of
the outstanding shares of the series of the Federated Fund entitled to vote. A
special meeting of the shareholders of the State Bond Fund is required to be
called upon the written request of shareholders representing not less than 25%
of the issued and outstanding shares entitled to vote. Each share of the
Federated Fund gives the shareholder one vote in director elections and other
matters submitted to shareholders for vote. All shares of each series or class
in the Federated Fund have equal voting rights except that in matters affecting
only a particular series or class, only shares of that series or class are
entitled to vote. All shares of the State Bond Fund have equal voting rights.
Directors. The Bylaws of the Federated Fund provide that the term of
office of each Director shall be until his or her resignation or removal or
until the annual meeting next held after his or her election or until election
and qualification of his or her successor. A Director of the Federated Fund may
be removed by a vote of a majority of all shares outstanding and entitled to
vote at any special meeting of shareholders, and such shareholders may elect a
Director to replace the Director so removed to serve for the remainder of the
term and until the election and qualification of his or her successor. A
vacancy on the Board may be filled by the action of a majority of the Directors
remaining in office, and such elected Director shall hold office until the next
annual meeting of shareholders or until his or her successor is duly elected and
qualifies. Notwithstanding the foregoing, the shareholders may, at any time
during the term of such Director elected to fill a vacancy, elect some other
person to fill said vacancy and thereupon the election by the Board shall be
superseded. The Bylaws of the State Bond Fund provide that each Director holds
office from the time of his or her election until the next annual meeting of
shareholders or until his or her successor is duly elected and qualifies. No
Director of the State Bond Fund shall be qualified for election by the
shareholders if he or she has attained the age of 70. The Board of Directors of
the State Bond Fund shall call a meeting of shareholders for the purpose of
voting upon the question of removal of any Director or Directors when requested
in writing to do so by the record holders of not less than 10% of the
outstanding shares. A Director of the State Bond Fund may be removed, with or
without cause, by the affirmative vote of a majority of the votes entitled to be
cast for the election of Directors, and such shareholders may elect a qualified
person as Director to replace the Director so removed. In case of any vacancy
on the Board of Directors, a majority of the remaining Directors may elect a
successor to hold office until the next annual meeting of the shareholders and
until his or her successor is duly elected and qualifies. With respect to both
the Federated Fund and the State Bond Fund, a meeting of shareholders will be
required for the purpose of electing additional Directors whenever fewer than a
majority of the Directors then in office were elected by shareholders.
Liability of Directors and Officers. Under the Articles of
Incorporation of the Federated Fund, a Director or officer will be personally
liable only for his or her own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her
office. The Articles of Incorporation further provide that Directors and
officers will be indemnified by the Federated Fund against reasonable costs and
expenses incurred in connection with any claim or litigation unless the person's
conduct is determined to constitute willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
person's office. The Articles of Amendment and Restatement of the State Bond
Fund contain a provision eliminating liability of directors and officers to the
State Bond Fund or its shareholders to the fullest extent permitted by Maryland
law. Therefore, directors and officers of the State Bond Fund will not be
liable for monetary damages to the State Bond Fund or its shareholders for
breach of the duty of care. However, such elimination of liability regarding a
director's duty of care does not permit the elimination or limitation of
liability (1) to the extent that it is proved that the person actually received
an improper benefit or profit in money, property or services; (2) to the extent
that a judgment or other final adjudication adverse to the person is entered in
a proceeding based on a finding in the proceeding that the person's action, or
failure to act, was committed in bad faith or was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding; or (3) for any action or failure to act occurring prior to February
18, 1988. In addition, due to the provisions of the 1940 Act, shareholders
would still have the right to pursue monetary claims against directors or
officers for acts involving willful malfeasance, bad faith, gross negligence or
reckless disregard of their duties as directors or officers. Under the
agreement by and among Federated, ARM and ARM Capital, Federated has agreed for
a period of three (3) years following the Closing to provide coverage under a
directors and officers liability insurance policy for the current Directors of
the State Bond Fund.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated Fund
or of the termination or liquidation of the State Bond Fund, the shareholders of
the respective fund or class are entitled to receive, when and as declared by
its Directors the excess of the assets belonging to the respective fund or class
over the liabilities belonging to the respective fund or class. In either case,
the assets belonging to the fund or class will be distributed among the
shareholders in proportion to the number of shares of the respective fund or
class held by them.
Capitalization
The following table sets forth the unaudited capitalization of the Class A
Shares of the Federated Fund and the shares of the State Bond Fund as of
August 31, 1996 and on a pro forma combined basis as of that date:
Federated Fund State Bond Pro Forma
(Class A Shares) Fund Combined
Net Assets............... $1,230,191,290 $13,093,303 $1,243,284,593
Net Asset Value Per Share $7.62 $4.96 $7.62
Shares Outstanding....... 161,503,208 2,642,232 163,222,136
INFORMATION ABOUT THE FEDERATED FUND
AND THE STATE BOND FUND
Federated Fund for U.S. Government Securities, Inc.
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated May 31, 1996, a copy of which is included
herewith and incorporated by reference herein. Additional information about the
Federated Fund is included in the Federated Fund's Annual Report to Shareholders
dated March 31, 1996, the Statement of Additional Information dated May 31, 1996
and the Statement of Additional Information dated November , 1996 (relating to
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this Prospectus/Proxy Statement), each of which is incorporated herein by
reference. Copies of the Annual Report and Statements of Additional
Information, which have been filed with the Securities and Exchange Commission
(the "SEC"), may be obtained upon request and without charge by contacting the
Federated Fund at 1-800-341-7400 or by writing the Federated Fund at Federated
Investors Tower, Pittsburgh, PA 15222-3779. The Federated Fund is subject to
the informational requirements of the Securities Act of 1933, as amended (the
`1933 Act''), the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and in accordance therewith files reports and other information
with the SEC. Reports, proxy and information statements, charter documents and
other information filed by the Federated Fund can be obtained by calling or
writing the Federated Fund and can also be inspected and copied by the public at
the public reference facilities maintained by the SEC in Washington, D.C.
located at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
certain of its regional offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, IL 60661 and 13th Floor, Seven World
Trade Center, New York, NY 10048. Copies of such material can be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the 1933
Act, omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Federated Fund and the
shares offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the SEC.
State Bond U.S. Government and Agency Securities Fund
Information about the State Bond Fund and State Bond Income Funds, Inc.
is contained in the State Bond Fund's current Prospectus dated March 1, 1996,
the Annual Report to Shareholders dated October 31, 1995, the Semi-Annual Report
to Shareholders dated April 30, 1996, its Statement of Additional Information
dated March 1, 1996 and the Statement of Additional Information dated November
, 1996 (relating to this Prospectus/Proxy Statement), each of which is
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incorporated herein by reference. Copies of such Prospectus, Annual Report,
Semi-Annual Report, and Statement(s) of Additional Information, which have been
filed with the SEC, may be obtained upon request and without charge from the
State Bond Fund by calling 1-800-328-4735 or by writing to the State Bond Fund
at 100 North Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-0069. The
State Bond Fund is subject to the informational requirements of the 1933 Act,
the 1934 Act and the 1940 Act and in accordance therewith files reports and
other information with the SEC. Reports, proxy and information statements,
charter documents and other information filed by State Bond Income Funds, Inc.
or its portfolio, the State Bond Fund, can be obtained by calling or writing the
State Bond Fund and can also be inspected at the public reference facilities
maintained by the SEC or obtained at prescribed rates at the addresses listed in
the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the State Bond Fund of proxies for use
at the Special Meeting of Shareholders (the "Special Meeting") to be held at
4:00 p.m. on December , 1996 at: 100 North Minnesota Street, New Ulm,
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Minnesota 56073-0069, and at any adjournments thereof. The proxy confers
discretionary authority on the persons designated therein to vote on other
business not currently contemplated which may properly come before the Special
Meeting. A proxy, if properly executed, duly returned and not revoked, will be
voted in accordance with the specifications thereon; if no instructions are
given, such proxy will be voted in favor of the Plan. A shareholder may revoke
a proxy at any time prior to use by filing with the Secretary of the State Bond
Fund an instrument revoking the proxy, by submitting a proxy bearing a later
date or by attending and voting at the Special Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Advisers. In addition to
solicitations through the mails, proxies may be solicited by officers, employees
and agents of the State Bond Fund, Federated Advisers and their respective
affiliates at no additional cost to the State Bond Fund. Such solicitations may
be by telephone, telegraph or personal contact. Federated Advisers will
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.
