AMERICAN LEADERS FUND, INC.
CLASS A SHARES
PROSPECTUS
The Class A Shares of American Leaders Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) investing in common stocks and other securities of high quality companies
to achieve growth of capital and income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISK INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class A Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, Class C Shares and Fortress Shares dated July 31,
1994, with the Securities and Exchange Commission. The information contained in
the Combined Statement of Additional Information is incorporated by reference
into this prospectus. You may request a copy of the Combined Statement of
Additional Information free of charge by calling 1-800-235-4669. To obtain other
information or make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--
CLASS A SHARES 2
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GENERAL INFORMATION 3
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 3
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Liberty Family Retirement Program 5
INVESTMENT INFORMATION 5
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Investment Objective 5
Investment Policies 5
Acceptable Investments 5
The Leaders List 6
Repurchase Agreements 6
Illiquid Securities 6
Lending of Portfolio Securities 6
Portfolio Turnover 6
Investment Limitations 6
NET ASSET VALUE 7
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INVESTING IN CLASS A SHARES 7
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Share Purchases 7
Through a Financial Institution 7
Directly from the Distributor 7
Minimum Investment Required 8
What Shares Cost 8
Dealer Concession 9
Reducing the Sales Load 9
Quantity Discounts and Accumulated
Purchases 9
Letter of Intent 10
Reinvestment Privilege 10
Purchases with Proceeds from
Redemptions of Unaffiliated
Investment Companies 10
Concurrent Purchases 10
Systematic Investment Program 11
Certificates and Confirmations 11
Dividends 11
Capital Gains 11
Retirement Plans 11
EXCHANGE PRIVILEGE 11
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Reduced Sales Load 12
Requirements for Exchange 12
Tax Consequences 12
Making an Exchange 12
Telephone Instructions 12
REDEEMING CLASS A SHARES 13
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Through a Financial Institution 13
Directly From the Fund 13
By Telephone 13
By Mail 14
Signatures 14
Contingent Deferred Sales Charge 14
Systematic Withdrawal Program 15
Accounts with Low Balances 15
FUND INFORMATION 16
- ------------------------------------------------------
Management of the Fund 16
Board of Directors 16
Officers and Directors 16
Investment Adviser 19
Advisory Fees 19
Adviser's Background 19
Distribution of Class A Shares 20
Administration of the Fund 20
Administrative Services 20
Shareholder Services Plan 20
Other Payments to Financial
Institutions 21
Custodian 21
Transfer Agent and Dividend
Disbursing Agent 21
Legal Counsel 21
Independent Public Accountants 21
Brokerage Transactions 21
SHAREHOLDER INFORMATION 22
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Voting Rights 22
TAX INFORMATION 22
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Federal Income Tax 22
Pennsylvania Corporate and
Personal Property Taxes 22
PERFORMANCE INFORMATION 23
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OTHER CLASSES OF SHARES 23
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FINANCIAL HIGHLIGHTS--
CLASS C SHARES 25
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FINANCIAL HIGHLIGHTS--
FORTRESS SHARES 26
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SUMMARY OF FUND EXPENSES
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<TABLE>
<CAPTION>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)............................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL CLASS A SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee............................................................................................ 0.67%
12b-1 Fee................................................................................................. None
Total Other Expenses...................................................................................... 0.52%
Shareholder Services Fee (2)................................................................. 0.17%
Total Class A Shares Operating Expenses (3)........................................................... 1.19%
</TABLE>
(1) Shareholders who purchased Shares with the proceeds of a redemption of
shares of a mutual fund sold with a sales load and not distributed by
Federated Securities Corp., prior to June 1, 1994, will be charged a
contingent deferred sales charge by the Fund's distributor of .50 of 1% for
redemptions made within one year of purchase. See "Contingent Deferred Sales
Charge" on page 14.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Class A Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1995. The Total
Class A Shares Operating Expenses were 1.18% for the fiscal year ended March
31, 1994.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS A SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS A SHARES" AND "FUND
INFORMATION." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period....... $ 57 $ 81 $ 107 $ 183
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Class A Shares of the Fund. The Fund also offers three additional classes of
shares called Class B Shares, Class C Shares, and Fortress Shares. Class A
Shares, Class B Shares, Class C Shares, and Fortress Shares are all subject to
certain of the same expenses. However, Class B Shares are subject to a 12b-1 fee
of up to 0.75% and a maximum contingent deferred sales charge of 5.00%, but are
not subject to a sales load. Class C Shares are subject to a 12b-1 fee of 0.75%
and a maximum contingent deferred sales charge of 1.00% but are not subject to a
sales load. Fortress Shares are subject to a maximum sales load of 1.00% and a
contingent deferred sales charge of 1.00% but are not subject to a 12b-1 fee.
See "Other Classes of Shares."
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and the following table
for each of the periods presented is included in the Annual Report, which is
incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59 $ 11.55
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.23 0.29 0.29 0.37 0.55 0.50 0.45 0.46 0.53 0.03
- ----------------------
Net realized and
unrealized gain
(loss) on investments 0.18 2.05 1.34 1.28 0.36 1.08 (1.21) 1.81 2.88 0.01
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.41 2.34 1.63 1.65 0.91 1.58 (.76) 2.27 3.41 0.04
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.24) (0.28) (0.28) (0.38) (0.56) (0.50) (0.43) (0.47) (0.52) --
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (0.49) (1.04) (0.65) (0.30) (1.18) (0.59) (0.47) (1.23) (0.84) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.73) (1.32) (.93) (.68) (1.74) (1.09) (0.90) (1.70) (1.36) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END
OF PERIOD $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 2.76% 18.31% 12.91% 14.17% 7.13% 13.23% (5.32)% 18.38% 31.80% 0.35%
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.18% 1.13% 1.02% 1.02% 1.01% 1.01% 1.00% 1.00% 1.09% 1.06%(a)
- ----------------------
Net investment income 1.48% 2.07% 2.12% 3.06% 4.23% 3.85% 3.35% 3.44% 4.42% 3.18%(a)
- ----------------------
Expense waiver/
reimbursement (b) -- 0.06% 0.16% 0.30% 0.35% 0.12% 0.11% 0.12% 0.18% 0.22%(a)
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 226,857 202,866 171,210 149,360 147,235 149,049 158,818 157,999 112,472 71,899
- ----------------------
Portfolio turnover
rate 27% 39% 67% 57% 50% 27% 65% 28% 31% 6%
- ----------------------
<CAPTION>
YEAR ENDED
<S> <C>
1985
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.97
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.54
- ----------------------
Net realized and
unrealized gain
(loss) on investments 1.91
- ---------------------- -------------
Total from investment
operations 2.45
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.52 )
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (1.35 )
- ---------------------- -------------
Total distributions (1.87 )
- ---------------------- -------------
NET ASSET VALUE, END
OF PERIOD $ 11.55
- ---------------------- -------------
TOTAL RETURN** 25.85
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.29 %
- ----------------------
Net investment income 5.03 %
- ----------------------
Expense waiver/
reimbursement (b) 0.05 %
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 71,455
- ----------------------
Portfolio turnover
rate 32 %
- ----------------------
</TABLE>
* For the one month period ended March 31, 1985. The Fund changed its fiscal
year-end from February 28 to March 31, effective March 31, 1985.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated
March 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") has established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares and
Fortress Shares. This prospectus relates only to the Class A Shares ("Shares")
of the Fund.
Class A Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. A minimum initial
investment of $500 is required, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.
Shares are sold at net asset value plus an applicable sales load and are
redeemed at net asset value. However, a contingent deferred sales charge is
imposed on certain Shares. For a more complete description, see "Redeeming Class
A Shares."
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Equity Fund, providing long-term capital growth and income
through international securities;
International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communications utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation of
principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industries.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of proven, professional investment advisers.
Shareholders of Class A Shares participating in The Liberty Account are
designated as Liberty Life Members. Liberty Life Members are exempt from sales
loads on future purchases in and exchanges between the Class A Shares of any
funds in the Liberty Family of Funds, as long as they maintain a $500 balance in
one of the Liberty Funds.
Liberty Life Members are those individuals who previously invested in the Fund
through an agreement with the American Association of Retired Persons ("AARP")
who promoted the Fund to its members. When these members initially invested in
the Fund, they did so at net asset value because the Fund did not impose a sales
load at that time. As the Fund's marketing efforts expanded, a sales load was
imposed upon investors who invested through broker/dealers, but Liberty Life
Members were still exempt from this sales load. The formal agreement with AARP
to promote the Fund's Class A Shares to its members no longer exists, but
Liberty Life Members are still exempt from the sales load based on the former
agreement. Liberty Life Membership is limited to current Liberty Life Members
and members of their immediate family, including their children.
LIBERTY FAMILY RETIREMENT PROGRAM
The Fund is also a member of the Liberty Family Retirement Program (the
"Program"), an integrated program of investment options, plan record keeping,
and consultation services for 401(k) and other participant-directed benefit and
savings plans. Under the Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Program for
record keeping and administrative services. Additional fees are charged to
participating plans for these services. As part of the Program, exchanges may be
readily made between investment options selected by the employer or plan
trustee.
The other funds participating in the Liberty Family Retirement Program are:
Capital Growth Fund, Fund for U.S. Government Securities, Inc., International
Equity Fund, International Income Fund, Liberty Equity Income Fund, Inc.,
Liberty High Income Bond Fund, Inc., Liberty Utility Fund, Inc., Prime Cash
Series, and Stock and Bond Fund, Inc.
No sales load is imposed on purchases made by qualified retirement plans with
over $1 million invested in funds available in the Liberty Family Retirement
Program.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The Fund's investment approach is based upon the conviction
that over the longer term, the economy will continue to expand and develop and
that this economic growth will be reflected importantly in the growth of major
corporations. The Fund pursues this investment objective by investing at least
65% of its assets in a portfolio of securities issued by the one hundred
companies contained in "The Leaders List." Generally, the Fund's management
makes portfolio selections utilizing fundamental analysis, with emphasis on
earning power, financial condition, and valuation. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities of companies
selected from "The Leaders List" by the Fund's investment adviser on the basis
of traditional fundamental research techniques and standards. The securities in
which the Fund invests include, but are not limited to:
common stocks;
preferred stocks;
domestic issues of corporate debt obligations rated, at the time of
purchase, BBB or better by Standard & Poor's Corporation, Moody's
Investors Service, Inc., or Fitch Investors Service, Inc. or, if not
rated, are determined by the Fund's investment adviser to be of comparable
quality. If a security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not
required to drop the security from the portfolio, but will consider doing
so. (A description of the rating categories is contained in the Appendix
to the Statement of Additional Information); and
warrants.
The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.
THE LEADERS LIST. "The Leaders List" is a trade name which represents a
list of 100 blue chip companies selected by the Fund's investment adviser
principally on the basis of fundamental research techniques and standards.
Shareholders can obtain a copy of "The Leaders List" by contacting the
Fund. In the opinion of the investment adviser, securities of these
companies represent diversified and highly marketable investments. The list
is subject to continuous review and modification. A number of standards and
fundamental research factors are used in determining "The Leaders List."
"The Leaders List" includes leading companies in their industries
determined in terms of sales, earnings, and/or market capitalization.
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government or other securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price.
ILLIQUID SECURITIES. The Fund may acquire securities which are subject to
legal or contractual delays, restrictions, and costs on resale. Because of
time limitations, the Fund might not be able to dispose of these securities
at reasonable prices or at times advantageous to the Fund. Where the Fund
considers these securities to be illiquid, it intends to limit the purchase
of them together with other securities considered to be illiquid, including
repurchase agreements providing for settlement in more than seven days
after notice, to not more than 10% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Directors and will receive collateral equal to at least
100% of the value of the securities loaned.
PORTFOLIO TURNOVER. Securities in the Fund's portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences. Any
such trading will increase the Fund's portfolio turnover rate and transaction
costs.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it
back on a set date) except, under certain circumstances, the Fund may
borrow up to one-third of the value of its total assets;
invest more than 5% of its total assets in securities of one issuer
(except U.S. government securities) or purchase more than 10% of any class
of voting securities of any one issuer;
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
purchase restricted securities if immediately thereafter more than 15% of
the net assets of the Fund would be invested in such securities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class A Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class A Shares in the liabilities of the Fund and those attributable to the
Class A Shares, and dividing the remainder by the total number of Class A Shares
outstanding. The net asset value for Class A Shares may differ from that of
Class B Shares, Class C Shares and Fortress Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
INVESTING IN CLASS A SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
Participants in plans under the Liberty Family Retirement Program shall purchase
Shares in accordance with the requirements of their respective plans.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order or when converted into federal funds.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price. It
is the financial institution's responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:
complete and sign the new account form available from the Fund;
enclose a check made payable to American Leaders Fund, Inc.--Class A
Shares; and
mail both to Federated Services Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares directly from the distributor by wire, once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: American Leaders Fund,
Inc.--Class A Shares; Title or Name of Account; Wire Order Number and/or Account
Number. Shares cannot be purchased by wire on Columbus Day, Veterans' Day, or
Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class A Shares is $500 unless the investment
is in a retirement plan, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans, which must be in amounts of at least $50. (Other minimum
investment requirements may apply to investments through the Liberty Family
Retirement Program.)
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales load as follows:
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.00% 0.00%
</TABLE>
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Shareholders designated as Liberty Life Members are exempt from sales loads.
Shareholders of record in the Fund on February 28, 1987, who are NOT
participating in The Liberty Account are exempt from sales loads only in the
Fund and only as long as they maintain a $500 balance in the Fund.
No sales load is imposed for Shares purchased through bank trust departments,
investment advisers registered under the Investment Advisers Act of 1940, as
amended, or retirement plans where the third party administrator has entered
into certain arrangements with Federated Securities Corp. or its affiliates.
However, investors who purchase Shares through a trust department, investment
adviser, or retirement plan may be charged an additional service fee by that
institution.
No sales load is imposed on purchases made by qualified retirement plans with
over $1 million invested in funds available in the Liberty Family Retirement
Program.
DEALER CONCESSION. For sales of Shares, a dealer will normally receive up to
90% of the applicable sales load. Any portion of the sales load which is not
paid to the dealer will be retained by the distributor. However, the distributor
may offer to pay dealers up to 100% of the sales load retained by it. Such
payments may take the form of cash or promotional incentives, such as
reimbursement of certain expenses of qualified employees and their spouses to
attend informational meetings about the Fund or other special events at
recreational-type facilities, or of items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales load, however, the distributor will make twelve
monthly payments to the dealer totaling 0.25% of the public offering price over
the first year following the purchase. Such payments are based on the original
purchase price of shares outstanding at each month end.
The sales load for Shares sold other than through registered broker/dealers will
be retained by Federated Securities Corp. Federated Securities Corp. may pay
fees to banks out of the sales load in exchange for sales and/or administrative
services performed on behalf of the bank's customers in connection with the
initiation of customer accounts and purchases of Shares.
Effective June 1, 1994, and until further notice the entire amount of the
applicable sales load will be reallowed to dealers. In addition, the distributor
will pay dealers additional bonus payments in an amount equal to 0.50 of 1% of
the public offering price of the Shares sold.
REDUCING THE SALES LOAD
The sales load can be reduced on the purchase of Shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege;
purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales load paid. The Fund will combine purchases of
Shares made on the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales load. In addition,
the sales load, if applicable, is reduced for purchases made at one time by a
trustee or fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public
offering price of $90,000 and he purchases $10,000 more at the current public
offering price, the sales load on the additional purchase according to the
schedule now in effect would be 3.75%, not 4.50%.
To receive the sales load reduction, Federated Securities Corp. must be notified
by the shareholder in writing or by his financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will reduce the sales load after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Liberty Family of Funds over the next 13 months, the
sales load may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales load adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold 4.5% of the total amount intended to be purchased in escrow
(in shares) until such purchase is completed.
The 4.5% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales load.
