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
It is proposed that this filing will become effective on April 23, 1997
pursuant to Rule 488. (Approximate Date of Proposed Public Offering).
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.
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 Penn Square Fund
6.Information About the Information About the Federated Fund
Company Being Acquired and the Penn Square 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
PENN SQUARE MUTUAL FUND
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
Dear Shareholders:
The Board of Trustees and management of Penn Square Mutual Fund
(the `Penn Square Fund'') are pleased to submit for your vote a proposal
for the tax-free transfer of all the assets of the Penn Square 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 Penn Square Fund in that it seeks growth
of capital and income by concentrating on the area of investment decision
in the securities of high quality companies. As part of the transaction,
holders of shares in the Penn Square Fund would receive shares of the
Federated Fund equal in value to their shares in the Penn Square Fund and
the Penn Square Fund would be liquidated. Shareholders would not have to
pay a sales charge 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. Further, William Penn fund
group shareholders who were invested as of November 30, 1988, will not be
charged a sales charge for future purchases made in any Federated Fund,
provided the account has remained open since that date.
The Board of Trustees of the Penn Square Fund, as well as Penn
Square Management Corporation, the Penn Square Fund's manager and
distributor, believe the proposed agreement and plan of reorganization is
in the best interests of Penn Square Fund shareholders for the following
reasons:
-- The Federated Fund has an investment objective similar to that
of the Penn Square Fund and offers an investment portfolio which
seeks growth of capital and income by concentrating in the area of
investment decision in the securities of high quality companies.
-- The Federated Fund offers competitive performance and
comparable expense ratios.
-- As an investor in the Federated Fund, shareholders would have
access to a dramatically expanded array of investment alternatives
in the Federated retail family of funds.
-- Federated Investors also has an excellent reputation for
customer servicing, having received a #1 rating for the last five
surveys 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,
and efficient routing of telephone calls to the appropriate
person.
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 $110
billion invested across more than 300 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 family
management who founded the company in 1955. Federated funds are presently
at work in and through 4,500 financial institutions nationwide.
We believe the transfer of the Penn Square 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
Penn Square 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 TRUSTEES BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTERESTS OF THE PENN SQUARE FUND AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
James E. Jordan
President
PENN SQUARE MUTUAL FUND
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF PENN SQUARE MUTUAL FUND:
A Special Meeting of Shareholders of Penn Square Mutual Fund (the
`Penn Square Fund'') will be held at 9:00 a.m. (general meeting) and 11:00
a.m. (Fund meeting) on May 29,1997 at: Sheraton Berkshire Motor Inn, 1741
Paper Mill Road, Wyomissing, PA 19610, for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the Penn Square Fund and Federated American Leaders
Fund, Inc. (the `Federated Fund''), whereby the Federated Fund would
acquire all of the assets and assume certain liabilities of the Penn Square
Fund in exchange for the Federated Fund's Class A Shares and Class C Shares
to be distributed pro rata by the Penn Square Fund to the holders of its
Class A Shares and Class C Shares respectively in complete liquidation of
the Penn Square 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 Trustees,
Dated: [ ] Sandra J. Houck
Secretary
Shareholders of record at the close of business on [ ],
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
[ ]
Acquisition of the Assets of
PENN SQUARE MUTUAL FUND
2650 Westview Drive
Wyomissing, PA 19610
Telephone Number: 1-800-523-8440
By and in exchange for Class A Shares and Class C 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 assets and assume certain liabilities of Penn Square Mutual Fund
(the `Penn Square Fund''), a Pennsylvania common-law trust, in exchange
for the Federated Fund's Class A Shares and Class C Shares to be
distributed pro rata by the Penn Square Fund to the holders of its Class A
Shares and Class C Shares, respectively, in complete liquidation of the
Penn Square Fund. As a result of the Plan, each shareholder of the Penn
Square Fund will become the owner of the corresponding Federated Fund's
Class A Shares and Class C Shares having a total net asset value equal to
the total net asset value of his or her holdings in the Penn Square Fund's
Class A Shares and Class C Shares.
THE BOARD OF TRUSTEES OF THE PENN SQUARE FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The shares of each of the Federated Fund and the Penn Square Fund
represent interests in separate open-end, diversified management investment
companies. The Federated Fund's investment objective is to seek growth of
capital and of income by concentrating in the area of investment decision
in the securities of high quality companies. The Penn Square Fund's
primary investment objective is long-term capital growth from a diversified
portfolio of securities, consisting for the most part of blue chip common
stocks. The realization of current income is a secondary consideration
although an important one. For a comparison of the investment policies of
the Federated Fund and the Penn Square 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 [ ], 1997 (relating to this Prospectus/Proxy
------------
Statement), the Annual Report to Shareholders dated March 31, 1996, and
Semi-Annual Report to Shareholders dated September 30, 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, the Annual Report, and the Semi-
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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Penn Square Management Corp.
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 Penn Square Management Corporation,
The William Penn Company 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 Penn Square Fund
Federated American Leaders Fund, Inc. ..................
Penn Square Mutual 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
(CLASS A SHARES)
<TABLE>
<CAPTION>
Penn Square Pro Forma
Federated Fund Fund Combined
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.50%(1) 4.75% 5.50%(1)
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price) None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,
as applicable) 0.00%(2) None 0.00%(2)
Redemption Fee (as a percentage of
amount redeemed, if applicable)(3) None None None
Exchange Fee None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee 0.65% 0.65% 0.63%
12b-1 Fee(4) None 0.13% None
Total Other Expenses(5) 0.51% 0.18% 0.45%
Total Operating Expenses(6) 1.16% 0.96% 1.08%
(1) This sales charge would not be applicable to Class A Shares of the
Federated Fund acquired through the proposed reorganization, or to Penn
Square Fund invested as of November 30, 1988, for future purchases of any
of the Federated Funds provided the account remains open.
(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. and not charged a
sales charge but 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 `Summary - Distribution Arrangements.'' This
contingent deferred sales charge would not be applicable to Class A Shares
of the Federated Fund acquired through 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 Penn Square Fund shares by wire
transfer.
(4) With respect to the Penn Square Fund, the 12b-1 fee has been reduced
to reflect the voluntary waiver; the maximum 12b-1 fee for Class A Shares
is 0.50%. The Federated Fund's Class A Shares have no 12b-1 fee.
(5) Total other expenses for the Federated Fund and the Pro Forma Combined
Fund include a shareholder services fee of 0.18% and 0.00% for the Penn
Square Fund. 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 in its sole discretion. The maximum shareholder services fee is 0.25%
for the Federated Fund and the Pro Forma Combined Fund and 0.50% for Penn
Square Fund.
(6) The total operating expenses for Class A Shares of the Federated Fund
are based on expenses expected during its 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 Penn Square Fund are based upon expenses incurred by the Penn Square
Fund during its fiscal year ended December 31, 1996. The total operating
expenses were 0.96% for the fiscal year ended December 31, 1996.
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 Penn Square 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."
EXAMPLES
The Examples below are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Examples assume payment of operating expenses at the
levels set forth in the table above.
(1) This Example does not include sales charges or contingent deferred
sales charges since such sales charges are not applicable to Federated Fund
Class A Shares received as a result of the proposed reorganization.
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 years10 years
Federated Fund $12 $37 $64 $141
Penn Square Fund $10 $31 $53 $118
Pro Forma Combined $11 $34 $60 $132
(2) This Example includes sales charges since Class A Shares purchased
subsequent to the reorganization may be subject to sales charges. For a
more 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 Penn Square Fund dated March 15, 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 $66 $96 $115 $188
Penn Square Fund $57 $77 $98 $160
Pro Forma Combined $65 $87 $111 $179
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY OF EXPENSES
(CLASS C SHARES)
<TABLE>
<CAPTION>
Penn Square Pro Forma
Federated Fund Fund Combined
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage of
offering price) None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,
as applicable)(1) 1.00% 1.00% 1.00%
Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None
Exchange Fee None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee 0.65% 0.65% 0.63%
12b-1 Fee 0.75% 0.75% 0.75%
Total Other Expenses(2) 0.56% 0.53% 0.49%
Total Operating Expenses(3) 1.96% 1.93% 1.87%
(1) The Contingent Deferred Sales Charge assessed is 1.00% of the lesser
of the original purchase price or the net Asset Value of Shares redeemed
within one year of their purchase date. For a more complete description,
see `Summary -- Distribution Arrangement.''
(2) Total Other Expenses include a shareholder services fee of 0.25%.
(3) The total operating expenses for Class C Shares of the Federated Fund
are based on expenses expected during its fiscal year ending March 31,
1997. The total operating expenses were 1.96% for the fiscal year ended
March 31, 1996, and would have been 1.98% absent the voluntary waiver of a
portion of the shareholder services fee. The total operating expenses for
the Penn Square Fund are based upon estimates for fiscal year ending
December 31, 1996. The total operating expenses were, 1.83% for fiscal
year ended December 31, 1996.
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 Penn Square 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."
EXAMPLES
The Examples below are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The Examples assume payment of operating expenses at the
levels set forth in the table above.
(1) This Example does not include sales charges or contingent deferred
sales charges since such sales charges are not applicable to Federated Fund
Class C Shares received as a result of the proposed reorganization.
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 $20 $62 $106 $229
Penn Square Fund $19 $58 $99 $215
Pro Forma Combined $19 $59 $101 $219
(2) This Example includes contingent deferred sales charges since Class C
Shares purchased subsequent to the reorganization may be subject to a sales
charge. For a more complete description of 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 Penn Square Fund dated March 15, 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. 1 year 3 years 5 years 10 years
Federated Fund $30 $62 $106 $229
Penn Square Fund $19 $58 $99 $215
Pro Forma Combined $29 $59 $101 $219
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) no redemption at the end of each time
period. 1 year 3 years 5 years 10 years
Federated Fund $20 $62 $106 $229
Penn Square Fund $19 $58 $99 $215
Pro Forma Combined $29 $59 $101 $219
THE ABOVE EXAMPLES 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 Statement of Additional Information, dated [ ],
related to 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 Penn Square Fund
dated March 15, 1996, the Statement of Additional Information of the Penn
Square Fund dated March 15, 1996, and the Plan, a copy of which is attached
to this Prospectus/Proxy Statement as Exhibit A all of which are
incorporated herein by reference thereto.
About the Proposed Reorganization
The Board of Trustees of the Penn Square Fund has voted unanimously
to recommend to holders of the Class A Shares and Class C Shares of the
Penn Square Fund the approval of the Plan whereby the Federated Fund would
acquire all of the assets and assume certain liabilities of the Penn Square
Fund's Class A Shares and Class C Shares in exchange for the corresponding
Federated Fund's Class A Shares and Class C Shares to be distributed pro
rata by the Penn Square Fund to holders of its Class A Shares and Class C
Shres, respectively, in complete liquidation and dissolution of the Penn
Square Fund (the "Reorganization"). As a result of the Reorganization,
each shareholder of the Penn Square Fund Class A Shares and Class C Shares
will become the owner of the Federated Fund's Class A Shares or Class C
Shares, respectively, having a total net asset value equal to the total net
asset value of his or her holdings in the Penn Square 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 Penn Square 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 Penn Square Fund or the shareholders of the Penn
Square Fund. The tax basis of the Federated Fund's corresponding Class A
Shares and Class C Shares received by Penn Square Fund's Class A Shares and
Class C Shares shareholders will be the same as the tax basis of their
shares in the Penn Square Fund. After the acquisition is completed, the
Penn Square 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 `1940 Act'').
The primary investment objective of the Penn Square Fund is long-
term capital growth from a diversified portfolio of securities, consisting
for the most part of blue chip common stocks. The realization of current
income is a secondary consideration, although an important one. The
investment objectives may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the Penn Square 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 `The
Leaders List.'' ``The Leaders List'' is a trade name which represents a
list of 100 blue chip companies selected by Federated Advisers 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, Baa 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. (`Fitch'') 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 investment universe for the Penn Square Fund is generally
comprised of stocks in the Standard & Poor's 500 Stock Index. The Penn
Square Fund usually buys only dividend paying stocks, and usually requires
that the dividend yield of a stock at the time of purchase equal or exceed
that of the S&P 500 at that time. The Penn Square Fund will generally not
pay a multiple for earnings that exceed a company's expected earnings
growth rate, and will generally not buy the stocks of companies whose long-
term debt exceeds 35% of total capitalization. At times, the Penn Square
Fund's assets may be invested for defensive purposes in bonds, preferred
stocks, and other debt instruments, or in cash and cash equivalents. In
order to enhance Penn Square Fund income, the Fund may sell covered-call
options. When appropriate, the Penn Square Fund may purchase foreign
securities through dollar-denominated American Depositary Receipts
(`ADRs''). ADRs do not involve the same currency risks as securities
denominated in foreign currency and are issued by domestic banks and
publicly traded in the United States. Unless otherwise designated, the
investment policies of the Penn Square Fund may be changed by the Board of
Directors without shareholder approval.
Both the Federated Fund and the Penn Square 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 5% of the value of its
total 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 above investment
limitations of the Federated Fund cannot be changed without shareholder
approval.
The Penn Square Fund may not: (1) sell short or buy on margin; (2)
purchase or retain any common or preferred stock of an issuer if the
Trustees together own more than 5% of any class of securities of such
issuer; (3) purchase securities of any issuer if such purchase would cause
more than 5% of the total assets at market to be invested in the securities
of such issuer (other than obligations of the United States, its agencies
and instrumentalities) of if such purchase, except temporarily in the event
of a merger of a portfolio company, would cause more than 10% of any class
of securities of such issuer to be held in the Fund's portfolio; (4) invest
in companies for the purpose of exercising control of management; (5) buy
or sell real estate except real estate investment trusts; (6) make loans to
other persons (except by the purchase of bonds and other obligations
constituting part of a public issue), or underwrite securities issued by
others; (7) purchase the securities of any other investment company, except
where such purchase is a part of a plan of merger or consolidation; (8)
purchase securities of companies which including predecessors have not had
a record of continuous operation for at least five years; (9) borrow money
on behalf of the Fund or Trustees of the Fund; (10) invest more than 25% of
its assets in any one industry; and (11) no member of the Investment
Committee of the Fund may serve as a director, trustee, or officer of any
issuer during such period that securities of said issuer are held in the
Fund's portfolio. The above investment limitations of the Penn Square Fund
cannot be changed without shareholder approval.
In addition to the policies and limitations set forth above, both
the Federated Fund and the Penn Square 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 Penn
Square Fund's Statement of Additional Information dated March 15, 1996.
Reference is hereby made to the Federated Fund's Prospectus and Statement
of Additional Information, each dated May 31, 1996, and to the Penn Square
Fund's Prospectus and Statement of Additional Information, each dated March
15, 1996, which set forth in full the investment objective, policies and
investment limitations of each of the Federated Fund and the Penn Square
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, 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. The maximum annual
management fee for the Penn Square Fund is 0.65 of 1% of average daily net
assets of the Penn Square Fund. The investment adviser of the Penn Square
Fund is Penn Square Management Corporation. The adviser is a wholly owned
subsidiary of The William Penn Company, New York, York.