Outstanding Shares and Voting Requirements
The Board of Directors of the State Bond Fund has fixed the close of
business on October 11, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and any
adjournment thereof. As of the record date, there were shares of the
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State Bond Fund outstanding. Each of the State Bond Fund's shares is entitled
to one vote and fractional shares have proportionate voting rights. [On the
record date, the Directors and officers of the State Bond Fund as a group owned
less than 1% of the outstanding shares of the State Bond Fund.] To the best
knowledge of ARM Capital, as of the record date, no person, except as set forth
in the table below, owned beneficially or of record 5% or more of the State Bond
Fund's outstanding shares.
Percent of
Shares Percent of Outstanding
Name and Address of Owned Outstanding Shares of the
Beneficial Owner Beneficially Shares Federated Fund
Following
Reorganization
As of the record date, there were Class A, Class B and
-------- ----
Class C Shares of the Federated Fund outstanding. On the record date, the
- ----
Directors and officers of the Federated Fund as a group owned less than 1% of
the outstanding Class A, Class B and Class C Shares of the Federated Fund
outstanding. To the best knowledge of Federated Advisers, as of the record
date, no person, except as set forth in the table below, owned beneficially or
of record 5% or more of the Federated Fund's outstanding Class A, Class B or
Class C Shares.
Percent of
Outstanding
Shares Owned Percent of Shares of the
Class A Name and Address of Beneficially Outstanding Federated Fund
Shares Beneficial Owner Shares Following
Reorganization
Shares Owned Percent of
Class B Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Shares Owned Percent of
Class C Name and Address of Beneficially Outstanding
Shares Beneficial Owner Shares
Approval of the Plan requires the affirmative vote of a majority of the
outstanding shares of the State Bond Fund. The votes of shareholders of the
Federated Fund are not being solicited since their approval is not required in
order to effect the Reorganization.
One-third of the issued and outstanding shares of the State Bond Fund,
represented in person or by proxy, will be required to constitute a quorum at
the Special Meeting for the purpose of voting on the proposed Reorganization.
For purposes of determining the presence of a quorum, shares represented by
abstentions and "broker non-votes" will be counted as present, but not as votes
cast, at the Special Meeting. Because approval of the Reorganization requires
the approval of a majority of the outstanding shares of the State Bond Fund,
abstentions and "broker non-votes" will have the same effect as if they were
votes against the Reorganization.
Dissenter's Right of Appraisal
Shareholders of the State Bond Fund objecting to the Reorganization have
no appraisal rights under the State Bond Fund's Articles of Incorporation or
Maryland law. Under the Plan, if approved by State Bond Fund shareholders, each
shareholder will become the owner of Class A Shares of the Federated Fund having
a total net asset value equal to the total net asset value of his or her
holdings in the State Bond Fund at the Closing Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the State Bond Fund knows of no other matters that may
properly be, or which are likely to be, brought before the meeting. However, if
any other business shall properly come before the meeting, the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
If at the time any session of the Special Meeting is called to order, a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Special 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 Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of the proposal, in favor of such an adjournment, and
will vote those proxies required to be voted against the proposal, against any
such adjournment
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC., a
Maryland corporation (hereinafter called the "Acquiring Fund"), and STATE BOND
INCOME FUNDS, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio STATE BOND U.S. GOVERNMENT AND AGENCY
SECURITIES FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
net assets of the Acquired Fund in exchange solely for Class A Shares of the
Acquiring Fund (the "Acquiring Fund Shares") and the distribution, after the
Closing Date (as hereinafter defined), of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered open-end
management investment companies and the Acquired Fund owns securities in which
the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized to
issue shares of common stock or shares of beneficial interest, as the case may
be;
WHEREAS, the Board of Directors, including a majority of the directors
who are not "interested persons" (as defined under the Investment Company Act of
1940, as amended (the "1940 Act")), of the Acquiring Fund has determined that
the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares
is in the best interests of the Acquiring Fund shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the directors
who are not "interested persons" (as defined under the 1940 Act), of the
Corporation has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the Acquired
Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the net
assets of the Acquired Fund, including all securities and cash, other than cash
in an amount necessary to pay any unpaid dividends and distributions as provided
in paragraph 1.5, beneficially owned by the Acquired Fund, and the Acquiring
Fund agrees in exchange therefor to deliver to the Acquired Fund the number of
Acquiring Fund Shares, including fractional Acquiring Fund Shares, determined as
set forth in paragraph 2.3. Such transaction shall take place at the closing
(the "Closing") on the closing date (the "Closing Date") provided for in
paragraph 3.1. In lieu of delivering certificates for the Acquiring Fund
Shares, the Acquiring Fund shall credit the Acquiring Fund Shares to the
Acquired Fund's account, for the benefit of its shareholders, on the stock
record books of the Acquiring Fund and shall deliver a confirmation thereof to
the Acquired Fund.
1.2 The Acquired Fund will discharge or make provision for the discharge
of all of its liabilities and obligations prior to or on the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall be
made on the Closing Date and shall be delivered to State Street Bank and Trust
Company (hereinafter called "State Street"), Boston, Massachusetts, the
Acquiring Fund's custodian (the "Custodian"), for the account of the Acquiring
Fund, together with proper instructions and all necessary documents to transfer
to the account of the Acquiring Fund, free and clear of all liens, encumbrances,
rights, restrictions and claims created by the Acquired Fund. All cash
delivered shall be in the form of immediately available funds payable to the
order of the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect to
assets transferred to the Acquiring Fund thereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or with
respect to the securities transferred. Such assets shall be deemed included in
assets transferred to the Acquiring Fund on the Closing Date and shall not be
separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. In addition, each Acquired Fund
Shareholder shall have the right to receive any unpaid dividends or other
distributions which were declared before the Valuation Date (as hereinafter
defined) with respect to the shares of the Acquired Fund that are held by the
shareholder on the Valuation Date. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open accounts
on the share record books of the Acquiring Fund in the names of the Acquired
Fund Shareholders, and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders, based on their ownership of shares
of the Acquired Fund on the Closing Date. All issued and outstanding Shares of
the Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Corporation up to and including the Closing Date and
such later dates, with respect to dissolution and deregistration of the
Corporation, on which the Corporation is dissolved and deregistered.
1.9 The Corporation shall be deregistered as an investment company under
the 1940 Act and dissolved as a Maryland corporation as promptly as practicable
following the Closing Date and the making of all distributions pursuant to
paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) on the
Closing Date (such time and date being herein called the "Valuation Date"),
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1, by
the net asset value of one Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value shall be made in accordance with the regular
practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as the
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parties may mutually agree. All acts taking place at the Closing Date shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m. (Eastern
time) at the offices of the Acquiring Fund, Federated Investors Tower,
Pittsburgh, PA 15222-3779, or such other time and/or place as the parties may
mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired Fund,
shall deliver at the Closing a certificate of an authorized officer stating that
its records contain the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership of outstanding shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date to the Secretary of the Acquired Fund, or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
power to own all of its properties and assets and to carry out this Agreement.
