Reg. No.333-
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811-1704
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FEDERATED AMERICAN LEADERS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940
that it elects to register an indefinite amount of securities under the
Securities Act of 1933 and filed the Notice required by that Rule for
Registrant's fiscal year ended March 31, 1996 on May 15, 1996. Accordingly,
no filing fee is submitted herewith.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the Federated
Registrant Fund and the State Bond Fund
6.Information About the Information About the Federated Fund
Company Being Acquired and the State Bond Fund
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
STATE BOND DIVERSIFIED FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
Dear Shareholder:
The Board of Directors and management of State Bond Diversified
Fund (the ``tate Bond Fund'') are pleased to submit for your vote a
proposal to transfer all of the assets of the State Bond Fund to Federated
American Leaders Fund, Inc. (the "Federated Fund"), a mutual fund advised
by Federated Advisers. The Federated Fund has an investment objective
similar to that of the State Bond Fund in that it seeks growth of capital
and of income by concentrating the area of investment decision in the
securities of high quality companies. As part of the transaction, holders
of shares in the State Bond Fund would receive Class A Shares of the
Federated Fund equal in value to their shares in the State Bond Fund and
the State Bond Fund would be liquidated. Shareholders receiving Class A
Shares of the Federated Fund as a result of the proposed reorganization
would not have to pay a sales load upon receiving such Shares, nor would
they be subject to any contingent deferred sales charges in connection with
the exercise of exchange rights or redemptions of such Shares.
The Board of Directors of the State Bond Fund, as well as ARM
Capital Advisors, Inc., the State Bond Fund's manager, and ARM Financial
Services, Inc., the State Bond Fund's distributor, believe the proposed
agreement and plan of reorganization is in the best interests of State Bond
Fund shareholders for the following reasons:
-- The reorganization of the State Bond Fund into the Federated
Fund may provide operating efficiencies as a result of the size of
the Federated Fund which were not available to State Bond Fund
shareholders due to the smaller size of the State Bond Fund.
-- The Federated Fund has an investment objective similar to that
of the State Bond Fund and offers an investment portfolio which
invests in common stocks and other securities of high quality
companies to achieve growth of capital and income.
The Federated Fund is managed by Federated Advisers, a subsidiary
of Federated Investors. Federated Investors was founded in 1955 and is
located in Pittsburgh, Pennsylvania. Federated Advisers and other
subsidiaries of Federated Investors serve as investment advisers to a
number of investment companies and private accounts. With over $90 billion
invested across more than 250 funds under management and/or administration
by its subsidiaries, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.
Federated Investors also has an excellent reputation for customer
servicing, having received a #1 rating for five years in a row by Dalbar,
Inc. The shareholder services for the Federated funds include advanced
technological systems that result in quick shareholder access to a broad
spectrum of information.
We believe the transfer of the State Bond Fund's assets in this
transaction presents an exciting investment opportunity for our
shareholders. Your vote on the transaction is critical to its success.
The transfer will be effected only if approved by a majority of all of the
State Bond Fund's outstanding shares on the record date voted in person or
represented by proxy. We hope you share our enthusiasm and will
participate by casting your vote in person, or by proxy if you are unable
to attend the meeting. Please read the enclosed prospectus/proxy statement
carefully before you vote.
THE BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTEREST OF THE STATE BOND FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
Dale C. Bauman
President
STATE BOND DIVERSIFIED FUND
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF STATE BOND DIVERSIFIED FUND:
A Special Meeting of Shareholders of State Bond Diversified Fund, a
portfolio of State Bond Investment Funds, Inc. (the `State Bond Fund'')
will be held at 3:20 p.m. on December , 1996 at: 100 North Minnesota
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Street, New Ulm, Minnesota 56073-0069, for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between State Bond Fund and Federated American Leaders Fund,
Inc. (the "Federated Fund"), whereby the Federated Fund would acquire all
of the net assets of the State Bond Fund in exchange for the Federated
Fund's Class A Shares to be distributed pro rata by the State Bond Fund to
the holders of its shares in complete liquidation of the State Bond Fund;
and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
Dated: November , 1996 Kevin L. Howard
--
Secretary
Shareholders of record at the close of business on October 11,
1996, are entitled to vote at the meeting. Whether or not you plan to
attend the meeting, please sign and return the enclosed proxy card. Your
vote is important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR
VOTE IN PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
NOVEMBER , 1996
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Acquisition of the Assets of
STATE BOND DIVERSIFIED FUND,
a portfolio of
STATE BOND INVESTMENT FUNDS, INC.
100 North Minnesota Street
P.O. Box 69
New Ulm, Minnesota 56073-0069
Telephone Number: 1-800-328-4735
By and in exchange for Class A Shares of
FEDERATED AMERICAN LEADERS FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement
and Plan of Reorganization (the "Plan") whereby Federated American Leaders
Fund, Inc., a Maryland corporation (the "Federated Fund"), would acquire
all of the net assets of State Bond Diversified Fund, a portfolio of State
Bond Investment Funds, Inc., a Maryland corporation (the ``tate Bond
Fund'), in exchange for the Federated Fund's Class A Shares to be
distributed pro rata by the State Bond Fund to the holders of its shares,
in complete liquidation of the State Bond Fund. As a result of the Plan,
each shareholder of the State Bond Fund will become the owner of the
Federated Fund's Class A Shares having a total net asset value equal to the
total net asset value of his or her holdings in the State Bond Fund.
THE BOARD OF DIRECTORS OF THE STATE BOND FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The Shares of each of the Federated Fund and the State Bond Fund
represent interests of separate open-end, diversified management investment
companies. The Federated Fund's investment objective is growth of capital
and of income, which it pursues by concentrating the area of investment
decision in the securities of high quality companies. The State Bond
Fund's investment objective is to produce reasonable current income and
long-term capital value growth without exposing capital to undue risk by
investing primarily in common stocks, or holding assets in cash and fixed-
income securities. For a comparison of the investment policies of the
Federated Fund and the State Bond Fund, see "Summary-Investment Objectives,
Policies and Limitations."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Federated
Fund that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the
Federated Fund dated May 31, 1996, which is incorporated herein by
reference. Statements of Additional Information for the Federated Fund
dated May 31, 1996 (relating to the Federated Fund's prospectus of the same
date) and November , 1996 (relating to this Prospectus/Proxy Statement)
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and the Annual Report to Shareholders dated March 31, 1996, all containing
additional information, have been filed with the Securities and Exchange
Commission and are incorporated herein by reference. Copies of the
Statements of Additional Information and the Annual Report may be obtained
without charge by writing or calling the Federated Fund at the address and
telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page No.
Summary of Expenses
Summary
About the Proposed Reorganization
Investment Objectives, Policies and Limitations
Advisory and Other Fees
Distribution Arrangements
Purchase, Exchange and Redemption Procedures
Dividends
Tax Consequences
Risk Factors
Information About the Reorganization
Background and Reasons for the Proposed Reorganization
Agreement Among ARM, ARM Capital and Federated
Description of the Plan of Reorganization
Description of Federated Fund Shares
Federal Income Tax Consequences
Comparative Information on Shareholder Rights and Obligations
Capitalization
Information About the Federated Fund and the State Bond Fund
Federated American Leaders Fund, Inc.
State Bond Diversified Fund
Voting Information
Outstanding Shares and Voting Requirements
Dissenter's Right of Appraisal
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A
SUMMARY OF EXPENSES
Federated State Pro Forma
Fund Bond Combined
(Class A Fund
Shares)
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases 5.50%(1) 4.75% 5.50%(1)
(as a percentage of offering
price)...........................
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of None None None
offering price)................
Contingent Deferred Sales Charge
(as a percentage of original
purchase 0.00%(2) 0.00% 0.00%(2)
price or redemption proceeds, as
applicable)......................
Redemption Fee (as a percentage of
amount redeemed, if None None None
applicable)(3)...................
Exchange Fee..................... None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................... 0.65% 0.65% 0.65%
12b-1 Fee........................ None 0.25% None
Total Other Expenses............. 0.51%(4) 0.27% 0.51%(4)
Total Operating 1.16% 1.17% 1.16%
Expenses(5)......................
(1) This sales charge would not be applicable to shares of the Federated
Fund acquired under the proposed reorganization.
(2) Class A Shares purchased with the proceeds of a redemption of shares
of an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by Federated Securities Corp. may be charged a
contingent deferred sales charge of 0.50 of 1% for redemptions made within
one full year of purchase. For a more complete description see ``ummary
- - Distribution Arrangements.'' This contingent deferred sales charge
would not be applicable to shares of the Federated Fund acquired under the
proposed reorganization.
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund
of less than $5,000 may be subject to additional fees. A $10.00 fee will
be charged for certain redemptions of State Bond Fund shares by wire
transfer.
(4) Total other expenses for the Federated Fund and the Pro Forma
Combined Fund include a shareholder services fee of 0.18%. The
shareholder services fee has been reduced to reflect the voluntary waiver
of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(5) The total operating expenses for Class A Shares of the Federated Fund
are based on expenses expected during the fiscal year ending March 31,
1997. The total operating expenses were 1.16% for the fiscal year ended
March 31, 1996 and would have been 1.23% absent the voluntary waiver of a
portion of the shareholder services fee. The total operating expenses for
the State Bond Fund are based upon expenses incurred by the State Bond
Fund during its fiscal year ended December 31, 1995.
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder of shares
of each of the Federated Fund, the State Bond Fund and the pro forma
combined fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses see "Summary - Advisory and
Other Fees" and "Summary - Distribution Arrangements."
Long-term shareholders of the State Bond Fund may pay more than
the economic equivalent of the maximum front-end sales charges permitted
under the rules of the National Association of Securities Dealers, Inc.
EXAMPLE
The Example below is intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Example assumes payment of operating expenses at the
levels set forth in the table above. The Example does not include sales
charges or contingent deferred sales charges since such sales charges are
not applicable to Federated Fund Shares received as a result of the
proposed reorganization. Shares purchased subsequent to the
reorganization may be subject to sales charges. For a complete
description of sales charges, contingent deferred sales charges and
exemptions from such charges, reference is hereby made to the Prospectus
of the Federated Fund dated May 31, 1996 and the Prospectus of the State
Bond Fund dated May 1, 1996, each of which is incorporated herein by
reference thereto.