This letter of intent will not obligate the shareholder to purchase Shares, but
if he does, each purchase during the period will be at the sales load applicable
to the total amount intended to be purchased. This letter may be dated as of a
prior date to include any purchases made within the past 90 days towards the
dollar fulfillment of the letter of intent. Prior trade prices will not be
adjusted.
REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales load.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to eliminate a sales
load. If the shareholder redeems his Shares in the Fund, there may be tax
consequences.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Shares at net asset value, without a sales load, with
the proceeds from the redemption of shares of an investment company which were
sold with a sales load or commission and were not distributed by Federated
Securities Corp. (This does not include shares of a mutual fund which were or
would be subject to a contingent deferred sales charge upon redemption.) The
purchase must be made within 60 days of the redemption, and Federated Securities
Corp. must be notified by the investor in writing, or by his financial
institution, at the time the purchase is made.
CONCURRENT PURCHASES. For purposes of qualifying for a sales load reduction, a
shareholder has the privilege of combining concurrent purchases of two or more
funds in the Liberty Family of Funds, the purchase price of which includes a
sales load. For example, if a shareholder concurrently invested $30,000 in one
of the other Liberty Funds with a sales load, and $70,000 in this Fund, the
sales load would be reduced.
To receive this sales load reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales load
after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund, plus the applicable sales load. A shareholder may apply
for participation in this program through his financial institution or directly
through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares of the Fund on payment dates at the ex-dividend date net asset value
without a sales load, unless shareholders request cash payments on the new
account form or by writing to the transfer agent. All shareholders on the record
date are entitled to the dividend. If Shares are redeemed or exchanged prior to
the record date or purchased after the record date, those Shares are not
entitled to that month's dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Class A shareholders may exchange all or some of their Shares for Class A Shares
of other funds in the Liberty Family of Funds at net asset value. Shareholders
of Class A Shares may also exchange into certain funds which are advised by
subsidiaries or affiliates of Federated Investors ("Federated Funds") which are
sold with a sales load different from that of the Fund's or with no sales load.
These exchanges are made at net asset value plus the difference between the
Fund's sales load already paid and any sales load of the Federated Fund into
which the Shares are to be exchanged, if higher. Neither the Fund nor any of the
funds in the Liberty Family of Funds imposes any additional fees on exchanges.
Shareholders in certain other Federated Funds may exchange their Shares in the
Federated Funds for Class A Shares. Participants in a plan under the Liberty
Family Retirement Program may
exchange all or some of their Shares for Class A Shares of other funds offered
under the plan at net asset value.
REDUCED SALES LOAD
If a shareholder making such an exchange qualifies for a reduction of the sales
load, Federated Securities Corp. must be notified in writing by the shareholder
or by his financial institution.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
modified or terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If a shareholder cannot contact his
broker or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Services
Company, P.O. Box 8604, Boston, Massachusetts 02266-8604.
Instructions for exchanges for the Liberty Family Retirement Program should be
given to the plan administrator.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. Telephone exchange instructions may be recorded. If the
instructions are given by a broker, a telephone authorization form completed by
the broker must be on file with the Fund. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts
02266-8604 and deposited to the shareholder's account before being exchanged.
Such instructions will be processed as of 4:00 p.m. (Eastern time) and must be
received by the Fund before that time for Shares to be exchanged the same day.
Shareholders exchanging into a fund will not receive any dividend that is
payable to shareholders of record on that date. This privilege may be modified
or terminated at any time.
REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemptions can be made through a financial institution or directly
from the Fund. Redemption requests must be received in proper form. Redemptions
of Shares held through the Liberty Family Retirement Program will be governed by
the requirements of the respective plans.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value, less any applicable contingent deferred
sales charge, next determined after the Fund receives the redemption request
from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased Shares through a financial
institution may redeem their Shares by telephoning the Fund. Telephone
redemption instructions may be recorded. The proceeds will be mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
the request. The minimum amount for a wire transfer is $1,000. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. If reasonable procedures are not
followed by the fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, P.O. Box 8604, Boston, Massachusetts 02266-8604. The
written request should include the shareholder's name, the Fund name and class
designation, the account number, and the Share or dollar amount requested, and
should be signed exactly as the Shares are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders who purchased Shares with the proceeds of a redemption of shares of
a mutual fund sold with a sales load and not distributed by Federated Securities
Corp. prior to June 1, 1994, will be charged a contingent deferred sales charge
by the Fund's distributor of .50 of 1% for redemptions made within one year of
purchase. Purchases under the program made after that date will not be subject
to any type of contingent deferred sales charge. The contingent deferred sales
charge will be calculated based upon the lesser of the original purchase price
of the Shares or the net asset value of the Shares when redeemed.
The contingent deferred sales charge will not be imposed on Shares acquired
through reinvestment of dividends or distributions of short-term or long-term
capital gains. Redemptions are deemed to have occurred in the following order:
i) Shares acquired through the reinvestment of dividends and long-term capital
gains, ii) purchases of Shares occurring more than one year before the date of
redemption, iii) purchases of Shares within the previous year without the use of
redemption proceeds as described
above, and iv) purchases of Shares within the previous year through the use of
redemption proceeds as described above.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified retirement plan, other than an IRA, Keogh
Plan, or a custodial account, following retirement; (ii) a total or partial
distribution from an IRA, Keogh Plan, or a custodial account, after the
beneficial owner attains age 59-1/2; or (iii) from the death or permanent and
total disability of the beneficial owner. The exemption from the contingent
deferred sales charge for qualified plans, an IRA, Keogh Plan or a custodial
account does not extend to account transfers, rollovers, and other redemptions
made for purposes of reinvestment.
A contingent deferred sales charge will not be charged in connection with
exchanges of Shares for Class A Shares in other Liberty Family Funds or Liberty
Family Retirement Program funds or in connection with redemptions by the Fund of
accounts with low balances. No contingent deferred sales charge will be charged
for redemptions from the Liberty Family Retirement Program.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. Due
to the fact that Shares are sold with a sales load, it is not advisable for
shareholders to be purchasing Shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below $500
because of changes in the Fund's net asset value. Before Shares are redeemed to
close an account, the shareholder is notified in writing and allowed 30 days to
purchase additional Shares to meet the minimum requirement.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
in the Combined Statement of Additional Information).
<TABLE>
<S> <C> <C>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
John F. Donahue\* President and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President and
Director of the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate ventures
Associates, Inc., Realtors in Southwest Florida; Director, Trustee, or Managing General
3255 Tamiami Trail North Partner of the Funds; formerly, President, Naples Property
Naples, FL Management, Inc.
William J. Copeland Director Director and Member of the Executive Committee, Michael
One PNC Plaza-- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC Bank
Pittsburgh, PA N.A. and PNC Bank Corp and Director, Ryan Homes, Inc.
J. Christopher Donahue* Vice President and President and Trustee, Federated Investors; Trustee and
Federated Investors Tower Director President, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director and President, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, President and Director of the Fund.
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
Edward L. Flaherty, Jr.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc. and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State Street Bank
and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
formerly, Vice Chairman, Horizon Financial, F.A.
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
and Technology.
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Tower President and Director, Federated Securities Corp.;
Pittsburgh, PA President or Vice President of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales* Vice President and Vice President, Treasurer, and Trustee, Federated In-
Federated Investors Tower Treasurer vestors; Vice President and Treasurer, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Executive Vice
President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the
Funds; Vice President and Treasurer of the Funds.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors Tower and Secretary Federated Investors; Vice President, Secretary, and Trustee,
Pittsburgh, PA Federated Advisers, Federated Management, and Federated
Research; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Trustee, Federated
Services Company; Director and Executive Vice President,
Federated Securities Corp.; Vice President and Secretary of
the Funds.
</TABLE>
* This Director is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940, as amended.
\ Members of the Fund's Executive Committee. The Executive Committee of the
Board of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers (the "adviser"), the Fund's investment adviser, subject to direction by
the Directors. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .55 of 1% of the Fund's average daily net assets, plus 4.5% of
the Fund's gross income (excluding any capital gains or losses). Gross
income includes, in general, discount earned on U.S. Treasury bills and
agency discount notes, interest earned on all interest-bearing obligations,
and dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Funds for
certain operating expenses. The adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion. The adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Peter R. Anderson has been the Fund's portfolio manager since December,
1989. Mr. Anderson joined Federated Investors in 1972 as, and is presently,
a Senior Vice President of the Fund's investment adviser. Mr. Anderson is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Wisconsin.
Michael P. Donnelly has been the Fund's co-portfolio manager since
February, 1993. Mr. Donnelly joined Federated Investors in 1989 and has
been an Assistant Vice President of the Fund's investment adviser since
1992. From 1989 until 1991, Mr. Donnelly acted as an investment
analyst for the investment adviser. Mr. Donnelly was a Fixed Income
Associate at Donaldson, Lufkin & Jenrette from 1987 until 1989. Mr.
Donnelly is a Chartered Financial Analyst and received his M.B.A. in
Finance from the University of Virginia.
DISTRIBUTION OF CLASS A SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments 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
("shareholder services"). The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Fund and Federated Shareholder Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings and loan association) from being an underwriter or distributor
of most securities. In the even the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Directors
will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp. will pay
financial institutions, at the time of purchase, an amount equal to .50 of 1% of
the net asset value of Shares purchased by their clients or customers under the
Liberty Family Retirement Program or by certain qualified plans as approved by
Federated Securities Corp. (Such payments are subject to a reclaim from the
financial institution should the assets leave the program within 12 months after
purchase.) Furthermore, the distributor may offer to pay a fee from its own
assets to financial institutions as financial assistance for providing
substantial marketing and sales support. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
Shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604, is transfer agent for the shares of
the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, L.L.P., 2101 L Street, N.W., Washington, D.C. 20037.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., 2100 One PPG Place, Pittsburgh, Pennsylvania 15222.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Directors.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Fund have equal voting rights, except that only shares of that
particular portfolio or class are entitled to vote in matters affecting that
portfolio or class.
As a Maryland Corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Class A
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class A Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class A Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
A Shares over a thirty-day period by the maximum offering price per share of
Class A Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Class A Shares, and therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load,
which, if excluded, would increase the total return.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Fortress Shares. Because Class B Shares and Class C
Shares are subject to Rule 12b-1 fees and Shareholder Services fees, the yield
for Class A Shares and Fortress Shares, for the same period, may exceed that of
Class B Shares and Class C Shares. Because Class A Shares are subject to a
higher maximum sales load, the total return for Class B Shares, Class C Shares,
and Fortress Shares for the same period may exceed that of Class A Shares.
Depending on the dollar amount invested, and the time period for which any class
of Shares is held, the total return for any particular class may exceed that of
another.
From time to time, the Fund may advertise the performance of Class A Shares,
Class B Shares, Class C Shares, and Fortress Shares using certain financial
publications and/or compare the performance of Class A Shares, Class B Shares,
Class C Shares, and Fortress Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund presently offers Class A Shares, Class B Shares, Class C Shares, and
Fortress Shares.
Class B Shares are sold primarily to customers of financial institutions,
subject to certain contingent deferred sales charges. The Fund has also adopted
a Rule 12b-1 Plan whereby the distributor is paid a fee of up to .75 of 1% and a
Shareholder Services fee of up to .25 of 1% of the Class B Shares' average daily
net assets with respect to Class B Shares. Investments in Class B Shares are
subject to a minimum initial investment of $1,500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load, however, Class C Shares are subject to a
contingent deferred sales charge of up to 1.00%. Class C Shares are distributed
pursuant to a Rule 12b-1 Plan adopted by the Fund whereby the distributor is
paid a fee of up to .75 of 1%, in addition to a Shareholder Services fee of .25
of 1% of the Class C Shares' average daily net assets. Investments in Class C
Shares are subject to a minimum initial investment of $1,500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
Fortress Shares are sold primarily to customers of financial institutions
subject to a front-end sales load of 1.00% and a contingent deferred sales
charge of up to 1.00%. The Fund has also adopted a Shareholder Services fee of
up to .25 of 1% of the Fortress Shares' average daily net assets with respect to
Fortress Shares. Investments in Fortress Shares are subject to a minimum initial
investment of $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $50.
The amount of dividends payable to Class A Shares may exceed that of Class C
Shares by the difference between class expenses and distribution and shareholder
service expenses borne by shares of each respective class.
The stated advisory fee is the same for all four classes of shares.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report,
which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.12
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.35
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.47
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.49)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.62)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.55
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 3.16%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 2.11%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 0.71%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 11,895
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate %27
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 21, 1993 (date of initial
public offering) to March 31, 1994.
** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report,
which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.95
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.16
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.20)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.04)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.17)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.33)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.58
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (0.30)%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.35%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 1.51%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 15,282
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate %27
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1993 (date of initial
public offering) to March 31, 1994.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS
FUND, INC.
CLASS A SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
027128107
8062808A-A (7/94)
DOCUMENT DESCRIPTION
DOCUMENT TYPE
COUNT 28
AMERICAN LEADERS FUND, INC.
CLASS B SHARES
PROSPECTUS
The Class B Shares of American Leaders Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) investing in common stocks and other securities of high quality companies
to achieve growth of capital and income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class B Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, Class C Shares, and Fortress Shares dated July 31,
1994, with the Securities and Exchange Commission. The information contained in
the Combined Statement of Additional Information is incorporated by reference
into this prospectus. You may request a copy of the Combined Statement of
Additional Information free of charge by calling 1-800-235-4669. To obtain other
information or make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 4
Acceptable Investments 4
The Leaders List 4
Repurchase Agreements 4
Illiquid Securities 4
Lending of Portfolio Securities 4
Portfolio Turnover 5
Investment Limitations 5
NET ASSET VALUE 5
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 5
- ------------------------------------------------------
Share Purchases 5
Through a Financial Institution 6
Directly from the Distributor 6
Minimum Investment Required 6
What Shares Cost 6
Conversion of Class B Shares 7
Systematic Investment Program 7
Certificates and Confirmations 7
Dividends 8
Capital Gains 8
Retirement Plans 8
EXCHANGE PRIVILEGE 8
- ------------------------------------------------------
Requirements for Exchange 8
Tax Consequences 9
Making an Exchange 9
Telephone Instructions 9
REDEEMING CLASS B SHARES 9
- ------------------------------------------------------
Through a Financial Institution 9
Directly From the Fund 10
By Telephone 10
By Mail 10
Signatures 10
Contingent Deferred Sales Charge 11
Elimination of Contingent Deferred
Sales Charge 11
Systematic Withdrawal Program 12
Reinvestment Privilege 12
Accounts with Low Balances 12
FUND INFORMATION 13
- ------------------------------------------------------
Management of the Fund 13
Board of Directors 13
Officers and Directors 13
Investment Adviser 16
Advisory Fees 16
Adviser's Background 16
Distribution of Class B Shares 17
Distribution and Shareholder
Services Plans 17
Other Payments to Financial Institutions 18
Administration of the Fund 18
Administrative Services 18
Custodian 18
Transfer Agent and Dividend
Disbursing Agent 18
Legal Counsel 18
Independent Public Accountants 18
Brokerage Transactions 19
Expenses of the Fund and Class B Shares 19
SHAREHOLDER INFORMATION 19
- ------------------------------------------------------
Voting Rights 19
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 22
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES 23
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--FORTRESS SHARES 24
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)....................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)................................................. 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable).......................................... None
Exchange Fee................................................................................................ None
<CAPTION>
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C> <C>
Management Fee.............................................................................................. 0.67%
12b-1 Fee (after waiver) (2)................................................................................ 0.63%
Total Other Expenses........................................................................................ 0.60%
Shareholder Services Fee..................................................................... 0.25%
Total Class B Shares Operating Expenses (3)(4)...................................................... 1.90%
</TABLE>
(1) The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge").
(2) The maximum 12b-1 fee is 0.75%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) The Total Class B Shares Operating Expenses are estimated to be 2.02% absent
the anticipated voluntary waiver of a portion of the 12b-1 fee.
* Total Class B Shares Operating Expenses are estimated based on average
expenses expected to be incurred during the period ending March 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS B SHARES" AND "FUND
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period................................................... $ 76 $ 104
You would pay the following expenses on the same investment, assuming no redemption............. $ 19 $ 60
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1995.