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% on the first $250 million of all such funds'
average aggregate daily net assets, 0.125% on the next $250 million, 0.10%
on the next $250 million and 0.075% 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 fiscal year ended March 31, 1996, was $423,163,
representing an effective fee rate of %. Administrative personnel and
---
services necessary to operate the Penn Square Fund are currently provided
by Penn Square Management Corporation and are included in the annual
transfer agent fee for the Penn Square Fund.
The Federated Fund has entered into a Shareholder Services
Agreement under which it may make payments of up to 0.25% of the average
daily net asset value of each of the Class A Shares and Class C 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,
either will 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.
The total annual operating expenses for Class A Shares and Class C
Shares of the Federated Fund were 1.16% and 1.96% respectively of average
daily net assets (after waivers) for its most recent fiscal year. The
total annual operating expenses for Class A Shares of the Penn Square Fund
were [ ]% and [ ]% respectively of average daily net assets (after
expense reimbursements) for its most recent fiscal year. Without such
waivers or reimbursements, the expense ratios of the Federated Fund would
have been 1.23% (Class A Shares), 1.98% (Class C Shares) and for the Penn
Square Fund, % (Class A Shares) and % (Class C Shares).
--- ---
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated
Advisers, is the principal distributor for shares of the Federated Fund.
The Federated Fund has adopted a Rule 12b-1 Distribution Plan (the
`Distribution Plan'') pursuant to which the Federated Fund will pay a fee
to the distributor in an amount computed at an annual rate of 0.75% of the
average daily net assets of the Class C Shares to finance any activity
which is principally intended to result in the sale of Class C Shares
subject to the Distribution Plan. FSC may offer to pay financial
institutions, at the time of purchase, an amount equal to 1.00% of the net
asset value of Class C Shares purchased by their clients. These payments
will be made directly by the distributor from its assets, and will not be
made from the assets of the Fund. The Federated Fund does not have a
Distribution Plan in effect with respect to its Class A Shares. However,
FSC will pay financial institutions, at the time of purchase of Class A
Shares, an amount equal to 0.50% of the net asset value of Class A Shares
purchased by 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 and
FSS, from their 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 Class A Shares and Class C Shares of the Federated Fund. Such
assistance will be predicated upon the amount of shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments
made by 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).
Penn Square Management Corporation is the principal distributor for
shares of the Penn Square Fund. The Penn Square Fund has adopted a Rule
12b-1 Distribution Plan (the "Rule 12b-1 Plan") pursuant to which the Penn
Square Fund reimburses Penn Square Management Corporation for certain of
its expenses incurred in connection with its services as distributor at an
annual rate not to exceed 0.50% of the average daily net assets of the Penn
Square Fund's Class A Shares. The fee may be used by Penn Square
Management Corporation for its expenses incurred in connection with (a)
advertising and marketing Class A Shares; (b) printing and distributing the
Prospectus; (c) implementing and operating the Rule 12b-1 Plan; and (d)
payments made by the distributor for servicing fees to broker/dealers,
financial institutions, or other industry professionals (`Service
Organizations') for distribution and/or shareholder administrative
services provided to their customers who own Class A Shares. Pursuant to a
Servicing Agreement with Penn Square Management Corporation, a Service
Organization may receive, on an annual basis, up to 0.50% of the average
daily net asset value of the Class A Shares owned by shareholders with whom
the Service Organization has a servicing relationship. The services
provided by a Service Organization pursuant to a Servicing Agreement may
include distribution or shareholder administrative services, including
establishing and maintaining shareholder accounts, sending confirmations of
transactions, forwarding financial reports and other communications to
shareholders, and responding to shareholder inquiries regarding the Penn
Square Fund. The Penn Square Fund has adopted a Distribution Plan for
Class C Shares to compensate the distributor for its services and costs in
distributing Class C Shares. Under the Rule 12b-1 Plan, the Penn Square
Fund pays Penn Square Management Corporation an annual 12b-1 Distribution
Fee of 0.75% per year on Class C Shares. Penn Square Management
Corporation also receives a Service Fee of 0.25% per year. Both fees are
computed on the average annual net assets of Class C Shares, determined as
of the close of each regular business day. The distribution fee allows
investors to buy Class C Shares without a front end sales charge while
permitting the distributor to compensate dealers who sell Class C Shares.
The distribution and service fee increase Class C expenses by 1.00% of
average net assets per year. Penn Square Management Corporation pays sales
commissions of 1.00% of the purchase price to dealers from its own
resources at the time of sale. Penn Square Management Corporation retains
the distribution fee during the first year shares are outstanding to recoup
the sales commission it pays, the advances of service fee payments it
makes, and its financing costs. Penn Square Management Corporation plans
to pay the distribution fee as an ongoing commission to the dealer on Class
C Shares that have been outstanding for a year or more. Penn Square
Management Corporation receives no other compensation for its services as
distributor, except that the sales charge will be paid to the distributor.
Penn Square Management Corporation may, in turn, pay such sales charge to
broker/dealers as a commission for generating sales of Class C Shares.
Certain costs exist with respect to the purchase and sale of
Federated Fund and Penn Square Fund shares. Shares of the Federated Fund
and shares of the Penn Square Fund are sold at their net asset value next
determined after an order is received, plus any applicable sales charge.
The Federated Fund Class A Shares and Penn Square Fund Class A Shares have
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 Class A
Shares to Class A Shareholders of the Penn Square Fund as a result of the
Reorganization. Further, shareholders of the William Penn fund group who
acquired Class A Shares on or before November 30, 1988, will not be charged
a sales charge for future purchases made in any Federated fund, provided
the account has remained open. 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% 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 Class A
Shares received by shareholders of the Penn Square Fund as a result of the
Reorganization. Sales of Class C Shares are subject to a 1.00% contingent
deferred sales charge on assets redeemed within the first twelve months
following purchase. 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 Penn Square Fund dated March 15, 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. The transfer agent and
dividend disbursing agent for the Penn Square Fund is Penn Square
Management Corporation. Procedures for the purchase, exchange and
redemption of the Federated Fund's Class A Shares and Class C Shares differ
slightly from procedures applicable to the purchase, exchange and
redemption of the Penn Square Fund's Class A Shares and Class C 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 and Class C Shares or the Penn Square Fund's Class A Shares and
Class C Shares may be obtained from FSC, principal distributor for the
Federated Fund, at 1-800-341-7400, or from Penn Square Management
Corporation, principal distributor for the Penn Square Fund, at 1-800-523-
8440.
Reference is made to the Prospectus of the Federated Fund dated May
31, 1996, and the Prospectus of the Penn Square Fund dated March 15, 1996,
for a complete description of the purchase, exchange and redemption
procedures applicable to purchases, exchanges, and redemptions of Federated
Fund and Penn Square 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 Class C Shares and
the Penn Square Fund's Class A Shares and Class C Shares.
Purchases of Class A Shares and Class C Shares of the Federated
Fund may be made through a financial institution that has an agreement with
FSC or, once an account has been established, by wire or check. Purchases
of shares of the Penn Square Fund may be made through Penn Square
Management Corporation and through certain broker-dealers under contract
with Penn Square Management Corporation or directly by wire or check once
an account has been established. The minimum initial investment in the
Federated Fund is $500 for Class A Shares and $1,500 for Class C Shares,
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 Penn Square Fund is $500 for either Class of Shares, except for
retirement accounts for which the minimum is $250. Subsequent investments
must be in amounts of at least $100. The Federated Fund and the Penn
Square Fund each reserves the right to reject any purchase request.
The purchase price of the Federated Fund's Class A Shares and the
Penn Square Fund's Class A Shares is based on net asset value plus a sales
charge. The net asset value per share for each class of the Federated Fund
and the Penn Square 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 Penn Square 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 the Penn Square Fund are
executed based on the net asset value calculated at the close of business
on the day such purchase orders are received. Purchase orders received
after the close of the NYSE will be executed based on the net asset value
calculated on the next business day. Redemption orders for shares of the
Penn Square Fund presented prior to the close of the NYSE on any business
day are redeemed at the net asset value calculated at the close of the
exchange that day, except that some Class C Shares may be subject to a
1.00% contingent deferred sales charge. 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 and Class C Shares of the Federated Fund
have exchange privileges with respect to corresponding Class A Shares and
Class C 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 and Class C Shares of
the Federated Fund may be exchanged for corresponding Class A Shares and
Class C Shares of certain Federated Funds at net asset value without a
contingent deferred sales charge. To the extent a shareholder exchanges
Class A Shares or Class C Shares of the Federated Fund for Class A Shares
or Class C Shares of 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 for purposes of determining the contingent deferred sales
charge. 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 Penn Square Fund have
exchange privileges with respect to shares in certain of the other funds
for which Penn Square Management Corporation serves as investment manager
(collectively, the `Penn Square Group''), each of which has different
investment objectives and policies. Any exchange for shares of other funds
in the Penn Square Group will generally be at the respective net asset
values next determined after receipt of the request for exchange, provided
the amount exchanged previously incurred a sales charge. 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 Penn Square Fund, as appropriate.
Redemptions of Federated Fund Class A Shares and Class C 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 Penn Square Fund shares may be made by presenting share
certificates, by letter form, by telephone, or through the Penn Square
Fund's systematic withdrawal plan. Class C 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.
The Penn Square Fund imposes no charges for redemptions of Class A Shares.
For Class C Shares, redemptions within the first year of purchase will bear
a contingent deferred sales charge. Penn Square Fund Class C shareholders
will have their current holding period tacked into the period of time they
hold their corresponding Federated Class C Shares for purposes of
determining any applicable redemption charges. Redemptions may also be
made through a broker/dealer, and that broker/dealer may charge a
transaction fee. Checks for redemption proceeds will be mailed within
three business days. However, redemption checks will not be mailed until
all checks in payment for the shares redeemed have been cleared.
Dividends
Both the Federated Fund and the Penn Square Fund pay dividends
quarterly from net investment income and make annual distributions of net
realized capital gains, if any. With respect to the Federated 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. The Penn Square Fund shareholders may instruct
the fund to make such reinvestments which are also not subject to a sales
charge.
Tax Consequences
As a condition to the Reorganization, the Federated Fund and the
Penn Square 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 Penn Square Fund or the shareholders of the Penn
Square Fund. The tax basis of the Federated Fund shares received by Penn
Square Fund shareholders will be the same as the tax basis of their shares
in the Penn Square 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 Penn Square 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 Penn Square Fund. The Federated Fund may also
acquire securities which are subject to legal or contractual delays,
restrictions, and costs of resale. Because of time limitations, the
Federated Fund might not be able to dispose of these securities at
reasonable prices or at times advantageous to the Federated Fund. A full
discussion of the risks inherent in investment in the Federated Fund and
the Penn Square Fund is set forth in the Federated Fund's Prospectus and
Statement of Additional Information, each dated May 31, 1996, and the Penn
Square Fund's Prospectus and Statement of Additional Information, each
dated March 15, 1996, each of which is incorporated herein by reference
thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
Considerations of the Board of Trustees of the Penn Square Fund.
On February 12, 1997, Penn Square Management Corporation advised the Board
of Trustees of the Penn Square Fund that The William Penn Company was
considering redirecting its corporate strategy away from the management and
distribution of retail mutual funds and that it was seeking a buyer for its
core businesses. Moreover, Penn Square Management Corporation engaged an
investment banker to locate potential buyers for the Corporation. The
potential buyer would provide value-added shareholder services,
technological advancements, comprehensive distribution networks, and
diversified mutual fund product choices that many larger mutual fund
complexes offer. After conducting a screening process, Penn Square
Management Corporation determined that in its judgment, the proposed
Reorganization was the most desirable alternative involving the Penn Square
Fund that was reasonably available and that it should be presented to the
Penn Square Fund's Board of Trustees for its consideration.
The independent trustees formed a four-person due diligence team.
The due diligence team visited the Federated Investors offices in
Pittsburgh, Pennsylvania, and reviewed with the portfolio manager of the
Federated Fund the investment style and philosophy used to manage the
assets of the Federated Fund. In addition, the due diligence team
inspected the Federated customer services area and the Penn Square Fund's
independent counsel inspected the legal records of the Federated Fund.
A meeting of the entire Board of Trustees was held on March 5,
1997, at which Federated Investors 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 $110 billion invested
across more than 300 funds under management and/or administration by its
subsidiaries, and over 2,000 employees. Federated's management discussed
the Federated Fund's investment performance history and 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 Willliam Penn Fund Group, the exchange privileges that would
be available to former Penn Square 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 Penn Square Fund would
receive shares of the Federated Fund without the imposition of any sales
charge and without incurring any tax consequences.
Federated's management advised the Board of its reputation for
customer servicing, noting that it has received a #1 rating for the last
five surveys 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 charges
with the Board. In particular, it was noted that the maximum front-end
sales load of the Class A Shares of the Federated Fund is higher than that
of the Class A Shares of the Penn Square 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 Penn Square Fund and considered
potential economies of scale that might be experienced by former Penn
Square Fund shareholders if they were to become shareholders of a larger
fund.
The Board determined that the investment objectives and policies of
the Penn Square Fund were substantially similar to those of the Federated
Fund. The Board was also presented with and discussed materials comparing
the performance, and relative risks of the Penn Square 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 noted that the Penn Square Fund would not bear any of the
costs involved in the Reorganization, which would be borne entirely by The
William Penn Company and/or Federated. In addition, the Board discussed
the anticipated tax-free nature of the Reorganization to the Penn Square
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 Penn Square Management Corporation),
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 Trustees of the investment company
are not `interested persons'' (as defined in the 1940 Act) of the new
investment manager or its predecessor; and (2) no `unfair burden'' (as
defined in the 1940 Act) is imposed on the investment company as a result
of the assignment or any express or implied terms, conditions or
understandings applicable thereto.
With respect to the first condition of Section 15(f) relating to
Board composition, the Board was advised that the Federated Fund's Board of
Trustees presently consists of thirteen (13) Directors, only three (3) of
whom are `interested persons.'' With respect to the second condition of
Section 15(f), while there is no specific definition of `unfair burden,''
it includes any arrangement, for two years after the transaction, pursuant
to which the predecessor or successor adviser is entitled to receive
compensation from any person in connection with the mutual fund's purchase
or sale of securities, other than bona fide ordinary compensation as
principal underwriter. The definition of unfair burden also includes any
payments from the fund for other than bona fide investment advisory or
other services. The Board considered the fact that representations were
made by Federated and Penn Square Management Corporation that the agreement
among Federated, Penn Square Management Corporation and The William Penn
Company would contain representations and covenants that the Reorganization
would not impose an unfair burden on the Penn Square Group.