(b) The Corporation 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.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquired Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired Fund
at October 31, 1994 has been audited by independent auditors and at October 31,
1995 has been audited by Ernst & Young LLP, independent auditors, and have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Acquired
Fund as of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein.
(h) The unaudited Statement of Assets and Liabilities of the
Acquired Fund at April 30, 1996 has been prepared in accordance with generally
accepted accounting principles, consistently applied, although subject to year-
end adjustments, and on a basis consistent with the Statement of Assets and
Liabilities of the Acquired Fund at October 31, 1995 which has been audited by
Ernst & Young LLP, independent auditors, and such statement (copies of which
have been furnished to the Acquiring Fund) fairly reflects the financial
condition of the Acquired Fund as of such date, and there are no known
liabilities of the Acquired Fund, contingent or otherwise, as of such date not
disclosed therein.
(i) Since April 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such date
shall have been filed or an appropriate extension obtained, and all Federal and
other taxes shall have been paid so far as due, or provision shall have been
made for the payment thereof or contest in good faith, and to the best of the
Acquired Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(k) For each fiscal year of its operation, subject to applicable
statute of limitation periods, the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company.
(l) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing, be held by the persons and in
the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(n) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary action
on the part of the Corporation and, subject to the approval of the Acquired Fund
Shareholders, this Agreement constitutes the valid and legally binding
obligation of the Acquired Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether the
enforceability is considered in a proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (only insofar as it relates to the Acquired Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
the power to carry on its business as it is now being conducted and to carry out
this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration has
not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Acquiring Fund's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquiring Fund knows of
no facts which might form the basis for the institution of such proceedings, and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the Acquiring
Fund at March 31, 1995 and 1996, have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition of the
Acquiring Fund as of such dates, and there are no known contingent liabilities
of the Acquiring Fund as of such dates not disclosed therein.
(g) Since March 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as disclosed to and
accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision shall
have been made for the payment thereof or contest in good faith, and to the best
of the Acquiring Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, subject to applicable
statute of limitation periods, the Acquiring Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company.
(j) All issued and outstanding Acquiring Fund Shares are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes the valid and legally binding obligation of
the Acquiring Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general principles of
equity and the discretion of the court (regardless of whether the enforceability
is considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund) will,
on the effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for Federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code and which will be certified by the Corporation's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Prospectus/Proxy Statement,
referred to in paragraph 4.1(m), all to be included in a Registration Statement
on Form N-14 of the Acquiring Fund (the "Registration Statement"), in compliance
with the 1933 Act, the Securities Exchange Act of 1934, as amended, and the 1940
Act in connection with the meeting of the Acquired Fund Shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company taxable
income, if any, plus the excess of its interest income, if any, excludable from
gross income under Code section 103(a) over its deductions disallowed under Code
sections 265 and 171(a)(2) for the taxable periods or years ended on or before
October 31, 1995 and for the period from said date to and including the Closing
Date (computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ended on or
before October 31, 1995 and in the period from said date to and including the
Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Corporation contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquiring
Fund, to the effect that the representations and warranties of the Corporation
made in this Agreement are true and correct in all material respects at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquiring
Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the Acquired
Fund, to the effect that the representations and warranties of the Acquiring
Fund made in this Agreement are true and correct in all material respects at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Acquired
Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the Acquiring
Fund's financial condition, assets, liabilities or business since the date
hereof other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of any indebtedness, except as otherwise
disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, either
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of the Corporation's Articles of
Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Acquired Fund, provided that either party hereto may
for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an opinion
of Dickstein Shapiro Morin & Oshinsky LLP substantially to the effect that for
Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange
for the Acquiring Fund Shares and the distribution of the Acquiring Fund Shares
to the Acquired Fund Shareholders in liquidation of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of the
Code; (b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the Acquiring
Fund Shares; (c) No gain or loss will be recognized by the Acquired Fund upon
the transfer of the Acquired Fund assets to the Acquiring Fund in exchange for
the Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund; (d) No gain or loss will be
recognized by the Acquired Fund Shareholders upon the exchange of their Acquired
Fund shares for the Acquiring Fund Shares; (e) The tax basis of the Acquired
Fund assets acquired by the Acquiring Fund will be the same as the tax basis of
such assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the Acquired
Fund Shareholders pursuant to the Reorganization will be the same as the tax
basis of the Acquired Fund shares held by such shareholder immediately prior to
the Reorganization; (g) The holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and (h) The holding period of the
Acquiring Fund Shares to be received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund shares exchanged therefor were
held by such shareholder (provided the Acquired Fund shares were held as capital
assets on the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time prior to
the Closing Date (and notwithstanding any vote of the Acquired Fund
Shareholders) if circumstances should develop that, in the opinion of either of
the parties' Board, make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement shall
become void and have no effect, without any liability on the part of any party
hereto or the directors or officers of the Corporation or the Acquiring Fund or
the shareholders of the Acquiring Fund or of the Acquired Fund, in respect of
this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Directors of the Acquiring Fund or the Board of
Directors of the Corporation, if, in the judgment of either, such waiver will
not have a material adverse effect on the benefits intended under this Agreement
to the shareholders of the Acquiring Fund or of the Acquired Fund, as the case
may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and merges and
supersedes all prior discussions, agreements, and understandings of every kind
and nature between them relating to the subject matter hereof. Neither party
shall be bound by any condition, definition, warranty or representation, other
than as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York, without giving effect to principles of
conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6 An agreement has been entered into under which Federated Advisers will
assume substantially all of the expenses of the reorganization including
accountants' fees, registration fees, transfer taxes (if any), the fees of banks
and transfer agents and the costs of preparing, printing, copying and mailing
proxy solicitation materials to the Acquired Fund's shareholders and the costs
of holding the Special Meeting of Shareholders. ARM Financial Group, Inc. will
assume the legal fees of the Acquired Fund.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have each
caused this Agreement and Plan of Reorganization to be executed and attested on
its behalf by its duly authorized representatives as of the date first above
written.
Acquired Fund:
STATE BOND INCOME FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND U.S. GOVERNMENT AND
AGENCY SECURITIES FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES, INC.
/s/ S. Elliot Cohan By: /s/ J. Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: President
STATEMENT OF ADDITIONAL INFORMATION
November , 1996
---
ACQUISITION OF THE ASSETS OF
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND,
A PORTFOLIO OF
STATE BOND INCOME FUNDS, INC.
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
TELEPHONE NUMBER: 1-800-328-4735
BY AND IN EXCHANGE FOR CLASS A SHARES OF
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-341-7400
This Statement of Additional Information dated November , 1996 is not
---
a prospectus. A Prospectus/Proxy Statement dated November , 1996 related to
---
the above-referenced matter may be obtained from Federated Fund for U.S.
Government Securities, Inc., Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779. This Statement of Additional Information should be read in
conjunction with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Fund for U.S.
Government Securities, Inc., dated May 31, 1996.
2. Statement of Additional Information of State Bond U.S. Government
and Agency Securities Fund, a portfolio of State Bond Income Funds, Inc., dated
March 1, 1996.
3. Financial Statements of Federated Fund for U.S. Government
Securities, Inc., dated March 31, 1996.
4. Financial Statements of State Bond U.S. Government and Agency
Securities Fund, a portfolio of State Bond Income Funds, Inc., dated October 31,
1995.