The information set forth in the foregoing table and example relates only to
Class B Shares of the Fund. The Fund also offers three additional classes of
Shares called Class A Shares, Class C Shares, and Fortress Shares. Class A
Shares, Class B Shares, Class C Shares, and Fortress Shares are subject to
certain of the same expenses. However, Class A Shares are subject to a maximum
sales load of 4.50%, but are not subject to a contingent deferred sales charge
or a 12b-1 fee. Class C Shares are subject to a 12b-1 fee of 0.75% and a
contingent deferred sales charge of 1.00%, but are not subject to a sales load.
Fortress Shares are subject to a maximum sales load of 1.00% and a contingent
deferred sales charge of 1.00%, but are not subject to a 12b-1 fee. See "Other
Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") has established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares and
Fortress Shares. This prospectus relates only to the Class B Shares ("Shares")
of the Fund.
Class B Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.
Except as otherwise noted in this prospectus, Class B Shares are sold at net
asset value and are redeemed at net asset value. However, a contingent deferred
sales charge is imposed on certain Shares which are redeemed within six full
years of the date of purchase.
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Equity Fund, providing long-term capital growth and income
through international securities;
International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income-producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated, corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communication utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation of
principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industry.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of a proven, professional investment adviser.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The Fund's investment approach is based upon the conviction
that over the longer term, the economy will continue to expand and develop and
that this economic growth will be reflected importantly in the growth of major
corporations. The Fund pursues this investment objective by investing at least
65% of its assets in a portfolio of securities issued by the one hundred
companies contained in "The Leaders List." Generally, the Fund's management
makes portfolio selections utilizing fundamental analysis, with emphasis on
earning power, financial condition, and valuation. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities of companies
selected from "The Leaders List" by the Fund's investment adviser on the basis
of traditional fundamental research techniques and standards. The securities in
which the Fund invests include, but are not limited to:
common stocks;
preferred stocks;
domestic issues of corporate debt obligations rated, at the time of
purchase, BBB or better by Standard & Poor's Corporation, Moody's
Investors Service, Inc., or Fitch Investors Service, Inc. or, if not
rated, are determined by the Fund's investment adviser to be of comparable
quality. If a security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not required to drop the security
from the portfolio, but will consider doing so. (A description of the
rating categories is contained in the Appendix to the Statement of
Additional Information); and
warrants.
The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.
THE LEADERS LIST. "The Leaders List" is a trade name which represents a
list of 100 blue chip companies selected by the Fund's investment adviser
principally on the basis of fundamental research techniques and standards.
Shareholders can obtain a copy of "The Leaders List" by contacting the
Fund. In the opinion of the investment adviser, securities of these
companies represent diversified and highly marketable investments. The list
is subject to continuous review and modification. A number of standards and
fundamental research factors are used in determining "The Leaders List."
"The Leaders List" includes leading companies in their industries
determined in terms of sales, earnings, and/or market capitalization.
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government or other securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price.
ILLIQUID SECURITIES. The Fund may acquire securities which are subject to
legal or contractual delays, restrictions, and costs on resale. Because of
time limitations, the Fund might not be able to dispose of these securities
at reasonable prices or at times advantageous to the Fund. Where the Fund
considers these securities to be illiquid, it intends to limit the purchase
of them together with other securities considered to be illiquid, including
repurchase agreements providing for settlement in more than seven days
after notice, to not more than 10% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Directors and will receive collateral equal to at least
100% of the value of the securities loaned.
PORTFOLIO TURNOVER. Securities in the Fund's portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences. Any
such trading will increase the Fund's portfolio turnover rate and transaction
costs.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets;
invest more than 5% of its total assets in securities of one issuer
(except U.S. government securities) or purchase more than 10% of any class
of voting securities of any one issuer;
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
purchase restricted securities if immediately thereafter more than 15% of
the net assets of the Fund would be invested in such securities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class B Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class B Shares in the liabilities of the Fund and those attributable to the
Class B Shares, and dividing the remainder by the total number of Class B Shares
outstanding. The net asset value for Class B Shares may differ from that of
Class A Shares, Class C Shares, and Fortress Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may from time to time offer certain items of nominal
value to any shareholder or investor. The Fund reserves the right to reject any
purchase request.
Orders for $250,000 or more of Class B Shares will normally be invested in Class
A Shares (see "Other Classes of Shares").
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:
complete and sign the new account form available from the Fund;
enclose a check made payable to American Leaders Fund, Inc.--Class B
Shares; and
mail both to Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares directly from the distributor by wire once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: American Leaders Fund,
Inc.--Class B Shares; Title or Name of Account; Wire Order Number and/or Account
Number. Shares cannot be purchased by wire on Columbus Day, Veterans' Day, or
Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class B Shares of the Fund is $1,500 unless
the investment is in a retirement plan, in which case the minimum initial
investment is $50. Subsequent investments must be in amounts of at least $100,
except for retirement plans, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no Shares
are tendered for redemption and no orders to purchase Shares are received; or
(iii) the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgving Day, and Christmas Day.
Under certain circumstances, described under "Redeeming Class B Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the times Shares are redeemed.
CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares at the end of the month eight years after the purchase date,
except as noted below, and will no longer be subject to a distribution services
fee (see "Other Classes of Shares"). Such conversion will be on the basis of the
relative net asset values per share, without the imposition of any sales load,
fee or other charge. Class B Shares acquired by exchange from Class B Shares of
another fund in the Liberty Family of Funds will convert into Class A Shares
based on the time of the initial purchase. For purposes of conversion to Class A
Shares, Shares purchased through the reinvestment of dividends and distributions
paid on Class B Shares will be considered to be held in a separate sub-account.
Each time any Class B Shares in the shareholder's account (other than those in
the sub-account) convert to Class A Shares, an equal pro rata portion of the
Class B Shares in the sub-account will also convert to Class A Shares. The
availability of the conversion feature is subject to the granting of an
exemptive order by the Securities and Exchange Commission or the adoption of a
rule permitting such conversion. In the event that the exemptive order or rule
ultimately issued by the Securities and Exchange Commission requires any
conditions additional to those described in this prospectus, shareholders will
be notified. The conversion of Class B Shares to Class A Shares is subject to
the continuing availability of a ruling from the Internal Revenue Service or an
opinion of counsel that such conversions will not constitute taxable events for
Federal tax purposes. There can be no assurance that such ruling or opinion will
be available, and the conversion of Class B Shares to Class A Shares will not
occur if such ruling or opinion is not available. In such event, Class B Shares
would continue to be subject to higher expenses than Class A Shares for an
indefinite period.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. A shareholder may apply for participation in this program
through his financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares of the Fund on payment dates at the ex-dividend date net asset value
without a sales load, unless shareholders request cash payments on the new
account form or by writing to the transfer agent. All shareholders on the record
date are entitled to the dividend. If Shares are redeemed or exchanged prior to
the record date or purchased after the record date, those Shares are not
entitled to that month's dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class B shareholders may exchange all or some of their
Shares for Class B Shares of other funds in the Liberty Family of Funds. (Not
all funds in the Liberty Family of Funds currently offer Class B Shares. Contact
your financial institution regarding the availability of other Class B Shares in
the Liberty Family of Funds.) Exchanges are made at net asset value without
being assessed a contingent deferred sales charge on the exchanged shares. To
the extent that a Shareholder exchanges Shares for Class B Shares in other funds
in the Liberty Family of Funds, the time for which the exchanged-for shares were
held will be added, or tacked, to the time for which exchanged-from shares were
held for purposes of satisfying the applicable holding period.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class B shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds may be given in
writing or by telephone. Written instructions may require a signature guarantee.
Shareholders of the Fund may have difficulty in making exchanges by telephone
through brokers and other financial institutions during times of drastic
economic or market changes. If a shareholder cannot contact his broker or
financial institution by telephone, it is recommended that an exchange request
be made in writing and sent by overnight mail to Federated Services Company,
P.O. Box 8604, Boston, Massachusetts 02266-8604.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts
02266-8604 and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be recorded. Such instructions will be
processed as of 4:00 p.m. (Eastern time) and must be received by the transfer
agent before that time for shares to be exchanged the same day. Shareholders
exchanging into a fund will not receive any dividend that is payable to
shareholders of record on that date. This privilege may be modified or
terminated at any time. If reasonable procedures are not followed by the Fund,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request, less any applicable contingent deferred sales
charge (see "Contingent Deferred Sales Charge" below). Redemptions will be made
on days on which the Fund computes its net asset value. Redemptions can be made
through a financial institution or directly from the Fund. Redemption requests
must be received in proper form.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value, less any applicable contingent deferred
sales charge, next determined after the Fund receives the redemption request
from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that
day's net asset value. The financial institution is responsible for promptly
submitting redemption requests and providing proper written redemption
instructions to the Fund. The financial institution may charge customary fees
and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
An authorization form permitting the transfer agent to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
BY MAIL. Any shareholder may redeem Shares by sending a written request to the
transfer agent. The written request should include the shareholder's name, the
Fund name and class designation, the account number, and the Share or dollar
amount requested, and should be signed exactly as the Shares are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions
that are members of a signature guarantee program. The Fund and its transfer
agent reserve the right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within six full years of
the purchase date of those Shares will be charged a contingent deferred sales
charge by the fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First.................................................................................. 5.5%
Second................................................................................. 4.75%
Third.................................................................................. 4%
Fourth................................................................................. 3%
Fifth.................................................................................. 2%
Sixth.................................................................................. 1%
Seventh and thereafter................................................................. 0%
</TABLE>
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than six
full years from the date of purchase. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years from the
date of purchase; (3) Shares held for fewer than six years on a first-in,
first-out basis. A contingent deferred sales charge is not assessed in
connection with an exchange of Fund shares for shares of other Class B Shares of
funds in the Liberty Family of Funds (see "Exchanges for Shares of Other
Funds"). Any contingent deferred sales charge imposed at the time the exchanged-
for shares are redeemed is calculated as if the shareholder had held the shares
from the date on which he became a shareholder of the exchanged-from shares.
Moreover, the contingent deferred sales charge will be eliminated with respect
to certain redemptions (see "Elimination of Contingent Deferred Sales Charge"
below).
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions
from an Individual Retirement Account or other retirement plan to a shareholder
who has attained the age of 70-1/2; and (3) involuntary redemptions by the Fund
of Shares in shareholder accounts that do not comply with the minimum balance
requirements. In addition, to the extent that the distributor does not make
advance payments to certain financial institutions for purchases made by their
clients, no contingent deferred sales charge will be imposed on redemptions of
Shares held by Directors, employees and sales representatives of the Fund, the
distributor, or affiliates of the Fund or distributor; employees of any
financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers Act
of 1940, as amended, or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp. or its
affiliates, or any other financial institution, to the extent that no payments
were advanced for purchases made through such entities. The Directors reserve
the right to discontinue elimination of the contingent deferred sales charge.
Shareholders will be notified of such elimination. Any Shares purchased prior to
the termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Shares. If a shareholder making a redemption qualifies for an elimination of
the contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that he is entitled to such
elimination.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. A
contingent deferred sales charge will be imposed on Shares redeemed within six
full years of their purchase date.
REINVESTMENT PRIVILEGE
If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds into Class A Shares at the
next-determined net asset value without a sales load (see "Other Classes of
Shares"). Federated Securities Corp. must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to receive
this privilege. If the shareholder redeems his Shares, there may be tax
consequences.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance
falls below $500 because of changes in the Fund's net asset value. Before Shares
are redeemed to close an account, the shareholder is notified in writing and
allowed 30 days to purchase additional Shares to meet the minimum requirement.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp., Federated
Administrative Services, Inc., and the Funds (as defined in the Combined
Statement of Additional Information).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue+* President and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President and
Director of the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate ventures
Associates, Inc., Realtors in Southwest Florida; Director, Trustee, or Managing General
3255 Tamiami Trail North Partner of the Funds; formerly, President, Naples Property
Naples, FL Management, Inc.
William J. Copeland Director Director and Member of the Executive Committee, Michael
One PNC Plaza-- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC
Pittsburgh, PA Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes,
Inc.
</TABLE>
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
J. Christopher Donahue* Vice President and President and Trustee, Federated Investors; Trustee and
Federated Investors Tower Director President, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director and President, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, President and Director of the Fund.
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
Edward L. Flaherty, Jr.+ Director Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc., and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State Street Bank
and Trust Company and State Street Boston Corporation; and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Trustee, or Managing General
Pittsburgh, PA Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
</TABLE>
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
and Technology.
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Tower President and Director, Federated Securities Corp.;
Pittsburgh, PA President or Vice President of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales* Vice President and Vice President, Treasurer, and Trustee, Federated In-
Federated Investors Tower Treasurer vestors; Vice President and Treasurer, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Executive Vice
President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services; Trustee or Director of some of the
Funds; Vice President and Treasurer of the Funds.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors Tower and Secretary Federated Investors; Vice President, Secretary, and Trustee,
Pittsburgh, PA Federated Advisers, Federated Management, and Federated
Research; Executive Vice President, Secretary, and Director,
Federated Administrative Services; Director and Executive
Vice President, Federated Securities Corp.; Vice President
and Secretary of the Funds.
</TABLE>
*This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended.
+Members of the Fund's Exectutive Committee. The Exectutive Committee of the
Board of Directors handles the responsibilites of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .55 of 1% of the Fund's average daily net assets, plus 4.5% of
the Fund's gross income (excluding any capital gains or losses). Gross
income includes, in general, discount earned on U.S. Treasury bills and
agency discount notes, interest earned on all interest-bearing obligations,
and dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Funds for
certain operating expenses. The adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion. The adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subisidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors is
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Peter R. Anderson has been the Fund's portfolio manager since January,
1990. Mr. Anderson joined Federated Investors in 1972 as, and is presently,
a Senior Vice President of the Fund's investment adviser. Mr. Anderson is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Wisconsin.
Michael P. Donnelly has been the Fund's co-portfolio manager since
December, 1993. Mr Donnelly joined Federated Investors in 1989 and has been
an Assistant Vice President of the Fund's investment adviser since 1992.
From 1989 until 1991, Mr. Donnelly acted as an investment analyst for the
investment adviser. Mr. Donnelly was a Fixed Income Associate at Donaldson,
Lufkin & Jenrette from 1987 until 1989. Mr. Donnelly is a Chartered
Financial Analyst and received his M.B.A. in Finance from the University of
Virginia.
DISTRIBUTION OF CLASS B SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
The distributor will pay dealers an amount equal to 5.5% of the net asset value
of shares purchased by their clients or customers. These payments will be made
directly by the distributor from its assets, and will not be made from the
assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
Class B Shares will pay to the distributor an amount computed at an annual rate
of .75% of the average daily net assets of Class B Shares to finance any
activity which is principally intended to result in the sale of Class B Shares
subject to the Distribution Plan.
Because distribution fees to be paid by the Fund to the distributor may not
exceed an annual rate of .75% of the Class B Shares' average daily net assets,
it will take the distributor a number of years to recoup the expenses it has
incurred for its distribution and distribution-related services pursuant to the
Plan.
The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class B Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholders
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Directors will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution Plan, certain financial
institutions may be compensated by the adviser or its affiliates for the
continuing investment of customer's assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly to the
distributor or adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales load on shares. Furthermore, the
distributor may offer to pay a fee from its own assets to financial institutions
as financial assistance for providing substantial marketing and sales support.
The support may include participating in sales, educational and training
seminars at recreational-type facilities, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's investment adviser or its
affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, P.O.
Box 8604, Boston, Massachusetts, 02266-8604, is transfer agent for shares of the
Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, L.L.P., 2101 L Street, N.W., Washington, D.C. 20037.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., 2100 One PPG Place, Pittsburgh, Pennsylvania 15222.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Directors.