An investor 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.
Expenses would be the same if
there were no redemption at the
end of each time period. 1 year 3 years 5 years 10 years
Federated Fund $12 $37 $64 $141
State Bond Fund $12 $37 $64 $142
Pro Forma Combined $12 $37 $64 $141
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Prospectus of the Federated Fund dated May 31, 1996, the
Statement of Additional Information of the Federated Fund dated May 31,
1996, the Prospectus of the State Bond Fund dated May 1, 1996, the
Statement of Additional Information of the State Bond Fund dated May 1,
1996, and the Plan, a copy of which is attached to this Prospectus/Proxy
Statement as Exhibit A.
About the Proposed Reorganization
The Board of Directors of the State Bond Fund has voted to
recommend to holders of the shares of the State Bond Fund the approval of
the Plan whereby the Federated Fund would acquire all of the assets of the
State Bond Fund in exchange for the Federated Fund's Class A Shares to be
distributed pro rata by the State Bond Fund to its shareholders in complete
liquidation and dissolution of the State Bond Fund (the "Reorganization").
As a result of the Reorganization, each shareholder of the State Bond Fund
will become the owner of the Federated Fund's Class A Shares having a total
net asset value equal to the total net asset value of his or her holdings
in the State Bond Fund on the date of the Reorganization, i.e., the Closing
Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated
Fund and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
`Code''), so that no gain or loss will be recognized by either the
Federated Fund or the State Bond Fund or the shareholders of the State Bond
Fund. The tax basis of the Federated Fund's Class A Shares received by
State Bond Fund shareholders will be the same as the tax basis of their
shares in the State Bond Fund. After the acquisition is completed, the
State Bond Fund will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to seek growth of
capital and of income by concentrating the area of investment decision in
the securities of high quality companies. This investment objective may
not be changed without the affirmative vote of a majority of the
outstanding voting securities of the Federated Fund, as defined in the
Investment Company Act of 1940, as amended (the ``940 Act'').
The investment objective of the State Bond Fund is to seek to
produce reasonable current income and long-term capital value growth
without exposing capital to undue risk. Income is considered both in terms
of the dollar amount of income received and in terms of retention of
purchasing power. This investment objective may not be changed without
the affirmative vote of a majority of the outstanding voting securities of
the State Bond Fund, as defined in the 1940 Act.
The Federated Fund invests at least 65% of its assets in a
portfolio of securities issued by the 100 companies contained in ``he
Leaders List.'' ``The Leaders List'' is a trade name which represents a
list of 100 blue chip companies selected by Federated Advisers (as
hereinafter defined) principally on the basis of traditional research
techniques and standards. Generally, portfolio selections are made
utilizing fundamental analysis, with emphasis on earning power, financial
condition, and valuation. The securities in which the Federated Fund
invests include, but are not limited to: common and preferred stocks;
domestic issues of corporate debt obligations rated, at the time of
purchase, ``aa'' or better by Moody's Investors Service, Inc. (``Moody's'')
or `BBB'' or better by Standard & Poor's Ratings Group (``S&P'') or Fitch
Investors Services, Inc. (``itch'') or, if not rated, are determined by
Federated Advisers to be of comparable quality; and warrants. In the event
that a debt security which had an eligible rating when purchased is
downgraded below investment grade, Federated Advisers will reassess whether
the continued holding of the security is consistent with the Federated
Fund's investment objective. The Federated Fund may enter into repurchase
agreements, purchase illiquid securities (subject to a limit on all
illiquid securities of 10% of net assets), and lend portfolio securities.
If necessary for temporary defensive purposes, the Federated Fund may also
hold cash and invest in U.S. Government securities. Unless otherwise
designated, the investment policies of the Federated Fund may be changed by
the Board of Directors without shareholder approval, although shareholders
will be notified before any material change becomes effective.
The State Bond Fund's assets may be held in cash or invested in all
forms of securities. The State Bond Fund emphasizes careful selection of
individual securities suited to its investment objectives, broad
diversification of investment risk, and continuing supervision of
securities owned. For many years, common stocks have made up the bulk of
securities owned. However, substantial proportions of assets have been
held, and may be held, in cash and fixed-income securities. The State Bond
Fund limits its investments in non-government fixed income securities to
those which at the time of purchase are within the four highest grades as
rated by S&P or Moody's or to those which, while not rated at the time of
purchase, are, in the judgment of ARM Capital (as hereinafter defined), of
comparable quality. The State Bond Fund may also invest in convertible
preferred stocks. The State Bond Fund may lend portfolio securities, enter
into repurchase agreements and invest in high-yield securities. Unless
otherwise designated, the investment policies of the State Bond Fund may be
changed by the Board of Directors without shareholder approval.
Both the Federated Fund and the State Bond Fund are subject to
certain investment limitations. For the Federated Fund, these include
investment limitations which prohibit it from (1) borrowing money directly
or through reverse repurchase agreements except, under certain
circumstances, the Federated Fund may borrow up to one-third of the value
of its net assets; (2) investing more than 5% of its total assets in
securities of one issuer (except U.S. Government securities) or acquiring
more than 10% of any class of voting securities of any one issuer; (3)
investing more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations; or (4)
purchasing restricted securities if immediately thereafter more than 15% of
its net assets would be invested in such securities. The investment
limitations listed above cannot be changed without shareholder approval.
The State Bond Fund has investment limitations which prohibit it
from (1) investing more than 5% of the market value of its total assets in
the securities of any one issuer, other than the U.S. Government or its
agencies, or purchasing any security if, as a result, it would hold more
than 10% of the outstanding voting securities of any issuer; (2) borrowing
money except from banks as a temporary emergency measure and then not in
excess of 10% of the State Bond Fund's total assets at cost; (3) purchasing
the securities of an issuer in continuous operation for less than three
years if more than 5% of the State Bond Fund's assets would be so invested;
or (4) investing more than 25% of its net asset value in any one industry.
The above investment limitations of the State Bond Fund cannot be changed
without shareholder approval.
In addition to the policies and limitations set forth above, both
the Federated Fund and the State Bond Fund are subject to certain
additional investment policies and limitations, described in the Federated
Fund's Statement of Additional Information dated May 31, 1996 and the State
Bond Fund's Statement of Additional Information dated May 1, 1996.
Reference is hereby made to the Federated Fund's Prospectus and Statement
of Additional Information, each dated May 31, 1996, and to the State Bond
Fund's Prospectus and Statement of Additional Information, each dated May
1, 1996, which set forth in full the investment objective, policies and
investment limitations of each of the Federated Fund and the State Bond
Fund, all of which are incorporated herein by reference thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 0.55
of 1% of the Federated Fund's average daily net assets, plus 4.50% of the
Federated Fund's gross income (excluding any capital gains or losses). The
investment adviser to the Federated Fund, Federated Advisers ("Federated
Advisers"), a subsidiary of Federated Investors, may voluntarily choose to
waive a portion of its advisory fee or reimburse the Federated Fund for
certain operating expenses. This voluntary reimbursement of expenses may
be terminated by Federated Advisers at any time in its sole discretion.
Federated Advisers has also undertaken to reimburse the Federated Fund for
operating expenses in excess of limitations established by certain states.
The maximum annual management fee for the State Bond Fund is 0.65 of 1% on
the first $100 million of average daily net assets of the State Bond Fund,
0.60 of 1% on the next $100 million of average daily net assets of the
State Bond Fund and 0.55 of 1% of average daily net assets of the State
Bond Fund over $200 million. The State Bond Fund's investment manager, ARM
Capital Advisors, Inc.(`ARM Capital''), a wholly-owned subsidiary of ARM
Financial Group, Inc. (``RM''), has voluntarily agreed to reimburse the
State Bond Fund for expenses (including the management fee but excluding
interest, taxes, brokerage commissions, extraordinary expenses and fees
paid pursuant to a Rule 12b-1 plan) in excess of 1.5% of the first $30
million of the average daily net assets of the State Bond Fund and 1% of
any additional average daily net assets of the State Bond Fund. ARM Capital
has also undertaken to reimburse the State Bond Fund for operating expenses
in excess of limitations established by certain states.
Federated Services Company, an affiliate of Federated Advisers,
provides certain administrative personnel and services necessary to operate
the Federated Fund at an annual rate based upon the average aggregate daily
net assets of all funds advised by Federated Advisers and its affiliates.
The rate charged is 0.15 of 1% on the first $250 million of all such funds'
average aggregate daily net assets, 0.125 of 1% on the next $250 million,
0.10 of 1% on the next $250 million and 0.075 of 1% of all such funds'
average aggregate daily net assets in excess of $750 million, with a
minimum annual fee per portfolio of $125,000 plus $30,000 for each
additional class of shares of any such portfolio. Federated Services
Company may choose voluntarily to waive a portion of its fee. The
administrative fee expense for the Federated Fund's most recent fiscal year
was $423,163. Administrative personnel and other services necessary to
operate the State Bond Fund are currently provided by ARM Capital and are
included in the annual management fee for the State Bond Fund, as discussed
above.
The Federated Fund has entered into a Shareholder Services
Agreement under which it may make payments of up to 0.25 of 1% of the
average daily net asset value of the Class A Shares to obtain certain
personal services for shareholders and the maintenance of shareholder
accounts. The Shareholder Services Agreement provides that Federated
Shareholder Services ("FSS"), an affiliate of Federated Advisers, will
either perform shareholder services directly or will select financial
institutions to perform such services. Financial institutions will receive
fees based upon shares owned by their clients or customers. The schedule
of such fees and the basis upon which such fees will be paid is determined
from time to time by the Federated Fund and FSS. Other than in connection
with payments under a Rule 12b-1 plan as described below, the State Bond
Fund does not make payments to obtain similar shareholder services.