5. Financial Statements (unaudited) of State Bond U.S. Government
and Agency Securities Fund, a portfolio of State Bond Income Funds, Inc., dated
April 30, 1996.
The Statement of Additional Information of Federated Fund for U.S.
Government Securities, Inc. (the "Federated Fund"), dated May 31, 1996, is
incorporated herein by reference to Post-Effective Amendment No. 65 to the
Federated Fund's Registration Statement on Form N-1A (File Nos. 2-33490 and
811-1890) which was filed with the Securities and Exchange Commission on or
about May 24, 1996. A copy may be obtained, upon request and without charge,
from the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3279;
telephone number: 1-800-341-7400.
The Statement of Additional Information of State Bond U.S. Government
and Agency Securities Fund (the "State Bond Fund"), a portfolio of State Bond
Income Funds, Inc. (the "Corporation"), dated March 1, 1996, is incorporated
herein by reference to Post-Effective Amendment No. 11 to the Corporation's
Registration Statement on Form N-1A (File Nos. 33-1176 and 811-4445) which was
filed with the Securities and Exchange Commission on or about December 29, 1995.
A copy may be obtained, upon request and without charge, from the State Bond
Fund at 100 North Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-0069;
telephone number: 1-800-328-4735.
The audited financial statements of the Federated Fund, dated March 31,
1996, are incorporated herein by reference to the Federated Fund's Annual Report
to Shareholders dated March 31, 1996 which was filed with the Securities and
Exchange Commission. A copy may be obtained, upon request and without charge,
from the Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3279;
telephone number: 1-800-341-7400.
The audited financial statements of the State Bond Fund, dated
October 31, 1995, are incorporated herein by reference to the State Bond Fund's
Annual Report to Shareholders dated October 31, 1995, which was filed with the
Securities and Exchange Commission. A copy may be obtained, upon request and
without charge, from the State Bond Fund at 100 North Minnesota Street, P.O. Box
69, New Ulm, Minnesota 56073-0069; telephone number 1-800-328-4735.
The unaudited financial statement of the State Bond Fund, dated
April 30, 1996, are incorporated herein by reference to the State Bond Fund's
Semi-Annual Report to Shareholders, dated April 30, 1996, which was filed with
the Securities and Exchange Commission. A copy may be obtained, upon request
and without charge, from the State Bond Fund at 100 North Minnesota Street, P.O.
Box 69, New Ulm, Minnesota 56073-0069; telephone number: 1-800-328-4735.
Pro forma financial statements are not included herein as the total net
assets of the State Bond Fund do not exceed 10% of the total assets of the
Federated Fund. At August 31, 1996, the total net assets of the State Bond Fund
were $13,093,303 and the total net assets of the Federated Fund were
$1,396,770,053.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the Registrant
pursuant to the Registrant's Articles of Incorporation, except where such
indemnification is not permitted by law. However, the Articles of Incorporation
do not protect the directors or officers from liability based on willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.
Directors and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933 (the
"Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Articles of Incorporation or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by directors, officers, or controlling
persons of the Registrant in connection with the successful defense of any act,
suit, or proceeding) is asserted by such directors, officers, or controlling
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for directors, officers, or
controlling persons of the Registrant by the Registrant pursuant to the Articles
of Incorporation or otherwise, the Registrant is aware of the position of the
Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Articles of Incorporation or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority vote of
a quorum of non-party directors who are not interested persons of the Registrant
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, director, or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
directors or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant, as
amended(1)
2.1 Copy of the Bylaws of the Registrant, as amended*
3 Not Applicable
4 Agreement and Plan of Reorganization dated September 23, 1996, between
State Bond Income Funds, Inc., a Maryland corporation, on behalf of its
portfolio, State Bond U.S. Government and Agency Securities Fund, and Federated
Fund for U.S. Government Securities, Inc., a Maryland corporation*
5.1 Copy of Specimen Certificate for Class A Shares of Capital Stock of the
Registrant(2)
5.2 Copy of Specimen Certificate for Class B Shares of Capital Stock of the
Registrant(2)
5.3 Copy of Specimen Certificate for Class C Shares of Capital Stock of the
Registrant(2)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(3)
7.1 Conformed Copy of Distributor's Contract of the Registrant(2)
7.2 Conformed Copy of Exhibit D to the Distributor's Contract of the
Registrant(1)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement; and
Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form N-1A, filed with the Commission on July
24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(1)
10.1 Conformed Copy of Distribution Plan of the Registrant(1)
10.2 Conformed Copy of Exhibit C to the Distribution Plan of the Registrant(1)
10.3 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the Commission on January 26,
1996. (File Nos. 33-52149 and 811-07141)
10.4 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated Investors
regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization(4)
13.1 Conformed Copy of Agreement for Fund Accounting, Shareholder Recordkeeping
Services and Custody Services Procurement(5)
13.2 The responses described in Item 16 (7.3) and Item 16 (10.3) are hereby
incorporated by reference
13.3 The Registrant hereby incorporates the conformed copy of the Shareholder
Services Subcontract between National Pensions Alliance, Ltd. and Federated
Shareholder Services from Item 24(b)(9)(ii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with the Commission on March 25,
1996. (File Nos. 2-75670 and 811-3375)
13.4 The Registrant hereby incorporates the conformed copy of the Shareholder
Services Subcontract between Fidelity and Federated Shareholder Services from
Item 24(b)(9)(iii) of the Federated GNMA Trust Registration on Form N-1A, filed
with the Commission on March 25, 1996. (File Nos. 2-75670 and 811-3375)
14.1 Conformed Copy of Consent of Independent Auditors of Registrant, Deloitte &
Touche LLP*
14.2 Conformed Copy of Consent of Independent Auditors of State Bond U.S.
Government and Agency Securities Fund, Ernst & Young LLP*
14.3 Conformed Copy of Consent of Independent Auditors of State Bond U.S.
Government and Agency Securities Fund, Deloitte & Touche LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of State Bond U.S. Government and Agency Securities Fund*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 63 on Form N-1A filed on May 25, 1995. (File Nos. 2-33490 and
811-1890)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 60 on Form N-1A filed May 25, 1994. (File Nos. 2-33490 and
811-1890)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 49 on Form N-1A filed July 28, 1989. (File Nos. 2-33490 and
811-1890)
(4) To be filed by Post-Effective Amendment pursuant to `Dear Registrant''
letter dated February 15, 1996.
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 65 on Form N-1A filed May 24, 1996. (File Nos. 2-33490 and
811-1890)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Federated Fund for U.S. Government Securities, Inc., has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania on September 30,1996.
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES, INC.
(Registrant)
By: *
J. Christopher Donahue
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on September 30, 1996:
* Chairman and Director
John F. Donahue
(Chief Executive Officer)
* President and Director
J. Christopher Donahue
* Treasurer and Executive
Vice President
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
EXHIBIT 11
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
September 30, 1996
The Directors of Federated Fund
for U.S. Government Securities , Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Fund for U.S. Government Securities, Inc. (the `Fund''), a
Maryland Corporation, proposes to issue shares of capital stock (such
shares of capital stock being herein referred to as `Shares'') in
connection with the acquisition of the assets of State Bond U.S. Government
and Agency Securities Fund, a portfolio of State Bond Income Funds, Inc., a
Maryland corporation, pursuant to the Agreement and Plan of Reorganization
dated as of September 23, 1996 (`Agreement''), filed as an exhibit to the
registration statement of the Fund filed on Form N-14 (Securities Act of
1933 No. to be assigned) under the Securities Act of 1933 as amended (`N-
14 Registration').
As counsel I have participated in the organization of the Fund, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Articles of
Incorporation dated June 9, 1969 (`Articles of Incorporation''), the
Bylaws of the Fund, the Agreement and such other documents and records
The Directors of Federated Fund for
U.S. Government Securities , Inc.