After reviewing and considering all of the information provided by
Federated and Penn Square Management Corporation, including the terms of
the Reorganization, the Board, including all of the Trustees who are not
interested persons of the Penn Square Fund or Penn Square Management
Corporation, voted unanimously in person at the meeting held on March 5,
1997, to approve the Reorganization and to recommend it to the shareholders
of the Penn Square 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 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 William Penn Fund Group Shareholders, The William Penn
Company and Federated
The Reorganization is being proposed as part of an agreement
between Federated, The William Penn Company and the Penn Square Group
Shareholders, pursuant to which The William Penn Company would be
compensated for selling to Federated it's capital stock and the books,
records and goodwill relating to the management of the Penn Square Group
and cooperating in facilitating the transaction contemplated by the
agreement.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the
assets and assume certain liabilities of the Penn Square Fund's Class A
Shares and Class C Shares in exchange for the Federated Fund's Class A
Shares and Class C Shares to be distributed pro rata by the Penn Square
Fund to its Class A and Class C shareholders, respectively, shareholders in
complete liquidation of the Penn Square Fund on or about [ ]
(the "Closing Date"). Shareholders of the Penn Square 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 Penn Square 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 Penn Square 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 Penn Square 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 Penn Square Fund prior to the Closing
Date by either party if a majority of the independent board members of
either board believes that continuing the transaction would have a material
adverse impact on shareholders of that fund.
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, registration fees, transfer taxes (if any), and the costs
of preparing, printing, copying and mailing proxy solicitation materials to
the Penn Square Fund shareholders. Penn Square Management Corporation is
responsible for the payment of the legal fees of the Penn Square Fund. The
accountants' fees of the Penn Square Fund will be borne by Penn Square
Management Corporation.
The foregoing description of the Plan entered into between the
Federated Fund and the Penn Square 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 and Class C Shares of the
Federated Fund will be issued without the imposition of a sales charge or
other fee to the corresponding shareholders of the Penn Square Fund in
accordance with the procedures described above. Class A Shares and Class C
Shares of the Federated Fund to be issued to shareholders of the Penn
Square 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 and Class C Shares of the Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Fund and the
Penn Square 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 Penn
Square Fund's assets solely in exchange for Federated Fund Class A Shares
and Class C Shares and the assumption of certain stated liabilities; (3) no
gain or loss will be recognized by the Penn Square Fund upon the transfer
of its assets to the Federated Fund in exchange for Federated Fund Class A
Shares and Class C Shares and the assumption of certain stated liabilities
or upon the distribution (whether actual or constructive) of the Federated
Fund Class A Shares and Class C Shares to the Penn Square Fund shareholders
in exchange for their respective shares of the Penn Square Fund; (4) no
gain or loss will be recognized by shareholders of the Penn Square Fund
upon the exchange of their Penn Square Fund shares for Federated Fund Class
A Shares and Class C Shares; (5) the tax basis of the Penn Square Fund's
assets acquired by the Federated Fund will be the same as the tax basis of
such assets to the Penn Square Fund immediately prior to the
Reorganization; (6) the tax basis of Federated Fund Class A Shares and
Class C Shares received by each shareholder of the Penn Square Fund
pursuant to the Plan will be the same as the tax basis of Penn Square Fund
shares held by such shareholder immediately prior to the Reorganization;
(7) the holding period of the assets of the Penn Square Fund in the hands
of the Federated Fund will include the period during which those assets
were held by the Penn Square Fund; and (8) the holding period of Federated
Fund Class A Shares and Class C Shares received by each shareholder of the
Penn Square Fund will include the period during which the Penn Square Fund
shares exchanged therefor were held by such shareholder, provided the Penn
Square 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 Penn
Square 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 Penn Square Fund, followed by the taxable
liquidation of the Penn Square Fund.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the Penn Square 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, By-Laws and Board of Directors, in addition to applicable
state and federal law. The Penn Square Fund is organized as a common law
trust under the laws of the Commonwealth of Pennsylvania and is governed by
its Declaration of Trust and Board of Trustees, 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 Penn
Square Fund.
Shares of the Federated Fund and the Penn Square Fund. The
Federated Fund is authorized to issue 500,000,000 shares of common stock,
par value $0.20 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 Penn Square Fund is
authorized to issue an unlimited number of shares of beneficial interest
which have no par value. The Penn Square Fund has Class A Shares and Class
C Shares. Issued and outstanding shares of both the Federated Fund and
Penn Square Fund are fully paid, nonassessable, and freely transferable.
Voting Rights. The Federated Fund is not 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 Penn Square
Fund must hold meetings annually to appoint or reappoint Trustees. 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. 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 Penn Square Fund have equal voting rights with amendments
being made by the written consent of a majority of the outstanding shares
or with the consent of such owners voting in person or by proxy at a
meeting called to pass upon such amendment.
Directors/Trustees. The By-Laws of the Federated Fund provide that
the term of office of each Director shall be until his or her resignation
or removal or until the annual meeting next held after his or her election
or until election and qualification of his or her successor. A Director of
the Federated Fund may be removed by a vote of a majority of all shares
outstanding and entitled to vote at any special meeting of shareholders,
and such shareholders may elect a Director to replace the Director so
removed to serve for the remainder of the term and until the election and
qualification of his or her successor. A vacancy on the Board may be
filled by the action of a majority of the Directors remaining in office,
and such elected Director shall hold office until the next annual meeting
of shareholders or until his or her successor is duly elected and
qualifies. Notwithstanding the foregoing, the shareholders may, at any
time during the term of such Director elected to fill a vacancy, elect some
other person to fill said vacancy and thereupon the election by the Board
shall be superseded. The Declaration of Trust of the Penn Square Fund
provides that each Trustee appointed or elected in accordance with the
Declaration of Trust serves for terms of one year subject to annual re-
elections continue to serve until their successors have been elected and
qualified, unless they resign or are removed. Regarding the Penn Square
Fund, a majority of the Trustees may accept the written resignation of
another Trustee or may remove him or her from office by written notice to
him and to the Custodian. Pending the filling of any vacancy or vacancies
caused by death, resignation, or removal, the remaining Trustee or Trustees
shall have all the powers and duties of the whole number of Trustees. If a
vacancy occurs in the office of a Trustee for any reason, including an
increase in the number of Trustees, the other Trustees shall by written
notice delivered to the custodian appoint a Trustee to fill the vacancy and
will promptly notify the shareholders that they have done so, subject to
the provisions of Section 16(a) of the 1940 Act. The agreement entered
into with the Custodian provides, that, if at any time the custodian
decides that there is no Trustee available or able to serve, it will call a
meeting of the shareholders to elect at least three (3) Trustees. With
respect to the Federated 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/Trustees and Officers. Under the Articles
of Incorporation of the Federated Fund, a Director or officer will be
personally liable only for his or her own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The Articles of Incorporation further
provide that Directors and officers will be indemnified by the Federated
Fund against reasonable costs and expenses incurred in connection with any
claim or litigation unless the person's conduct is determined to constitute
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of the person's office. The Declaration
of Trust for the Penn Square Fund contains a provision indemnifying the
Trustees by the assets of the fund from personal liability for their
actions as Trustee. Trustees of the Penn Square Fund are not protected
from liability by reason of willful misconduct, bad faith, recklessness, or
gross negligence in the performance of his duties as Trustee. In addition,
due to the provisions of the 1940 Act, shareholders would still have the
right to pursue monetary claims against directors/trustees or officers for
acts involving willful malfeasance, bad faith, gross negligence or reckless
disregard of their duties as directors/trustees or officers.
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 Penn Square Fund, the
shareholders of the respective fund or class are entitled to receive, when
and as declared by its Directors or Trustees, 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 and Class C Shares of the Federated Fund and the shares
of the Penn Square Fund as of February 28, 1997, and on a pro forma
combined basis as of that date:
Class A Shares Pro Forma
Fed. Fund Penn Sq. Combined
Net Assets $653,310,993 $340,754,541 $994,065,534
Shares Outstanding$ 29,457,582 $ 26,973,853 $ 44,959,037
Net Asset Value Per Share $22.11 $12.63 $22.11
Class C Shares Pro Forma
Fed. Fund Penn Sq. Combined
Net Assets $71,365,493 $1,959,911 $73,325,404
Shares Outstanding $3,231,437 $ 155,403 $ 3,320,182
Net Asset Value Per Share $22.08 $12.61 $22.08
INFORMATION ABOUT THE FEDERATED FUND
AND THE PENN SQUARE 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 herein by reference. Additional information
about the Federated Fund is included in the Federated Fund's Annual Report
to Shareholders dated March 31, 1996, the Semi-Annual Report to
Shareholders dated September 30, 1996, the Statement of Additional
Information dated May 31, 1996, and the Statement of Additional Information
dated [ ] (relating to this Prospectus/Proxy Statement), each
of which is incorporated herein by reference. Copies of the Annual Report,
the Semi-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, option one, 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, DC located at Room 1024,
450 Fifth Street, N.W., Washington, DC 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, DC 20549 at prescribed rates or
electronically at Internet Web Site (www.sec.gov).
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.
Penn Square Mutual Fund
Information about the Penn Square Mutual Fund is contained in the
Penn Square Fund's current Prospectus dated March 15, 1996, the Annual
Report to Shareholders dated December 31, 1996, the Semi-Annual Report to
Shareholders dated June 30, 1996, the Statement of Additional Information
dated March 15, 1996, and the Statement of Additional Information dated [
] (relating to this Prospectus/Proxy Statement), each of which is
incorporated herein by reference. Copies of such Prospectus, Annual
Report, Semi-Annual Report, and Statements of Additional Information, which
have been filed with the SEC, may be obtained upon request and without
charge from the Penn Square Fund by calling 1-800-523-8440 or by writing to
the Penn Square Fund at 2650 Westview Drive, Wyomissing, PA 19610. The
Penn Square 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 Penn Square
Mutual Fund or its portfolio, the Penn Square Fund, can be obtained by
calling or writing the Penn Square 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 Trustees of the Penn Square Fund of proxies
for use at the Special Meeting of Shareholders (the "Special Meeting") to
be held at 9:00 a.m. (general meeting) and 11:00 a.m. (Fund meeting) (local
time) on May 29, 1997 at: Sheraton Berkshire Motor Inn, 1741 Paper Mill
Road, Wyomissing, PA 19610, 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 Penn Square Fund an instrument revoking the proxy, by
submitting a proxy bearing a later date or by attending and voting at the
Special Meeting. Proxies, instruments revoking a proxy, or proxies bearing
a later date may be communicated by telephone, by electronic means
including facsimilie, or by mail.
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, including third party solicitors, of the Penn Square
Fund, Federated Advisers and their respective affiliates at no additional
cost to the Penn Square Fund. Such solicitations may be by telephone,
telegraph, or personal contact. Any telephonic solicitations will follow
procedures designed to insure accuracy and prevent fraud including
requiring identifying shareholder information, and recording the
shareholder's instructions. Shareholders who communicate proxies by
telephone or by other electronic means have the same power and authority to
issue, revoke, or otherwise change their voting instructions as currently
exists for instructions communicated in written form. 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 Trustees of the Penn Square Fund has fixed the close
of business on [ ], as the record date for the determination
of shareholders entitled to notice of and to vote at the Special Meeting
and any adjournments thereof. As of the record date, there were [
] Class A Shares and [ ] Class C Shares of the Penn Square Fund
outstanding. Each of the Penn Square Fund's shares is entitled to one vote
and fractional shares have proportionate voting rights. On the record
date, the Trustees and Officers of the Penn Square Fund as a group owned
less than [ ] of the outstanding shares of the Penn Square Fund. To the
best knowledge of Penn Square Management Corporation, as of the record
date, no person owned beneficially or of record 5% or more of the Penn
Square Fund's outstanding shares.
As of the record date, there were [ ] Class A Shares, and [
] Class C Shares of the Federated Fund outstanding. On the record
date, the Directors and officers of the Federated Fund as a group owned
less than 1% of the outstanding Class A Shares, and Class C Shares of the
Federated Fund. 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, or Class C Shares.
CLASS C SHARES NAME AND ADDRESS SHARES OWNED PERCENT OF
OUTSTANDING SHARES
Approval of the Plan requires the affirmative vote of a majority of
the outstanding shares of the Penn Square 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 Penn Square
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 Penn Square 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 Penn Square Fund objecting to the
Reorganization have no appraisal rights under the Penn Square Fund's
Declaration of Trust or Pennsylvania law. Under the Plan, if approved by
Penn Square Fund shareholders, each shareholder will become the owner of
Class A Shares and Class C 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 Penn Square Fund's Class A Shares or Class C Shares, respectively, at
the Closing Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the Penn Square Fund knows of no other matters that
may properly be, or which are likely to be, brought before the Special
Meeting. However, if any other business shall properly come before the
Special 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 Special 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 [ ] (the
"Agreement"), between FEDERATED AMERICAN LEADERS FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and PENN SQUARE
MUTUAL FUND, a Pennsylvania Common Law Trust (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 the assets and the assumption of certain liabilities of the
Acquired Fund in exchange solely for Class A Shares and Class C 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 Acquired Fund 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 transfer of all of the assets and the assumption of
certain liabilities 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 Trustees, including a majority of the
trustees who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the transer of all of the assets
and the assumption of certain liabilities 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 Acquiring Fund will assume only those certain liabilities
which are set forth in a certificate to be provided by the Acquiried Fund
at the Closing and accepted by the Acquiring Fund.
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 paragraph 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 Acquired Fund up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Acquired Fund, on which the Acquired Fund is
dissolved and deregistered.
1.9 The Acquired Fund shall be deregistered as an investment company
under the 1940 Act and dissolved as a Pennsylvania common law trust 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, which have been reviewed by the
Acquired Funds Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as
the parties may mutually agree. All acts taking place at the Closing 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 Penn Square Management Corporation, 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 Acquired Fund represents and warrants to the Acquiring Fund
as follows:
(a) The Acquired Fund is a Common Law Trust duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Acquired Fund 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 Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquired Fund's Declaration of Trust 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, 1995 and at December 31, 1996 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) Since December 31, 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.
(i) 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.
(j) For each fiscal year of its operation the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) 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.
(l) 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.
(m) 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 Acquired Fund 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).
(n) 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 Acquired Fund
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) The unaudited Statement of Assets and Liabilities of
the Acquiring Fund at September 30, 1995 and 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 March 31, 1995 and 1996 which have been audited by Arthur Andersen
LLP, independent auditors, and such statement (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition of
the Acquiring Fund as of such date, and there are no known liabilities of
the Acquiring Fund, contingent or otherwise, as of such date not disclosed
therein.
(h) Since March 31, 1996, and September 30, 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.
(i) 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.
(j) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) 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 except for Class B
Shares which are convertible into Class A Shares eight (8) years after
purchase.
(l) 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).
(m) 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 Acquired Fund 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
Acquired Fund'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(o), 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 and the 1940 Act
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 Section 103(a) of the
Code over its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for the taxable periods or years ended on or before December 31, 1996
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, 1996 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 Acquired 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.