EXPENSES OF THE FUND AND CLASS B SHARES
Holders of Shares pay their allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with federal and state securities
authorities; Directors' fees; auditors' fees; the cost of meetings of Directors;
legal fees of the Fund; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Shareholder Services Plan and Distribution
Plan. However, the Directors reserve the right to allocate certain other
expenses to holders of Shares as it deems appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: distribution fees; transfer agent fees
as identified by the transfer agent as attributable to holders of Shares; fees
under the Fund's Shareholder Services Plan; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Directors' fees incurred as a result of issues relating solely to
Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All Shares of each portfolio or
class in the Fund have equal voting rights, except that only shares of that
particular portfolio or class are entitled to vote in matters affecting that
portfolio or class.
As a Maryland Corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Class B
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class B Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class B Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
B Shares over a thirty-day period by the maximum offering price per share of
Class B Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually
earned by Class B Shares, and therefore, may not correlate to the dividends or
other distributions paid to shareholders.
The performance information reflects the effect non-recurring charges, such as
the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Fortress Shares. Because Class B Shares and Class C
Shares are subject to Rule 12b-1 fees and Shareholder Services fees, the yield
for Class A Shares and Fortress Shares, for the same period, may exceed that of
Class B Shares and Class C Shares. Depending on the dollar amount invested and
the time period for which any class of Shares is held, the total return for any
particular class may exceed that of another.
From time to time, Fund may advertise the performance of Class A Shares, Class B
Shares, Class C Shares, and Fortress Shares using certain financial publications
and/or compare the performance of Class A Shares, Class B Shares, Class C
Shares, and Fortress Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund presently offers Class A Shares, Class B Shares, Class C Shares, and
Fortress Shares.
Class A Shares are sold primarily to customers of financial institutions subject
to a front-end sales load of up to 4.50%. Under certain circumstances, investors
may qualify for reduced sales loads on purchases of Class A Shares. The Fund has
also adopted a Shareholder Services fee of up to 0.25 of 1% of the Class A
Shares' average daily net assets with respect to Class A Shares. Investments in
Class A Shares are subject to a minimum initial investment of $500, unless the
investment is in a retirement account, in which case the minimum investment is
$50. Class A Shares are not distributed pursuant to a Rule 12b-1 Plan, and
therefore are not subject to a distribution services fee.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Rule 12b-1 Plan adopted by the Fund whereby the distributor is paid a fee
of up to 0.75 of 1%, in addition to a Shareholder Services fee of up to 0.25 of
1% of the Class C Shares' average daily net assets. Investments in Class C
Shares are subject to a minimum initial investment of $1,500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
Fortress Shares are sold primarily to customers of financial institutions
subject to a front-end sales load of 1.00% and a contingent deferred sales
charge of up to 1.00%. The Fund has also adopted a Shareholder Services fee of
up to 0.25 of 1% of the Fortress Shares' average daily net assets with respect
to Fortress Shares. Investments in Fortress Shares are subject to a minimum
initial investment of $1,500, unless the inestment is in a retirement account,
in which case the minimum investment is $50.
The amount of dividends payable to Class A Shares will generally exceed that of
Class B Shares, Class C Shares, and Fortress Shares by the difference between
class expenses and distribution and shareholder service expenses borne by shares
of each respective class.
The stated advisory fee is the same for all four classes of shares.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and the following table
for each of the periods presented is included in the Annual Report, which is
incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59 $ 11.55
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.23 0.29 0.29 0.37 0.55 0.50 0.45 0.46 0.53 0.03
- ----------------------
Net realized and
unrealized gain
(loss) on investments 0.18 2.05 1.34 1.28 0.36 1.08 (1.21) 1.81 2.88 0.01
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.41 2.34 1.63 1.65 0.91 1.58 (.76) 2.27 3.41 0.04
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.24) (0.28) (0.28) (0.38) (0.56) (0.50) (0.43) (0.47) (0.52) --
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (0.49) (1.04) (0.65) (0.30) (1.18) (0.59) (0.47) (1.23) (0.84) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.73) (1.32) (.93) (.68) (1.74) (1.09) (0.90) (1.70) (1.36) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END
OF PERIOD $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 2.76% 18.31% 12.91% 14.17% 7.13% 13.23% (5.32)% 18.38% 31.80% 0.35%
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.18% 1.13% 1.02% 1.02% 1.01% 1.01% 1.00% 1.00% 1.09% 1.06%(a)
- ----------------------
Net investment income 1.48% 2.07% 2.12% 3.06% 4.23% 3.85% 3.35% 3.44% 4.42% 3.18%(a)
- ----------------------
Expense waiver/
reimbursement (b) -- 0.06% 0.16% 0.30% 0.35% 0.12% 0.11% 0.12% 0.18% 0.22%(a)
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 226,857 202,866 171,210 149,360 147,235 149,049 158,818 157,999 112,472 71,899
- ----------------------
Portfolio turnover
rate 27% 39% 67% 57% 50% 27% 65% 28% 31% 6%
- ----------------------
<CAPTION>
YEAR ENDED
1985
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.97
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.54
- ----------------------
Net realized and
unrealized gain
(loss) on investments 1.91
- ---------------------- -------------
Total from investment
operations 2.45
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.52)
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (1.35)
- ---------------------- -------------
Total distributions (1.87)
- ---------------------- -------------
NET ASSET VALUE, END
OF PERIOD $ 11.55
- ---------------------- -------------
TOTAL RETURN** 25.85
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.29%
- ----------------------
Net investment income 5.03%
- ----------------------
Expense waiver/
reimbursement (b) 0.05%
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 71,455
- ----------------------
Portfolio turnover
rate 32%
- ----------------------
</TABLE>
* For the one month period ended March 31, 1985. The Fund changed its fiscal
year-end from February 28 to March 31, effective March 31, 1985.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report dated
March 31, 1994, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.12
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.35
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.47
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.49)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.62)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.55
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 3.16%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 2.11%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 0.71%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 11,895
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 27%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 21, 1993 (date of initial
public offering) to
March 31, 1994.
** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report dated
March 31, 1994, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.95
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.16
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.20)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.04)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.17)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.33)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.58
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (0.30)%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.35%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 1.51%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 15,282
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate %27
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1993 (date of initial
public offering) to
March 31, 1994.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS
FUND, INC.
CLASS B SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
027128404
8062808A-B (7/94)
AMERICAN LEADERS FUND, INC.
CLASS C SHARES
PROSPECTUS
The Class C Shares of American Leaders Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) investing in common stocks and other securities of high quality companies
to achieve growth of capital and income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT ENDORSED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISK INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class C Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, Class C Shares and Fortress Shares dated July 31, 1994
with the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CLASS C SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------
Liberty Family Retirement Program 4
INVESTMENT INFORMATION 5
- ------------------------------------------------------
Investment Objective 5
Investment Policies 5
Acceptable Investments 5
The Leaders List 5
Repurchase Agreements 5
Illiquid Securities 6
Lending of Portfolio Securities 6
Portfolio Turnover 6
Investment Limitations 6
NET ASSET VALUE 6
- ------------------------------------------------------
INVESTING IN CLASS C SHARES 7
- ------------------------------------------------------
Share Purchases 7
Through a Financial Institution 7
Directly From the Distributor 7
Minimum Investment Required 8
What Shares Cost 8
Systematic Investment Program 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 9
Retirement Plans 9
EXCHANGE PRIVILEGE 9
- ------------------------------------------------------
Requirements for Exchange 9
Tax Consequences 9
Making an Exchange 9
Telephone Instructions 10
REDEEMING CLASS C SHARES 10
- ------------------------------------------------------
Through a Financial Institution 10
Directly from the Fund 11
By Telephone 11
By Mail 11
Signatures 11
Contingent Deferred Sales Charge 12
Systematic Withdrawal Program 12
Accounts with Low Balances 13
FUND INFORMATION 13
- ------------------------------------------------------
Management of the Fund 13
Board of Directors 13
Officers and Directors 13
Investment Adviser 16
Advisory Fees 16
Adviser's Background 16
Distribution of Class C Shares 17
Distribution and Shareholder Services Plans 17
Other Payments to Financial
Institutions 18
Administration of the Fund 18
Administrative Services 18
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Legal Counsel 19
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Class C Shares 19
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 21
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CLASS A SHARES 23
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
FORTRESS SHARES 24
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) (1)............................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)...................................... None
Exchange Fee............................................................................................ None
ANNUAL CLASS C SHARES OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee.......................................................................................... 0.67%
12b-1 Fee............................................................................................... 0.75%
Total Other Expenses.................................................................................... 0.60%
Shareholder Services Fee.................................................................. 0.25%
Total Class C Shares Operating Expenses (2).................................................... 2.02%
</TABLE>
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
one year of their purchase date. For a more complete description, see
"Redeeming Class C Shares."
(2) The Total Class C Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1995. The Total
Class C Shares Operating Expenses were 2.11% for the period ended March 31,
1994.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS C SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS C SHARES" AND "FUND
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period....... $ 31 $ 63 $ 109 $ 235
You would pay the following expenses on the same investment, assuming no
redemption............................................................... $ 21 $ 63 $ 109 $ 235
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Class C Shares of the Fund. The Fund also offers three additional classes of
shares called Class A Shares, Class B Shares, and Fortress Shares. Class A
Shares, Class B Shares, Class C Shares, and Fortress Shares are all subject to
certain of the same expenses. However, Class A Shares are subject to a maximum
sales load of 4.50% but are not subject to a 12b-1 fee or a contingent deferred
sales charge. Class B Shares are subject to a 12b-1 fee of up to 0.75% and a
maximum contingent deferred sales charge of 5.00%, but are not subject to a
sales load. Fortress Shares are subject to a maximum sales load of 1.00% and a
contingent deferred sales charge of 1.00%, but are not subject to a 12b-1 fee.
See "Other Classes of Shares."
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report dated
March 31, 1994, which is incorporated by reference
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.12
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.35
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.47
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.49)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.62)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.55
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 3.16%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 2.11%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 0.71%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 11,895
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 27%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 21, 1993 (date of initial
public offering) to
March 31, 1994.
** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") has established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares and
Fortress Shares. This prospectus relates only to the Class C Shares ("Shares")
of the Fund.
Class C Shares of the Fund are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
common stocks and other securities of high quality companies. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum initial investment is $50.
Shares are sold at net asset value. A contingent deferred sales charge of 1.00%
will be charged on assets redeemed within the first 12 months following
purchase.
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
The Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
International Equity Fund, providing long-term capital growth and income
through international securities;
International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income producing equity securities;
Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;
Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;
Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communications utilities;
Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;
Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation
of principal, primarily limited to municipal securities;
Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;
Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;
Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and
World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industry.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of a proven, professional investment adviser.
LIBERTY FAMILY RETIREMENT PROGRAM
The Fund is also a member of the Liberty Family Retirement Program (the
"Program"), an integrated program of investment options, plan recordkeeping, and
consultation services for 401(k) and other participant-directed benefit and
savings plans. Under the Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Program for
recordkeeping and administrative services. Additional fees are charged to
participating plans for these services. As part of the Program, exchanges may be
readily made between investment options selected by the employer or plan
trustee.
The other funds participating in the Liberty Family Retirement Program are:
Capital Growth Fund, Fund for U.S. Government Securities,Inc., International
Equity Fund, International Income Fund, Liberty Equity Income Fund, Inc.,
Liberty High Income Bond Fund, Inc., Liberty Utility Fund, Inc., Prime Cash
Series.
Plans with over $1 million invested in funds available in the Liberty Family
Retirement Program may purchase Class A Shares at net asset value without a
sales load.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The Fund's investment approach is based upon the conviction
that over the longer term, the economy will continue to expand and develop and
that this economic growth will be reflected importantly in the growth of major
corporations. The Fund pursues this investment objective by investing at least
65% of its assets in a portfolio of securities issued by the one hundred
companies contained in "The Leaders List." Generally, the Fund's management
makes portfolio selections utilizing fundamental analysis, with emphasis on
earning power, financial condition, and valuation. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities of companies
selected from "The Leaders List" by the Fund's investment adviser on the basis
of traditional fundamental research techniques and standards. The securities in
which the Fund invests include, but are not limited to:
common stocks;
preferred stocks;
domestic issues of corporate debt obligations rated, at the time of
purchase, BBB or better by Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc. or, if not rated,
are determined by the Fund's investment adviser to be of comparable
quality. If a security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not required to drop the security
from the portfolio, but will consider doing so. (A description of the
rating categories is contained in the Appendix to the Statement of
Additional Information); and
warrants.
The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.
THE LEADERS LIST. "The Leaders List" is a trade name which represents a
list of 100 blue chip companies selected by the Fund's investment adviser
principally on the basis of fundamental research techniques and standards.
Shareholders can obtain a copy of "The Leaders List" by contacting the
Fund. In the opinion of the investment adviser, securities of these
companies represent diversified and highly marketable investments. The list
is subject to continuous review and modification. A number of standards and
fundamental research factors are used in determining "The Leaders List."
"The Leaders List" includes leading companies in their industries
determined in terms of sales, earnings, and/or market capitalization.
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in
which banks, broker/dealers, and other recognized financial institutions
sell U.S. government or other securities to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price.
ILLIQUID SECURITIES. The Fund may acquire securities which are subject to
legal or contractual delays, restrictions, and costs on resale. Because of
time limitations, the Fund might not be able to dispose of these securities
at reasonable prices or at times advantageous to the Fund. Where the Fund
considers these securities to be illiquid, it intends to limit the purchase
of them together with other securities considered to be illiquid, including
repurchase agreements providing for settlement in more than seven days
after notice, to not more than 10% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Directors and will receive collateral equal to at least
100% of the value of the securities loaned.
PORTFOLIO TURNOVER. Securities in the Fund's portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences. Any
such trading will increase the Fund's portfolio turnover rate and transaction
costs.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets;
invest more than 5% of its total assets in securities of one issuer
(except U.S. government securities) or purchase more than 10% of any class
of voting securities of any one issuer;
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
purchase restricted securities if immediately thereafter more than 15% of
the net assets of the Fund would be invested in such securities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class C Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class C Shares in the liabilities of the Fund and those attributable to the
Class C Shares, and dividing the remainder by the total number of Class C Shares
outstanding. The net asset value for Class C shares may differ from that of
Class A Shares, Class B Shares, and Fortress
Shares due to the variance in daily net income realized by each class. Such
variance will reflect only accrued net income to which the shareholders of a
particular class are entitled.
INVESTING IN CLASS C SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor, or directly from the distributor Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
Participants in plans under the Liberty Family Retirement Program shall purchase
Shares in accordance with the requirements of their respective plans.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:
complete and sign the new account form available from the Fund;
enclose a check made payable to American Leaders Fund, Inc.--Class C
Shares; and
mail both to Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares of the Fund directly from the distributor by wire once an
account has been established, call the Fund. All information needed will be
taken over the telephone, and the order is considered received when State Street
Bank receives payment by wire. Federal funds should be wired
as follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts 02105; Attention: Mutual Fund Servicing Division; For
Credit to: American Leaders Fund, Inc.-- Class C Shares; Title or Name of
Account; Wire Order Number and/or Account Number. Shares cannot be purchased by
wire on Columbus Day, Veterans' Day, or Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class C Shares is $1,500 unless the investment
is in a retirement plan, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans, which must be in amounts of at least $50. (Other minimum
investment requirements may apply to investments through the Liberty Family
Retirement Program.)
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgving Day, and Christmas Day.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. A shareholder may apply for participation in this program
through his financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on payment dates at the ex-dividend date net asset value without a sales
load, unless shareholders request cash payments on the new account form or by
writing to the transfer agent. All shareholders on the record date are entitled
to the dividend. If Shares are redeemed or exchanged prior to the record date or
purchased after the record date, those Shares are not entitled to that quarter's
dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class C shareholders may exchange all or some of their
Shares for Class C Shares of other funds in the Liberty Family of Funds at net
asset value without a contingent deferred sales charge. Participants in a plan
under the Liberty Family Retirement Program may exchange some or all of their
Shares for Class C Shares of other funds offered under their plan at net asset
value without a contingent deferred sales charge. Any contingent deferred sales
charge charged at the time exchanged-for Shares are redeemed is calculated as if
the shareholder had held the Shares from the date on which he or she became a
shareholder of the exchanged-from Shares. For more information, see "Contingent
Deferred Sales Charge."