September 30, 1996
Page 2
deemed relevant. I have also reviewed questions of law and consulted with
counsel thereon as deemed necessary or appropriate for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Fund is duly organized and validly existing pursuant to the
Articles of Incorporation.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Articles of Incorporation upon receipt
of consideration sufficient to comply with the provisions of Article Fifth,
Section (a), of the Articles of Incorporation and subject to compliance
with the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such Shares, when so issued, will
be fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
Very truly yours,
The Directors of Federated Fund for
U.S. Government Securities , Inc.
September 30, 1996
Page 2
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES, INC.
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Title: Assistant Secretary
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders
of the FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
We consent to the incorporation by reference in this registration statement
on Form N-14 of the Federated Fund for U.S. Government Securities,
Inc.(formerly, Fund for U.S. Government Securities, Inc.) of our report
dated May 17, 1996, appearing in the Annual Report of the Federated Fund
for U.S. Government Securities, Inc. for the year ended March 31, 1996, and
incorporated by reference in the Statement of Additional Information dated
May 31, 1996.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 1, 1996
Exhibit 14.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of State Bond U.S. Government and
Agency Securities Fund of our report dated November 29, 1994 accompanying
the financial statements of State Bond U.S. Government Securities Fund for
the year ended October 31, 1994 and to the reference to us under the
heading `Financial Highlights'' appearing in the Prospectus which is a
part of such Registration Statement and is incorporated by reference in the
Registration Statement (Form N-14) of Federated Fund for U.S. Government
Securities, Inc. filed with the Securities and Exchange Commission.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
September 30, 1996
EXHIBIT 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED FUND FOR U.S.
GOVERNMENT SECURITIES , INC. and the Deputy General Counsel of Federated
Investors, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and in
their names, place and stead, in any and all capacities, to sign any and
all documents to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940, by means of the Securities and
Exchange Commission's electronic disclosure system known as EDGAR; and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director September 30, 1996
John F. Donahue (Chief Executive Officer)
/s/J. Christopher Donahue President September 30, 1996
J. Christopher Donahue and Director
/s/John W. McGonigle Treasurer and September 30, 1996
John W. McGonigle Executive Vice
President
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director September 30, 1996
Thomas G. Bigley
/s/John T. Conroy, Jr. Director September 30, 1996
John T. Conroy, Jr.
/s/William J. Copeland Director September 30, 1996
William J. Copeland
/s/James E. Dowd Director September 30,1996
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director September 30, 1996
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director September 30, 1996
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director September 30, 1996
Peter E. Madden
/s/Gregor F. Meyer Director September 30, 1996
Gregor F. Meyer
/s/John E. Murray, Jr. Director September 30, 1996
John E. Murray, Jr.
/s/Wesley W. Posvar Director September 30, 1996
Wesley W. Posvar
/s/Marjorie P. Smuts Director September 30, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 30th day of September, 1996
/s/Jody L.Petras
Notarial Seal
Jody L. Petras, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Sept. 27, 1999
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
Rule 24f-2 Notice
FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 2-33490
(i) fiscal period for which notice is filed March 31, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at April 1, 1994,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 871,428 871,428
(iv) The number or amount of securities
sold during the fiscal period of this
notice 18,975,886
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 18,104,458
WITNESS the due execution hereof this 15th day of May, 1995
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) $140,618,151
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $484,006,026
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed -0- 484,006,026
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based ($343,387,875)
FEE SUBMITTED (1/29 of 1% of Total amount) $ -0-
CONVERSION OF NET REDEMPTIONS ON
RULE 24f-2 NOTICE TO FILING
UNDER RULE 24e-2
When a negative amount appears on the line captioned "Total amount upon
which the fee calculated specified in Section 6(b) of the Securities Act of
1933 is based", the following calculation should be made to determine the
share information needed to file under Rule 24e-2:
Total redemptions (per annual report) 62,842,774
Less: Line (v) - Rule 24f-2 Notice 18,104,458
Shares available to register under
Rule 24e-2 44,738,316 (a)
Fund's Current Net Asset Value $ 8.07 (b)
Multiply: Shares available to register
under Rule 24e-2 by the fund's current
net asset value (a x b) to obtain Proposed
Maximum Aggregate Offering Price $361,038,210
Federated Administrative
Services
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
May 15, 1995
Fund for U.S. Government Securities, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for Fund for U.S. Government Securities, Inc. ("Corporation") to be
filed in respect of shares of the Corporation ("Shares") sold for the fiscal
year ended March 31, 1995, pursuant to the Corporation's registration
statement filed with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933 (File No. 2-33490) ("Registration Statement").
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment Company
Act Rule 24f-2.
As counsel I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of 1933.
Further, I have examined and am familiar with the provisions of the Articles
of Incorporation dated June 9, 1969 ("Articles of Incorporation"), the Bylaws
of the Corporation and such other documents and records deemed relevant. I
have also reviewed questions of law and consulted with counsel thereon as
deemed necessary or appropriate by me for the purposes of this opinion.
On the basis of the foregoing, it is my opinion the Shares sold for the
fiscal year ended March 31, 1995, registration of which the Rule 24f-2 Notice
makes definite in number, were legally issued, fully paid and non-assessable
by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the Rule
24f-2 Notice referred to above, the Registration Statement of the Corporation
and to any application or registration statement filed under the securities
laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am expressing no opinion
as to the effect of the laws of any other jurisdiction.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Fund Attorney
FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
May 15, 1995
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 24f-2 Notice for FUND FOR U.S. GOVERNMENT SECURITIES, INC.
1933 Act File No. 2-33490
1940 Act File No. 811-1890
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company
Act of 1940, I enclose the Rule 24f-2 Notice for Fund For U.S. Government
Securities, Inc.
Since the aggregate redemption price of redeemed securities exceeded
the aggregate sales price of securities sold during the period for which
the Rule 24f-2 Notice is filed, an additional filing fee pursuant to Rule
24f-2(c) has not been filed.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel
has been electronically filed herewith which indicates whether the
securities, the registration of which this Notice makes definite in number,
were legally, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
EXHIBIT 2.1
FUND FOR U.S. GOVERNMENT SECURITIES, INC.
BY-LAWS
ARTICLE I
MEETING OF SHAREHOLDERS
Section 1. ANNUAL MEETINGS. The Corporation is not required to hold
an annual meeting of Shareholders in any year in which the election of
Directors is not required to be acted upon under the Investment Company Act
of 1940. If the Corporation is required to hold a meeting of Shareholders
to elect Directors, the meeting shall be designated the annual meeting of
Shareholders for that year. If an annual meeting of Shareholders is held,
it shall be held at a date and time determined by the Board of Directors
within 120 days after the occurrence of the event requiring the meeting.
Any other business may be considered at the meeting.
Section 2. SPECIAL MEETINGS. Special Meetings of Shareholders of the
Company or of a particular Series or Class may be called by the Chairman,
or by the Board of Directors; and shall be called by the Secretary whenever
ordered by the Chairman, any Director, or as requested in writing by
shareholders entitled to cast at least 10% of the voter shares entitled to
be cast at the meetings. Such request shall state the purpose of such
meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. The Secretary
shall inform such Shareholders of the reasonably estimated costs of
preparing and mailing the notice of the meeting, and upon payment to the
Corporation of such costs, the Secretary shall give not less than ten nor
more than 90 days' notice of the meeting. Unless required by Shareholders
entitled to cast a majority of all the votes entitled to be cast at the
meeting, a special meeting need not be called to consider any matter which
is substantially the same as a matter voted on at by special meeting of the
Shareholders held during the preceding 12 months.