The total annual operating expenses for Class A Shares of the
Federated Fund were 1.16% of average daily net assets (after waivers) for
its most recent fiscal year. The total annual operating expenses for shares
of the State Bond Fund were 1.17% of average daily net assets for its most
recent fiscal year. Without such waivers or reimbursements, the expense
ratio of the Federated Fund and the State Bond Fund would be higher by
0.07% and 0.0%, respectively, of average daily net assets.
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated
Advisers, is the principal distributor for shares of the Federated Fund.
The Federated Fund does not have a Rule 12b-1 plan in effect with respect
to its Class A Shares and, accordingly, does not, nor does FSC, compensate
brokers and dealers for sales and administrative services performed in
connection with sales of Class A Shares of the Federated Fund pursuant to a
plan of distribution adopted pursuant to Rule 12b-1. FSC will pay
financial institutions, at the time of purchase, from its assets, an amount
equal to 0.50 of 1% of the net asset value of Class A Shares purchased by
their clients or customers under certain qualified plans as approved by
FSC. (Such payments are subject to a reclaim from the financial
institution should the assets leave the program within 12 months after
purchase.) In addition, FSC, from its own assets, may pay financial
institutions supplemental fees as financial assistance for providing
substantial sales services, distribution-related support services or
shareholder services with respect to the Federated Fund. Such assistance
will be predicated upon the amount of Class A Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments
made by FSC may be reimbursed by Federated Advisers or its affiliates. If
a financial institution elects to waive receipt of this payment, the
Federated Fund will waive any applicable contingent deferred sales charge
(such contingent deferred sales charges are discussed below).
ARM Financial Services, Inc. (``RMFS''), an affiliate of ARM
Capital, is the principal distributor for shares of the State Bond Fund.
The State Bond Fund has adopted a Rule 12b-1 Distribution Plan (the "Rule
12b-1 Plan") pursuant to which the State Bond Fund pays ARMFS an amount
equal to an annual rate of 0.25 of 1% of the average daily net assets of
the State Bond Fund. The fee may be used by ARMFS to (i) provide initial
and ongoing sales compensation to its investment executives and to other
broker-dealers in connection with the sale of State Bond Fund shares and to
pay for other advertising and promotional expenses in connection with the
sale of State Bond Fund shares, and (ii) to provide compensation to
entities in connection with the provision of certain personal and account
maintenance services to State Bond Fund shareholders including, but not
limited to, responding to shareholder inquiries and providing information
on their investments. The Federated Fund will not assume any liabilities or
make any voluntary reimbursements on account of the State Bond Fund's Rule
12b-1 Plan.
Certain costs exist with respect to the purchase and sale of
Federated Fund and State Bond Fund shares. Class A Shares of the Federated
Fund and shares of the State Bond Fund are sold at their net asset value
next determined after an order is received, plus a maximum sales charge of
5.50% and 4.75%, respectively. No sales charge will be imposed in
connection with the issuance of Federated Fund shares to State Bond Fund
shareholders as a result of the Reorganization. Class A Shares of the
Federated Fund purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge
and not distributed by FSC may be charged a contingent deferred sales
charge of 0.50 of 1% for redemptions made within one full year of purchase.
Any such charge will be imposed on the lesser of the net asset value of the
redeemed shares at the time of purchase or redemption. The contingent
deferred sales charges are not imposed in connection with the exercise of
exchange rights, nor will they be imposed on redemptions of Federated Fund
shares received by shareholders of the State Bond Fund as a result of the
consummation of the Reorganization. For a complete description of sales
charges, contingent deferred sales charges and exemptions from such
charges, reference is hereby made to the Prospectus of the Federated Fund
dated May 31, 1996 and the Prospectus of the State Bond Fund dated May 1,
1996, each of which is incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated
Fund is Federated Shareholder Services Company (formerly called Federated
Services Company). The transfer agent and dividend disbursing agent for
the State Bond Fund is ARM Transfer Agency, Inc. Procedures for the
purchase, exchange and redemption of the Federated Fund's Class A Shares
differ slightly from procedures applicable to the purchase, exchange and
redemption of the State Bond Fund's shares. Any questions about such
procedures may be directed to, and assistance in effecting purchases,
exchanges or redemptions of the Federated Fund's Class A Shares or the
State Bond Fund's shares may be obtained from FSC, principal distributor
for the Federated Fund, at 1-800-341-7400 or from ARMFS, principal
distributor for the State Bond Fund, at 1-800-328-4735.
Reference is made to the Prospectus of the Federated Fund dated May
31, 1996, and the Prospectus of the State Bond Fund dated May 1, 1996, for
a complete description of the purchase, exchange and redemption procedures
applicable to purchases, exchanges and redemptions of Federated Fund and
State Bond Fund shares, respectively, each of which is incorporated herein
by reference thereto. Set forth below is a brief listing of the
significant purchase, exchange and redemption procedures applicable to the
Federated Fund's Class A Shares and the State Bond Fund's shares.
Purchases of Class A Shares of the Federated Fund may be made
through a financial institution who has an agreement with FSC or, once an
account has been established, by wire or check. Purchases of shares of the
State Bond Fund may be made through ARMFS and through certain broker-
dealers under contract with ARMFS or directly by wire or check once an
account has been established. The minimum initial investment in the
Federated Fund is $500, except for retirement accounts for which the
minimum is $50. Subsequent investments must be in amounts of at least
$100, except for retirement accounts for which the minimum is $50. The
minimum initial investment in the State Bond Fund is $250. Subsequent
investments must be in an amount of at least $50. The Federated Fund and
the State Bond Fund each reserve the right to reject any purchase request.
In connection with the sale of Class A Shares of the Federated Fund, FSC
may from time to time offer certain items of nominal value to any
shareholder.
The purchase price of the Federated Fund's Class A Shares and the
State Bond Fund's shares is based on net asset value plus a sales charge.
The net asset value per share for each of the Federated Fund and the State
Bond Fund is calculated as of the close of trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange, Inc. (the `NYSE'') on each
day on which the Federated Fund and the State Bond Fund compute their net
asset value. Purchase and redemption orders for the Federated Fund
received from broker/dealers before 5:00 p.m. (Eastern time) and from
financial institutions before 4:00 p.m. (Eastern time) may be entered at
that day's price. Purchase orders for shares of the State Bond Fund
received from authorized broker/dealers will be executed at the offering
price next determined after the receipt of the order by the broker/dealer,
provided that the broker/dealer promptly transmits the order to ARMFS the
same day. Redemption orders for shares of the State Bond Fund received by
the State Bond Fund's transfer agent from authorized dealers or
representatives of ARMFS prior to the close of the NYSE will be entered at
that day's price; such redemption orders received after the close of the
NYSE will be entered at the net asset value determined at the close of the
NYSE on the next trading day. Federated Fund purchase orders by wire are
considered received upon receipt of payment by wire. Federated Fund
purchase orders received by check are considered received after the check
is converted into federal funds, which normally occurs the business day
after receipt.
Holders of Class A Shares of the Federated Fund have exchange
privileges with respect to Class A Shares in certain of the funds for which
affiliates of Federated Investors serve as investment adviser or principal
underwriter (collectively, the "Federated Funds"), each of which has
different investment objectives and policies. Class A Shares in the
Federated Fund may be exchanged for Class A Shares of certain Federated
Funds at net asset value without a contingent deferred sales charge. To
the extent a shareholder exchanges Class A Shares of the Federated Fund for
Class A Shares in other Federated Funds, the time for which the exchanged-
for shares are to be held will be added to the time for which exchanged-
from shares were held for purposes of satisfying the applicable holding
period. Class A Shares to be exchanged must have a net asset value which
meets the minimum investment requirement for the fund into which the
exchange is being made. Holders of shares of the State Bond Fund have
exchange privileges with respect to shares in certain of the other funds
for which ARM Capital serves as investment manager (collectively, the
``tate Bond Group''), each of which has different investment objectives
and policies. Any exchange for shares of other funds in the State Bond
Group will generally be at the respective net asset values next determined
after receipt of the request for exchange. Exercise of the exchange
privilege is treated as a sale for federal income tax purposes and,
accordingly, may have tax consequences for the shareholder. Information on
share exchanges may be obtained from the Federated Fund or the State Bond
Fund, as appropriate.
Redemptions of Federated Fund Class A Shares may be made through a
financial institution, by telephone, by mailing a written request or
through the Federated Fund's Systematic Withdrawal Program. Redemptions of
State Bond Fund shares may be made through an authorized dealer or
representative of ARMFS or by mailing a written request to the State Bond
Fund's transfer agent. Class A Shares of the Federated Fund are redeemed at
their net asset value, less any applicable contingent deferred sales
charge, next determined after the redemption request is received. Shares
of the State Bond Fund are redeemed at their net asset value, determined at
the close of the NYSE on the date the redemption request is received.
Proceeds will ordinarily be distributed by check within seven days after
receipt of a redemption request.
Dividends
Each of the Federated Fund's and the State Bond Fund's current
policy is to declare and pay dividends quarterly from net investment income
and to make annual distributions of net realized capital gains, if any.
With respect to both the Federated Fund and the State Bond Fund, unless a
shareholder otherwise instructs, dividends and capital gain distributions
will be reinvested automatically in additional shares at net asset value,
subject to no sales charge.
Tax Consequences
As a condition to the Reorganization transactions, the Federated
Fund and the State Bond Fund will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable provisions of the Code so that no gain or loss will be
recognized by either the Federated Fund or the State Bond Fund or the
shareholders of the State Bond Fund. The tax basis of the Federated Fund
shares received by State Bond Fund shareholders will be the same as the tax
basis of their shares in the State Bond Fund.
RISK FACTORS
As with other mutual funds that invest in common stocks and other
securities of high quality companies, the Federated Fund is subject to
market risks. That is, the possibility exists that common stocks will
decline over short or even extended periods of time, and the United States
equity market tends to be cyclical, experiencing both periods when stock
prices generally increase and periods when stock prices generally decrease.