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class C Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If a shareholder cannot contact his
broker or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Services
Company, P.O. Box 8604, Boston, Massachusetts, 02266-8604.
Instructions for exchanges for the Liberty Family Retirement Program should be
given to the plan administrator.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts
02266-8604 and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be recorded. Such instructions will be
processed as of 4:00 p.m. (Eastern time) and must be received by the Fund before
that time for Shares to be exchanged the same day. Shareholders exchanging into
a Fund will not receive any dividend that is payable to shareholders of record
on that date. This privilege may be modified or terminated at any time. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
REDEEMING CLASS C SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemptions can be made through a financial institution or directly
from the Fund. Redemption requests must be received in proper form. Redemptions
of Shares held through the Liberty Family Retirement Program will be governed by
the requirements of the respective plans.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value, less any applicable contingent deferred
sales charge, next determined after the Fund receives the redemption request
from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased Shares through a financial
institution may redeem their Shares by telephoning the Fund. Telephone
redemption instructions may be recorded. The proceeds will be mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
the request. The minimum amount for a wire transfer is $1,000. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. If reasonable procedures are not
followed by the Fund it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty redeeming by telephone. If such a case should occur, another method
of redemption should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, P.O. Box 8604, Boston, Massachusetts 02266-8604. The
written request should include the shareholder's name, the Fund name and class
designation, the account number, and the Share or dollar amount requested, and
should be signed exactly as the Shares are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders who purchased Shares will be charged a contingent deferred sales
charge by Federated Securities Corp. of 1.00% for redemptions of those Shares
made within one year from date of purchase. To the extent that a shareholder
exchanges between or among Class C Shares in other funds in the Liberty Family
of Funds, the time for which the exchanged-for shares were held will be added,
or "tacked", to the time for which the exchanged-from Shares were held for
purposes of satisfying the one-year holding period. The contingent deferred
sales charge will be calculated based upon the lesser of the original purchase
price of the Shares or the net asset value of the Shares when redeemed. For
additional information, see "Other Payments to Financial Institutions."
The contingent deferred sales charge will not be imposed on Shares acquired
through reinvestment of dividends or distributions of short-term or long-term
capital gains. Redemptions are deemed to have occurred in the following order:
i) Shares acquired through the reinvestment of dividends and long-term capital
gains, ii) purchases of Shares occurring more than one year before the date of
redemption, and iii) purchases of Shares within the previous year.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified retirement plan, other than an IRA, Keogh
Plan, or a custodial account, following retirement; (ii) a total or partial
distribution from an IRA, Keogh Plan, or a custodial account, after the
beneficial owner attains age 59-1/2; or (iii) from the death or permanent and
total disability of the beneficial owner. The exemption from the contingent
deferred sales charge for qualified plans, an IRA, Keogh Plan, or a custodial
account does not extend to account transfers, rollovers, or other redemptions
made for purposes of reinvestment.
A contingent deferred sales charge will not be charged in connection with
exchanges of Shares for Class C Shares in other Liberty Family Funds or Liberty
Family Retirement Program funds or in connection with redemptions by the Fund of
accounts with low balances. No contingent deferred sales charge will be imposed
on shares purchased through a bank trust department, an investment adviser or a
retirement plan where the third party administrator has entered into certain
arrangements with Federated Securities Corp. No contingent deferred sales charge
will be charged for redemptions from the Liberty Family Retirement Program. For
additional information, see "Other Payments to Financial Institutions."
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an
account value of at least $10,000. A shareholder may apply for participation in
this program through his financial institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$1,500 because of changes in the Fund's net asset value. Before Shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Shares to meet the minimum requirement.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
in the Combined Statement of Additional Information).
<TABLE>
<S> <C> <C>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
John F. Donahue\* President and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President and Director
of the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation; General
John R. Wood and Partner or Trustee in private real estate ventures in
Associates, Inc., Realtors Southwest Florida; Director, Trustee, or Managing General
3255 Tamiami Trail North Partner of the Funds; formerly, President Naples Property
Naples, FL Management, Inc.
William J. Copeland Director Director and Member of the Executive Committee, Michael
One PNC Plaza Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC Bank
PNB Building N.A. and PNC Bank Corp and Director, Ryan Homes, Inc.
Pittsburgh, PA
J. Christopher Donahue* Vice President and President and Trustee, Federated Investors; Trustee and
Federated Investors Tower Director President, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director and President, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, President and Director of the Fund.
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
Edward L. Flaherty, Jr.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N
5916 Penn Mall Park Restaurants, Inc., and Statewide Settlement Agency,
Pittsburgh, PA Inc.; Director, Trustee, or Managing General Partner of the
Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.
Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General Partner
Boston, MA of the Funds; formerly, President, State Street Bank and
Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman, Horizon Financial, F.A.
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant; Trustee,
1202 Cathedral of Carnegie Endowment for International Peace, RAND Corporation,
Learning Online Computer Library Center, Inc.; and U.S. Space
University of Pittsburgh Foundation; Chairman, National Advisory Council for
Pittsburgh, PA Environmental Policy and Technology; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General
Partner of the Funds; President Emeritus, University of
Pittsburgh; formerly Chairman, National Advisory Council for
Environmental Policy and Technology.
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Tower President and Director, Federated Securities Corp.; President
Pittsburgh, PA or Vice President of the Funds; Director or Trustee of some
of the Funds.
Edward C. Gonzales* Vice President Vice President, Treasurer, and Trustee, Federated Investors;
Federated Investors Tower and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.;
Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
John W. McGonigle Vice President and Vice President, Secretary, General Counsel, and Trustee,
Federated Investors Tower Secretary Federated Investors; Vice President, Secretary, and Trustee,
Pittsburgh, PA Federated Advisers, Federated Management, and Federated
Research; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Trustee, Federated
Services Company; Director and Executive Vice President,
Federated Securities Corp.; Vice President and Secretary of
the Funds.
</TABLE>
* This Director is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940, as amended.
\ Members of the Fund's Exectutive Committee. The Exectutive Committee of the
Board of Directors handles the responsibilites of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers (the "adviser"), the Fund's investment adviser, subject to direction by
the Directors. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .55 of 1% of the Fund's average daily net assets, plus 4.5% of
the Fund's gross income (excluding any capital gains or losses). Gross
income includes, in general, discount earned on U.S. Treasury bills and
agency discount notes, interest earned on all interest-bearing obligations,
and dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary
reimbursement of expenses at any time in its sole discretion. The adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife,
and Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Peter R. Anderson has been the Fund's portfolio manager since December,
1989. Mr. Anderson joined Federated Investors in 1972 as, and is presently,
a Senior Vice President of the Fund's investment adviser. Mr. Anderson is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Wisconsin.
Michael P. Donnelly has been the Fund's co-portfolio manager since
February, 1993. Mr. Donnelly joined Federated Investors in 1989 and has
been an Assistant Vice President of the Fund's investment adviser since
1992. From 1989 to 1991, Mr. Donnelly acted as an investment analyst for
the investment adviser. Mr. Donnelly was a Fixed Income Associate at
Donaldson, Lufkin & Jenrette from 1987 until 1989. Mr. Donnelly is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Virginia.
DISTRIBUTION OF CLASS C SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
The distributor will pay financial institutions an amount equal to 1% of the net
asset value of Shares purchased by their clients or customers at the time of
purchase. These payments will be made directly by the distributor from its own
assets and will not be made from assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
Class C Shares will pay to the distributor an amount, computed at an annual rate
of 0.75 of 1% of the average daily net assets of the Class C Shares to finance
any activity which is principally intended to result in the sale of shares
subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of
the distributor, including amounts expended by the distributor in excess of
amounts received by it from the Fund, interest, carrying or other financing
charges in connection with excess amounts expended, or the distributor's
overhead expenses. However, the distributor may be able to recover such amount
or may earn a profit from future payments made by the Fund under the
Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net assets of the Class C Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or savings and loan association) to become an underwriter or
distributor of securities. In the even the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Directors will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _Financial institutions may elect to
waive the initial payment described above; such waiver will result in the waiver
by the Fund of the otherwise applicable contingent deferred sales charge.
The distributor may offer to pay a fee from its own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include participating in sales, educational and
training seminars at recreational-type facilities, providing sales literature,
and engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
operational support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's investment adviser or its
affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604, is transfer agent for the shares of
the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin L.L.P., 2101 L Street, N.W., Washington, D.C. 20037.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., 2100 One PPG Place, Pittsburgh, Pennsylvania 15222.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Directors.
EXPENSES OF THE FUND AND CLASS C SHARES
Holders of Shares pay their allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with federal and state securities
authorities; Directors' fees; auditors' fees; the cost of meetings of Directors;
legal fees of the Fund; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
porfolio; investment advisory services; taxes and
commissions; custodian fees; insurance premiums; auditors' fees; and such
non-recurring and extraordinary items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Shareholder Services Plan and Distribution
Plan. However, the Directors reserve the right to allocate certain other
expenses to holders of Shares as it deems appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: distribution fees; transfer agent fees
as identified by the transfer agent as attributable to holders of Shares; fees
under the Fund's Shareholder Services Plan; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Directors' fees incurred as a result of issues relating solely to
Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Fund have equal voting rights, except that only shares of that
particular portfolio or class are entitled to vote in matters affecting that
portfolio or class. As a Maryland Corporation, the Fund is not required to hold
annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Fund's operation and for the election of Directors under
certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises the total return and yield for Class C
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class C Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class C Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
C Shares over a thirty-day period by the maximum offering price per share of
Class C Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Class C Shares, and therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The performance information reflects the effect of non-recurring charges, such
as the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, Class C Shares, and Fortress Shares. Because Class B Shares and Class C
Shares are subject to Rule 12b-1 fees and Shareholder Services fees, the yield
for Class A Shares and Fortress Shares, for the same period, may exceed that of
Class B Shares and Class C Shares. Because Class A Shares are subject to a
higher maximum sales load, the total return for Class B Shares, Class C Shares
and Fortress Shares, for the same period, may exceed that of Class A Shares.
Depending on the dollar amount invested and the time period for which any
particular class of shares is held, the total return for any particular class
may exceed that of another.
From time to time, the Fund may advertise the performance of Class A Shares,
Class B Shares, Class C Shares, and Fortress Shares using certain financial
publications and/or compare the performance of Class A Shares, Class B Shares,
Class C Shares, and Fortress Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund presently offers Class A Shares, Class B Shares, Class C Shares, and
Fortress Shares.
Class A Shares are sold primarily to customers of financial institutions subject
to a front-end sales load of up to 4.50%. The Fund has also adopted a
Shareholder Services fee of up to 0.25 of 1% of the Class A Shares' average
daily net assets with respect to Class A Shares. Class A Shares are subject to a
minimum initial investment of $500, unless the investment is in a retirement
account, in which case the minimum investment is $50. Class A Shares are not
distributed pursuant to a Rule 12b-1 Plan and therefore are not subject to a
distribution services fee.
Class B Shares are sold primarily to customers of financial institutions subject
to certain contingent deferred sales charges. The Fund has also adopted a Rule
12b-1 plan whereby the distributor is paid a fee of up to .75 of 1% and a
Shareholder Services fee of up to .25 of 1% of the Class B Shares' average daily
net assets with respect to Class B Shares. Investments in Class B Shares are
subject to a minimum initial investment of $1,500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
Fortress Shares are sold primarily to customers of financial institutions
subject to a front-end sales load of 1.00% and a contingent deferred sales
charge of up to 1.00%. The Fund has also adopted a Shareholder Services fee of
up to .25 of 1% of the Fortress Shares' average daily net assets with respect to
Fortress Shares. Investments in Fortress Shares are subject to a minimum initial
investment of $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $50.
The amount of dividends payable to Class A Shares may exceed that of Class C
Shares by the difference between class expenses and distribution and shareholder
service expenses borne by shares of each respective class.
The stated advisory fee is the same for all four classes of shares.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended
March 31, 1994 and the following table for each of the periods presented is
included in the Annual Report, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59 $ 11.55
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.23 0.29 0.29 0.37 0.55 0.50 0.45 0.46 0.53 0.03
- ----------------------
Net realized and
unrealized gain
(loss)
on investments 0.18 2.05 1.34 1.28 0.36 1.08 (1.21) 1.81 2.88 0.01
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.41 2.34 1.63 1.65 0.91 1.58 (.76) 2.27 3.41 0.04
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.24) (0.28) (0.28) (0.38) (0.56) (0.50) (0.43) (0.47) (0.52) --
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (0.49) (1.04) (0.65) (0.30) (1.18) (0.59) (0.47) (1.23) (0.84) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.73) (1.32) (.93) (.68) (1.74) (1.09) (0.90) (1.70) (1.36) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END
OF PERIOD $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 2.76% 18.31% 12.91% 14.17% 7.13% 13.23% (5.32)% 18.38% 31.80% 0.35%
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.18% 1.13% 1.02% 1.02% 1.01% 1.01% 1.00% 1.00% 1.09% 1.06%(a)
- ----------------------
Net investment income 1.48% 2.07% 2.12% 3.06% 4.23% 3.85% 3.35% 3.44% 4.42% 3.18%(a)
- ----------------------
Expense waiver/
reimbursement (b) -- 0.06% 0.16% 0.30% 0.35% 0.12% 0.11% 0.12% 0.18% 0.22%(a)
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 226,857 202,866 171,210 149,360 147,235 149,049 158,818 157,999 112,472 71,899
- ----------------------
Portfolio turnover
rate 27% 39% 67% 57% 50% 27% 65% 28% 31% 6%
- ----------------------
<CAPTION>
YEAR ENDED
<S> <C>
1985
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.97
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.54
- ----------------------
Net realized and
unrealized gain
(loss)
on investments 1.91
- ---------------------- -------------
Total from investment
operations 2.45
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.52 )
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (1.35 )
- ---------------------- -------------
Total distributions (1.87 )
- ---------------------- -------------
NET ASSET VALUE, END
OF PERIOD $ 11.55
- ---------------------- -------------
TOTAL RETURN** 25.85
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.29 %
- ----------------------
Net investment income 5.03 %
- ----------------------
Expense waiver/
reimbursement (b) 0.05 %
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 71,455
- ----------------------
Portfolio turnover
rate 32 %
- ----------------------
</TABLE>
* For the one month period ended March 31, 1985. The Fund changed its fiscal
year-end from February 28 to March 31, effective
March 31, 1985.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund performance is contained in the Fund's annual
report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Anderson & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended
March 31, 1994 and on the following table for the period ended March 31, 1994 is
included in the Annual Report, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.95
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.16
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.20)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.04)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.17)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.33)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.58
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (0.30)%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.35%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 1.51%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 15,282
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 27%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1993 (date of initial
public offering) to
March 31, 1994.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which may be obtained free of charge.
AMERICAN LEADERS
FUND, INC.
CLASS C SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
027128206
8062808A-C (7/94)
AMERICAN LEADERS FUND, INC.