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 Acquired 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 Acquiring Fund shall reasonably request.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of
the Acquired Fund on the Closing Date, which liabilities shall be
acceptable to the Acquiring Fund in its sole discretion.
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
Acquired Fund's Declaration of Trust 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) 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 Acquired Fund 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 and
assumption of certain liabilities 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 and the assumption of certain liabilities; (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 and the assumption of certain liabilities 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 Trustees of the
Acquired Fund 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 a majority of the independent board members of either
board believes that continuing the transation would have a material adverse
impact on shareholders of that fund.
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 Trustees or Officers of the Acquired
Fund 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 Trustees of the Acquired Fund, 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 Commonwealth of Pennsylvania, 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 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 Shareholders and the
costs of holding the special meeting of shareholders. Penn Square
Management Corporation will assume the legal fees of the Acquired Fund.
The accountants' fees of the Acquired Fund will be borne equally by
Federated Advisers and Penn Square Management Corporation.
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:
Attest: PENN SQUARE MUTUAL FUND,
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: FEDERATED AMERICAN LEADERS FUND,
INC.
By:
Name: S. Elliott Cohan Name: J. Christopher Donahue
Title:Assistant Secretary Title: President
STATEMENT OF ADDITIONAL INFORMATION
[ ]
ACQUISITION OF THE ASSETS OF
PENN SQUARE MUTUAL FUND,
2650 WESTVIEW DRIVE
WYOMISSING, PENNSYLVANIA 19610
TELEPHONE NUMBER: 1-800-523-8440
BY AND IN EXCHANGE FOR CLASS A AND CLASS C SHARES RESPECTIVELY OF
FEDERATED AMERICAN LEADERS FUND, INC.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-343-7400
This Statement of Additional Information dated [ ] is not a
prospectus. A Prospectus/Proxy Statement dated [ ] 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 Penn Square Mutual Fund, dated
March 15, 1996.
3. Financial Statements of Federated American Leaders Fund, Inc., dated
March 31, 1996.
4. Financial Statements of Penn Square Mutual Fund, dated December 31,
1996.
5. Pro forma Financial Statements (unaudited) of the combined Penn Square
Mutual Fund, dated March 31, 1996, and September 30, 1996, and the
Federated American Leaders Fund, Inc., dated March 31, 1996, and September
30, 1996.
6. Unaudited Financial Statements dated September 30, 1996, of the
Federated American Leaders Fund, Inc.
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 29, 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 Penn Square Mutual Fund
(the "Penn Square Fund"), dated March 15, 1996, is incorporated herein by
reference to Post-Effective Amendment No. 54 to the Trust's Registration
Statement on Form N-1A (File Nos. 2-13943 and 811-00788) which was filed
with the Securities and Exchange Commission on or about March 19, 1996. A
copy may be obtained, upon request and without charge, from the Penn Square
Fund at 2650 Westview Drive, Wyomissing, Pennsylvania 19610; telephone
number: 1-800-523-8440.
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: 1-800-343-7400.
The audited financial statements of the Penn Square Fund, dated
December 31, 1996, are incorporated herein by reference to the Penn Square
Fund's Annual Report to Shareholders dated December 31, 1996, which was
filed with the Securities and Exchange Commission. A copy may be obtained,
upon request and without charge, from the Penn Square Fund at 2650 Westview
Drive, Wyomissing, Pennsylvania 19610; telephone number 1-800-523-8440.
The unaudited financial statements of the Federated American
Leaders Fund, Inc., dated September 30, 1996, are incorporated herein by
reference to the Federated American Leaders Fund, Inc.'s Semi-Annual Report
to Shareholders, dated September 30, 1996, which was filed with the
Securities and Exchange Commission. A copy may be obtained, upon request
and without charge, from Federated.
Pro forma financial statements are included herein as the total net
assets of the Penn Square Fund do exceed 10% of the total assets of the
Federated Fund. At February 28, 1997, the total net assets of the Penn
Square Fund were $342,714,452 and the total net assets of the Federated
Fund were $1,347,859,531.
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
INTRODUCTION TO PROPOSED MERGER
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated
American Leaders Fund, Inc. and Penn Square Mutual Fund, collectively (the
`Funds''), as of March 31, 1996. These statements have been derived from
the books and records utilized in calculating the daily net asset value at
March 31, 1996. The accompanying unaudited Pro Forma Combining Statement
of Operations reflects the accounts of Federated American Leaders Fund,
Inc. most recent fiscal year ended March 31, 1996, and the twelve month
period ended March 31, 1996, for Penn Square Mutual Fund.
In addition, included are the unaudited Pro Forma Combining Portfolio of
Investments and Statement of Assets and Liabilities reflecting the accounts
of the Funds at September 30, 1996. These statements have been derived
from the books and records utilized in calculating the daily net asset
value at September 30, 1996. The accompanying unaudited Pro Forma
Combining Statement of Operations reflects the accounts of Federated
American Leaders Fund, Inc. and Penn Square Mutual Fund for the six months
ended September 30, 1996 the most recent semi-annual report date of
Federated American Leaders Fund, Inc.
The Pro Forma statements give effect to the proposed transfer of assets
from Penn Square Mutual Fund Class A and Class C Shares in exchange for
Class A and Class C Shares respectively of Federated American Leaders Fund,
Inc.
<TABLE>
<CAPTION>
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
MARCH 31, 1996 (UNAUDITED)
<C> <C> <C> <S> <C> <C> <C>
FEDERATED PENN FEDERATED PENN SQUARE
AMERICAN SQUARE AMERICAN MUTUAL FUND
LEADERS FUND, MUTUAL PRO FORMA LEADERS FUND, PRO FORMA
INC. FUND COMBINED INC. COMBINED
SHARES SHARES SHARES VALUE VALUE VALUE
COMMON STOCKS--89.3%
AUTOMOTIVE--0.9%
- ----- 100,000 100,000 Fleet Enterprise, Inc. $----- $2,475,000 $2,475,000
- ----- 120,000 120,000 Ford Motor Corp. ----- 4,125,000 4,125,000
- ----- 50,000 50,000 Johnson Controls, Inc. ----- 3,731,250 3,731,250
Total ----- 10,331,250 10,331,250
BASIC INDUSTRY--2.5%
151,000 ----- 151,000 Eastman Chemical Co. 10,437,875 ----- 10,437,875
100,000 ----- 100,000 Great Lakes Chemical Corp. 6,737,500 ----- 6,737,500
279,000 ----- 279,000 Millipore Corp. 10,671,750 ----- 10,671,750
Total 27,847,125 ----- 27,847,125
BUILDING, CONSTRUCTION &
ENGINEERING--0.5%
- ----- 50,000 50,000 Fluor Corp. ----- 3,412,500 3,412,500
- ----- 120,000 120,000 Lafarge Corporation ----- 2,265,000 2,265,000
Total ----- 5,677,500 5,677,500
CAPITAL GOODS--0.9%
- ----- 105,000 105,000 Deere & Company ----- 4,383,750 4,383,750
- ----- 75,000 75,000 Ingersoll-Rand Company ----- 3,056,250 3,056,250
- ----- 75,000 75,000 Trinity Industries, Inc. ----- 2,615,625 2,615,625
Total ----- 10,055,625 10,055,625
CHEMICALS--1.4%
- ----- 75,000 75,000 Air Products & Chemicals, ----- 4,096,875 4,096,875
Inc.
- ----- 75,000 75,000 ARCO Chemical Company ----- 3,890,625 3,890,625
- ----- 50,000 50,000 (a)Eastern Chemical ----- 3,456,250 3,456,250
Company
- ----- 100,000 100,000 Morton International, Inc. ----- 3,837,500 3,837,500
Total ----- 15,281,250 15,281,250
CONSUMER DURABLES--3.4%
100,000 50,000 150,000 Chrysler Corp. 6,225,000 3,112,500 9,337,500
183,600 ----- 183,600 Eastman Kodak Co. 13,035,600 ----- 13,035,600
575,000 ----- 575,000 Mattel, Inc. 15,596,875 ----- 15,596,875
Total 34,857,475 3,112,500 37,969,975
CONSUMER GOODS--1.7%
- ----- 50,000 50,000 Colgate-Palmolive ----- 3,893,750 3,893,750
- ----- 70,000 70,000 Duracell International ----- 3,473,750 3,473,750
- ----- 50,000 50,000 Hasbro, Inc. ----- 1,850,000 1,850,000
- ----- 100,000 100,000 Home Depot ----- 4,787,500 4,787,500
- ----- 50,000 50,000 J.C. Penney ----- 2,487,500 2,487,500
- ----- 50,000 50,000 Whirlpool Corporation ----- 2,762,500 2,762,500
Total ----- 19,255,000 19,255,000
CONSUMER NON-DURABLES--
6.4%
123,200 65,000 188,200 Avon Products, Inc. 10,564,400 5,573,750 16,138,150
329,600 ----- 329,600 IBP, Inc. 8,446,000 ----- 8,446,000
189,540 ----- 189,540 Kimberly-Clark Corp. 14,120,730 ----- 14,120,730
204,900 ----- 204,900 Nike, Inc., Class B 16,648,125 ----- 16,648,125
197,000 ----- 197,000 Philip Morris Cos., Inc. 17,286,750 ----- 17,286,750
Total $67,066,005 $5,573,750 $72,639,755
DIVERSIFIED--0.7%
- ----- 100,000 100,000 National Service ----- 3,625,000 3,625,000
Industries
- ----- 70,000 70,000 Tenneco, Inc. ----- 3,911,250 3,911,250
Total ----- 7,536,250 7,536,250
ELECTRONICS--0.6%
- ----- 70,000 70,000 Avnet, Inc. ----- 3,377,500 3,377,500
- ----- 100,000 100,000 Philips Electric N.V. ----- 3,637,500 3,637,500
Total ----- 7,015,000 7,015,000
ENERGY MINERALS--6.3%
- ----- 60,000 60,000 Amoco Corp. ----- 4,335,000 4,335,000
- ----- 120,000 120,000 Baker Hughes ----- 3,510,000 3,510,000
166,100 50,000 216,100 Chevron Corp. 9,322,362 2,806,250 12,128,612
42,100 70,000 112,100 Exxon Corp. 3,436,412 5,713,750 9,150,162
- ----- 70,000 70,000 Haliburton Co. ----- 3,981,250 3,981,250
160,000 50,000 210,000 Mobil Corp. 18,540,000 5,793,750 24,333,750
- ----- 40,300 40,300 National Fuel Gas ----- 1,395,388 1,395,388
- ----- 50,000 50,000 Occidental Petroleum ----- 1,337,500 1,337,500
- ----- 50,000 50,000 Royal Dutch Petroleum Co., ----- 7,062,500 7,062,500
ADR
- ----- 50,000 50,000 Texaco, Inc. ----- 4,300,000 4,300,000
Total 31,298,774 40,235,388 71,534,162
ENTERTAINMENT--0.6%
- ----- 50,000 50,000 (a)Polygram N.V. ----- 3,012,500 3,012,500
- ----- 100,000 100,000 (a)Viacom, Inc. Class B ----- 4,212,500 4,212,500
Total ----- 7,225,000 7,225,000
ENVIRONMENTAL SERVICES--
0.6%
- ----- 100,000 100,000 Donaldson Co., Inc. ----- 2,750,000 2,750,000
- ----- 125,000 125,000 WMX Technologies, Inc. ----- 3,968,750 3,968,750
Total ----- 6,718,750 6,718,750
FINANCE--15.1%
225,000 ----- 225,000 Aflac, Inc. 7,031,250 ----- 7,031,250
203,400 ----- 203,400 American Express Co. 10,042,875 ----- 10,042,875
- ----- 40,000 40,000 Bank America Corp. ----- 3,100,000 3,100,000
- ----- 60,000 60,000 Bank of New York ----- 3,090,000 3,090,000
111,925 ----- 111,925 CIGNA Corp. 12,787,431 ----- 12,787,431
126,200 ----- 126,200 Chemical Banking Corp. 8,897,100 ----- 8,897,100
180,959 ----- 180,959 Citicorp 14,476,720 ----- 14,476,720
204,300 ----- 204,300 Dean Witter, Discover & 11,696,175 ----- 11,696,175
Co.
200,000 ----- 200,000 Federal Home Loan Mortgage 17,050,000 ----- 17,050,000
Corp.
400,000 65,000 465,000 Federal National Mortgage 12,750,000 2,071,875 14,821,875
Association
22,400 22,400 First Interstate Bancorp 3,886,400 ----- 3,886,400
- ----- 150,000 150,000 Great Western Financial ----- 3,618,750 3,618,750
258,600 60,000 318,600 Mellon Bank Corp. 14,255,325 3,307,500 17,562,825
50,000 ----- 50,000 Merrill Lynch & Co., Inc. 3,037,500 ----- 3,037,500
- ----- 80,000 80,000 PNC Bank ----- 2,460,000 2,460,000
129,600 ----- 129,600 Providian Corp. 5,783,400 ----- 5,783,400
274,232 ----- 274,232 The PMI Group 11,718,223 ----- 11,718,223
290,700 ----- 290,700 Travelers Group, Inc. 19,186,200 ----- 19,186,200
Total 152,598,599 17,648,125 170,246,724
FOOD & BEVERAGE--1.1%
- ----- 75,000 75,000 Conagra, Inc. ----- 3,046,875 3,046,875
- ----- 125,000 125,000 H. J. Heinz Corp. ----- 4,140,625 4,140,625
- ----- 75,000 75,000 Pepsico, Inc. ----- 4,743,750 4,743,750
Total ----- 11,931,250 11,931,250
HEALTH CARE--10.2%
354,000 ----- 354,000 Abbott Laboratories 14,425,500 ----- 14,425,500
112,700 50,000 162,700 American Home Products 12,213,862 5,418,750 17,632,612
Corp.
159,700 ----- 159,700 Becton, Dickinson & Co. $13,075,437 $----- $13,075,437
186,500 75,000 261,500 Bristol-Myers Squibb Co. 15,969,062 6,421,875 22,390,937
140,000 75,000 215,000 Columbia/HCA Healthcare 8,085,000 4,331,250 12,416,250
Corp.
100,000 ----- 100,000 Ivax Corp. 2,587,500 ----- 2,587,500
- ----- 50,000 50,000 Johnson & Johnson ----- 4,612,500 4,612,500
149,000 ----- 149,000 Merck & Co., Inc. 9,275,250 ----- 9,275,250
- ----- 70,000 70,000 Pharmacia & Upjohn ----- 2,791,250 2,791,250
300,000 50,000 350,000 Scherer (R.P.) Corp. 13,162,500 2,906,250 16,068,750
Total 88,794,111 26,481,875 115,275,986
INFORMATIONAL SERVICES--
0.2%
- ----- 75,000 75,000 Block (H.R.), Inc. ----- 2,709,375 2,709,375
INSURANCE--0.9%
- ----- 100,000 100,000 Liberty Corp. ----- 3,300,000 3,300,000
- ----- 50,000 50,000 Lincoln National Corp. ----- 2,537,500 2,537,500
- ----- 60,000 60,000 Travelers, Inc. (The) ----- 3,960,000 3,960,000
Total ----- 9,797,500 9,797,500
METALS--0.7%
- ----- 100,000 100,000 Allegheny Ludlum ----- 1,850,000 1,850,000
- ----- 75,000 75,000 Cleveland Cliffs, Inc. ----- 3,318,750 3,318,750
- ----- 100,000 100,000 Freeport-McMoran Copper & ----- 3,075,000 3,075,000
Gold, Inc.