Additionally, the prices of fixed income securities generally fluctuate
inversely to the direction of interest rates. Since the State Bond Fund
invests primarily in common stocks, in addition to holding assets in cash
and fixed income securities, these risk factors are generally also present
in an investment in the State Bond Fund. A full discussion of the risks
inherent in investment in the Federated Fund and the State Bond Fund is set
forth in the Federated Fund's Prospectus and Statement of Additional
Information, each dated May 31, 1996 and the State Bond Fund's Prospectus
and Statement of Additional Information, each dated May 1, 1996, each of
which is incorporated herein by reference thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
On June 14, 1995, SBM Company, which was then the investment
adviser to the State Bond Fund, completed the sale of substantially all of
its business operations to ARM (the ``995 Transaction''). In connection
with the 1995 Transaction, ARM Capital became the investment manager of the
State Bond Fund. In addition, ARM acquired all of the outstanding stock of
SBM Financial Services, Inc., the predecessor in interest to ARMFS, the
current distributor of shares of the State Bond Fund.
Considerations of the Board of Directors of the State Bond Fund.
On June 6, 1996, ARM management advised the Board of Directors of the State
Bond Fund that ARM was considering redirecting its corporate strategy away
from the management and distribution of retail mutual funds in order to
concentrate more fully on its core businesses. Moreover, ARM management
stated that due to the relatively small net assets in the State Bond Fund
and the other mutual funds in the State Bond Group, ARM and its affiliates
were not in a position to provide the value-added shareholder services,
technological advancements, comprehensive distribution networks and
diversified product choices that many larger mutual fund complexes offer.
As a result, management stated that ARM was engaged in the identification
and analysis of various potential alternatives for the State Bond Fund and
the other funds in the State Bond Group.
After conducting a screening process, ARM determined that in its
judgment, the proposed Reorganization was the most desirable alternative
involving the State Bond Fund that was reasonably available and that it
should be presented to the State Bond Fund's Board of Directors for its
consideration.
A meeting of the entire Board of Directors was held on August 16,
1996, at which Federated (as defined below) presented to the Board
information relating to the overall reputation, financial strength and
stability of Federated Investors, the parent company of Federated Advisers
(together with its affiliates, `Federated''). Federated, founded in 1955,
is among the seven largest mutual fund sponsors, with over $90 billion
invested across more than 250 funds under management and/or administration
by its subsidiaries, and over 2,000 employees. Federated's management also
discussed the growth of assets under management and/or administration by
Federated from approximately $35 billion in 1989 to over $90 billion as of
August 1996. Federated's management explained to the Board that the
majority of this growth came from within Federated through its multiple
distribution channels. The Board was also informed of the variety of
investment products available through Federated, including international
funds and an array of domestic funds broader than currently offered in the
State Bond Group, the exchange privileges that would be available to former
State Bond Fund shareholders if the Reorganization is consummated, and the
multiple sales charge (or `load'') structures available to prospective
shareholders. The Board took into account that if the Reorganization takes
place, shareholders of the State Bond Fund would exchange their shares for
Shares of the Federated Fund without the imposition of any sales charge.
Federated's management advised the Board of its reputation for
customer servicing, noting that it has received a #1 rating for five years
in a row by Dalbar, Inc. Federated's management stated that its
shareholder services include advanced technological systems that result in
quick shareholder access to a broad spectrum of information, including:
telephonic automated yield and performance information; consolidated
monthly shareholder statements; no-fee IRAs; quarterly newsletters; year-
end tax reporting information; direct deposit; and telephonic redemption
and exchange.
Federated's management also discussed comparative sales loads with
the Board. While the maximum front end sales load of the Federated Fund is
higher than that of the State Bond Fund, Federated's management advised the
Board that it is lower than the average for equity funds distributed
through brokers (as reported by Strategic Insight), and is competitive.
Federated's management described rights of accumulation and other programs
that can reduce sales charges with respect to the Federated Fund.
Federated's management also reviewed with the Board relative asset
size and expense ratios, including relative advisory fees. The Board
discussed the fact that the Federated Fund is larger in asset size than the
State Bond Fund and considered potential economies of scale that might be
experienced by former State Bond Fund shareholders if they were to become
shareholders of a larger fund. Federated's management discussed with the
Board expense waiver and reimbursement arrangements with respect to both
the Federated Fund in particular and to the complex generally.
The Chief Investment Officer, Equities/High Yield, of Federated
discussed with the Board the investment philosophy of Federated Advisers
for its funds, including the Federated Fund. He also described the
background and significant investment experience of Federated portfolio
managers and other related personnel issues.
The Board was presented with materials comparing the investment
objectives and policies of the State Bond Fund with those of the Federated
Fund, and determined that they were substantially similar. The Board was
also presented with and discussed materials comparing the performance,
Morningstar ratings and relative risks of the State Bond Fund and the
Federated Fund. Federated's management also presented biographical
information about each of the Directors of the Federated Fund and reviewed
with the Board the structure of its compliance and internal audit
departments and the scope of its training programs.
The Board also considered the potential benefits to ARM if the
Reorganization is consummated. The Board discussed the fact that ARM and
ARM Capital would be compensated for selling the books, records and
goodwill relating to the management of the State Bond Group, agreeing to
certain non-competition arrangements and cooperating in assisting in the
transfer of the net assets of the State Bond Group to the Federated Funds.
They also took into account the proposed payment to ARMFS of 0.25% of the
average daily net assets of the Federated Fund attributable to shareholder
accounts serviced by ARMFS, as well as the possible compensation of ARMFS
for distribution of additional Federated financial products in the future.
The Board noted that the State Bond Fund would not bear any of the
costs involved in the Reorganization, which would be borne entirely by ARM
and/or Federated. In addition, the Board discussed the anticipated tax-
free nature of the Reorganization to the State Bond Fund and its
shareholders.
In connection with their consideration of the Reorganization, the
Board also reviewed their fiduciary obligations under state and federal
law. They considered the requirements of Section 15(f) of the 1940 Act,
which provides that an investment manager to an investment company, and the
affiliates of such manager (such as ARM), may receive any amount or benefit
in connection with a sale of any interest in such investment manager which
results in an assignment of an investment management contract if (1) for a
period of three years after such assignment, at least 75% of the board of
directors of the investment company are not ``nterested persons'' (as
defined in the 1940 Act) of the new investment manager or its predecessor;
and (2) no ``nfair burden'' (as defined in the 1940 Act) is imposed on the
investment company as a result of the assignment or any express or implied
terms, conditions or understandings applicable thereto.
With respect to the first condition of Section 15(f) relating to
Board composition, the Board was advised that the Federated Fund's Board of
Directors presently consists of thirteen (13) Directors, only three (3) of
whom are `interested persons.'' With respect to the second condition of
Section 15(f), while there is no specific definition of ``nfair burden,''
it includes any arrangement, for two years after the transaction, pursuant
to which the predecessor or successor adviser is entitled to receive
compensation from any person in connection with the mutual fund's purchase
or sale of securities, other than bona fide ordinary compensation as
principal underwriter. The definition of unfair burden also includes any
payments from the fund for other than bona fide investment advisory or
other services. The Board considered the fact that representations were
made by Federated and ARM that the agreement among Federated, ARM and ARM
Capital would contain representations and covenants that the Reorganization
would not impose an unfair burden on the State Bond Group.
After reviewing and considering all of the information provided by
Federated and ARM, including the terms of the Reorganization, the Board,
including all of the Directors who are not interested persons of the State
Bond Fund or ARM Capital, voted unanimously at a special telephonic meeting
held on August 26, 1996, to approve the Reorganization and to recommend it
to the shareholders of the State Bond Fund for their approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund.
The Board of Directors of the Federated Fund, including a majority of the
independent Directors, have unanimously concluded that consummation of the
Reorganization is in the best interests of the Federated Fund and the
shareholders of the Federated Fund and that the interests of Federated Fund
shareholders would not be diluted as a result of effecting the
Reorganization and have unanimously voted to approve the Plan.
Agreement Among ARM, ARM Capital and Federated
The Reorganization is being proposed as part of an agreement by and
among Federated, ARM, and ARM Capital, pursuant to which ARM and ARM
Capital would be compensated for selling to Federated the books, records
and goodwill relating to the management of the State Bond Group and
cooperating in facilitating the transaction contemplated by the agreement.
As part of that agreement, ARM Capital and its affiliates have agreed not
to compete with Federated by providing investment advisory services to
certain investment companies. Following the Reorganization, ARM or its
affiliates have agreed to provide certain services to shareholders for
which ARM or its affiliates may receive fees paid by Federated and/or
mutual funds in which the shareholders are invested.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the
net assets of the State Bond Fund in exchange for the Federated Fund's
Class A Shares to be distributed pro rata by the State Bond Fund to its
shareholders in complete liquidation of the State Bond Fund on or about
December , 1996 (the "Closing Date"). Shareholders of the State Bond
---
Fund will become shareholders of the Federated Fund as of the close of
business on the Closing Date, and will be entitled to the Federated Fund's
next dividend distribution.
As of or prior to the Closing Date, the State Bond Fund will
declare and pay a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to its shareholders
all taxable income for the period ending on the Closing Date. In addition,
the State Bond Fund's dividend will include its net capital gains realized
in the period ending on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the State Bond Fund and the Federated Fund, as described
under the caption "Federal Income Tax Consequences" below. The Plan may be
terminated and the Reorganization may be abandoned at any time before or
after approval by shareholders of the State Bond Fund prior to the Closing
Date by either party if it believes that consummation of the Reorganization
would not be in the best interests of its shareholders.
Federated Advisers is responsible for the payment of substantially
all of the expenses of the Reorganization incurred by either party, whether
or not the Reorganization is consummated. Such expenses include, but are
not limited to, accountants' fees, registration fees, transfer taxes (if
any), the fees of banks and transfer agents and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the State
Bond Fund's shareholders and the costs of holding the Special Meeting (as
hereinafter defined). ARM is responsible for the payment of the legal fees
of the State Bond Fund.