FORTRESS SHARES
PROSPECTUS
The Fortress Shares of American Leaders Fund, Inc. (the "Fund") represent
interests in an open-end, diversified management investment company (a mutual
fund) investing in common stocks and other securities of high quality companies
to achieve growth of capital and income.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISK INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Fortress Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, Class C Shares and Fortress Shares dated July 31,
1994, with the Securities and Exchange Commission. The information contained in
the Combined Statement of Additional Information is incorporated by reference
into this prospectus. You may request a copy of the Combined Statement of
Additional Information free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
FORTRESS SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
FORTRESS INVESTMENT PROGRAM 3
- ------------------------------------------------------
INVESTMENT INFORMATION 4
- ------------------------------------------------------
Investment Objective 4
Investment Policies 4
Acceptable Investments 4
The Leaders List 5
Repurchase Agreements 5
Illiquid Securities 5
Lending of Portfolio Securities 5
Portfolio Turnover 5
Investment Limitations 6
NET ASSET VALUE 6
- ------------------------------------------------------
INVESTING IN FORTRESS SHARES 6
- ------------------------------------------------------
Share Purchases 6
Through a Financial Institution 6
Directly By Mail 7
Directly By Wire 7
Minimum Investment Required 7
What Shares Cost 7
Dealer Concession 8
Eliminating the Sales Load 8
Quantity Discounts and Accumulated
Purchases 8
Letter of Intent 8
Reinvestment Privilege 9
Concurrent Purchases 9
Systematic Investment Program 9
Exchange Privileges 9
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING FORTRESS SHARES 10
- ------------------------------------------------------
Through a Financial Institution 10
Directly By Mail 11
Signatures 11
Receiving Payment 11
Contingent Deferred Sales Charge 11
Systematic Withdrawal Program 12
Accounts with Low Balances 13
Exchanges for Shares of Other Funds 13
FUND INFORMATION 13
- ------------------------------------------------------
Management of the Fund 13
Board of Directors 13
Officers and Directors 13
Investment Adviser 16
Advisory Fees 16
Adviser's Background 17
Distribution of Fortress Shares 17
Other Payments to Financial
Institutions 18
Administration of the Fund 18
Administrative Services 18
Shareholder Services Plan 18
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Legal Counsel 19
Independent Public Accountants 19
Brokerage Transactions 19
Expenses of the Fund and Fortress Shares 19
SHAREHOLDER INFORMATION 20
- ------------------------------------------------------
Voting Rights 20
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
Pennsylvania Corporate and
Personal Property Taxes 20
PERFORMANCE INFORMATION 21
- ------------------------------------------------------
OTHER CLASSES OF SHARES 21
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES 23
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES 24
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FORTRESS SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. 1.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)....................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)(1).................................................. 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable).......................................... None
Exchange Fee................................................................................................ None
ANNUAL FORTRESS SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee.............................................................................................. 0.67%
12b-1 Fee................................................................................................... None
Total Other Expenses........................................................................................ 0.60%
Shareholder Services Fee..................................................................... 0.25%
Total Fortress Shares Operating Expenses (2)....................................................... 1.27%
</TABLE>
(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
four years of their purchase dates. For a more complete description, see
"Redeeming Fortress Shares."
(2) The Total Fortress Shares Operating Expenses in the table above are based on
expenses expected during the fiscal year ending March 31, 1995. The Total
Fortress Shares Operating Expenses were 1.35% for the period ended March 31,
1994.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF FORTRESS SHARES OF THE FUND
WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN FORTRESS SHARES" AND "FUND
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $ 33 $ 61
You would pay the following expenses on the same investment, assuming no redemption............ $ 23 $ 50
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Fortress Shares of the Fund. The Fund also offers three additional classes of
shares called Class A Shares, Class B Shares and Class C Shares. Fortress
Shares, Class A Shares, Class B Shares and Class C Shares are all subject to
certain of the same expenses. However, Class A Shares are subject to a maximum
sales load of 4.50%, but are not subject to a 12b-1 fee or a contingent deferred
sales charge. Class B Shares are subject to a 12b-1 fee of up to 0.75% and a
maximum contingent deferred sales charge of 5.00%, but are not subject to a
front end sales load. Class C Shares are subject to a 12b-1 fee of 0.75%, and a
contingent deferred sales charge of 1.00% but are not subject to a sales load.
See "Other Classes of Shares."
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--FORTRESS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report dated
March 31, 1994, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.95
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.16
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.20)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.04)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.17)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.33)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.58
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (0.30)%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.35%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 1.51%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 15,282
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate %27
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 27, 1993 (date of initial
public offering) to March 31, 1994.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated March 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") has established four
classes of shares, known as Class A Shares, Class B Shares, Class C Shares and
Fortress Shares. This prospectus relates only to the Fortress Shares ("Shares")
of the Fund.
Fortress Shares of the Fund are designed for individuals as a convenient means
of accumulating an interest in a professionally managed, diversified portfolio
of common stocks and other securities of high quality companies. A minimum
initial investment of $1,500 is required, unless the investment is in a
retirement account, in which case the minimum initial investment is $50.
Shares are sold at net asset value plus an applicable sales load and are
redeemed at net asset value. However, a contingent deferred sales charge is
imposed on shares, other than shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase dates.
FORTRESS INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
This class of shares is a class of Fortress Shares ("Fortress Shares"). It is a
member of a family of funds ("Fortress Funds"), collectively known as the
Fortress Investment Program. The other funds in the Program are:
California Municipal Income Fund, providing current income exempt from
federal regular income tax and California personal income taxes;
Fortress Adjustable Rate U.S. Government Fund, Inc., providing current
income consistent with lower volatility of principal through a diversified
portfolio of adjustable and floating rate mortgage securities which are
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
Fortress Bond Fund, providing current income primarily through
high-quality corporate debt;
Fortress Municipal Income Fund, Inc., providing a high level of current
income generally exempt from the federal regular income tax by investing
primarily in a diversified portfolio of municipal bonds;
Fortress Utility Fund, Inc., providing high current income and moderate
capital appreciation primarily through equity and debt securities of
utility companies;
Government Income Securities, Inc., providing current income through
long-term U.S. government securities;
Limited Term Fund,providing a high level of current income consistent with
minimum fluctuation in principal value;
Limited Term Municipal Fund, providing a high level of current income
which is exempt from federal regular income tax consistent with the
preservation of capital;
Money Market Management, Inc., providing current income consistent with
stability of principal through high-quality money market instruments;
New York Municipal Income Fund, providing current income exempt from
federal regular income tax, New York personal income taxes, and New York
City income taxes;
Ohio Municipal Income Fund, providing current income exempt from federal
regular income tax and Ohio personal income taxes;
Strategic Income Fund, providing high current income through investing in
domestic corporate debt obligations, U.S. government securities, and
foreign government and corporate debt obligations; and
World Utility Fund, providing total return by investing primarily in
securities issued by domestic and foreign companies in the utilities
industry.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Fortress Investment Program provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles, and by providing
the investment services of a proven, professional investment adviser.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek growth of capital and of income
by concentrating the area of investment decision in the securities of high
quality companies. The Fund's investment approach is based upon the conviction
that over the longer term, the economy will continue to expand and develop and
that this economic growth will be reflected importantly in the growth of major
corporations. The Fund pursues this investment objective by investing at least
65% of its assets in a portfolio of securities issued by the one hundred
companies contained in "The Leaders List." Generally, the Fund's management
makes portfolio selections utilizing fundamental analysis, with emphasis on
earning power, financial condition, and valuation. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests primarily in securities of companies
selected from "The Leaders List" by the Fund's investment adviser on the basis
of traditional fundamental research techniques and standards. The securities in
which the Fund invests include, but are not limited to:
common stocks;
preferred stocks; and
domestic issues of corporate debt obligations rated, at the time of
purchase BBB, or better by Standard & Poor's Corporation, Moody's
Investors Service, Inc., or Fitch Investors Service, Inc. or, if not
rated, are determined by the Fund's investment adviser to be of comparable
quality. If a security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not required to drop the security
from the portfolio, but will consider doing so. (A description of the
rating categories is contained in the Appendix to the Statement of
Additional Information); and
warrants.
The Fund may also temporarily hold cash and invest in U.S. government securities
in such proportions as the Fund's investment adviser may deem necessary for
defensive purposes.
THE LEADERS LIST. "The Leaders List" is a trade name which represents a
list of 100 blue chip companies selected by the Fund's investment adviser
principally on the basis of fundamental research techniques and standards.
Shareholders can obtain a copy of "The Leaders List" by contacting the
Fund. In the opinion of the investment adviser, securities of these
companies represent diversified and highly marketable investments. The list
is subject to continuous review and modification. A number of standards and
fundamental research factors are used in determining "The Leaders List."
"The Leaders List" includes leading companies in their industries
determined in terms of sales, earnings, and/or market capitalization.
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund
invests may be purchased pursuant to repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government or other securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price.
ILLIQUID SECURITIES. The Fund may acquire securities which are subject to
legal or contractual delays, restrictions, and costs on resale. Because of
time limitations, the Fund might not be able to dispose of these securities
at reasonable prices or at times advantageous to the Fund. Where the Fund
considers these securities to be illiquid, it intends to limit the purchase
of them together with other securities considered to be illiquid, including
repurchase agreements providing for settlement in more than seven days
after notice, to not more than 10% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Fund's Board of Directors and will receive collateral equal to at least
100% of the value of the securities loaned.
PORTFOLIO TURNOVER. Securities in the Fund's portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences. Any
such trading will increase the Fund's portfolio turnover rate and transaction
costs.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets;
invest more than 5% of its total assets in securities of one issuer
(except U.S. government securities) or purchase more than 10% of any class
of voting securities of any one issuer;
invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or
purchase restricted securities if immediately thereafter more than 15% of
the net assets of the Fund would be invested in such securities.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Fortress Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Fortress Shares in the liabilities of the Fund and those attributable to the
Fortress Shares, and dividing the remainder by the total number of Fortress
Shares outstanding. The net asset value for Fortress Shares may differ from that
of Class A Shares, Class B Shares, and Class C Shares due to the variance in
daily net income realized by each class. Such variance will reflect only accrued
net income to which the shareholders of a particular class are entitled.
INVESTING IN FORTRESS SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
either by mail or by wire. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 P.M. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 P.M. (Eastern time) in order for Shares to
be purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").
DIRECT BY MAIL. To purchase Shares by mail directly from Federated Securities
Corp.:
complete and sign the new account form available from the Fund;
enclose a check made payable to American Leaders Fund--Fortress Shares;
and
mail both to Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank") into federal funds. This is generally the next business day after State
Street Bank receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from Federated Securities Corp.
by Federal Reserve wire, call the Fund. All information needed will be taken
over the telephone, and the order is considered received when State Street Bank
receives payment by wire.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Fortress Shares of the Fund is $1,500, except
for an IRA account, which requires a minimum initial investment of $50.
Subsequent investments must be in amounts of at least $100, except for an IRA
account, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales load of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales load for purchases of $1 million or
more. In addition, no sales load is imposed for Shares purchased through bank
trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Trustees, and employees of the Fund, Federated Advisers, and
Federated Securities Corp., or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided which may be related to the ownership of Fund
Shares. This prospectus should, therefore, be read together with any agreement
between the customer and the institution with regard to services provided, the
fees charged for these services, and any restrictions and limitations imposed.
The net asset value is determined at 4:00 P.M. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances, described under "Redeeming Fortress Shares",
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
DEALER CONCESSION. For sales of Shares, broker/dealers will normally receive
100% of the applicable sales load. Any portion of the sales load which is not
paid to a broker/dealer will be retained by the distributor. However, from time
to time, and at the sole discretion of the distributor, all or part of the
remaining sales load or that portion may be paid to a dealer. The sales load for
Shares sold other than through registered broker/dealers will be retained by
Federated Securities Corp. Federated Securities Corp. may pay fees to banks out
of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customer in connection with the initiation of
customer accounts and purchases of Shares.
ELIMINATING THE SALES LOAD
The sales load can be eliminated on the purchase of Shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales load for
purchases of $1 million or more. The Fund will combine purchases made on the
same day by the investor, his spouse, and his children under age 21 when it
calculates the sales load.
If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
charge on the additional purchase. The Fund will also combine purchases for the
purpose of reducing the contingent deferred sales charge imposed on some Share
redemptions. For example, if a shareholder already owns Shares having current
value at public offering price of $1 million and purchases an additional $1
million at the current public offering price, the applicable contingent deferred
sales charge would be reduced to .50% of those additional Shares. For more
information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."
To receive the sales load reduction and/or the contingent deferred sales charge
reduction, Federated Securities Corp. must be notified by the shareholder in
writing or by their financial institution at the time the purchase is made that
Shares are already owned or that purchases are being combined. The Fund will
eliminate the sales load and/or reduce the contingent deferred sales charge
after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $1 million of
Shares over the next 13 months, the sales load may be reduced by signing a
letter of intent to that effect. This letter of intent includes a provision for
a sales load elimination depending on the amount actually purchased within the
13-month period and a provision for the Fund's custodian to hold 1.00% of the
total amount intended to be purchased in escrow (in Shares) until such purchase
is completed.
The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more of Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales load.
This letter of intent also includes a provision for reductions in the contingent
deferred sales charge and holding period depending on the amount actually
purchased within the 13-month period. For more information on the various levels
of contingent deferred sales charges and holding periods, see the section
entitled "Contingent Deferred Sales Charge."
This letter of intent will not obligate the shareholder to purchase Shares. The
letter may be dated as of a prior date to include any purchases made within the
past 90 days (purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales load on such purchases
will not be adjusted to reflect a lower sales load).
REINVESTMENT PRIVILEGE. If Shares have been redeemed, the shareholder has a
one-time right, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales load. Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to receive this elimination of the
sales load. If the shareholder redeems his Shares, there may be tax
consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales load elimination,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Fortress Investment Program, the purchase prices of which include a
sales load. For example, if a shareholder concurrently invested $400,000 in one
of the other Fortress Funds and $600,000 in Shares, the sales load would be
eliminated.
To receive this sales load elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will eliminate the sales load
after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by the Fund, plus
the 1% sales charge for purchases under $1 million. A shareholder may apply for
participation in this program through Federated Securities Corp. or his
financial institution.
EXCHANGE PRIVILEGES
The Securities and Exchange Commission has promulgated Rule 11a-3 under the
Investment Company Act of 1940 which allows shareholders to exchange shares in
other Fortress Funds for Shares at net asset value without a sales load (if
previously paid) or a contingent deferred sales charge. The exchanging privilege
is available to shareholders residing in any state in which the shares being
acquired may be legally sold.
The Securities and Exchange Commission has also issued an order exempting the
Fund from certain provisions of the Investment Company Act of 1940. The order
allows shares in certain Federated Funds
which are advised by subsidiaries or affiliates of Federated Investors to be
exchanged for Shares at net asset value (plus a sales load, if applicable).
Shareholders using this privilege must exchange Shares equal to the minimum
investment requirements of the fund into which the exchange is being made.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
on the application or by contacting Federated Services Company.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares of the Fund on payment dates at the ex-dividend date net asset value
without a sales load, unless shareholders request cash payments on the new
account form or by writing to the transfer agent. All shareholders on the record
date are entitled to the dividend. If Shares are redeemed or exchanged prior to
the record date or purchased after the record date, those Shares are not
entitled to that quarter's dividend.
CAPITAL GAINS
Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.
REDEEMING FORTRESS SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
through a financial institution or directly from the Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. Redemption requests through a
registered broker/dealer must be received by the broker before 4:00 P.M.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
P.M. (Eastern time) in order for Shares to be redeemed at that day's net asset
value. Redemption requests through other financial institutions must be received
by the financial institution and transmitted to the Fund before 4:00 P.M.
(Eastern time) in order for Shares to be redeemed at that day's net asset value.
The financial institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions to the Fund. The
financial institution may charge customary fees and commissions for this
service. If, at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept redemption
requests by telephone must first be completed. In the event of drastic economic
or market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such as
"Directly by Mail", should be considered.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent instructions.