Total ----- 8,243,750 8,243,750
PAPER AND FOREST PRODUCTS-
-1.0%
- ----- 40,000 40,000 Georgia-Pacific ----- 2,775,000 2,775,000
- ----- 125,000 125,000 Longview Fibre ----- 2,109,375 2,109,375
- ----- 100,000 100,000 Louisiana Pacific Co. ----- 2,437,500 2,437,500
- ----- 75,000 75,000 Weyerhaeuser Co. ----- 3,459,375 3,459,375
Total ----- 10,781,250 10,781,250
PRINTING AND PUBLISHING--
0.6%
- ----- 100,000 100,000 John H. Harland Company ----- 2,200,000 2,200,000
- ----- 85,000 85,000 Reader's Digest ----- 4,016,250 4,016,250
Association, Inc.
Total ----- 6,216,250 6,216,250
PRODUCER MANUFACTURING--
5.1%
121,300 110,000 231,300 General Electric Co. 9,446,238 8,566,250 18,012,488
120,200 ----- 120,200 Loews Corp. 9,090,125 ----- 9,090,125
280,000 ----- 280,000 Philips Electronics N.V., 10,185,000 ----- 10,185,000
ADR
180,000 ----- 180,000 Textron, Inc. 14,400,000 ----- 14,400,000
280,000 ----- 280,000 Westinghouse Electric 5,390,000 ----- 5,390,000
Corp.
Total 48,511,363 8,566,250 57,077,613
RETAIL TRADE--1.4%
250,000 ----- 250,000 Sears, Roebuck & Co. 12,187,500 ----- 12,187,500
140,700 ----- 140,700 (a)Toys R Us, Inc., 3,798,900 ----- 3,798,900
Total 15,986,400 ----- 15,986,400
SERVICES--2.3%
100,000 100,000 200,000 Disney (Walt) Co. 6,387,500 6,387,500 12,775,000
150,000 ----- 150,000 Gannett Co., Inc. 10,087,500 ----- 10,087,500
67,300 ----- 67,300 Interpublic Group Cos., 3,179,925 ----- 3,179,925
Inc.
Total 19,654,925 6,387,500 26,042,425
TECHNOLOGY--15.9%
- ----- 40,000 40,000 (a)AMP, Inc. ----- 1,655,000 1,655,000
150,000 ----- 150,000 (a)BMC Software, Inc. 8,212,500 ----- 8,212,500
500,000 ----- 500,000 (a)Ceridian Corp. 21,500,000 ----- 21,500,000
- ----- 60,000 60,000 (a)Cisco Systems ----- 2,782,500 2,782,500
425,000 ----- 425,000 (a)Data General Corp. 6,215,625 ----- 6,215,625
200,000 ----- 200,000 (a)Digital Equipment Corp. 11,025,000 ----- 11,025,000
100,000 ----- 100,000 General Dynamics Corp. 5,850,000 ----- 5,850,000
275,000 ----- 275,000 General Motors Corp., 15,675,000 ----- 15,675,000
Class E
109,800 40,000 149,800 Hewlett-Packard Co. 10,321,200 3,760,000 14,081,200
172,200 60,000 232,200 Intel Corp. $9,793,875 $3,412,500 $13,206,375
110,300 ----- 110,300 International Business 12,257,088 ----- 12,257,088
Machines Corp.
82,478 ----- 82,478 (a)Litton Industries, Inc. 3,793,988 ----- 3,793,988
205,500 ----- 205,500 Lockheed Martin Corp. 15,592,313 ----- 15,592,313
143,500 30,000 173,500 (a)Microsoft Corp. 14,798,438 3,183,750 17,982,188
- ----- 55,000 55,000 (a)Oracle Systems ----- 2,585,000 2,585,000
- ----- 50,000 50,000 Pitney Bowes ----- 2,450,000 2,450,000
121,000 ----- 121,000 Raytheon Co. 6,201,250 ----- 6,201,250
185,500 ----- 185,500 Rockwell International 10,921,313 ----- 10,921,313
Corp.
182,100 ----- 182,100 (a)Solectron Corp. 8,012,400 ----- 8,012,400
Total 160,169,990 19,828,750 179,998,740
TRANSPORTATION--2.8%
- ----- 200,000 200,000 Canadian Pacific Ltd. ----- 4,000,000 4,000,000
254,100 ----- 254,100 Consolidated Rail Corp. 18,199,912 ----- 18,199,912
100,000 ----- 100,000 Kansas City Southern 4,650,000 ----- 4,650,000
Industries, Inc.
- ----- 35,000 35,000 Norfolk Southern Corp. ----- 2,975,000 2,975,000
- ----- 30,000 30,000 Union Pacific ----- 2,058,750 2,058,750
Total 22,849,912 9,033,750 31,883,662
UTILITIES--5.5%
- ----- 100,000 100,000 (a)360 Degree ----- 2,387,500 2,387,500
Communications
196,900 75,000 271,900 AT&T Corp. 12,060,125 4,593,750 16,653,875
- ----- 135,000 135,000 (a)AirTouch Communications ----- 4,201,875 4,201,875
- ----- 100,000 100,000 BCE, Inc. ----- 3,537,500 3,537,500
- ----- 100,000 100,000 Bell South Corp. ----- 3,700,000 3,700,000
200,000 ----- 200,000 Columbia Gas System, Inc. 9,175,000 ----- 9,175,000
425,000 ----- 425,000 Enron Corp. 15,671,875 ----- 15,671,875
213,200 ----- 213,200 MCI Communications Corp. 6,449,300 ----- 6,449,300
Total 43,356,300 18,420,625 61,776,925
TOTAL COMMON STOCKS
(IDENTIFIED COST 712,990,979 294,063,513 1,007,054,492
$754,928,484)
PREFERRED STOCKS--0.9%
CONSUMER NON-DURABLES--
0.3%
516,700 ----- 516,700 RJR Nabisco Holdings
Corp., Conv. Pfd., Series 3,164,788 ----- 3,164,788
C, $.60
FINANCE--0.6%
133,200 ----- 133,200 Merrill Lynch & Co., Inc.,
STRYPES, Series MGIC, 7,092,900 ----- 7,092,900
$3.12
TOTAL PREFERRED STOCKS
(IDENTIFIED COST 10,257,688 ----- 10,257,688
$9,844,100)
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT VALUE VALUE VALUE
SHORT-TERM INVESTMENTS--1.0%
COMMERCIAL PAPER--0.8%
$----- $4,488,32 $4,488,322 Ford Motor Credit Corp. $----- $4,488,323 $4,488,323
2
- ----- 2,492,300 2,492,300 General Electric Credit ----- 2,492,300 2,492,300
Corp.
- ----- 1,994,750 1,994,750 Sears Roebuck Acceptance ----- 1,994,750 1,994,750
Corp.
Total ----- 8,975,373 8,975,373
OTHER--0.2%
- ----- 2,463,299 2,463,299 CoreFund Cash Reserve ----- 2,463,299 2,463,299
TOTAL SHORT-TERM ----- 11,438,672 11,438,672
INVESTMENTS (AT AMORTIZED
COST)
(B) REPURCHASE AGREEMENTS--7.8%
87,500,000 ----- 87,500,000 BT Securities Corporation,
5.43%, dated 3/29/1996, 87,500,000 ----- 87,500,000
due 4/1/1996 (AT AMORTIZED
COST)
TOTAL INVESTMENTS
(IDENTIFIED COST $810,748,667 $305,502,185 $1,116,250,852
$863,711,256)(C)
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $863,711,256.
The net unrealized appreciation of investments on a federal tax basis amounts to
$252,539,596 which is comprised of $255,492,619 appreciation and $2,953,023
depreciation at March 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($1,127,318,953) at March 31, 1996.
The following acronyms are used throughout this portfolio:
ADR --American Depositary Receipt
STRYPES --Structured Yield Product Exchangeable for Stock
<TABLE>
<CAPTION>
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNAUDITED)
FEDERATED PENN
AMERICAN SQUARE PRO FORMA PRO FORMA
LEADERS FUND, INC. MUTUAL FUND ADJUSTMENT COMBINED
<S> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value $ 810,748,667 $ 305,502,185 ---- $ 1,116,250,852
Cash 132,590 ---- ---- 132,590
Receivables for:
Investments sold --- 6,352,987 ---- 6,352,987
Shares sold 8,272,660 49,867 ---- 8,322,527
Income 1,385,585 573,924 ---- 1,959,509
Total assets 820,539,502 312,478,963 ---- 1,133,018,465
Liabilities:
Payables for:
Shares redeemed 701,830 701,830
Options contracts at value 355,626 355,626
Investments purchased 2,614,812 1,397,868 ---- 4,012,680
Accrued expenses and
other liabilities 569,100 60,276 ---- 629,376
Total liabilities 3,885,742 1,813,770 ---- 5,699,512
Total Net Assets $ 816,653,760 $ 310,665,193 ---- $ 1,127,318,953
Net Assets consist of:
Paid in capital $ 625,635,086 $ 222,929,747 ---- $ 848,564,833
Net unrealized
appreciation of
investments 175,393,133 77,146,463 ---- 252,539,596
Accumulated net realized
gain (loss) on investments 14,818,186 10,958,335 ---- 25,776,521
Undistributed
(Distributions in excess
of) net investment income 807,355 (369,352) ---- 438,003
Total Net Assets $ 816,653,760 $ 310,665,193 $ ---- $ 1,127,318,953
Class A Shares $ 455,866,640 $ 310,317,078 $ ---- $ 766,183,718
Class B Shares $ 261,024,343 $ ---- $ ---- $ 261,024,343
Class C Shares $ 44,433,642 $ 348,115 $ ---- $ 44,781,757
Class F Shares $ 55,329,135 $ ---- $ ---- $ 55,329,135
Shares Outstanding
Class A Shares 23,046,979 24,989,427 (9,300,911) (a) 38,735,495
Class B Shares 13,186,538 ---- ---- 13,186,538
Class C Shares 2,244,614 28,100 (10,515) (a) 2,262,199
Class F Shares 2,797,212 ---- ---- 2,797,212
Total Shares Outstanding 41,275,343 25,017,527 56,981,444
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share $ 19.78 $ 12.42 $ 19.78
Offering Price Per Share 20.93 * $ 13.04 **** $ 20.93
Redemption Proceeds Per Share $ 19.78 ** $ 12.42 $ 19.78
Class B Shares:
Net Asset Value Per Share $ 19.79 $ N/A $ 19.79
Offering Price Per Share $ 19.79 * $ N/A $ 19.79
Redemption Proceeds Per Share $ 18.70 ** $ N/A $ 18.70
Class C Shares:
Net Asset Value Per Share $ 19.80 $ 12.39 $ 19.80
Offering Price Per Share $ 19.80 * $ 12.39 $ 19.80
Redemption Proceeds Per Share $ 19.60 ** $ 12.27 **** $ 19.60
Class F Shares:
Net Asset Value Per Share $ 19.78 $ N/A $ 19.78
Offering Price Per Share $ 19.98 ***$ N/A $ 19.98
Redemption Proceeds Per Share $ 19.58 ** $ N/A $ 19.58
Total Investments, at
identified cost $ 635,355,534 $ 228,377,533 $ 863,711,256
(a) Adjustment to reflect share balance as a result of the combination,
based on the exchange ratio
of 0.6278061589 . for Class A Shares and 0.6258152947 for Class C Shares.
* See "How to Purchase Shares" in the Federated American Leaders Fund, Inc.
Prospectus, as of
May 31, 1996.
** See "Contingent Deferred Sales Charge" in the Federated American Leaders
Fund, Inc. Prospectus, as of May 31, 1996.
*** See ``What Shares Cost'' in the Federated American Leaders Fund, Inc.
Prospectus, as of May 31, 1996.
**** See ``How to Buy Shares'' in the Penn Square Mutual Fund Prospectus,
as of March 15, 1996.
</TABLE>
<TABLE>
<CAPTION>
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996 (UNAUDITED)
FEDERATED PENN
AMERICAN SQUARE
LEADERS MUTUAL PRO FORMA PRO FORMA
FUND, INC. FUND ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Investment Income:
Dividends $10,436,184 7,125,722 $ ---- $17,561,906
Interest 2,042,570 1,123,012 ---- 3,165,582
Total Investment Income 12,478,754 8,248,734 ---- 20,727,488
Expenses:
Investment advisory 3,637,755 1,830,052 1,123 (a) 5,468,930
Administrative personnel and
services fee 423,163 ---- 212,525 (b) 635,688
Custodian fees 64,795 50,774 (1,026) (c) 114,543
Transfer and dividend disbursing agent
fees and expenses 727,174 341,168 (163,760) (d) 904,582
Directors'/Trustees' fees 10,077 29,638 (26,715) (e) 13,000
Legal and auditing fees 22,784 19,613 (19,197) (f) 23,200
Portfolio accounting fees 134,801 ---- 23,850 (g) 158,651
Distribution services fee
- Class A Shares ---- 321,580 ---- 321,580
Distribution services fee
- Class B Shares 971,408 971,408
Distribution services fee
- Class C Shares 226,754 567 ---- 227,321
Shareholder services fee
- Class A Shares 898,781 ---- 177,203 (h) 1,075,984
Shareholder services fee
- Class B Shares 323,803 ---- ---- 323,803
Shareholder services fee
- Class C Shares 75,585 189 4,805 (h) 80,579
Shareholder services fee
- Class F Shares 100,110 ---- ---- 100,110
Share registration costs 234,996 ---- 1,086 (i) 236,082
Printing and postage 133,137 71,214 (39,124) (j) 165,227
Taxes 55,198 ---- 14,802 (k) 70,000
Insurance premiums and miscellaneous 19,518 9,279 (5,948) (l) 22,849
Total expenses 8,059,839 2,674,074 179,624 10,913,537
Deduct-
Waiver of shareholder services fee
--Class A Shares (243,794) ---- ---- (243,794)
Waiver of shareholder services fee
--Class B Shares (70,191) ---- ---- (70,191)
Waiver of shareholder services fee
--Class C Shares (4,805) ---- ---- (4,805)
Waiver of shareholder services fee
--Class F Shares (8,009) ---- ---- (8,009)
Total Waivers (326,799) (326,799)
Net expenses 7,733,040 2,674,074 10,586,738
Net investment income 4,745,714 5,574,660 10,140,750
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 29,467,435 9,367,427 ---- 38,834,862
Net change in unrealized appreciation
of investments 112,788,561 29,129,502 ---- 141,918,063
Net realized and unrealized gain on
investments 142,255,996 38,496,929 ---- 180,752,925
Change in net assets resulting
from operations $147,001,710 $44,071,589 $190,893,675
</TABLE>
(See Notes to Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
NOTES TO PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996 (UNAUDITED)
(a) The Federated American Leaders Fund, Inc.'s (the ``Federated Fund'')
Adviser, Federated Advisers receives for its services an annual investment
advisory fee equal to a maximum of (a) 0.55% of average daily net assets and
(b) 4.50% of the Federated Fund's gross income. The Federated Fund is averaging
an investment advisory fee that is slighter higher than 0.65% of its average
daily net assets. Penn Square Management Corporation the Penn Square Mutual
Fund's Adviser receives for its services a fee equal to 0.65% on the first
$250,000,000 of average daily net assets, 0.60% on the next $250,000,000 of
average daily net assets, and 0.55% on average net assets exceeding
$500,000,000.