The foregoing description of the Plan entered into between the
Federated Fund and the State Bond Fund, is qualified in its entirety by the
terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class A Shares of the Federated Fund will be
issued without the imposition of a sales charge or other fee to the
shareholders of the State Bond Fund in accordance with the procedures
described above. Class A Shares of the Federated Fund to be issued to
shareholders of the State Bond Fund under the Plan will be fully paid and
nonassessable when issued and transferable without restriction and will
have no preemptive or conversion rights. Reference is hereby made to the
Prospectus of the Federated Fund dated May 31, 1996 provided herewith for
additional information about Class A Shares of the Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Fund and the
State Bond Fund will receive an opinion from Dickstein Shapiro Morin &
Oshinsky LLP, counsel to the Federated Fund, to the effect that, on the
basis of the existing provisions of the Code, current administrative rules
and court decisions, for federal income tax purposes: (1) the
Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a)(1)(C) of the Code; (2) no gain or loss
will be recognized by the Federated Fund upon its receipt of the State Bond
Fund's assets solely in exchange for Federated Fund Class A Shares; (3) no
gain or loss will be recognized by the State Bond Fund upon the transfer of
its assets to the Federated Fund in exchange for Federated Fund Class A
Shares or upon the distribution (whether actual or constructive) of the
Federated Fund Class A Shares to the State Bond Fund shareholders in
exchange for their shares of the State Bond Fund; (4) no gain or loss will
be recognized by shareholders of the State Bond Fund upon the exchange of
their State Bond Fund shares for Federated Fund Class A Shares; (5) the tax
basis of the State Bond Fund's assets acquired by the Federated Fund will
be the same as the tax basis of such assets to the State Bond Fund
immediately prior to the Reorganization; (6) the tax basis of Federated
Fund Class A Shares received by each shareholder of the State Bond Fund
pursuant to the Plan will be the same as the tax basis of State Bond Fund
shares held by such shareholder immediately prior to the Reorganization;
(7) the holding period of the assets of the State Bond Fund in the hands of
the Federated Fund will include the period during which those assets were
held by the State Bond Fund; and (8) the holding period of Federated Fund
Class A Shares received by each shareholder of the State Bond Fund will
include the period during which the State Bond Fund shares exchanged
therefor were held by such shareholder, provided the State Bond Fund shares
were held as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not
binding on the Internal Revenue Service (`IRS'') or any court. The State
Bond Fund does not expect to obtain a ruling from the IRS regarding the
consequences of the Reorganization. Accordingly, if the IRS sought to
challenge the tax treatment of the Reorganization and was successful,
neither of which is anticipated, the Reorganization would be treated as a
taxable sale of assets of the State Bond Fund, followed by the taxable
liquidation of the State Bond Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the State Bond Fund are open-
end, diversified management investment companies registered under the 1940
Act, which continuously offer to sell shares at their current net asset
value. The Federated Fund is organized as a corporation under the laws of
the State of Maryland and is governed by its Articles of Incorporation,
Bylaws, and Board of Directors, in addition to applicable state and
Federal law. The State Bond Fund is organized as a separate series of State
Bond Investment Funds, Inc. under the laws of the State of Maryland and is
governed by its Articles of Incorporation, Bylaws, and Board of Directors,
in addition to applicable state and Federal law. Set forth below is a
brief summary of the significant rights of shareholders of the Federated
Fund and the State Bond Fund.
Shares of the Federated Fund and the State Bond Fund. The
Federated Fund is authorized to issue 100,000,000 shares of common stock,
par value $.20 per share. The Board of Directors has established four
classes of shares of the Federated Fund, known as Class A Shares, Class B
Shares, Class C Shares and Class F Shares. The State Bond Fund has an
authorized capital of 10,000,000,000 shares of common stock with a par
value of $.00001 per share. The State Bond Fund is currently the sole
investment portfolio of State Bond Investment Funds, Inc. and has only one
class of shares. Issued and outstanding shares of both the Federated Fund
and State Bond Fund are fully paid and nonassessable, and freely
transferable.
Voting Rights. Neither the Federated Fund nor the State Bond Fund
is required to hold annual meetings of shareholders, except as required
under the 1940 Act. Shareholder approval is necessary only for certain
changes in operations or the election of directors under certain
circumstances. The Federated Fund requires that a special meeting of
shareholders be called for any permissible purpose upon the written request
of the holders of at least 10% of the outstanding shares of the series of
the Federated Fund entitled to vote. A special meeting of the shareholders
of the State Bond Fund is required to be called upon the written request of
shareholders representing not less than 25% of the issued and outstanding
shares entitled to vote. Each share of the Federated Fund gives the
shareholder one vote in director elections and other matters submitted to
shareholders for vote. All shares of each series or class in the Federated
Fund have equal voting rights except that in matters affecting only a
particular series or class, only shares of that series or class are
entitled to vote. All shares of the State Bond Fund have equal voting
rights.
Directors. The Bylaws of the Federated Fund provide that the term
of office of each Director shall be until his or her resignation or removal
or until the next annual meeting of shareholders and until the election and
qualification of his or her successor. A Director of the Federated Fund
may be removed by a vote of a majority of all shares entitled to vote at
any special meeting of shareholders, and such shareholders may elect a
Director to fill the vacancy. A vacancy on the Board may be filled by a
majority of the Directors remaining in office. The Bylaws of the State
Bond Fund provide that each Director holds office from the time of his or
her election until the next annual meeting of shareholders or until his or
her successor is duly elected and qualifies or the earlier of his or her
death, resignation, removal, or other cause. A Director of the State Bond
Fund may be removed, with or without cause, by the affirmative vote of a
majority of the votes entitled to be cast for the election of Directors,
and such shareholders may elect a qualified person as Director to replace
the Director so removed. In case of any vacancy on the Board of Directors,
a majority of the remaining Directors may elect a successor to hold office
until the next annual meeting of the shareholders and until his or her
successor is duly elected and qualifies. With respect to both the
Federated Fund and the State Bond Fund, a meeting of shareholders will be
required for the purpose of electing additional Directors whenever fewer
than a majority of the Directors then in office were elected by
shareholders.
Liability of Directors and Officers. Under the Articles of
Restatement of the Federated Fund, a Director or officer will be
personally liable only for his or her own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The Articles of Restatement further provide
that Directors and officers will be indemnified by the Federated Fund
against reasonable costs and expenses incurred in connection with any claim
or litigation unless the person's conduct is determined to constitute
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the person's office. The Articles of
Amendment and Restatement of the State Bond Fund contain a provision
eliminating liability of directors and officers to the State Bond Fund or
its shareholders to the fullest extent permitted by Maryland law.
Therefore, directors and officers of the State Bond Fund will not be liable
for monetary damages to the State Bond Fund or its shareholders for breach
of the duty of care. However, such elimination of liability regarding a
director's duty of care does not permit the elimination or limitation of
liability (1) to the extent that it is proved that the person actually
received an improper benefit or profit in money, property or services; (2)
to the extent that a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was committed in bad faith or was
the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding; or (3) for any action or
failure to act occurring prior to February 18, 1988. In addition, due to
the provisions of the 1940 Act, shareholders would still have the right to
pursue monetary claims against directors or officers for acts involving
willful malfeasance, bad faith, gross negligence or reckless disregard of
their duties as directors or officers. Under the agreement by and among
Federated, ARM and ARM Capital, Federated has agreed for a period of three
(3) years following the Closing to provide coverage under a directors and
officers liability insurance policy for the current Directors of the State
Bond Fund.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated
Fund or of the termination or liquidation of the State Bond Fund, the
shareholders of the respective fund or class are entitled to receive, when
and as declared by its Directors the excess of the assets belonging to the
respective fund or class over the liabilities belonging to the respective
fund or class. In either case, the assets belonging to the fund or class
will be distributed among the shareholders in proportion to the number of
shares of the respective fund or class held by them.
Capitalization
The following table sets forth the unaudited capitalization of the
Class A Shares of the Federated Fund and the shares of the State Bond Fund
as of August 31, 1996 and on a pro forma combined basis as of that date:
Federated Fund State Bond Pro Forma
(Class A Shares) Fund Combined
Net Asset $481,049,165 $46,529,066 $527,578,231
Net Asset Value Per Share $19.48 $10.62 $19.48
Shares Outstanding 24,695,789 4,381,558 27,084,468
INFORMATION ABOUT THE FEDERATED FUND
AND THE STATE BOND FUND
Federated American Leaders Fund, Inc.
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated May 31, 1996, a copy of which is included
herewith and incorporated by reference herein. Additional information
about the Federated Fund is included in the Federated Fund's Annual Report
to Shareholders dated March 31, 1996, the Statement of Additional
Information dated May 31, 1996 and the Statement of Additional Information
dated November , 1996 (relating to this Prospectus/Proxy Statement), each
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of which is incorporated herein by reference. Copies of the Annual Report
and Statements of Additional Information, which have been filed with the
Securities and Exchange Commission (the "SEC"), may be obtained upon
request and without charge by contacting the Federated Fund at 1-800-341-
7400 or by writing the Federated Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Federated Fund is subject to the
informational requirements of the Securities Act of 1933, as amended (the
`1933 Act''), the Securities Exchange Act of 1934, as amended (the "1934
Act") and the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements,
charter documents and other information filed by the Federated Fund can be
obtained by calling or writing the Federated Fund and can also be inspected
and copied by the public at the public reference facilities maintained by
the SEC in Washington, D.C. located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at certain of its regional offices located at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
IL 60661 and 13th Floor, Seven World Trade Center, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the
1933 Act, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and to
the exhibits thereto for further information with respect to the Federated
Fund and the shares offered hereby. Statements contained herein concerning
the provisions of documents are necessarily summaries of such documents,
and each such statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC.