DIRECTLY BY MAIL
Shareholders may also redeem Shares by sending a written request to Federated
Services Company, P.O. Box 8604, Boston, MA 02266-8604. This written request
must include the shareholders' name, the Fund name and class designation, the
account number, and the Share or dollar amount to be redeemed. Shares will be
redeemed at their net asset value less any applicable contingent deferred sales
charge next determined after the Fund receives the redemption request.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders may call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
any other "eligible guarantor institution", as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. A check for the proceeds is mailed within seven days after
receipt of proper written redemption instructions from a broker or from the
shareholder.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming shares from their Fund accounts within certain periods of
the purchase date of those Shares will be charged a contingent deferred sales
charge by the Fund's distribution of the lesser of the original price or the net
asset value of the Shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
<S> <C> <C>
Up to $1,999,999................................... less than 4 years 1%
$2,000,000 to $4,999,999........................... less than 2 years .50%
$5,000,000 or more................................. less than 1 year .25%
</TABLE>
In instances in which Shares have been acquired in exchange for shares in other
Fortress Funds, (i) the purchase price is the price of the shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on shares acquired through the reinvestment of
dividends or distributions of long-term capital gains. In computing the amount
of contingent deferred sales charge for accounts with shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: 1) first of shares acquired through the reinvestment of dividends and
long-term capital gains, 2) second of purchases of shares occurring prior to the
number of years necessary to satisfy the applicable holding period, and 3)
finally of purchases of shares occurring within the current holding period. For
accounts with shares subject to multiple share holding periods, the redemption
sequence will be determined first, with reinvested dividends and long-term
capital gains, and second, on a first-in, first-out basis.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account after the beneficial owner
attains age 59-1/2; or (iii) from the death or disability of the beneficial
owner. The exemption from the contingent deferred sales charge for qualified
plans, an IRA, Keogh Plan, or a custodial account does not extend to account
transfers, rollovers, and other redemptions made for purposes of reinvestment.
Contingent deferred sales charges are not charged in connection with exchanges
of Shares for shares in other Fortress Funds, or in connection with redemptions
by the Fund of accounts with low balances. Shares of the Fund originally
purchased through a bank trust department, investment adviser registered under
the Investment Advisers Act of 1940, as amended, or retirement plans where the
third party administrator has entered into certain arrangements with Federated
Securities Corp. or its affiliates, are not subject to the contingent deferred
sales charge, to the extent that no payment was advanced for purchases made by
such entities.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
the Fund. For this reason, payments under this program should not be considered
as yield or income on the shareholder's investment in the Fund. To be eligible
to participate
in this program, a shareholder must have invested at least $10,000 in the Fund
(at current offering price).
A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales load and
contingent deferred sales charge, it is not advisable for shareholders to be
purchasing Shares while participating in this program.
Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000. This
requirement does not apply, however, if the balance falls below $1,000 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.
EXCHANGES FOR SHARES OF OTHER FUNDS
Shares may be exchanged for shares in other Fortress Funds at net asset value
without a contingent deferred sales charge or a sales load.
Shares may also be exchanged for shares in other Federated Funds which are
advised by subsidiaries or affiliates of Federated Investors. With the exception
of exchanges into other Fortress Funds, such exchanges will be subject to a
contingent deferred sales charge and possibly a sales load.
Shareholders using this privilege must exchange shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. A shareholder may obtain information on the exchange
privilege, and may obtain prospectuses for other Fortress Funds and Federated
Funds by calling Federated Securities Corp. or his financial institution.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp., Federated
Services Company, Federated Administrative Services, and the Funds (as defined
in the Combined Statement of Additional Information).
<TABLE>
<S> <C> <C>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
John F. Donahue\* President and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President and
Director of the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation, Senior
Wood/IPC Commercial Vice-President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private
Associates, Inc., real estate ventures in Southwest Florida; Director,
Realtors Trustee, or Managing General Partner of the Funds; formerly,
3255 Tamiami Trail North President, Naples Property Management, Inc.
Naples, FL
William J. Copeland Director Director and Member of the Executive Committee, Michael
One PNC Plaza-- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC
PNC Bank Building Bank, N.A. and PNC Bank Corp and Director, Ryan Homes, Inc.
Pittsburgh, PA
J. Christopher Donahue* Vice President and President and Trustee, Federated Investors; Trustee and
Federated Investors Tower Director President, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Director and President, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President or
Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds. Mr. Donahue is the son
of John F. Donahue, President and Director of the Fund.
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
Edward L. Flaherty, Jr.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc., and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State Street Bank
and Trust Company and State Street Boston Corporation;
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
formerly, Vice Chairman, Horizon Financial, F.A.
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation, Online Computer Library Center, Inc. and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Manangement
Pittsburgh, PA Center; Director, Trustee, or Managing General Partner of
the Funds; President Emeritus, University of Pittsburgh;
formerly, Chairman, National Advisory Council for Environ-
mental Policy and Technology.
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Tower President and Director, Federated Securities Corp.;
Pittsburgh, PA President or Vice President of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales Vice President and Vice President, Treasurer, and Trustee, Federated In-
Federated Investors Tower Treasurer vestors; Vice President and Treasurer, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Executive Vice
President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the
Funds; Vice President and Treasurer of the Funds.
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors Tower and Secretary Federated Investors; Vice President, Secretary, and Trustee,
Pittsburgh, PA Federated Advisers, Federated Management, and Federated
Research; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Trustee, Federated
Services Company; Director and Executive Vice President,
Federated Securities Corp.; Vice President and Secretary of
the Funds.
</TABLE>
* This Director is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940, as amended.
\ Members of the Fund's Exectutive Committee. The Exectutive Committee of the
Board of Directors handles the responsibilites of the Board of Directors
between meetings of the Board.
Officers and Directors own less than 1% of the Fund's outstanding Shares.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers (the "Adviser"), the Fund's investment adviser, subject to direction by
the Directors. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase and sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .55 of 1% of the Fund's average daily net assets, plus 4.5% of the
Fund's gross income (excluding any capital gains or losses). Gross income
includes, in general, discount earned on U.S. Treasury bills and agency
discount notes, interest earned on all interest-bearing obligations, and
dividend income recorded on the ex-dividend date but does not include
capital gains or losses or reduction for expenses. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Funds
for certain operating expenses. The Adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion. The Adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subisidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
Peter R. Anderson has been the Fund's portfolio manager since 1989. Mr.
Anderson joined Federated Investors in 1972 and has been a Senior Vice
President of Federated Advisers since 1989. Mr. Anderson is a Chartered
Financial Analyst and received his M.B.A. in finance from the University of
Wisconsin.
Michael P. Donnelly has been the Fund's co-portfolio manager since
February, 1993. Mr. Donnelly joined Federated Investors in 1989 and has
been an Assistant Vice President of the Fund's investment adviser since
1992. From 1989 until 1991, Mr. Donnelly acted as an investment analyst for
the investment adviser. Mr. Donnelly was a Fixed Income Associate at
Donaldson, Lufkin & Jenrette from 1987 until 1989. Mr. Donnelly is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Virginia.
DISTRIBUTION OF FORTRESS SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.
The distributor will pay financial institutions, for distribution and/or
administrative services, an amount equal to 1.00% of the offering price of the
offering price of the Shares acquired by their clients or customers on purchases
up to $1,999,999, .50% of the offering price on purchases of $2,000,000 to
$4,999,999, and .25% of the offering price on purchases of $5,000,000 or more.
(This fee is in addition to the 1.00% sales load on purchases of less that $1
million.) The financial institutions may elect to waive the initial payment
described above; such waiver will result in the waiver by the Fund of the
otherwise applicable contingent deferred sales charge.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _The distributor may offer to pay a
fee from its own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
participating in sales, educational and training seminars at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
The Glass-Steagall Act prohibits a depository institution (such as a Commercial
Bank Or A savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Board of Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Fortress Class Shares to obtain certain
personal services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Fund and Federated Shareholder Services.
CUSTODIAN. State Street Bank and Trust Company, Box 8604, Boston, Massachusetts
02266-8604, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604, is transfer agent for the Shares of
the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, L.L.P., 2101 L Street, N.W., Washington, D.C. 20037.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., 2100 One PPG Place, Pittsburgh, Pennsylvania 15222.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Board of Directors.
EXPENSES OF THE FUND AND FORTRESS SHARES
Holders of Shares pay their allocable portion of Fund and portfolio expenses.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with federal and state securities
authorities; Directors' fees; auditors' fees; the cost of meetings of Directors;
legal fees of the Fund; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses allocated specifically to the Shares as a class
are expenses under the Fund's Shareholder Services Plan. However, the Directors
reserve the right to allocate other expenses to holders of Shares as it deems
appropriate ("Class Expenses"). In any case, Class Expenses would be limited to:
transfer agent fee, as identified by the transfer agent as attributable to
holders of Shares; fees under the Fund's Shareholder Service Plan; printing and
postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Directors' fees incurred as a result of issues relating solely to
Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All Shares of each portfolio or
class in the Fund have equal voting rights, except that only shares of that
particular portfolio or class are entitled to vote in matters affecting that
portfolio or class.
As a Maryland Corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
the Fund is subject to the Pennsylvania corporate franchise tax; and
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return and yield for Fortress
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Fortress Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Fortress Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
Fortress Shares over a thirty-day period by the maximum offering price per share
of Fortress Shares on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Fortress Shares, and therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load, such
as the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return, and yield will be calculated separately for Class A Shares, Class
B Shares, Class C Shares, and Fortress Shares. Because Class B Shares and, Class
C Shares, are subject to Rule 12b-1 fees and Shareholder Services fees, the
yield for Class A Shares and Fortress Shares, for the same period, may exceed
that of Class B Shares and Class C Shares. Because Class A Shares are subject to
a higher maximum sales load, the total return for Class B Shares, Class C Shares
and Fortress Shares, for the same period, will exceed that of Class A Shares.
From time to time, the Fund may advertise the performance of Class A Shares,
Class B Shares, Class C Shares and Fortress Shares using certain financial
publications and/or compare the performance of Class A Shares, Class B Shares,
Class C Shares and Fortress Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund presently offers Class A Shares, Class B Shares, Class C Shares and
Fortress Shares.
Class A Shares offered by the Fund, are sold to customers of financial
institutions subject to a front-end sales load of up to 4.50% and certain
contingent deferred sales charges. Class A Shares are distributed pursuant to a
Shareholder Servicesfee of up to .25 of 1% of the Class A Shares' average daily
net assets. Investments in Class A Shares are subject to a minimum initial
investment of $500, unless the investment is in a retirement account, in which
case the minimum investment is $50.
Class B Shares are sold primarily to customers of financial institutions,
subject to certain contingent deferred sales charges. The Fund has also adopted
a Rule 12b-1 plan whereby the distributor is paid a fee of up to .75 of 1% and a
Shareholder Services fee of up to .25 of 1% of the Class B Shares' average daily
net assets with respect to Class B Shares. Investments in Class B Shares are
subject to a minimum initial investment of $1,500, unless the investment is in a
retirement account, in which case the minimum investment is $50.
Class C Shares are distributed pursuant to a Rule 12b-1 Plan adopted by the Fund
whereby the distributor is paid a fee of up to .75 of 1%, in addition to a
Shareholder Services fee of up to .25 of 1% of the Class C Shares' average daily
net assets; however, Class C Shares are subject to a contingent deferred sales
charge of up to 1.0%. Investments in Class C Shares are subject to a minimum
initial investment of $1,500, unless the investment is in a retirement account,
in which case the minimum investment is $50. Class C Shares offered by the Fund,
are sold primarily to customers of financial institutions at net asset value
with no initial sales load.
The amount of dividends payable to Fortress Shares and Class A Shares may exceed
that of Class B Shares and Class C Shares by the difference between class
expenses and distribution and shareholder service expenses borne by shares of
each respective class.
The stated advisory fee is the same for all four classes of shares.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and the following table
for each of the periods presented included in the Annual Report, which is
incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59 $ 11.55
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.23 0.29 0.29 0.37 0.55 0.50 0.45 0.46 0.53 0.03
- ----------------------
Net realized and
unrealized gain
(loss) on investments 0.18 2.05 1.34 1.28 0.36 1.08 (1.21) 1.81 2.88 0.01
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.41 2.34 1.63 1.65 0.91 1.58 (.76) 2.27 3.41 0.04
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.24) (0.28) (0.28) (0.38) (0.56) (0.50) (0.43) (0.47) (0.52) --
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transaction (0.49) (1.04) (0.65) (0.30) (1.18) (0.59) (0.47) (1.23) (0.84) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.73) (1.32) (.93) (.68) (1.74) (1.09) (0.90) (1.70) (1.36) --
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END
OF PERIOD $ 14.58 $ 14.90 $ 13.88 $ 13.18 $ 12.21 $ 13.04 $ 12.55 $ 14.21 $ 13.64 $ 11.59
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** 2.76% 18.31% 12.91% 14.17% 7.13% 13.23% (5.32)% 18.38% 31.80% 0.35%
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.18% 1.13% 1.02% 1.02% 1.01% 1.01% 1.00% 1.00% 1.09% 1.06%(a)
- ----------------------
Net investment income 1.48% 2.07% 2.12% 3.06% 4.23% 3.85% 3.35% 3.44% 4.42% 3.18%(a)
- ----------------------
Expense waiver/
reimbursement (b) -- 0.06% 0.16% 0.30% 0.35% 0.12% 0.11% 0.12% 0.18% 0.22%(a)
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 226,857 202,866 171,210 149,360 147,235 149,049 158,818 157,999 112,472 71,899
- ----------------------
Portfolio turnover
rate 27% 39% 67% 57% 50% 27% 65% 28% 31% 6%
- ----------------------
<CAPTION>
YEAR ENDED
1985
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.97
- ----------------------
INCOME FROM INVESTMENT
OPERATIONS
- ----------------------
Net investment income 0.54
- ----------------------
Net realized and
unrealized gain
(loss) on investments 1.91
- ---------------------- -------------
Total from investment
operations 2.45
- ----------------------
LESS DISTRIBUTIONS
- ----------------------
Dividends to
shareholders from net
investment income (0.52 )
- ----------------------
Dividends to
shareholders from net
realized gain on
investment
transactions (1.35 )
- ---------------------- -------------
Total distributions (1.87 )
- ---------------------- -------------
NET ASSET VALUE, END
OF PERIOD $ 11.55
- ---------------------- -------------
TOTAL RETURN** 25.85
- ----------------------
RATIOS TO AVERAGE NET
ASSETS
- ----------------------
Expenses 1.29 %
- ----------------------
Net investment income 5.03 %
- ----------------------
Expense waiver/
reimbursement (b) 0.05 %
- ----------------------
SUPPLEMENTAL DATA
- ----------------------
Net assets, end of
period (000 omitted) 71,455
- ----------------------
Portfolio turnover
rate 32 %
- ----------------------
</TABLE>
* For the one month period ended March 31, 1985. The Fund changed its fiscal
year-end from February 28 to March 31, effective March 31,1985.
** Based on net asset value which does not reflect sales load or contingent
deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen & Co., the Fund's
independent public accountants. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 and on the following
table for the period ended March 31, 1994 is included in the Annual Report dated
March 31, 1994, which is incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED
3/31/94*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.70
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.12
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.35
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.47
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.13)
- --------------------------------------------------------------------------------------------------
Distributions for shareholders from net realized gain on investment transactions (0.49)
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.62)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.55
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** 3.16%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 2.11%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 0.71%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) -- (a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 11,895
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 27%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 21, 1993 (date of initial
public offering) to March 31, 1994.
** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
AMERICAN LEADERS
FUND, INC.
FORTRESS SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
027128305
8062808A-FS (7/94)
AMERICAN LEADERS FUND, INC.
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with
the respective prospectuses of Class A Shares, Class B Shares, Class C
Shares, and Fortress Shares of American Leaders Fund, Inc. (the
"Fund") each dated July 31, 1994. This Statement is not a prospectus
itself. To receive a copy of any of the prospectuses, write or call
the Fund.
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Lending of Portfolio Securities 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Portfolio Turnover 1
Investment Limitations 2
THE FUNDS 3
- ---------------------------------------------------------------
INVESTMENT ADVISORY SERVICES 4
- ---------------------------------------------------------------
Adviser to the Fund 4
Advisory Fees 4
Other Payments to Financial
Institutions 4
ADMINISTRATIVE SERVICES 4
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
- ---------------------------------------------------------------
PURCHASING SHARES 5
- ---------------------------------------------------------------
Distribution Plan (Class B and Class C Shares
Only) and Shareholder Services Plans 5
Purchases by Sales Representatives,
Fund Directors, and Employees 6
Exchanging Securities for Fund Shares 6
DETERMINING NET ASSET VALUE 6
- ---------------------------------------------------------------
DETERMINING MARKET VALUE OF SECURITIES 6
- ---------------------------------------------------------------
EXCHANGE PRIVILEGE 7
- ---------------------------------------------------------------
Reduced Sales Load 7
Requirements for Exchange 7
Tax Consequences 7
Making an Exchange 7
REDEEMING SHARES 7
- ---------------------------------------------------------------
Redemption in Kind 8
TAX STATUS 8
- ---------------------------------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
TOTAL RETURN 8
- ---------------------------------------------------------------
YIELD 8
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
FINANCIAL STATEMENTS 10
- ---------------------------------------------------------------
APPENDIX 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July 22,
1968. On April 20, 1993, the shareholders of the Fund voted to permit the Fund
to offer separate series and classes of Shares.