(b) Federated Services Company (`FServ'') provides the Federated Fund with
certain administrative personnel and services. The fee paid to FServ is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
(c) State Street Bank and Trust Company is custodian for the securities and cash
of the Federated Fund. The custodian fee is based upon the level of the
Federated Fund's average daily net assets for the period plus out-of-pocket
expenses
(d) FServ serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type, and number of accounts and transactions made by
shareholders.
(e) Adjustment to reflect the elimination of the Trustees fees paid for the
Penn Square Mutual Fund.
(f) Adjustment to reflect the audit and legal fee reductions due to the
combining of two portfolios into a single portfolio.
(g) FServ maintains the Federated Fund's accounting records. The fee paid to
FServ is based on the level of the Federated Fund's average daily net assets,
plus out-of-pocket expenses.
(h) Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services (`FSS''), the Federated Fund will pay FSS up to 0.25% of
daily average net assets of the Federated Fund's shares for the period. The fee
paid to FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion. Penn Square Management receives for its services a fee up to 0.50%
of the average daily net assets of the Class A Shares and a fee up to 0.25% of
the average daily net assets of Class C Shares. Penn Square Management may
voluntarily choose to waive any portion of its fee. Penn Square Management can
modify or terminate this voluntary waiver at any time at its sole discretion.
(i) Adjustment to reflect the increase the cost due to the increase in net
assets and share registration.
(j) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(k) Adjustment to taxes to reflect increases in additional income associated
with combination of portfolios' assets.
(l) Adjustment to reflect the decrease in insurance fees due to the reduction in
the coverage requirement for a single portfolio.
<TABLE>
<CAPTION>
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
<C> <C> <C> <S> <C> <C> <C>
FEDERATED FEDERATED
AMERICAN PENN AMERICAN
LEADERS SQUARE LEADERS FUND,
FUND, INC. MUTUAL PRO FORMA INC. PENN SQUARE PRO FORMA
FUND COMBINED MUTUAL FUND COMBINED
SHARES SHARES SHARES VALUE VALUE VALUE
COMMON STOCKS--94.7%
AUTOMOTIVE--0.3%
- ----- 50,000 50,000 Johnson Controls, Inc. $----- $3,750,000 $3,750,00
0
BASIC INDUSTRY--3.2%
200,000 ----- 200,000 Betz Laboratories, Inc. 10,500,000 ----- 10,500,00
0
185,000 ----- 185,000 Consolidated Papers, Inc. 9,620,000 ----- 9,620,000
300,000 ----- 300,000 Monsanto Co. 10,950,000 ----- 10,950,00
0
275,000 ----- 275,000 Morton International, Inc. 10,931,250 ----- 10,931,25
0
34,000 ----- 34,000 Sigma-Aldrich Corp. 1,938,000 ----- 1,938,000
Total 43,939,250 ----- 43,939,25
0
BUILDING MATERIALS-
ENGINEERING--0.3%
- ----- 70,000 70,000 Fluor Corp. ----- 4,305,000 4,305,000
CHEMICALS--0.8%
- ----- 75,000 75,000 (a) ARCO Chemical Co. ----- 3,750,000 3,750,000
- ----- 60,000 60,000 Dow Chemical Co. ----- 4,815,000 4,815,000
- ----- 60,000 60,000 Morton International, Inc. ----- 2,385,000 2,385,000
Total ----- 10,950,000 10,950,00
0
CONSUMER DURABLES--2.4%
200,000 140,000 340,000 Chrysler Corp. 5,725,000 4,007,500 9,732,500
45,300 ----- 45,300 Mattel, Inc. 1,172,138 ----- 1,172,138
865,000 ----- 865,000 Rubbermaid, Inc. 21,192,500 ----- 21,192,50
0
30,500 ----- 30,500 Stanley Works 857,813 ----- 857,813
Total 28,947,451 4,007,500 32,954,95
1
CONSUMER GOODS--1.4%
- ----- 50,000 50,000 Colgate-Palmolive Co. ----- 4,343,750 4,343,750
- ----- 85,000 85,000 Corning, Inc. ----- 3,315,000 3,315,000
- ----- 80,000 80,000 Home Depot ----- 4,550,000 4,550,000
- ----- 50,000 50,000 (a) JC Penney ----- 2,706,250 2,706,250
- ----- 60,000 60,000 May Department Stores ----- 2,917,500 2,917,500
- ----- 40,000 40,000 (a) Tupperware Corp. ----- 1,960,000 1,960,000
Total ----- 19,792,500 19,792,50
0
CONSUMER NON-DURABLES--
11.2%
246,400 110,000 356,400 (a) Avon Products, Inc. 12,227,600 5,458,750 17,686,35
0
272,100 ----- 272,100 CPC International, Inc. 20,373,487 ----- 20,373,48
7
480,000 ----- 480,000 Heinz (H.J.) Co. 16,200,000 ----- 16,200,00
0
625,000 ----- 625,000 IBP, Inc. 14,531,250 ----- 14,531,25
0
248,500 90,000 338,500 Kimberly-Clark Corp. 21,899,062 7,931,250 29,830,31
2
197,000 ----- 197,000 Philip Morris Cos., Inc. 17,680,750 ----- 17,680,75
0
225,000 ----- 225,000 Tambrands, Inc. 9,478,125 ----- 9,478,125
169,300 ----- 169,300 Unilever N.V., ADR 26,685,913 ----- 26,685,91
3
Total 139,076,187 13,390,000 152,466,1
87
DIVERSIFIED--0.6%
- ----- 100,000 100,000 National Service ----- 3,500,000 3,500,000
Industries
- ----- 90,000 90,000 Tenneco, Inc. ----- 4,511,250 4,511,250
Total ----- 8,011,250 8,011,250
ELECTRONICS--0.4%
- ----- 100,000 100,000 Philips Electric N.V. $----- $3,587,500 $3,587,50
0
- ----- 120,000 120,000 Westinghouse Electric ----- 2,235,000 2,235,000
Total ----- 5,822,500 5,822,500
ENERGY MINERALS--10.2%
166,100 50,000 216,100 (a) Chevron Corp. 10,402,012 3,131,250 13,533,26
2
120,000 80,000 200,000 Exxon Corp. 9,990,000 6,660,000 16,650,00
0
- ----- 80,000 80,000 (a) Louisiana Land & ----- 4,210,000 4,210,000
Exploration Co.
240,000 50,000 290,000 Mobil Corp. 27,780,000 5,787,500 33,567,50
0
- ----- 100,000 100,000 National Fuel Gas ----- 3,675,000 3,675,000
- ----- 150,000 150,000 Occidental Petrolium ----- 3,506,250 3,506,250
89,000 ----- 89,000 Royal Dutch Petroleum Co., 13,895,125 ----- 13,895,12
ADR 5
110,000 70,000 180,000 Texaco, Inc. 10,120,000 6,440,000 16,560,00
0
558,700 ----- 558,700 USX Corp. 12,081,888 ----- 12,081,88
8
377,000 ----- 377,000 Union Pacific Resources 10,556,000 ----- 10,556,00
Group, Inc. 0
284,500 ----- 284,500 Unocal Corp. 10,242,000 ----- 10,242,00
0
Total 105,067,025 33,410,000 138,477,0
25
ENTERTAINMENT--0.5%
- ----- 50,000 50,000 Polygram N.V. ----- 2,787,500 2,787,500
- ----- 100,000 100,000 (a)Viacom, Inc., Class B ----- 3,550,000 3,550,000
Total ----- 6,337,500 6,337,500
ENVIRONMENTAL SERVICES--
0.2%
- ----- 100,000 100,000 WMX Technologies, Inc. ----- 3,287,500 3,287,500
FINANCE--12.1%
290,500 ----- 290,500 Aflac, Inc. 10,312,750 ----- 10,312,75
0
211,500 ----- 211,500 Allstate Corp. 10,416,375 ----- 10,416,37
5
- ----- 60,000 60,000 Bank America Corp., Inc. ----- 4,927,500 4,927,500
- ----- 160,000 160,000 (a) Bank of New York ----- 4,700,000 4,700,000
126,200 80,000 206,200 Chase Manhattan Corp. 10,111,775 6,410,000 16,521,77
5
112,500 ----- 112,500 CIGNA Corp. 13,485,937 ----- 13,485,93
7
120,000 ----- 120,000 Citicorp 10,875,000 ----- 10,875,00
0
200,000 ----- 200,000 Dean Witter, Discover & 11,000,000 ----- 11,000,00
Co. 0
106,700 ----- 106,700 Federal Home Loan Mortgage 10,443,262 ----- 10,443,26
Corp. 2
593,200 85,000 678,200 Federal National Mortgage 20,687,850 2,964,375 23,652,22
Association 5
- ----- 150,000 150,000 Great Western Financial ----- 3,975,000 3,975,000
Corp.
211,000 ----- 211,000 Marsh & McLennan Cos., 20,493,375 ----- 20,493,37
Inc. 5
- ----- 90,000 90,000 Mellon Bank ----- 5,332,500 5,332,500
248,500 ----- 248,500 National City Corp. 10,468,063 ----- 10,468,06
3
166,800 ----- 166,800 Travelers Group, Inc. 8,194,050 ----- 8,194,050
Total 136,488,437 28,309,375 164,797,8
12
FOOD & BEVERAGE--0.5%
- ----- 75,000 75,000 ConAgra, Inc. ----- 3,693,750 3,693,750
- ----- 100,000 100,000 Pepsico, Inc. ----- 2,825,000 2,825,000
Total ----- 6,518,750 6,518,750
HEALTH CARE--13.0%
354,000 ----- 354,000 Abbott Laboratories 17,434,500 ----- 17,434,50
0
- ----- 70,000 70,000 (a) Aetna Life & Casualty ----- 4,926,250 4,926,250
Company
225,000 100,000 325,000 American Home Products 14,343,750 6,375,000 20,718,75
Corp. 0
270,000 ----- 270,000 Bausch & Lomb, Inc. 9,922,500 ----- 9,922,500
320,000 ----- 320,000 Becton, Dickinson & Co. 14,160,000 ----- 14,160,00
0
620,000 ----- 620,000 (a) Biomet, Inc. 10,152,500 ----- 10,152,50
0
186,500 75,000 261,500 Bristol-Myers Squibb Co. 17,973,937 7,228,125 25,202,06
2
274,000 85,000 359,000 Columbia/HCA Healthcare 15,583,750 4,834,375 20,418,12
Corp. 5
720,400 ----- 720,400 (a) Healthsource, Inc. 10,625,900 ----- 10,625,90
0
- ----- 100,000 100,000 (a) Johnson & Johnson ----- 5,125,000 5,125,000
149,000 65,000 214,000 Merck & Co., Inc. 10,485,875 4,574,375 15,060,25
0
- ----- 70,000 70,000 Pharmacia & Upjohn ----- 2,887,500 2,887,500
- ----- 50,000 50,000 (a) Schering-Plough Corp. ----- 3,075,000 3,075,000
275,000 120,000 395,000 (a) United Healthcare $11,446,875 $4,995,000 $16,441,8
Corp. 75
Total 132,129,587 44,020,625 176,150,2
12
INSURANCE--0.8%
- ----- 65,000 65,000 Conseco, Inc. ----- 3,201,250 3,201,250
- ----- 100,000 100,000 Liberty Corp. ----- 3,512,500 3,512,500
- ----- 90,000 90,000 Travelers, Inc. (The) ----- 4,421,250 4,421,250
Total ----- 11,135,000 11,135,00
0
METALS--0.8%
- ----- 70,000 70,000 (a) Aluminum Co. of ----- 4,130,000 4,130,000
America
- ----- 150,000 150,000 Allegheny Teledyne, Inc. ----- 3,393,750 3,393,750
- ----- 100,000 100,000 Freeport-McMoRan Copper & ----- 2,950,000 2,950,000
Gold, Inc.
Total ----- 10,473,750 10,473,75
0
PAPER & FOREST PRODUCTS--
0.8%
- ----- 40,000 40,000 (a) Georgia-Pacific ----- 3,165,000 3,165,000
- ----- 125,000 125,000 Longview Fibre ----- 1,968,750 1,968,750
- ----- 80,000 80,000 Louisiana-Pacific Corp. ----- 1,820,000 1,820,000
- ----- 75,000 75,000 Weyerhaeus Co. ----- 3,459,375 3,459,375
Total ----- 10,413,125 10,413,12
5
PRINTING & PUBLISHING--
0.2%
- ----- 100,000 100,000 John H. Harland Co. ----- 3,000,000 3,000,000
PRODUCER MANUFACTURING--
4.8%
12,200 ----- 12,200 Dover Corp. 582,550 ----- 582,550
142,500 110,000 252,500 General Electric Co. 12,967,500 10,010,000 22,977,50
0
223,800 ----- 223,800 Ingersoll-Rand Co. 10,630,500 ----- 10,630,50
0
120,000 ----- 120,000 Loews Corp. 9,285,000 ----- 9,285,000
250,000 ----- 250,000 Textron, Inc. 21,250,000 ----- 21,250,00
0
Total 54,715,550 10,010,000 64,725,55
0
RETAIL TRADE--4.1%
312,000 ----- 312,000 Dayton-Hudson Corp. 10,296,000 ----- 10,296,00
0
453,000 ----- 453,000 Dillard Department Stores, 14,609,250 ----- 14,609,25
Inc., Class A 0
250,000 ----- 250,000 Sears, Roebuck & Co. 11,187,500 ----- 11,187,50
0
765,000 ----- 765,000 Wal-Mart Stores, Inc. 20,176,875 ----- 20,176,87
5
Total 56,269,625 ----- 56,269,62
5
SERVICES--3.1%
800,000 ----- 800,000 Browning-Ferris 20,000,000 ----- 20,000,00
Industries, Inc. 0
100,000 100,000 200,000 Disney (Walt) Co. 6,337,500 6,337,500 12,675,00
0
150,000 ----- 150,000 Gannett Co., Inc. 10,556,250 ----- 10,556,25
0
Total 36,893,750 6,337,500 43,231,25
0
TECHNOLOGY--10.7%
92,800 ----- 92,800 Automatic Data Processing, 4,048,400 ----- 4,048,400
Inc.