Section 3. PLACE OF MEETINGS. All meetings of the Shareholders of
the Corporation or a particular Series or Class, shall be held at the
office of the Corporation in Pittsburgh, Pennsylvania, or at such other
place within or without the State of Maryland as may be fixed by the Board
of Directors.
Section 4. NOTICE. Not less than ten nor more than ninety days
before the date of every Annual or Special Meeting of Shareholders the
Secretary or an Assistant Secretary shall give to each Shareholder of
record of the Corporation or of the relevant Series or Class written notice
of such meeting. Such notice shall be deemed to have been given when
mailed to the Shareholder at his address appearing on the books of the
Corporation, which shall be maintained separately for the shares of each
Series or Class. It shall not be necessary to set forth the business
proposed to be transacted in the notice of any Annual Meeting except that
any proposal to amend the Charter of the Corporation shall be set forth in
such notice. Notice of a Special Meeting shall state the purpose or
purposes for which it is called.
Section 5. QUORUM. The presence in person or by proxy of holders of one-
third of the shares of stock of the Corporation entitled to vote without
regard to class shall constitute a quorum at any meeting of the
shareholders, except with respect to any matter which by law requires the
approval of one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of stock of
each class entitled to vote on the matter shall constitute a quorum.
In the absence of a quorum at any meeting, a majority of those
Shareholders present in person or by proxy may adjourn the meeting from
time to time to a date not later than 120 days after the original record
date without further notice than by announcement to be given at the meeting
until a quorum, as above defined, shall be present. Any business may be
transacted at the adjourned meeting which might have been transacted at the
meeting originally called had the same been held at the time so called.
Section 6. VOTING. At all meetings of Shareholders each Shareholder
shall be entitled to one vote or fraction thereof for each Share or
fraction thereof standing in his name on the books of the Corporation on
the date for the determination of Shareholders entitled to vote at such
meeting. All shares of each portfolio or class in the Corporation have
equal voting rights, except that in matters affecting only a particular
portfolio or class, only shares of that portfolio or class are entitled to
vote.
Section 7. PROXIES. Any Shareholder entitled to vote at any meeting
of Shareholders may vote either in person or by proxy, but no proxy which
is dated more than eleven months before the meeting named therein shall be
accepted. Every proxy shall be in writing and signed by the Shareholder or
his duly authorized attorney in fact and dated, but need not be sealed,
witnessed or acknowledged.
Section 8. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at any meeting of Shareholders may be taken without a
meeting, if a consent in writing, setting forth such action, is signed by
all the Shareholders entitled to vote on the subject matter thereof, and
such consent is filed with the records of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 1. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. All powers of
the Corporation may be exercised by or under the authority of the Board of
Directors except as conferred on or reserved to the Shareholders by law, by
the Charter or by these By-Laws.
Section 2. NUMBER, QUALIFICATIONS, MANNER OF ELECTION AND TERM OF
OFFICE. The number of Directors of the Corporation can be changed from
time to time to not less than three or the number of Shareholders,
whichever is less, nor more than twenty. Directors need not be
Shareholders. The term of office of a Director shall not be affected by
any decrease in the number of Directors made by the Board pursuant to the
foregoing authorization. Each Director shall hold office until the Annual
Meeting next held after he
becomes a director and until the election and qualification of his
successor.
Section 3. PLACE OF MEETING. The Board of Directors may hold its
meetings at such place or places within or without the State of Maryland as
the Board or as the person or persons requesting said meeting to be called
may from time to time determine.
Section 4. ANNUAL MEETINGS. The Board of Directors shall meet
annually for the election of Officers and any other business.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such intervals and on such dates as the Board
may from time to time designate, provided that any Director who is absent
when such designation is made shall be given notice of the designation.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at such times and at such places as may be designated
at the call of such meeting. Special meetings shall be called by the
Secretary or Assistant Secretary at the request of the Chairman or any
Director. If the Secretary when so requested refuses or fails for more
than twenty-four hours to call such meeting, the Chairman or such Director
may in the name of the Secretary call such meeting by giving due notice in
the manner required when notice is given by the Secretary.
Section 7. NOTICE. The Secretary or Assistant Secretary shall give,
at least two days before the meeting, notice of each meeting of the Board
of Directors, whether Annual, Regular or Special, to each member of the
Board by mail, telegram or telephone to his last known address. It shall
not be necessary to state the purpose or business to be transacted in the
notice of any meeting. Personal attendance at any meeting by a Director
other than to protest the validity of said meeting shall constitute a
waiver of the foregoing requirement of notice. In addition, notice of a
meeting need not be given if a written waiver of notice executed by such
Director before or after the Meeting is filed with the records of the
meeting.
Section 8. CONDUCT OF MEETINGS AND BUSINESS. The Board of Directors
may adopt such rules and regulations for the conduct of their meetings and
the management of the affairs of the Corporation as they may deem proper
and not inconsistent with applicable law, the Charter of the Corporation or
these By-Laws.
Section 9. QUORUM. One-third of the entire Board of Directors but
not less than two directors shall constitute a quorum at any meeting of the
Board of Directors. The action of a majority of Directors present at any
meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for
such action by statute, the Charter of the Corporation, or these By-Laws.
In the absence of a quorum at any meeting a majority of Directors present
may adjourn the meeting from day to day or for such longer periods as they
may designate until a quorum shall be present. Notice of any adjourned
meeting need not be given other than by announcement at the meeting.
Section 10. RESIGNATIONS. Any Director of the Corporation may resign
at any time by written notice to the Chairman of the Board of Directors or
to the Secretary of the Corporation. The resignation of any Director shall
take effect at the time specified therein or, if no time is specified, when
received by the Corporation. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 11. REMOVAL. At any meeting of Shareholders duly called for
the purpose, any Director may by the vote of a majority of all of the
Shares entitled to vote be removed from office. At the same meeting, the
vacancy in the Board of Directors may be filled by the election of a
Director to serve until the next annual meeting of Shareholders and the
election and qualification of his successor.
Section 12. VACANCIES. Except as otherwise provided by law, any
vacancy occurring in the Board of Directors for any cause other than by
reason of an increase in the number of Directors may be filled by a
majority of the remaining members of the Board of Directors although such
majority is less than a quorum and any vacancy occurring by reason of an
increase in the number of Directors may be filled by action of a majority
of the entire Board of Directors. A Director elected by the Board to fill
a vacancy shall be elected to hold office until the next Annual Meeting of
Shareholders and until his successor is duly elected and qualifies.
Section 13. COMPENSATION OF DIRECTORS. The Directors may receive
compensation for their services as Directors as determined by the Board of
Directors and expenses of attendance at each Meeting. Nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity, as an Officer, Agent or otherwise, and
receiving compensation therefor.
Section 14. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any Annual, Regular or Special Meeting of the
Board of Directors may be taken without a meeting if a written consent to
such action is signed by all members of the Board and such written consent
is filed with the minutes of proceedings of the Board.
Section 15. TELEPHONE CONFERENCE. Members of the Board of Directors
or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at the meeting.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. APPOINTMENT AND TERM OF OFFICE OF EXECUTIVE COMMITTEE.