State Bond Diversified Fund
Information about the State Bond Fund and State Bond Investment
Funds, Inc. is contained in the State Bond Fund's current Prospectus dated
May 1, 1996, the Annual Report to Shareholders dated December 31, 1995, the
Semi-Annual Report to Shareholders dated June 30, 1996, its Statement of
Additional Information dated May 1, 1996 and the Statement of Additional
Information dated November , 1996 (relating to this Prospectus/Proxy
--
Statement), each of which is incorporated herein by reference. Copies of
such Prospectus, Annual Report, Semi-Annual Report, and Statement(s) of
Additional Information, which have been filed with the SEC, may be obtained
upon request and without charge from the State Bond Fund by calling 1-800-
328-4735 or by writing to the State Bond Fund at 100 North Minnesota
Street, P.O. Box 69, New Ulm, Minnesota 56073-0069. The State Bond Fund is
subject to the informational requirements of the 1933 Act, the 1934 Act and
the 1940 Act and in accordance therewith files reports and other
information with the SEC. Reports, proxy and information statements,
charter documents and other information filed by State Bond Investment
Funds, Inc. or its portfolio, the State Bond Fund, can be obtained by
calling or writing the State Bond Fund and can also be inspected at the
public reference facilities maintained by the SEC or obtained at prescribed
rates at the addresses listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of the State Bond Fund of proxies
for use at the Special Meeting of Shareholders (the "Special Meeting") to
be held at 3:20 p.m. on December , 1996 at: 100 North Minnesota Street,
--
New Ulm, Minnesota 56073-0069, and at any adjournments thereof. The proxy
confers discretionary authority on the persons designated therein to vote
on other business not currently contemplated which may properly come before
the Special Meeting. A proxy, if properly executed, duly returned and not
revoked, will be voted in accordance with the specifications thereon; if no
instructions are given, such proxy will be voted in favor of the Plan. A
shareholder may revoke a proxy at any time prior to use by filing with the
Secretary of the State Bond Fund an instrument revoking the proxy, by
submitting a proxy bearing a later date or by attending and voting at the
Special Meeting.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Advisers. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees and agents of the State Bond Fund, Federated Advisers and their
respective affiliates at no additional cost to the State Bond Fund. Such
solicitations may be by telephone, telegraph or personal contact.
Federated Advisers will reimburse custodians, nominees and fiduciaries for
the reasonable costs incurred by them in connection with forwarding
solicitation materials to the beneficial owners of shares held of record by
such persons.
Outstanding Shares and Voting Requirements
The Board of Directors of the State Bond Fund has fixed the close
of business on October 11, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and
any adjournment thereof. As of the record date, there were shares
-------
of the State Bond Fund outstanding. Each of the State Bond Fund's shares
is entitled to one vote and fractional shares have proportionate voting
rights. [On the record date, the Directors and officers of the State Bond
Fund as a group owned less than 1% of the outstanding shares of the State
Bond Fund.] To the best knowledge of ARM Capital, as of the record date,
no person, except as set forth in the table below, owned beneficially or of
record 5% or more of the State Bond Fund's outstanding shares.
Percent of
Shares Owned Percent of Outstanding
Name and Address of Beneficially Outstanding Shares of the
Beneficial Owner Shares Federated Fund
Following
Reorganization
As of the record date, there were Class A, Class B,
-------- ---- ----
Class C and Class F Shares of the Federated Fund outstanding. On
---------
the record date, the Directors and officers of the Federated Fund as a
group owned less than 1% of the outstanding Class A, Class B, Class C and
Class F Shares of the Federated Fund outstanding. To the best knowledge of
Federated Advisers, as of the record date, no person, except as set forth
in the table below, owned beneficially or of record 5% or more of the
Federated Fund's outstanding Class A, Class B, Class C or Class F Shares.
Class A Name and Address of Shares Percent of Percent of
Shares Beneficial Owner Owned Outstanding Outstanding
Beneficially Shares Shares of the
Federated Fund
Following
Reorganization
Class B Name and Address of Shares Percent of
Shares Beneficial Owner Owned Outstanding
Class C Name and Address of Shares Percent of
Shares Beneficial Owner Owned Outstanding
Class F Name and Address of Shares Percent of
Shares Beneficial Owner Owned Outstanding
Approval of the Plan requires the affirmative vote of a majority of
the outstanding shares of the State Bond Fund. The votes of shareholders
of the Federated Fund are not being solicited since their approval is not
required in order to effect the Reorganization.
One-third of the issued and outstanding shares of the State Bond
Fund, represented in person or by proxy, will be required to constitute a
quorum at the Special Meeting for the purpose of voting on the proposed
Reorganization. For purposes of determining the presence of a quorum,
shares represented by abstentions and "broker non-votes" will be counted as
present, but not as votes cast, at the Special Meeting. Because approval of
the Reorganization requires the approval of a majority of the outstanding
shares of the State Bond Fund, abstentions and "broker non-votes" will have
the same effect as if they were votes against the Reorganization.
Dissenter's Right of Appraisal
Shareholders of the State Bond Fund objecting to the Reorganization
have no appraisal rights under the State Bond Fund's Articles of
Incorporation or Maryland law. Under the Plan, if approved by State Bond
Fund shareholders, each shareholder will become the owner of Class A Shares
of the Federated Fund having a total net asset value equal to the total net
asset value of his or her holdings in the State Bond Fund at the Closing
Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the State Bond Fund knows of no other matters that
may properly be, or which are likely to be, brought before the meeting.
However, if any other business shall properly come before the meeting, the
persons named in the proxy intend to vote thereon in accordance with their
best judgment.
If at the time any session of the Special Meeting is called to
order, a quorum is not present in person or by proxy, the persons named as
proxies may vote those proxies which have been received to adjourn the
Special Meeting to a later date. In the event that a quorum is present but
sufficient votes in favor of one or more of the proposals have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitation of proxies with
respect to any such proposal. All such adjournments will require the
affirmative vote of a majority of the shares present in person or by proxy
at the session of the Special Meeting to be adjourned. The persons named
as proxies will vote those proxies which they are entitled to vote in favor
of the proposal, in favor of such an adjournment, and will vote those
proxies required to be voted against the proposal, against any such
adjournment
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED AMERICAN LEADERS FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and STATE BOND
INVESTMENT FUNDS, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio STATE BOND DIVERSIFIED FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the assets of the Acquired Fund
for Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
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the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1994 has been audited by independent auditors and at
December 31, 1995 has been audited by Ernst & Young LLP, independent
auditors, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such dates, and there are no
known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) The unaudited Statement of Assets and Liabilities of
the Acquired Fund at June 30, 1996 has been prepared in accordance with
generally accepted accounting principles, consistently applied, although
subject to year-end adjustments, and on a basis consistent with the
Statement of Assets and Liabilities of the Acquired Fund at December 31,
1995 which has been audited by Ernst & Young LLP, independent auditors, and
such statement (copies of which have been furnished to the Acquiring Fund)
fairly reflects the financial condition of the Acquired Fund as of such
date, and there are no known liabilities of the Acquired Fund, contingent
or otherwise, as of such date not disclosed therein.
(i) Since June 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(k) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(n) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at March 31, 1995 and 1996, have been audited by Arthur
Andersen LLP, independent auditors, and have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since March 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before December 31, 1995 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before
December 31, 1995 and in the period from said date to and including the
Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including accountants' fees, registration fees, transfer taxes (if any),
the fees of banks and transfer agents and the costs of preparing, printing,
copying and mailing proxy solicitation materials to the Acquired Fund's
shareholders and the costs of holding the Special Meeting of Shareholders.
ARM Financial Group, Inc. will assume the legal fees of the Acquired Fund.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND INVESTMENT FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND DIVERSIFIED FUND
/s/ Sheri Bean By: /s/ Kevin L. Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED AMERICAN LEADERS FUND, INC.
/s/ S. Elliot Cohan By: /s/ J.Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President
STATEMENT OF ADDITIONAL INFORMATION
November , 1996
---
ACQUISITION OF THE ASSETS OF
STATE BOND DIVERSIFIED FUND,
A PORTFOLIO OF
STATE BOND INVESTMENT FUNDS, INC.
100 NORTH MINNESOTA STREET
P.O. BOX 69
NEW ULM, MINNESOTA 56073-0069
TELEPHONE NUMBER: 1-800-328-4735
BY AND IN EXCHANGE FOR CLASS A SHARES OF
FEDERATED AMERICAN LEADERS FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-341-7400
This Statement of Additional Information dated November , 1996
---
is not a prospectus. A Prospectus/Proxy Statement dated November , 1996
---
related to the above-referenced matter may be obtained from Federated
American Leaders Fund, Inc., Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. This Statement of Additional Information should
be read in conjunction with such Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated American
Leaders Fund, Inc., dated May 31, 1996.
2. Statement of Additional Information of State Bond
Diversified Fund, a portfolio of State Bond Investment Funds, Inc., dated
May 1, 1996.
3. Financial Statements of Federated American Leaders Fund,
Inc., dated March 31, 1996.
4. Financial Statements of State Bond Diversified Fund, a
portfolio of State Bond Investment Funds, Inc., dated December 31, 1995.
5. Financial Statements (unaudited) of State Bond Diversified
Fund, a portfolio of State Bond Investment Funds, Inc., dated June 30,
1996.
The Statement of Additional Information of Federated American
Leaders Fund, Inc. (the "Federated Fund"), dated May 31, 1996, is
incorporated herein by reference to Post-Effective Amendment No. 61 to the
Federated Fund's Registration Statement on Form N-1A (File Nos. 2-29786 and
811-1704) which was filed with the Securities and Exchange Commission on or
about May 9, 1996. A copy may be obtained, upon request and without
charge, from the Federated Fund at Federated Investors Tower, Pittsburgh,
PA 15222-3279; telephone number: 1-800-341-7400.
The Statement of Additional Information of State Bond Diversified
Fund (the "State Bond Fund"), a portfolio of State Bond Investment Funds,
Inc. (the "Corporation"), dated May 1, 1996, is incorporated herein by
reference to Post-Effective Amendment No. 50 to the Corporation's
Registration Statement on Form N-1A (File Nos. 2-22365 and 811-1256) which
was filed with the Securities and Exchange Commission on or about March 1,
1996. A copy may be obtained, upon request and without charge, from the
State Bond Fund at 100 North Minnesota Street, P.O. Box 69, New Ulm,
Minnesota 56073-0069; telephone number: 1-800-328-4735.