201,700 ----- 201,700 Computer Associates 12,051,575 ----- 12,051,57
International, Inc. 5
296,000 ----- 296,000 (a) Electronic Data 18,167,000 ----- 18,167,00
Systems Corp. 0
226,600 100,000 326,600 Hewlett-Packard Co. 11,046,750 4,875,000 15,921,75
0
200,200 60,000 260,200 Intel Corp. 19,106,587 5,726,250 24,832,83
7
71,200 ----- 71,200 International Business 8,864,400 ----- 8,864,400
Machines Corp.
112,600 ----- 112,600 Lockheed Martin Corp. 10,148,075 ----- 10,148,07
5
132,200 ----- 132,200 Lucent Technologies, Inc. 6,064,675 ----- 6,064,675
- ----- 30,000 30,000 Microsoft Corp. ELKS ----- 3,292,500 3,292,500
244,300 ----- 244,300 (a) Oracle Corp. 10,398,019 ----- 10,398,01
9
- ----- 62,500 62,500 (a) Oracle Systems ----- 2,660,156 2,660,156
- ----- 40,000 40,000 Pitney Bowes ----- 2,110,000 2,110,000
185,500 ----- 185,500 Rockwell International 10,457,563 ----- 10,457,56
Corp. 3
334,400 ----- 334,400 (a) Solectron Corp. 16,385,600 ----- 16,385,60
0
Total 126,738,644 18,663,906 145,402,5
50
TEXTILES--0.3%
- ----- 160,000 160,000 Warnaco Group, Inc. ----- 3,800,000 3,800,000
TRANSPORTATION--2.1%
- ----- 50,000 50,000 Burlington Northern Santa $----- $4,218,750 $4,218,75
Fe 0
- ----- 200,000 200,000 Canadian Pacific Ltd. ----- 4,625,000 4,625,000
- ----- 35,000 35,000 (a) Norfolk Southern Corp. ----- 3,198,125 3,198,125
176,600 50,000 226,600 Union Pacific Corp. 12,935,950 3,662,500 16,598,45
0
Total 12,935,950 15,704,375 28,640,32
5
UTILITIES--9.7%
- ----- 110,000 110,000 (a) 360 Degree ----- 2,585,000 2,585,000
Communications
300,000 ----- 300,000 AT&T Corp. 15,675,000 ----- 15,675,00
0
243,700 ----- 243,700 Columbia Gas System, Inc. 13,647,200 ----- 13,647,20
0
425,000 ----- 425,000 Enron Corp. 17,318,750 ----- 17,318,75
0
- ----- 240,000 240,000 Enserch Corp. ----- 5,010,000 5,010,000
233,000 ----- 233,000 FPL Group, Inc. 10,077,250 ----- 10,077,25
0
266,000 ----- 266,000 GTE Corp. 10,241,000 ----- 10,241,00
0
737,500 ----- 737,500 MCI Communications Corp. 18,898,438 ----- 18,898,43
8
- ----- 185,400 185,400 Merrill Lynch STRYPES ----- 3,708,000 3,708,000
- ----- 90,000 90,000 (a) Nokia Corp. ----- 3,982,500 3,982,500
948,000 ----- 948,000 Pacific Gas & Electric Co. 20,619,000 ----- 20,619,00
0
464,000 ----- 464,000 Southern Co. 10,498,000 ----- 10,498,00
0
Total 116,974,638 15,285,500 132,260,1
38
TOTAL COMMON STOCKS
(IDENTIFIED COST 990,176,094 296,735,656 1,286,911
$1,037,388,255) ,750
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT VALUE VALUE VALUE
SHORT-TERM INVESTMENTS--1.5%
COMMERCIAL PAPER--1.5%
$----- $5,477,866 $5,477,866 Ford Motor Credit Corp. $----- $5,477,866 $5,477,86
- ----- 1,990,613 1,990,613 General Electric Credit ----- 1,990,613 1,990,613
Corp.
- ----- 1,990,542 1,990,542 Prudential Funding ----- 1,990,542 1,990,542
- ----- 10,951,706 10,951,706 Sears Roebuck Acceptance ----- 10,951,706 10,951,70
Corp. 6
Total ----- 20,410,727 20,410,72
7
OTHER--0.0%
- ----- 222,613 222,613 CoreFund Cash Reserves ----- 222,613 222,613
TOTAL SHORT-TERM ----- 20,633,340 20,633,34
INVESTMENTS (AT COST) 0
(B) REPURCHASE AGREEMENT--2.8%
38,210,000 ----- ----- BT Securities Corporation,
5.72%, dated 9/30/1996,
due 10/1/1996 (AT 38,210,000 ----- 38,210,00
AMORTIZED COST) 0
TOTAL INVESTMENTS
(IDENTIFIED COST $1,028,386,094 $317,368,996 $1,345,75
$1,096,532,595)(C) 5,090
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
accounts with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to
$1,096,532,595. The net unrealized appreciation of investments on a federal tax
basis amounts to $249,222,495 which is comprised of $260,279,712 appreciation
and $11,057,217 depreciation at September 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($1,358,534,078) at September 30, 1996.
The following acronyms are used throughout this portfolio:
ADR --American Depository Receipt
STRYPES --Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED PENN
AMERICAN SQUARE
PRO FORMA PRO FORMA
LEADERS FUND, INC. MUTUAL FUND
ADJUSTMENT COMBINED
ASSETS:
<S> <C> <C> <C> <C>
Investments in securities,
at value $ 1,028,386,094 $ 317,368,996 -
- --- $ 1,345,755,090
Cash 14,967 --- -
- --- 14,967
Receivables for:
Investments sold 6,933,929 5,193,227 -
- --- 12,127,156
Shares sold 4,297,853 14,476 -
- --- 4,312,329
Income 2,439,792 577,564 -
- --- 3,017,356
Total assets 1,042,072,635 323,154,263 -
- --- 1,365,226,898
Liabilities:
Payables for:
Shares redeemed 480,725 ---- 480,725
Options contracts at value 552,500 552,500
Investments purchased 4,652,792 486,850 -
- --- 5,139,642
Accrued expenses and other
liabilities 387,552 132,401 -
- --- 519,953
Total liabilities 5,521,069 1,171,751 -
- --- 6,692,820
TOTAL NET ASSETS 1,036,551,566 $ 321,982,512 -
- --- $ 1,358,534,078
NET ASSETS CONSIST OF:
Paid in capital $ 810,558,567 $ 220,324,473 -
- --- $ 1,030,883,040
Net unrealized appreciation of
investments 181,458,331 67,764,164 -
- --- 249,222,495
Accumulated net realized gain (loss)
on investments 43,211,183 34,208,625 -
- --- 77,419,808
Undistributed (Distributions in excess
of) net investment income 1,323,485 (314,750) -
- --- 1,008,735
Total Net Assets $ 1,036,551,566 $ 321,982,512 $
$ 1,358,534,078
Class A Shares $ 510,464,473 $ 320,908,864 $ $ 831,373,337
Class B Shares $ 396,077,509 $ ---- $
- ---- $ 396,077,509
Class C Shares $ 57,924,578 $ 1,073,648 $ $ 58,998,226
Class F Shares $ 72,085,006 $ ---- $
- ---- $ 72,085,006
Shares Outstanding
Class A Shares 24,921,010 24,730,455
(9,063,600) (a) 40,587,865
Class B Shares 19,340,768 ---- -
- --- 19,340,768
Class C Shares 2,827,793 82,907
(30,493) (a 2,880,207
Class F Shares 3,519,988 ---- -
- --- 3,519,988
Total Shares Outstanding 50,609,559 24,813,362
(9,094,093) 66,328,828
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share $ 20.48 $ 12.98 $ 20.48
Offering Price Per Share $ 21.67 * $ 13.63
**** $ 21.67
Redemption Proceeds Per Share $ 20.48 ** $ 12.98 $ 20.48
Class B Shares:
Net Asset Value Per Share $ 20.48 $ N/A $ 20.48
Offering Price Per Share $ 20.48 * $ N/A $ 20.48
Redemption Proceeds Per Share $ 19.35 ** $ N/A $ 19.35
Class C Shares:
Net Asset Value Per Share $ 20.48 $ 12.95 $ 20.48
Offering Price Per Share $ 20.48 * $ 12.95 $ 20.48
Redemption Proceeds Per Share $ 20.28 ** $12.82
**** $ 20.28
Class F Shares:
Net Asset Value Per Share $ 20.48 $ N/A $ 20.48
Offering Price Per Share $ 20.69 ***$ N/A $ 20.69
Redemption Proceeds Per Share $ 20.28 ** $ N/A $ 20.28
Total Investments, at identified
cost $846,927,763 $ 249,604,832 $1,096,532,595
</TABLE>
(a) Adjustment to reflect
share balance as a result of
the combination, based on the
exchange ratio of
0.6335045291 for Class A
Shares and 0.6322014034 for
Class C Shares.
* See "How to Purchase
Shares" in the Federated
American Leaders Fund, Inc.
Prospectus, as of May 31,
1996.
* See "Contingent Deferred
Sales Charge" in the
Federated American Leaders
Fund, Inc. Prospectus, as of
May 31, 1996.
*** See ``What Shares Cost''
in the Federated American
Leaders Fund, Inc.
Prospectus, as of May 31,
1996.
**** See ``How to Buy
Shares''in the Penn Square
Mutual Fund Prospectus, as of
March 15, 1996.
<TABLE>
<CAPTION>
Federated American Leaders Fund, Inc.
Penn Square Mutual Fund
Pro Forma Combining Statement of Operations
For the Six Months Ended September 30, 1996 (unaudited)
Federated Penn
American Square
Leaders Mutual Pro Forma Pro Forma
Fund, Inc. Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investment Income:
Dividends $8,184,750 $3,486,714 $---- $11,671,464
Interest 1,584,439 550,946 ---- 2,135,385
Total Investment Income 9,769,189 4,037,660 ---- 13,806,849
Expenses:
Investment advisory 2,886,909 1,007,745 (40,018) (a) 3,854,636
Administrative personnel and
services fee 349,048 ---- 117,209 (b) 466,257
Custodian fees 56,173 6,374 3,706 (c) 66,253
Transfer and dividend disbursing agent
fees and expenses 591,567 177,551 (142,551) (d) 626,567
Directors'/Trustees' fees 6,793 11,731 (11,524) (e) 7,000
Legal and auditing fees 12,410 12,252 (12,162) (f) 12,500
Portfolio accounting fees 87,856 ---- 495 (g) 88,351
Distribution services fee -
Class A Shares ---- 136,869 136,869
Distribution services fee -
Class B Shares 1,235,559 ---- ---- 1,235,559
Distribution services fee -
Class C Shares 191,597 349 ---- 191,946
Shareholder services fee -
Class A Shares 598,845 ---- 192,290 (h) 791,135
Shareholder services fee -
Class B Shares 411,853 ---- ---- 411,853
Shareholder services fee -
Class C Shares 63,866 116 ---- 63,982
Shareholder services fee -
Class F Shares 79,697 ---- ---- 79,697
Share registration costs 105,542 ---- 500 (i) 106,042
Printing and postage 79,398 40,531 (24,947) (j) 94,982
Taxes 22,016 ---- 3,000 (k) 25,016
Insurance premiums and miscellaneous 3,034 11,632 (2,904) (l) 11,762
Total expenses 6,782,163 1,405,150 83,094 8,270,407
Deduct-
Waiver of shareholder services fee--Class A
Shares (87,657) ---- ---- (87,657)
Waiver of shareholder services fee--Class F
Shares (5,231) ---- ---- (5,231)
Total Waivers (92,888) ---- ---- (92,888)
Net expenses 6,689,275 1,405,150 83,094 8,177,519
Net investment income 3,079,914 2,632,510 (83,094) 5,629,330
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 43,236,764 23,250,290 ---- 66,487,054
Net change in unrealized appreciation of
investments 6,065,198 9,382,299 ---- 15,447,497
Net realized and unrealized gain on
investments 49,301,962 32,632,589 ---- 81,934,551
Change in net assets resulting
from operations $52,381,876 $35,265,099 $(83,094) $87,563,881
(See Notes to Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
Federated American Leaders Fund, Inc.
Penn Square Mutual Fund
Notes to Pro Forma Combining Statement of Operations
For the Six Months Ended September 30, 1996 (unaudited)
(a) The Federated American Leaders Fund, Inc.'s (the ``Federated Fund'')
Adviser, Federated Advisers receives for its services an annual investment
advisory fee equal to a maximum of (a) 0.55% of average daily net assets and
(b) 4.50% of the Federated Fund's gross income. The Federated Fund is averaging
an investment advisory fee that is slighter higher than 0.65% of its average
daily net assets. Penn Square Management Corporation the Penn Square Mutual
Fund's Adviser receives for its services a fee equal to 0.65% on the first
$250,000,000 of average daily net assets, 0.60% on the next $250,000,000 of
average daily net assets, and 0.55% on average net assets exceeding
$500,000,000.
(b) Federated Services Company (`FServ'') provides the Federated Fund with
certain administrative personnel and services. The fee paid to FServ is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
(c) State Street Bank and Trust Company is custodian for the securities and cash
of the Federated Fund. The custodian fee is based upon the level of the
Federated Fund's average daily net assets for the period plus out-of-pocket
expenses
(d) FServ serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type, and number of accounts and transactions made by
shareholders.
(e) Adjustment to reflect the elimination of the Trustees fees paid for the
Penn Square Mutual Fund.
(f) Adjustment to reflect the audit and legal fee reductions due to the
combining of two portfolios into a single portfolio.
(g) FServ maintains the Federated Fund's accounting records. The fee paid to
FServ is based on the level of the Federated Fund's average daily net assets,
plus out-of-pocket expenses.
(h) Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services (`FSS''), the Federated Fund will pay FSS up to 0.25% of
daily average net assets of the Federated Fund's shares for the period. The fee
paid to FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion. Penn Square Management receives for its services a fee up to 0.50%
of the average daily net assets of the Class A Shares and a fee up to 0.25% of
the average daily net assets of Class C Shares. Penn Square Management may
voluntarily choose to waive any portion of its fee. Penn Square Management can
modify or terminate this voluntary waiver at any time at its sole discretion.
(i) Adjustment to reflect the increase the cost due to the increase in net
assets and share registration.
(j) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(k) Adjustment to taxes to reflect increases in additional income associated
with combination of portfolios' assets.
(l) Adjustment to reflect the decrease in insurance fees due to the reduction in
the coverage requirement for a single portfolio.
FEDERATED AMERICAN LEADERS FUND, INC.