The Board of Directors may appoint an Executive Committee, which shall
consist of two (2) or more Directors.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in
the Executive Committee from any cause may be filled by the Board of
Directors.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO BOARD. All action by the
Executive Committee shall be reported to the Board of Directors at its
Meeting next succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee
shall fix its own rules of procedure not inconsistent with these By-Laws or
with any directions of the Board of Directors. It shall meet at such times
and places and upon such notice as shall be provided by such rules or by
resolution of the Board of Directors. The presence of a majority shall
constitute a quorum for the transaction of business, and in every case the
affirmative vote of a majority of the members of the Committee present
shall be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the Meetings of the Board of Directors the Executive Committee,
except as limited by law or by specific directions of the Board of
Directors, shall possess and may exercise all the powers of the Board of
Directors in the management and direction of the business and conduct of
the affairs of the Corporation.
Section 6. OTHER COMMITTEES. From time to time the Board of
Directors may appoint any other Committee or Committees which shall have
such powers as shall be specified in the resolution of appointment and may
be delegated by law.
Section 7. COMPENSATION. The members of any duly appointed Committee
shall receive such compensation as from time to time may be fixed by the
Board of Directors and reimbursement of expenses.
Section 8. INFORMAL ACTION BY EXECUTIVE COMMITTEE OR OTHER
COMMITTEES. Any action required or permitted to be taken at any meeting of
the Executive Committee or any other duly appointed Committee may be taken
without a meeting if written consent to such action is signed by all
Members of such Committee and such written consent is filed with the
minutes of the proceedings of such Committee.
Section 9. ADVISORY BOARD. The Directors may appoint an Advisory
Board to consist in the first instance of not less than three (3) members.
Members of such Advisory Board shall not be Directors or Officers and need
not be Shareholders. Members of this Board shall hold office for such
period as the Directors may by resolution provide. Any Member of such
Board may resign therefrom by written instrument signed by him which shall
take effect upon delivery to the Directors. The Advisory Board shall have
no legal powers and shall not perform functions of Directors in any manner,
said Board being intended to act merely in an advisory capacity. Such
Advisory Board shall meet at such times and upon such notice as the Board
of Directors may by resolution provide. The compensation of the Members of
the Advisory Board, if any, shall be determined by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall
be a Chairman, a President, one or more Vice Presidents, a Treasurer, and a
Secretary. The Board of Directors may elect or appoint other Officers or
agents, including one or more Assistant Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers. The same
person may hold any two offices except those of President and Vice
President.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual Meeting.
Each Officer shall hold office for one year and until the election and
qualification of his successor. Any vacancy in any of the offices may be
filled for the unexpired portion of the term by the Board of Directors at
any Regular or Special Meeting of the Board. The Board of Directors may
elect or appoint additional Officers or agents at any Regular or Special
Meeting of the Board.
Section 3. REMOVAL. Any Officer elected by the Board of Directors
may be removed with or without cause at any time by the Board of Directors.
Any other employee of the Corporation may be removed or dismissed at any
time by the President.
Section 4. RESIGNATIONS. Any Officer may resign at any time by
giving written notice to the Board of Directors. Any such resignation
shall take effect at the time specified therein or, if no time is
specified, at the time of receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any Office because of death,
resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term in the manner prescribed in these By-
Laws for regular election or appointment to such Office.
Section 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be a Chairman, shall preside at the meetings
of Shareholders and of the Board of Directors. He shall receive such
information and reports as he may request from the Officers of the
Corporation. He shall counsel and advise the President on matters of major
importance.
Section 7. PRESIDENT. The Chairman for Fund for U.S. Government
Securities, Inc. shall be the chief executive officer of the Corporation.
He shall, unless other provisions are made therefor by the Board or
Executive Committee, employ and define the duties of all employees of the
Corporation, shall have the power to discharge any such employees, shall
exercise general supervision over the affairs of the Corporation and shall
perform such other duties as may be assigned to him from time to time by
the Board of Directors. In the absence of the Chairman of the Board of
Directors, the President or an officer or Director appointed by the
President, shall preside at all meetings of Shareholders.
Section 8. VICE PRESIDENT. The Vice President (or if more than one,
the senior Vice President) in the absence of the President shall perform
all duties and may exercise any of the powers of the President subject to
the control of the Board. Each Vice President shall perform such other
duties as may be assigned to him from time to time by the Board of
Directors, the Executive Committee, or the President.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept
in books provided for the purpose the Minutes of the Meetings of the
Shareholders, and of the Board of Directors; shall see that all Notices are
duly given in accordance with the provisions of these By-Laws and as
required by Law; shall be custodian of the records and of the Seal of the
Corporation and see that the Seal is affixed to all documents the execution
of which on behalf of the Corporation under its seal is duly authorized;
shall keep directly or through a transfer agent a register of the post
office address of each Shareholder, and make all proper changes in such
register, retaining and filing his authority for such entries; shall see
that the books, reports, statements, certificates and all other documents
and records required by law are properly kept and filed; and in general
shall perform all duties incident to the Office of Secretary and such other
duties as may, from time to time, be assigned to him by the Board of
Directors, the Executive Committee, or the President.
Section 10. TREASURER. The Treasurer shall have supervision of the
custody of all funds and securities of the Corporation, subject to
applicable law. He shall perform such other duties as may be from time to
time assigned to him by the Board of Directors, the Executive Committee, or
the President.
Section 11. ASSISTANT VICE PRESIDENT. The Assistant Vice President
or Vice Presidents of the Corporation shall have such authority and perform
such duties as may be assigned to them by the Board of Directors, the
Executive Committee, or the President of the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary or Secretaries and the Assistant Treasurer or
Treasurers shall perform the duties of the Secretary and of the Treasurer
respectively, in the absence of those Officers and shall have such further
powers and perform such other duties as may be assigned to them
respectively by the Board of Directors or the Executive Committee or by the
President.
Section 13. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director
of the Corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
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Section 1. CERTIFICATES. All share certificates shall be signed by
the Chairman, the President, or any Vice President and by the Treasurer or
Secretary or any Assistant Treasurer or Assistant Secretary and may be
sealed with the seal of the Corporation. The signatures may be either
manual or facsimile signatures and the seal may be either facsimile or any
other form of Seal. Certificates for shares for which the Corporation has
appointed an independent Transfer Agent and Registrar shall not be valid
unless countersigned by such Transfer Agent and registered by such
Registrar. In case any Officer who has signed any certificate ceases to be
an Officer of the Corporation before the certificate is issued, the
certificate may nevertheless be issued by the Corporation with the same
effect as if the Officer had not ceased to be such Officer as of the date
of its issuance. Share certificates shall be in such form not inconsistent
with law and these By-Laws as may be determined by the Board of Directors.
Section 2. TRANSFER OF SHARES. Shares of each Series and Class shall
be transferable on the books of the Corporation by the holder thereof in
person or by duly authorized attorney upon surrender of the certificate
representing the shares to be transferred properly endorsed.
Section 3. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. The
Board of Directors may fix in advance a date as the record date for the
purpose of determining Shareholders of a Series or Class entitled to notice
of or to vote at any Meeting of Shareholders or Shareholders to receive
payment of any dividend. Such date shall in any case not be more than 90
days and in case of a Meeting of Shareholders not less than l0 days prior
to the date on which the particular action requiring such determination of
Shareholders is to be taken. Only Shareholders of record on the record
-14-
date shall be entitled to notice of and to vote at such meeting or to
receive such dividends or rights, as the case may be. In lieu of fixing a
record date the Board of Directors may provide that the share transfer
books of the Corporation shall be closed for a stated period not to exceed
in any case 20 days. If the share transfer books are closed for the
purpose of determining Shareholders entitled to notice of or to vote at a
Meeting of Shareholders such books shall be closed for at least l0 days
immediately preceding such meeting.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any
Share certificate is lost, mutilated or destroyed the Board of Directors
may issue a new certificate in place thereof upon indemnity to the relevant
Series or Class against loss and upon such other terms and conditions as
the Board may deem advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Board of
Directors shall have power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer
and registration of Share certificates and may appoint a Transfer Agent
and/or Registrar of Share certificates of each Series or Class, and may
require all such Share certificates to bear the signature of such Transfer
Agent and/or of such Registrar.