Shares of the Fund are offered in four classes known as Class A Shares, Class B
Shares, Class C Shares and Fortress Shares (individually and collectively
referred to as "Shares" as the context may require). This combined statement of
additional information relates to all four classes of the above-mentioned
Shares.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to seek growth of capital and of income by
concentrating the area of investment decision in the securities of high quality
companies. The investment objective cannot be changed without shareholder
approval.
TYPES OF INVESTMENTS
The Fund invests primarily in common stocks, preferred stocks, corporate bonds,
notes, and warrants of companies selected from "The Leaders List."
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan. The Fund does not have the right to
vote securities on loan, but would terminate the loan and regain the right to
vote if that were considered important with respect to the investment.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institution's sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price. The Fund or its custodian will
take possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks or other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy,
pursuant to guidelines established by the Board of Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as an institution,
broker, or dealer, in return for a percentage of the instrument's market value
in cash, and agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements may
enable the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not engage in short-term trading but may dispose of securities
held for a short period if, after examination of their value, management
believes such disposition to be advisable. In determining whether or not to sell
portfolio securities, consideration will be given among other factors to the
effect on shareholders of the resultant tax liability. Nevertheless changes will
be made whenever, in the judgment of management, they will contribute to the
attainment of the Fund's investment objective, even though such changes may
result in realization of capital gains. For the fiscal years ended March 31,
1994, 1993, and 1992, the portfolio turnover rates were 27%, 39%, and 67%,
respectively.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin.
BORROWING MONEY
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets. In addition, the Fund may
enter into reverse repurchase agreements and otherwise borrow up to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. This latter practice is not for investment
leverage but solely to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous.
Interest paid on borrowed funds will not be available for investment and
will reduce net income. The Fund will liquidate any such borrowings as
soon as possible and may not purchase any portfolio securities while the
borrowings are outstanding. However, during the period any reverse
repurchase agreements are outstanding, but only to the extent necessary
to assure completion of the reverse repurchase agreements, the Fund will
restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse
repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its securities.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of its total assets in the
securities of any one issuer, except U.S. government securities, and will
not purchase more than 10% of any class of voting securities of any one
issuer.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies,
except by purchase in the open market involving only customary brokerage
commissions or as part of a merger or consolidation.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers with a record of less than three years of
continuous operation, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Directors of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
UNDERWRITING
The Fund will not underwrite or engage in agency distribution of
securities, except as it may be deemed to be an underwriter, if it
purchases and sells restricted securities as permitted.
INVESTING IN COMMODITIES OR REAL ESTATE
The Fund will not invest in commodities, commodity contracts, or real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities.
(This shall not prevent the purchase or holding of bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, repurchase agreements, or other transactions which are permitted
by the Fund's investment objective and policies or Articles of
Incorporation.)
ACQUIRING SECURITIES
The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund may invest in up to
10% of the voting securities of any one issuer and may exercise its
voting powers consistent with the best interests of the Fund. In
addition, the Fund, other companies advised by the Fund's investment
adviser, and other affiliated companies may together buy and hold
substantial
amounts of voting stock of a company and may vote together in regard to
such company's affairs. In some such cases, the Fund and its affiliates
might collectively be considered to be in control of such company. In
some cases, the Directors and other persons associated with the Fund and
its affiliates might possibly become directors of companies in which the
Fund holds stock.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of the value of its total assets
in any one industry.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase restricted securities if immediately
thereafter more than 15% of the net assets of the Fund, taken at market
value, would be invested in such securities. (In order to comply with
certain state requirements, the Fund will not invest more than 5% of its
total assets in restricted securities. If state requirements change, this
policy may be revised without notice to shareholders.)
In addition, in order to comply with certain state restrictions, the Fund
will not invest in real estate limited partnerships or oil, gas, or other
mineral leases. Also, the Fund will not invest more than 5% of its net
assets in warrants. No more than 2% of the Fund's net assets may be in
warrants which are not listed on the New York Stock Exchange. If state
requirements change, these restrictions may be revised without notice to
shareholders.
Except when borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
The Fund did not borrow money, invest in reverse repurchase agreements,
or purchase restricted securities in excess of 5% of the value of its
total or net assets during the last fiscal year and has no present intent
to do so in the coming fiscal year. Restricted securities are generally
not available from companies comprising "The Leader's List."
THE FUNDS
- --------------------------------------------------------------------------------
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priorty
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; World Investment Series, Inc.
FUND OWNERSHIP
As of July 3, 1994, the following shareholders of record owned 5% or more
of the outstanding Fortress Shares of the Fund: Merrill Lynch Pierce
Fenner & Smith (as record owner holding Shares for its clients),
Jacksonville, Florida, owned approximately 309,031 Shares (23.63%);
United Mineral Resources, Inc., Irving, Texas, owned approximately 79,344
Shares (6.07%).
As of July 3, 1994, the following shareholder of record owned 5% or more
of the outstanding Class C Shares of the Fund: Merrill Lynch Pierce
Fenner & Smith (as record owner holding Shares for its clients),
Jackonsville, Florida, owned approximately 344,437 Shares (37.06%).
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue. John F. Donahue is Chairman and Trustee of
Federated Advisers, Chairman and Trustee, Federated Investors, and President and
Director of the Fund. J. Christopher Donahue is President and Trustee of
Federated Advisers, President and Trustee, Federated Investors, Trustee,
Federated Administrative Services, and Vice President and Director of the Fund.
John W. McGonigle is Vice President, Secretary and Trustee of Federated
Advisers, Trustee, Vice President, Secretary and General Counsel, Federated
Investors, Executive Vice President, Secretary and Trustee, Federated
Administrative Services, Executive Vice President and Director, Federated
Securities Corp., and Vice President and Secretary of the Fund.
The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended March
31, 1994, 1993, and 1992, the Fund's adviser earned $1,549,057, $1,254,834, and
$1,066,459, respectively, which were reduced by $0, $104,310, and $248,067,
respectively, because of undertakings to limit the Fund's expenses.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
The administrative services for which the distributor will pay financial
institutions include, but are not limited to, providing office space, equipment,
telephone facilities, and various clerical, supervisory and computer personnel,
as is necessary or beneficial to establish and maintain shareholders' accounts
and records, process purchase and redemption transactions, process automatic
investments of client account cash balances, answer routine client inquiries
regarding the Fund, assist clients in changing dividend options, account
designations, and addresses, and providing such other services as the Fund may
reasonably request.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 31, 1994, Federated Admistrative Services, Inc., also
a subsidiary of Federated Investors, served as the Fund's administrator. For
purposes of this Statement of Additional Information, Federated Administrative
Services and Federated Administrative Services, Inc. may be referred to as the
"Administrators." For the fiscal year ended March 31, 1994, the administrators
collectively earned $441,948. For the fiscal years ended March 31, 1993, and
1992, Federated Administrative Services, Inc., earned $369,702, and $303,843,
respectively. Dr. Henry J. Gailliot, an officer of Federated Advisers, the
adviser to the
Fund, holds approximately 20%, of the outstanding common stock and serve as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services, Inc., and Federated
Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, expect when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Directors.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such person are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
For the fiscal years ended March 31, 1994, 1993, and 1992, the Fund paid total
brokerage commissions of $140,868 $158,973, and $205,006, respectively.
As of March 31, 1994, the Fund owned approximately $3,361,000 of the securities
of Dean Witter Discover & Co., $6,475,000 of the securities of General Electric
Co., and $6,505,000 of the securities of Travelers (Smith Barney) all of whom
are regular brokers of the Funds that derive more than 15% of gross revenues
from securities-related activities.
PURCHASING SHARES
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Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value (plus a sales charge on Class A Shares and Fortress
Shares only) on days the New York Stock Exchange is open for business. The
procedure for purchasing Shares is explained in the respective prospectus under
"Investing in Class A Shares", "Investing in Class B Shares", "Investing in
Class C Shares" and "Investing in Fortress Shares".
DISTRIBUTION (CLASS B AND CLASS C ONLY) AND SHAREHOLDER SERVICES PLANS
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, as appropriate to stimulate
distribution activities and to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, (Class B and Class C Shares only) the Board
of Directors expects that the Fund will be able to achieve a more predictable
flow of cash for investment purposes and to meet redemptions. This will
facilitate more efficient portfolio management and assist the Fund in pursuing
its investment objectives. By identifying potential investors whose needs are
served by the Fund's objectives, and properly serving these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal period ending March 31, 1994, payments in the amount of $40,115
were made pursuant to the Distribution Plan all of which was paid to Financial
Institutions. In addition, for this period, payments of $152,161 were made
pursuant to the Shareholder Services Plan.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., and their spouses and
children under 21, may buy shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these people.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange convertible securities they already own for Shares, or
they may exchange a combination of convertible securities and cash for Shares.
Any securities to be exchanged must meet the investment objective and policies
of the Fund, must have a readily ascertainable market value, must be liquid, and
must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for acceptance and
furnish this list to brokers upon request. The Fund reserves the right to reject
any security, even though it appears on the list, and the right to amend the
list of acceptable securities at any time without notice to brokers or
investors.
An investment broker acting for an investor should forward the securities in
negotiable form with an authorized letter of transmittal to Federated Securities
Corp. Federated Securities Corp. will determine that transmittal papers are in
good order and forward to the Fund's custodian, State Street Bank. The Fund will
notify the broker of its acceptance and valuation of the securities within five
business days of their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Shares, a gain or loss may be realized by the investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
- --------------------------------------------------------------------------------
Market values of the Fund's portfolio securities are determined as follows:
.according to the last sale price on a national securities exchange, if
available;
.in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices and for bonds and other fixed
income securities, as determined by an independent pricing service; or
.for short-term obligations according to the prices as furnished by an
independent pricing service or for short-term obligations with remaining
maturities of 60 days or less at the time of purchase at amortized cost, or at
fair value as determined in good faith by the Board of Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has promulgated Rule 11a-3 under the
Investment Company Act of 1940 which allows shareholders to exchange all or some
of their shares for shares in other Fortress Funds or certain Funds which are
sold with a sales load different from that of the Fund or with no sales charge
and which are advised by subsidiaries or affiliates of Federated Investors.
These exchanges are made at net asset value plus the difference between the
Fund's sales load already paid and any sales load of the fund into which the
shares are to be exchanged, if higher.
The SEC has also issued an order exempting the Fund from certain provisions of
the Investment Company Act of 1940. The order allows certain other funds,
including funds that are not advised by subsidiaries or affiliates of Federated
Investors, which do not have a sales load, to exchange their shares for Fund
shares on a basis other than their current offering price. These exchanges may
be made to the extent that such shares were acquired in a prior exchange, at net
asset value, for shares of a Federated Fund carrying a sales load.
REDUCED SALES LOAD
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales load, the shareholder must notify Federated Securities
Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset value
of at least $1,500. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.
Further information on the exchange privilege and prospectuses for Fortress
Funds or certain Federated Funds are available by calling the Fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for Fortress Funds or certain Federated Funds may be
given in writing or by telephone. Written instructions may require a signature
guarantee.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with
the Fund or its agents. If the instructions are given by a broker, a
telephone authorization form completed by the broker must be on file with
the Fund or its agents. Shares may be exchanged betweeen two funds by
telephone only if the two funds have identical shareholder registrations.
Telephoned exchange instructions may be recorded. They must be received
by the transfer agent before 4:00 p.m. (Eastern time) for shares to be
exchanged that day.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
respective prospectuses under "Redeeming Class A Shares," "Redeeming Class B
Shares," "Redeeming Class C Shares" or "Redeeming Fortress Shares." Although the
transfer agent does not charge for telephone redemptions, it reserves the right
to charge a fee for the cost of wire-transferred redemptions of less than
$5,000.
Class B Shares redeemed within six years of purchase, Class C Shares redeemed
within one year of purchase, and Fortress Shares redeemed within four years of
purchase may be subject to a contingent deferred sales charge. The amount of the
contingent deferred sales charge is based upon the amount of the administrative
fee paid at the time of purchase by the distributor to the financial
institutions for services rendered, and the length of time the investor remains
a shareholder in the Fund. Should financial institutions elect to receive an
amount less than the administrative fee that is stated in the prospectus for
servicing a particular shareholder, the contingent deferred sales charge and/or
holding period for that particular shareholder will be reduced accordingly.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the Board
of Directors determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem shares for any shareholder
in cash up to the lesser of $250,000 or 1% of the Fund's net asset value during
any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during the
year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's average annual total returns for Class A Shares for the one-year,
five-year, and ten-year periods ended March 31, 1994, were (1.85%), 9.85%, and
12.87%, respectively.
The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the net asset value per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load on Class A Shares or Fortress Shares, adjusted over the period by any
additional Shares, assuming the quarterly reinvestment of all dividends and
distributions. Any applicable redemption fee is deducted from the ending value
of the investment based on the lesser of the original purchase price or the net
asset value of Shares redeemed. Occasionally, total return which does not
reflect the effect of the sales load may be quoted in advertising.
The Fund's cumulative total return for Class C Shares, for the period from April
21, 1993 to March 31, 1994 was 2.52%.
The Fund's cumulative total return for Fortress Shares, for the period from July
27, 1993 to March 31, 1994 was (2.31%).
Cumulative total return reflects the Fund's total performance over a specified
period of time. This total return assumes and is reduced by the payment of
maximum sales load and redemption fee. The Fund's total return is representative
of only eleven months of activity for the Class C Shares and eight months of
activity for the Fortress Class of shares.
YIELD
- --------------------------------------------------------------------------------
The Fund's yields for Class A Shares, Class C Shares, and Fortress Shares were
1.53%, .68%, and 1.41%, respectively, for the thirty-day period ended March 31,
1994.
The yield for each class of Shares of the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the class of Shares over a thirty-day period by the
maximum offering price per share of the respective class on the last day of the
period. This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the Securities and Exchange
Commission and therefore, may not correlate to the dividends or other
distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a class
of Shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of each class of Shares depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates and market value of portfolio securities;
.changes in the Fund's or a class of Shares' expenses; and
.various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per Share fluctuate daily. Both net earnings and net asset
value per Share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio composition, of other funds, and methods
used, to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC. --ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the growth and income
funds category in advertising and sales literature.
DOW JONES INDUSTRIAL AVERAGE ("DJIA") --represents share prices of selected
blue-chip industrial corporations as well as public utility and transportation
companies. The DJIA indicates daily changes in the average price of stocks in
any of its categories. It also reports total sales for each group of industries.
Because it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS--a composite
index of common stocks in industry, transportation, and financial and public
utility companies, compares total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's index assumes
reinvestment of all dividends paid by stocks listed on the index. Taxes due on
any of these distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
MORNINGSTAR, INC.--an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and sales literature for all four classes classes of Shares may
quote total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in either class of Shares based on quarterly reinvestment of dividends over a
specified period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of either class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of deposit
and time deposits and to money market funds using the Lipper Analytical Services
money market instruments average.
Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for the fiscal year ended March 31, 1994 are
incorporated herein by reference to the Annual Report of the Fund dated March
31, 1994 (File Nos. 2-29786 and 811-1704). A copy of the Report may be obtained
without charge by contacting the Fund.
APPENDIX
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS DEFINITIONS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
FITCH INVESTOR SERVICE, INC. INVESTMENT GRADE BOND RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
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