The audited financial statements of the Federated Fund, dated
March 31, 1996, are incorporated herein by reference to the Federated
Fund's Annual Report to Shareholders dated March 31, 1996 which was filed
with the Securities and Exchange Commission. A copy may be obtained, upon
request and without charge, from the Federated Fund at Federated Investors
Tower, Pittsburgh, PA 15222-3279; telephone number: 1-800-341-7400.
The audited financial statements of the State Bond Fund, dated
December 31, 1995, are incorporated herein by reference to the State Bond
Fund's Annual Report to Shareholders dated December 31, 1995, which was
filed with the Securities and Exchange Commission. A copy may be obtained,
upon request and without charge, from the State Bond Fund at 100 North
Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-0069; telephone
number 1-800-328-4735.
The unaudited financial statement of the State Bond Fund, dated
June 30, 1996, are incorporated herein by reference to the State Bond
Fund's Semi-Annual Report to Shareholders, dated June 30, 1996, which was
filed with the Securities and Exchange Commission. A copy may be obtained,
upon request and without charge, from the State Bond Fund at 100 North
Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-0069; telephone
number: 1-800-328-4735.
Pro forma financial statements are not included herein as the total
net assets of the State Bond Fund do not exceed 10% of the total assets of
the Federated Fund. At August 31, 1996, the total net assets of the State
Bond Fund were $46,529,066 and the total net assets of the Federated Fund
were $964,292,855.
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to directors and officers of the
Registrant pursuant to the Registrant's Articles of Incorporation, except
where such indemnification is not permitted by law. However, the Articles
of Incorporation do not protect the directors or officers from liability
based on willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office.
Directors and officers of the Registrant are insured against
certain liabilities, including liabilities arising under the Securities Act
of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Articles of Incorporation or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by directors,
officers, or controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted by such
directors, officers, or controlling persons in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for directors,
officers, or controlling persons of the Registrant by the Registrant
pursuant to the Articles of Incorporation or otherwise, the Registrant is
aware of the position of the Securities and Exchange Commission as set
forth in Investment Company Act Release No. IC-11330. Therefore, the
Registrant undertakes that in addition to complying with the applicable
provisions of the Articles of Incorporation or otherwise, in the absence of
a final decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not be made
unless in the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum of
non-party directors who are not interested persons of the Registrant or
(ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an officer,
director, or controlling person of the Registrant will not be made absent
the fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Registrant is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of disinterested non-party directors or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.
Item 16. Exhibits
1.1 Conformed Copy of Articles of Incorporation of the Registrant, as
restated(1)
1.2 Conformed Copy of the Registrant's Articles Supplementary(1)
2.1 Bylaws of the Registrant, as amended(1)
3 Not Applicable
4 Agreement and Plan of Reorganization dated September 23, 1996, between
State Bond Investment Funds, Inc., a Maryland corporation, on behalf of its
portfolio, State Bond Diversified Fund, and Federated American Leaders
Fund, Inc., a Maryland corporation*
5 Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant(2)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(1)
7.1 Conformed Copy of Distributor's Contract of the Registrant(3)
7.2 Conformed Copy of Exhibit D to the Distributor's Contract of the
Registrant(1)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement;
and Plan Trustee/Mutual Funds Service Agreement from Item 24(b)(6) of the
Cash Trust Series II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(1)
10.1 Conformed Copy of Distribution Plan of the Registrant(4)
10.2 Conformed Copy of Exhibit A to the Distribution Plan of the
Registrant(1)
10.3 Conformed Copy of Exhibit B to the Distribution Plan of the
Registrant(1)
10.4 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series,
Inc. Registration Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
10.5 The responses described in Item 16 (7.3) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated
Investors regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization(5)
13.1 Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Shareholder Recordkeeping Services and Custody
Services Procurement(6)
13.2 The responses described in Item 16 (7.3) and Item 16 (10.4) are hereby
incorporated by reference
13.3 The Registrant hereby incorporates the conformed copy of the
Shareholder Services Subcontract between National Pensions Alliance, Ltd.
and Federated Shareholder Services from Item 24(b)(9)(ii) of the Federated
GNMA Trust Registration Statement on Form N-1A, filed with the Commission
on March 25, 1996. (File Nos. 2-75670 and 811-3375)
13.4 The Registrant hereby incorporates the conformed copy of the
Shareholder Services Subcontract between Fidelity and Federated Shareholder
Services from Item 24(b)(9)(iii) of the Federated GNMA Trust Registration
on Form N-1A, filed with the Commission on March 25, 1996. (File Nos. 2-
75670 and 811-3375)
14.1 Conformed Copy of Consent of Independent Public Accountants of
Federated American Leaders Fund, Inc., Arthur Andersen LLP*
14.2 Conformed Copy of Consent of Independent Auditors of State Bond
Diversified Fund, Ernst & Young LLP*
14.3 Conformed Copy of Consent of Independent Auditors of State Bond
Diversified Fund, Deloitte & Touche LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of State Bond Diversified Fund*
* Filed electronically.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 60 on Form N-1A filed on May 25, 1995. (File Nos. 2-29786
and 811-1704)
(2) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form S-5 filed August 5, 1968. (File Nos. 2-
29786 and 811-1704)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 59 on Form N-1A filed May 26, 1994. (File Nos. 2-29786 and
811-1704)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 59 on Form N-1A filed on May 26, 1994. (File Nos. 2-29786
and 811-1704)
(5) To be filed by Post-Effective Amendment pursuant to `Dear
Registrant''letter dated February 15, 1996.
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 61 on Form N-1A filed May 29, 1996. (File Nos. 2-29786 and
811-1704)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this Registration Statement by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an amendment
to the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Federated American Leaders Fund, Inc., has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania on September 30, 1996.
FEDERATED AMERICAN LEADERS FUND, INC.
(Registrant)
By: *
John F. Donahue
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on September 30, 1996:
* President and Director
John F. Donahue
(Chief Executive Officer)
* Executive Vice President and Director
J. Christopher Donahue
* Treasurer
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
cbrx01!.doc/589083
78
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
1* Such signature has been affixed pursuant to a Power of Attorney.
FEDERATED AMERICAN LEADERS FUND, INC. EXHIBIT 11
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
September 27, 1996
The Directors of
Federated American Leaders Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated American Leaders Fund, Inc. (the `Fund''), a Maryland
Corporation, proposes to issue shares of capital stock (such shares of
capital stock being herein referred to as `Shares'') in connection with
the acquisition of the assets of State Bond Diversified Fund, a portfolio
of State Bond Investment Funds, Inc., a Maryland corporation, pursuant to
the Agreement and Plan of Reorganization dated as of September 23, 1996
(`Agreement''), filed as an exhibit to the registration statement of the
Fund filed on Form N-14 (Securities Act of 1933 No. to be assigned) under
the Securities Act of 1933 as amended (`N-14 Registration'').
As counsel I have participated in the organization of the Fund, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Articles of
Incorporation dated July 22, 1968 (`Articles of Incorporation''), the
Bylaws of the Fund, the Agreement and such other documents and records
deemed relevant. I have also reviewed questions of law and consulted with
counsel thereon as deemed necessary or appropriate for the purposes of this
opinion.
Based upon the foregoing, it is my opinion that:
1. The Fund is duly organized and validly existing pursuant to the
Articles of Incorporation.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Articles of Incorporation upon receipt
of consideration sufficient to comply with the provisions of Article Fifth,
Section (a), of the Articles of Incorporation and subject to compliance
with the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities. Such Shares, when so issued, will
be fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
Very truly yours,
FEDERATED AMERICAN LEADERS FUND, INC.
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary
Exhibit 14.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement (Form N-14 of Federated
American Leaders Fund, Inc.) of our report dated May 15, 1996, included in
the Federated American Leaders Fund, Inc. Annual Report for the year ended
March 31, 1996, and to all references to our firm included in this
registration Statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
September 27, 1996
Exhibit 14.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions `Financial
Highlights''and ``Independent Auditors'' and the use of our report dated
January 26, 1996 on the financial statements of State Bond Diversified Fund
(the Fund) in the Registration Statement (Form N-1A) of the Fund which is
incorporated by reference in, and reference to our firm in Exhibit A of,
the Registration Statement (Form N-14) of Federated American Leaders Fund,
Inc. filed with the Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Kansas City, Missouri
September 30, 1996
EXHIBIT 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED AMERICAN
LEADERS FUND, INC. and the Deputy General Counsel of Federated Investors,
and each of them, their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for them and in their names,
place and stead, in any and all capacities, to sign any and all documents
to be filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Director September 26,
1996
John F. Donahue (Chief Executive Officer)
/s/J. Christopher Donahue Executive Vice President September 26, 1996
J. Christopher Donahue and Director
/s/John W. McGonigle Treasurer and Executive September 26, 1996
John W. McGonigle Vice President
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director September 26, 1996
Thomas G. Bigley
/s/John T. Conroy, Jr. Director September 26, 1996
John T. Conroy, Jr.
/s/William J. Copeland Director September 26, 1996
/s/James E. Dowd Director September 26, 1996
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director September 26, 1996
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director September 26, 1996
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director September 26, 1996
Peter E. Madden
/s/Gregor F. Meyer Director September 26, 1996
Gregor F. Meyer
/s/John E. Murray, Jr. Director September 26, 1996
John E. Murray, Jr.
/s/Wesley W. Posvar Director September 26, 1996
Wesley W. Posvar
/s/Marjorie P. Smuts Director September 26, 1996
Marjorie P. Smuts
Sworn to and subscribed before me this 26th day of September, 1996
/s/Jody L.Petras
Notarial Seal
Jody L. Petras, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Sept. 27, 1999
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
Rule 24f-2 Notice
AMERICAN LEADERS FUND, INC.
(Fund Name)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 2-29786
(i) fiscal period for which notice is filed March 31, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at April 1, 1994,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities, if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 575,449 575,449
(iv) The number or amount of securities
sold during the fiscal period of this
notice 8,792,239
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 8,216,790
WITNESS the due execution hereof this 15th day of May, 1995.