PENN SQUARE MUTUAL FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE TWELVE MONTH PERIOD ENDED MARCH 31, 1996 (UNAUDITED) AND
THE SIX MONTH PERIOD ENDED SPETEMBER 30,1996 (UNAUDITED)
1. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolio of
Investments and Statement of Assets and Liabilities reflect the
accounts of Federated American Leaders Fund, Inc. and Penn Square
Mutual Fund, collectively (the `Funds'') as of March 31, 1996 and
September 30, 1996. These statements have been derived from the books
and records utilized in calculating daily net asset values at March
31, 1996 and September 30, 1996. The accompanying unaudited Pro Forma
Combining Statement of Operations reflects the accounts of Federated
American Leaders Fund, Inc. and Penn Square Mutual Fund, for the
period ended March 31, 1996 and September 30, 1996.
The Pro Forma Financial Statements should be read in conjunction with
the historical financial statements of the Funds which are
incorporated by reference in the Statement of Additional Information.
The Funds follow generally accepted accounting principles applicable
to management investment companies which are disclosed in the
historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed
transfer of assets of Penn Square Mutual Fund's Class A Shares and
Class C Shares in exchange for Class A Shares and Class C Shares,
respectively of Federated American Leaders Fund, Inc. Under generally
accepted accounting principles, Federated American Leaders Fund, Inc.,
will be the surviving entity for accounting purposes with its
historical cost of investments and results of operations being carried
forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administrative fee arrangements for the
surviving entity. Certain other operating costs have also been
adjusted to reflect anticipated expenses of the combined entity. Other
costs which may change as a result of the reorganization are currently
undeterminable.
For the period ended March 31, 1996, Federated American Leaders Fund,
Inc. and Penn Square Mutual Fund paid investment advisory fees
computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fund Percent of Each Fund's Average Net Assets
Federated American Leaders Fund, Inc. maximum of 0.55% and 4.50% of gross income
Penn Square Mutual Fund 0.65% on the first $250 million
0.60% on the next $250 million
0.55% in excess of $500 million
</TABLE>
2. SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of
15,803,562 Class A Shares and 84,930 Class C shares of Federated
American Leaders Fund, Inc. in exchange for 27,102,784 Class A Shares
and 145,694 Class C shares, respectively, of Penn Square Mutual Fund
in conjunction with the proposed reorganization.
SHERATON BERKSHIRE MOTOR INN
1741 PAPER MILL ROAD
WYOMISSING, PA 19610
PENN SQUARE MUTUAL FUND
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
PENN SQUARE MUTUAL FUND
The undersigned shareholder(s) of PENN SQUARE MUTUAL FUND
hereby appoint(s) James E. Jordan, Sandra Houck, and Dennis Westley or any
of them true and lawful proxies, with power of substitution of each, to
vote all shares of the Penn Square Mutual Fund which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on May
29, 1997, at Sheraton Berkshire Motor Inn, 1741 Paper Mill Road,
Wyomissing, PA 19610, at 9:00 a.m. (general meeting) and at 11:00 a.m.
(Fund meeting)(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 TRUSTEES. 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.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
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.
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.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PENN SQUARE MUTUAL FUND
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE PENN SQUARE MUTUAL FUND AND THE FEDERATED AMERICAN LEADERS FUND, INC.
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date:
---------------------------------
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 Copy of Bylaws of the Registrant, as amended(1)
3 Not Applicable
4 Agreement and Plan of Reorganization dated as of March 24, 1997,
between Penn Square Mutual Fund, a Pennsylvania common law trust, 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(3)
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 (4)
13.1 Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Shareholder Recordkeeping Services and Custody
Services Procurement(5)
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 Penn Square
Mutual Fund, Ernst & Young LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of Penn Square Mutual 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) To be filed by Post-effective Amendment pursuant to `Dear
Registrant''letter dated February 15, 1996.
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 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 March 24, 1997.
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
March 24, 1997:
* President and Director
John F. Donahue
(Chief Executive Officer)
* Executive Vice President and Director
J. Christopher Donahue
* Treasurer, Executive Vice President and
Secretary
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Director
Thomas G. Bigley
* Director
John T. Conroy, Jr.
* Director
William J. Copeland
* Director
James E. Dowd
* Director
Lawrence D. Ellis, M.D.
* Director
Edward L. Flaherty, Jr.
* Director
Peter E. Madden
* Director
Gregor F. Meyer
* Director
John E. Murray, Jr., J.D., S.J.D.
* Director
Wesley W. Posvar
* Director
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
EXHIBIT 11
FEDERATED AMERICAN LEADERS FUND, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
March 24, 1997
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 Penn Square Mutual Fund, a Pennsylvania
common law trust, pursuant to the Agreement and Plan of Reorganization
dated as of March 24, 1997 (`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
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
Title: 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 on Form N-14 of Federated
American Leaders Fund, Inc. of our report dated May 15, 1996, included in
its Annual Report dated March 31, 1996, and to all references to our firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Pittsburgh, Pennsylvania,
March 20, 1997
Exhibit 14.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement
on Form N-14 ("Registration Statement") of Federated American Leaders Fund,
Inc., of our report dated January 12, 1996, appearing in the Annual Report
of Penn Square Mutual Fund, for the year ended December 31, 1995, and to
the incorporation by reference of such report in the Prospectus and
Statement of Additional Information of Penn Square Mutual Fund, dated
March 15, 1996, and the incorporation by reference in the Registration
Statement of Federated American Leaders Fund, Inc., of our report dated
January 9, 1997, appearing in the Annual Report of Penn Square Mutual Fund,
for the year ended December 31, 1996.
By:/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Reading, PA
March 19, 1997
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 Services
Company, 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 President and Director February 25, 1997
John F. Donahue (Chief Executive Officer)
/s/J. Christopher Donahue Executive Vice President February 25, 1997
J. Christopher Donahue and Director
/s/John W. McGonigle Treasurer, Executive February 25, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Director February 25, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Director February 25, 1997
John T. Conroy, Jr.
/s/William J. Copeland Director February 25, 1997
William J. Copeland
/s/James E. Dowd Director February 25, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Director February 25, 1997
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Director February 25, 1997
Edward L. Flaherty, Jr.
/s/Peter E. Madden Director February 25, 1997
Peter E. Madden
/s/Gregor F. Meyer Director February 25, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Director February 25, 1997
John E. Murray, Jr.
/s/Wesley W. Posvar Director February 25, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Director February 25, 1997
Marjorie P. Smuts
Sworn to and subscribed before me this 25th day of February, 1997
/s/Marie M. Hamm
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Alleghny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 24F-2
ANNUAL NOTICE OF SECURITIES SOLD
PURSUANT TO RULE 24F-2
Read instructions at end of Form before preparing Form.
Please print or type.
1. Name and address of issuer:
Federated American Leaders Fund, Inc.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
2. Name of each series or class of funds for which this
notice is filed: Federated American Leaders Fund, Inc.
3. Investment Company Act File Number: 811-1704
Securities Act File Number: 2-29786
4. Last day of fiscal year for which this notice is filed:
March 31, 1996
5. Check box if this notice is being filed more than 180 days after the
close of the issuer's fiscal year for purposes of reporting securities sold
after the close of the fiscal year but before termination of the issuer's
24f-2 declaration: [ ]
6. Date of termination of issuer's declaration under rule
24f-2(a)(1), if applicable:
7. Number and amount of securities of the same class or series which had
been registered under the Securities Act of 1933 other than pursuant to
rule 24f-2 in a prior fiscal year, but which remained unsold at the
beginning of the fiscal year: 0; $0
8. Number and amount of securities registered during the fiscal year other
than pursuant to rule 24f-2: 0; $0
9. Number and aggregate sale price of securities sold during the fiscal
year (includes DRIP shares): 22,875,955; $429,232,094
10. Number and aggregate sale price of securities sold during the fiscal
year in reliance upon registration pursuant to rule 24f-2: 22,875,955;
$429,232,094
11. Number and aggregate sale price of securities issued during the fiscal
year in connection with dividend reinvestment plans, if applicable:
12. Calculation of registration fees:
(i) Aggregate sale price of securities sold during the fiscal
year in reliance on rule 24f-2
(from Item 10): $429,232,094
(ii) Aggregate price of shares issued in connection
with dividend reimbursement plans
(from Item 11, if applicable) +
(iii)Aggregate price of shares redeemed or repurchased
during the fiscal year (if applicable)- 7,801,360
(iv) Aggregate price of shares redeemed or repurchased
and previously applied as a reduction to filing
fees pursuant to rule 24e-2 (if applicable) + 0
(v) Net aggregate price of securities sold and issued
during the fiscal year in reliance on rule 24f-2
[line (i), plus line (ii), less line (iii), plus
line (iv)] (if applicable): 341,430,734
(vi) Multiplier prescribed by Section 6(b) of the
Securities Act of 1933 or other applicable law or
regulation (see Instruction C.6): x 1/2900
(vii)Fee due [line (i) or line (v) multiplied by line
(vi)]:$117,735
Instruction:Issuers should complete lines (ii), (iii), (iv), and (v) only
if the form in being filed within 60 days after the close of the issuer's
fiscal year. See Instruction C.3.
13. Check box if fees are being remitted to the Commission's lockbox
depository as described in section 3a of the Commission's Rules of Informal
and Other Procedures (17 CFR 202.3a). [ ]
Date of mailing or wire transfer of filing fees to the
Commission's lockbox depository: May 15, 1996
SIGNATURES
This report has been signed below by the following persons
on behalf of the issuer and in the capacities and on the
dates indicated.
By (Signature and Title)*
Charles H. Field
Assistant Secretary
Date: May 15, 1996
* Please print the name and title of the signing officer
FEDERATED ADMINISTRATIVE SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
May 15, 1996
Federated American Leaders Fund, Inc.
(formerly: 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 Federated American Leaders Fund, Inc. (formerly: American
Leaders Fund, Inc.) ("Corporation") to be filed in respect of shares of the
Corporation ("Shares") sold for the fiscal year ended March 15, 1996,
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 July 22, 1968, 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 15, 1996, 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
FEDERATED AMERICAN LEADERS FUND, INC.
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
May 15, 1996
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 24f-2 Notice for FEDERATED 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 the Federated 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 proceeds of securities redeemed, an additional filing fee in the
amount of $117,735 pursuant to Rule 24f-2(c) has been FedDirect wire
transferred 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
issued, 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
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated ,1997 (the
--------
"Agreement"), between FEDERATED AMERICAN LEADERS FUND, INC., a Maryland
corporation (hereinafter called the "Acquiring Fund"), and PENN SQUARE
MUTUAL FUND, a Pennsylvania Common Law Trust (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 the assets and the assumption of certain liabilities of the
Acquired Fund in exchange solely for Class A Shares and Class C 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 Acquired Fund 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 transfer of all of the assets and the assumption of
certain liabilities 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 Trustees, including a majority of the
trustees who are not "interested persons" (as defined under the 1940 Act),
of the Acquired Fund has determined that the transer of all of the assets
and the assumption of certain liabilities 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 Acquiring Fund will assume only those certain liabilities
which are set forth in a certificate to be provided by the Acquiried Fund
at the Closing and accepted by the Acquiring Fund.
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 paragraph 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 Acquired Fund up to and including the
Closing Date and such later dates, with respect to dissolution and
deregistration of the Acquired Fund, on which the Acquired Fund is
dissolved and deregistered.
1.9 The Acquired Fund shall be deregistered as an investment company
under the 1940 Act and dissolved as a Pennsylvania common law trust 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, which have been reviewed by the
Acquired Funds Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as
the parties may mutually agree. All acts taking place at the Closing 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 Penn Square Management Corporation, 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 Acquired Fund represents and warrants to the Acquiring Fund
as follows:
(a) The Acquired Fund is a Common Law Trust duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Acquired Fund 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 Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Acquired Fund's Declaration of Trust 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, 1995 and at December 31, 1996 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) Since December 31, 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.
(i) 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.
(j) For each fiscal year of its operation the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) 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.
(l) 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.
(m) 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 Acquired Fund 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).
(n) 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 Acquired Fund
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) The unaudited Statement of Assets and Liabilities of
the Acquiring Fund at September 30, 1995 and 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 March 31, 1995 and 1996 which have been audited by Arthur Andersen
LLP, independent auditors, and such statement (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition of
the Acquiring Fund as of such date, and there are no known liabilities of
the Acquiring Fund, contingent or otherwise, as of such date not disclosed
therein.
(h) Since March 31, 1996, and September 30, 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.
(i) 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.
(j) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) 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 except for Class B
Shares which are convertible into Class A Shares eight (8) years after
purchase.
(l) 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).
(m) 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 Acquired Fund 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
Acquired Fund'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(o), 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 and the 1940 Act
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 Section 103(a) of the
Code over its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for the taxable periods or years ended on or before December 31, 1996
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, 1996 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 Acquired 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.
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 Acquired 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 Acquiring Fund shall reasonably request.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of
the Acquired Fund on the Closing Date, which liabilities shall be
acceptable to the Acquiring Fund in its sole discretion.
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
Acquired Fund's Declaration of Trust 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) 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 Acquired Fund 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 and
assumption of certain liabilities 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 and the assumption of certain liabilities; (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 and the assumption of certain liabilities 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 Trustees of the
Acquired Fund 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 a majority of the independent board members of either
board believes that continuing the transation would have a material adverse
impact on shareholders of that fund.
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 Trustees or Officers of the Acquired
Fund 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 Trustees of the Acquired Fund, 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 Commonwealth of Pennsylvania, 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 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 Shareholders and the
costs of holding the special meeting of shareholders. Penn Square
Management Corporation will assume the legal fees of the Acquired Fund.
The accountants' fees of the Acquired Fund will be borne equally by
Federated Advisers and Penn Square Management Corporation.
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:
Attest: PENN SQUARE MUTUAL FUND,
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: FEDERATED AMERICAN LEADERS FUND,
INC.
By:
Name: S. Elliott Cohan Name: J. Christopher Donahue
Title: Assistant Secretary Title: President
EXHIBIT 17.2
SHERATON BERKSHIRE MOTOR INN
1741 PAPER MILL ROAD
WYOMISSING, PA 19610
PENN SQUARE MUTUAL FUND
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
PENN SQUARE MUTUAL FUND
The undersigned shareholder(s) of PENN SQUARE MUTUAL FUND
hereby appoint(s) James E. Jordan, Sandra Houck, and Dennis Westley or any
of them true and lawful proxies, with power of substitution of each, to
vote all shares of the Penn Square Mutual Fund which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held on May
29, 1997, at Sheraton Berkshire Motor Inn, 1741 Paper Mill Road,
Wyomissing, PA 19610, at 9:00 a.m. (general meeting) and at 11:00 a.m.
(Fund meeting)(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 TRUSTEES. 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.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
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.
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.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PENN SQUARE MUTUAL FUND
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
THE PENN SQUARE MUTUAL FUND AND THE FEDERATED AMERICAN LEADERS FUND, INC.
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date: __________________________