ARTICLE VI
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Board of Directors or the Executive
Committee may authorize any Officer or Officers, or Agent or Agents of the
Corporation to enter into any Agreement or execute and deliver any
instrument in the name of the Corporation and such authority may be general
or confined to specific instances; and, unless so authorized by the Board
of Directors or by the Executive Committee or by these By-Laws, no Officer,
Agent or Employee shall have any power or authority to bind the Corporation
by any Agreement or engagement or to pledge its credit or to render it
liable pecuniarily for any purpose or to any amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts, or orders for
the payment of money, notes and other evidences of indebtedness shall be
signed by such Officer or Officers, Employee or Employees, or Agent or
Agents as shall be from time to time designated by the Board of Directors
or the Executive Committee, or as may be specified in or pursuant to the
agreement between the Corporation on behalf of any Series or Class and the
Bank or Trust Company appointed as custodian.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Corporation or its nominee or
directions for the transfer of securities belonging to the Corporation
shall be made by such Officer or Officers, Employee or Employees, or Agent
or Agents as may be authorized by the Board of Directors or the Executive
Committee.
ARTICLE VII
BOOKS AND RECORDS
Section 1. LOCATION. The books and records of the Corporation,
including the Stock ledger or ledgers, may be kept in or outside the State
of Maryland at such office or agency of the Corporation as may be from time
to time determined by the Board of Directors.
ARTICLE VIII
MISCELLANEOUS
Section 1. SEAL. The Seal of the Corporation shall consist of a
flat-faced die with the word "Maryland," together with the name of the
Corporation and the year of its organization cut or engraved thereon, but
unless otherwise required by the Directors, the Seal shall not be necessary
to be placed on, and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by or on behalf
of the Corporation.
Section 2. FISCAL YEAR. The Fiscal Year of the Corporation shall be
designated from time to time by the Board of Directors.
ARTICLE IX
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is consistent with
law. The Corporation shall indemnify its directors and officers who while
serving as directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership joint venture, trust, other
enterprise or employee benefit plan to the fullest extent consistent with
law. The indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director of officer and
shall inure to the benefit of the heirs, executors and administrators of
such a person. This Article shall not protect any such person against any
liability to the Corporation or any Shareholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. ADVANCES. Any current or former director or officer of
the Corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to fullest extent
permissible under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written affirmation of
his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking
to repay any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to
the Corporation for his undertaking; (b) the Corporation is insured against
losses arising by reason of the advance, or (c) a majority of a quorum of
directors of the Corporation who are neither 'interested persons' as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall be
determined, based on a review of facts readily available to the Corporation
at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found to
be entitled to indemnification.
Section 3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine,
or cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been
met. Indemnification shall be made only following: (a) a final decision
on the merits by a court or other body before whom the proceeding was
brought
that the person to be indemnified was not liable by reason of disabling
conduct or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by (i) the vote
of a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
[bylaws]fugs-new93
agents, as may be provided by action of the Board of Directors or by
contract, subject to any limitations imposed by the Investment Company Act
of 1940.
Section 5. OTHER RIGHTS. The Board of Directors may make further
provisions consistent with law for indemnification and advance of expenses
to directors, officers, employees and agents by resolution, agreement or
otherwise. The indemnification provided by this Article IX shall not be
deemed exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of Shareholders or disinterested
directors or otherwise.
Section 6. AMENDMENTS. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940,
as from time to time amended. No amendment of these By-Laws shall affect
any right of any person under this Article based on any event, omission or
proceeding prior to the amendment.
ARTICLE X
AMENDMENTS
Section 1. The Board of Directors shall have the power to alter,
amend or repeal any By-Laws of the Corporation and to make new By-Laws.
EXHIBIT 17.2
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND,
a Portfolio of
STATE BOND INCOME FUNDS, INC.,
SPECIAL MEETING OF SHAREHOLDERS
December , 1996
==
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND,
a Portfolio of
STATE BOND INCOME FUNDS, INC.
CUSIP NO. 856576103
The undersigned shareholder(s) of State Bond U.S. Government and Agency
Securities Fund, a portfolio of State Bond Income Funds, Inc. (the `State
Bond Fund'), hereby appoint(s) Kevin L. Howard, Keith O. Martens and
Dale C. Bauman, or any of them true and lawful proxies, with power of
substitution of each, to vote all shares of the State Bond Fund which the
undersigned is entitled to vote, at the Special Meeting of Shareholders to
be held on December , 1996, at 100 North Minnesota Street, New Ulm,
--
Minnesota 56073-0069, at 4:00 p.m. (local time) and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
PROPOSAL
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE STATE BOND FUND AND FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
STATE BOND U.S. GOVERNMENT AND AGENCY SECURITIES FUND,
a portfolio of State Bond Income Funds, Inc.
RECORD DATE SHARES:
-----------------
VOTE ON THE PROPOSAL
FOR AGAINST ABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
- -----------------------------------
Signature(s) of Shareholder(s)
Date: ____________________________
Exhibit 14.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions `Financial
Highlights''and ``Independent Auditors'' and the use of our report dated
November 17, 1995, on the financial statements of State Bond U.S.
Government and Agency Securities Fund (the Fund) in the Registration
Statement (Form N-1A) of the Fund which is incorporated by reference in,
and reference to our firm in Exhibit A of, the Registration Statement (Form
N-14) of Federated Fund for U.S. Government Securities, Inc. filed with the
Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
September 30, 1996
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.,
a Maryland corporation (hereinafter called the "Acquiring Fund"), and STATE
BOND INCOME FUNDS, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio STATE BOND U.S. GOVERNMENT AND
AGENCY SECURITIES FUND (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the assets of the Acquired Fund
for Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
--
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation 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.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at October 31, 1994 has been audited by independent auditors and at
October 31, 1995 has been audited by Ernst & Young LLP, independent
auditors, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such dates, and there are no
known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) The unaudited Statement of Assets and Liabilities of
the Acquired Fund at April 30, 1996 has been prepared in accordance with
generally accepted accounting principles, consistently applied, although
subject to year-end adjustments, and on a basis consistent with the
Statement of Assets and Liabilities of the Acquired Fund at October 31,
1995 which has been audited by Ernst & Young LLP, independent auditors, and
such statement (copies of which have been furnished to the Acquiring Fund)
fairly reflects the financial condition of the Acquired Fund as of such
date, and there are no known liabilities of the Acquired Fund, contingent
or otherwise, as of such date not disclosed therein.
(i) Since April 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(k) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(n) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at March 31, 1995 and 1996, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since March 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before October 31, 1995 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before
October 31, 1995 and in the period from said date to and including the
Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including accountants' fees, registration fees, transfer taxes (if any),
the fees of banks and transfer agents and the costs of preparing, printing,
copying and mailing proxy solicitation materials to the Acquired Fund's
shareholders and the costs of holding the Special Meeting of Shareholders.
ARM Financial Group, Inc. will assume the legal fees of the Acquired Fund.
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IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND INCOME FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND U.S. GOVERNMENT AND
AGENCY SECURITIES FUND
/s/ Sheri Bean By: /s/ Kevin L.
Howard
Name: Sheri Bean Name: Kevin L. Howard
Title:Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES, INC.
/s/S. Elliot Cohan By: /s/ J. Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: President