By: /s/Charles H Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1. Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) $124,130,406
2. Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $54,123,894
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed -0- $54,123,894
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based $70,006,512
FEE SUBMITTED (1/29 of 1% of Total amount) $24,140
Federated Administrative
Services
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
May 15, 1995
American Leaders Fund, Inc.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for American Leaders Fund, Inc. ("Corporation") to be filed in respect
of shares of the Corporation ("Shares") sold for the fiscal year ended March
31, 1995, pursuant to the Corporation's registration statement filed with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933
(File No. 2-29786) ("Registration Statement").
In its Registration Statement, the Corporation elected to register an
indefinite number of shares pursuant to the provisions of Investment Company
Act Rule 24f-2.
As counsel I have participated in the preparation and filing of the
Corporation's amended Registration Statement under the Securities Act of 1933.
Further, I have examined and am familiar with the provisions of the Articles
of Incorporation dated January 22, 1968 ("Articles of Incorporation"), the
Bylaws of the Corporation and such other documents and records deemed
relevant. I have also reviewed questions of law and consulted with counsel
thereon as deemed necessary or appropriate by me for the purposes of this
opinion.
On the basis of the foregoing, it is my opinion the Shares sold for the
fiscal year ended March 31, 1995, registration of which the Rule 24f-2 Notice
makes definite in number, were legally issued, fully paid and non-assessable
by the Corporation.
I hereby consent to the filing of this opinion as an exhibit to the Rule
24f-2 Notice referred to above, the Registration Statement of the Corporation
and to any application or registration statement filed under the securities
laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Maryland, and I am expressing no opinion
as to the effect of the laws of any other jurisdiction.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Fund Attorney
AMERICAN LEADERS FUND, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
May 15, 1995
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 24f-2 Notice for AMERICAN LEADERS FUND, INC.
1933 Act File No. 2-29786
1940 Act File No. 811-1704
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company
Act of 1940, I enclose the Rule 24f-2 Notice for American Leaders Fund,
Inc.
Since the aggregate sales price of securities sold by the fund during
the period for which the Rule 24f-2 Notice is filed exceeded the aggregate
redemption price of securities redeemed, an additional filing fee in the
amount of $24,140 pursuant to Rule 24f-2(c) has been remitted to the U.S.
Treasury Lockbox at Mellon Bank in Pittsburgh.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel
has been electronically filed herewith which indicates whether the
securities, the registration of which this Notice makes definite in number,
were legally, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated September 23, 1996 (the
"Agreement"), between FEDERATED AMERICAN LEADERS FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and STATE BOND
INVESTMENT FUNDS, INC., a Maryland corporation (hereinafter called the
"Corporation") on behalf of its portfolio STATE BOND DIVERSIFIED FUND
(hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all of the net assets of the Acquired Fund in exchange solely
for Class A Shares of the Acquiring Fund (the "Acquiring Fund Shares") and
the distribution, after the Closing Date (as hereinafter defined), of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Corporation and the Acquiring Fund are registered
open-end management investment companies and the Acquired Fund owns
securities in which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the exchange of all of the assets of the Acquired Fund
for Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
directors who are not "interested persons" (as defined under the 1940 Act),
of the Corporation has determined that the exchange of all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the net assets of the Acquired Fund, including all securities and
cash, other than cash in an amount necessary to pay any unpaid dividends
and distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, and the Acquiring Fund agrees in exchange therefor to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquired Fund will discharge or make provision for the
discharge of all of its liabilities and obligations prior to or on the
Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. All issued and outstanding Shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares, after the Closing Date as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Corporation up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Corporation, on which the Corporation is dissolved
and deregistered.
1.9 The Corporation shall be deregistered as an investment company
under the 1940 Act and dissolved as a Maryland corporation as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's
then-current prospectus or statement of additional information.
2.2 The net asset value of each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be December , 1996 or such later date as
--
the parties may mutually agree. All acts taking place at the Closing Date
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 ARM Transfer Agency, Inc., as transfer agent for the Acquired
Fund, shall deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares owned by each such shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments,
assumption agreements, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Corporation represents and warrants to the Acquiring Fund as
follows:
(a) The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has power to own all of its properties and assets and to carry
out this Agreement.
(b) The Corporation is registered under the 1940 Act, as an
open-end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Corporation is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Corporation's Articles of Incorporation or Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1994 has been audited by independent auditors and at
December 31, 1995 has been audited by Ernst & Young LLP, independent
auditors, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such dates, and there are no
known contingent liabilities of the Acquired Fund as of such dates not
disclosed therein.
(h) The unaudited Statement of Assets and Liabilities of
the Acquired Fund at June 30, 1996 has been prepared in accordance with
generally accepted accounting principles, consistently applied, although
subject to year-end adjustments, and on a basis consistent with the
Statement of Assets and Liabilities of the Acquired Fund at December 31,
1995 which has been audited by Ernst & Young LLP, independent auditors, and
such statement (copies of which have been furnished to the Acquiring Fund)
fairly reflects the financial condition of the Acquired Fund as of such
date, and there are no known liabilities of the Acquired Fund, contingent
or otherwise, as of such date not disclosed therein.
(i) Since June 30, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(k) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(n) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Corporation and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes the
valid and legally binding obligation of the Acquired Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and to general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Acquiring Fund represents and warrants to the Corporation as
follows:
(a) The Acquiring Fund is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquiring Fund's Articles of Incorporation or Bylaws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at March 31, 1995 and 1996, have been audited by Arthur
Andersen LLP, independent auditors, and have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since March 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as disclosed to and accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
Federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, subject to
applicable statute of limitation periods, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
5.COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include customary dividends and distributions.
5.2 The Corporation will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated
herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for Federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Corporation's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Code section 103(a) over
its deductions disallowed under Code sections 265 and 171(a)(2) for the
taxable periods or years ended on or before December 31, 1995 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital
gain, if any, realized in taxable periods or years ended on or before
December 31, 1995 and in the period from said date to and including the
Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Corporation contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the Acquired Fund.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Corporation made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Corporation's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Acquiring Fund and the Corporation shall have received an
opinion of Dickstein Shapiro Morin & Oshinsky LLP substantially to the
effect that for Federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets in
exchange for the Acquiring Fund Shares and the distribution of the
Acquiring Fund Shares to the Acquired Fund Shareholders in liquidation of
the Acquired Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Acquired Fund
solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund
assets to the Acquiring Fund in exchange for the Acquiring Fund Shares or
upon the distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund Shareholders in exchange for their shares of
the Acquired Fund; (d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Directors of the
Corporation or the Board of Directors of the Acquiring Fund at any time
prior to the Closing Date (and notwithstanding any vote of the Acquired
Fund Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors or officers of the
Corporation or the Acquiring Fund or the shareholders of the Acquiring Fund
or of the Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Directors of the Acquiring Fund or
the Board of Directors of the Corporation, if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Acquiring Fund or
of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements, and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
18
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the reorganization
including accountants' fees, registration fees, transfer taxes (if any),
the fees of banks and transfer agents and the costs of preparing, printing,
copying and mailing proxy solicitation materials to the Acquired Fund's
shareholders and the costs of holding the Special Meeting of Shareholders.
ARM Financial Group, Inc. will assume the legal fees of the Acquired Fund.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
STATE BOND INVESTMENT FUNDS, INC.,
on behalf of its portfolio,
Attest: STATE BOND DIVERSIFIED FUND
/s/ Sheri Bean By: /s/ Kevin L.
Howard
Name: Sheri Bean Name: Kevin L. Howard
Title: Assistant Secretary Title: Vice President and Secretary
Acquiring Fund:
Attest: FEDERATED AMERICAN LEADERS FUND,
INC.
/s/ S. Elliot Cohan By: /s/ J.
Christopher Donahue
Name: S. Elliot Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: Executive Vice President
EXHIBIT 17.2
STATE BOND DIVERSIFIED FUND,
a Portfolio of
STATE BOND INVESTMENT FUNDS, INC.,
SPECIAL MEETING OF SHAREHOLDERS
December , 1996
==
STATE BOND DIVERSIFIED FUND,
a Portfolio of
STATE BOND INVESTMENT FUNDS, INC.
CUSIP NO. 856900105
The undersigned shareholder(s) of State Bond Diversified Fund, a portfolio
of State Bond Investment Funds, Inc. (the `State Bond Fund''), hereby
appoint(s) Kevin L. Howard, Keith O. Martens and Dale C. Bauman, or any of
them true and lawful proxies, with power of substitution of each, to vote
all shares of the State Bond Fund which the undersigned is entitled to
vote, at the Special Meeting of Shareholders to be held on December ,
--
1996, at 100 North Minnesota Street, New Ulm, Minnesota 56073-0069, at 3:20
p.m. (local time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The proxies
named will vote the shares represented by this proxy in accordance with the
choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THAT MATTER.
PROPOSAL
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE STATE BOND FUND AND FEDERATED AMERICAN LEADERS FUND, INC.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X
KEEP THIS PORTION FOR YOUR RECORDS.
DETACH AND RETURN THIS PORTION ONLY.
STATE BOND DIVERSIFIED FUND,
a portfolio of State Bond
Investment Funds, Inc.
RECORD DATE SHARES:
-----------------
VOTE ON THE PROPOSAL
FOR AGAINST ABSTAIN
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
- -----------------------------------
Signature(s) of Shareholder(s)
Date:______________________________
Exhibit 14.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A of State Bond Diversified Fund of our
report dated January 23, 1995 (except for Note E, dated February 16, 1995)
accompanying the financial statements of State Bond Diversified Fund for
the year ended December 31, 1994 and to the reference to us under the
heading `Financial Highlights'' appearing in the Prospectus which is part
of such Registration Statement and is incorporated by reference in the
Registration Statement (Form N-14) of Federated Fund American Leaders Fund,
Inc. filed with the Securities and Exchange Commission.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Minneapolis, Minnesota
September 30, 1996
